The opportunity investment by going circular

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The following provocation by Rachel Brown forms one part of Financing the Future, our dynamic content project exploring the market opportunities for impact investment in Aotearoa New Zealand. The project is produced by Pure Advantage and promoted in association with the Impact Investing National Advisory Board Aotearoa New Zealand and the Responsible Investment Association of Australasia. Access the full project here.

In 2015 Accenture Strategy estimated the circular economy could unlock US$4.5 trillion of economic growth worldwide. This included a dramatic boost to employment. In 2018 the Sustainable Business Network (SBN) collaborated with Auckland Tourism, Events and Economic Development (ATEED) on a city wide study. This identified the potential for up to NZ$8.8 billion worth of additional GDP in Auckland by 2030. This could be realised if the city established a circular economy.

So where should impact investment be targeted for the best returns and outcomes?

A circular economy is one in which the life cycle of materials is maximised. Their use is optimised. At the end of life all materials are reutilised. It is underpinned by the use of renewable energy. It is one where waste no longer exists. It does not degrade the natural world in the way our current linear, ‘take, make, waste’ model does. It restores it and could be the most radical systems change to our way of life since the industrial revolution.

Circular economy thinking is already being applied to design, waste, infrastructure, business models, new technology, new bio-materials and government policy. The report identified how new opportunities will emerge in various sectors. These include secondary material production. They include repair and remanufacture, the services sector, and the sharing economy. The research also identified the opportunity to reduce embodied and generated CO2 emissions by a total of 2,700 kilotons in 2030.

The report focused on three key areas where the most impact would be felt in Auckland, a city with population near 1.6 million.

Construction produces the single biggest waste stream of any business sector in the city. This is likely to increase further with continuing growth. This creates options for high impact investment. These might include increased reuse and high value recycling of construction and demolition materials. It might also take in developments like off-site modular building.

Food Waste in Auckland makes up nearly a fifth of total landfill in 2016. This results in inefficient use of land, water, energy and other resources. The report estimated that investment here could unlock some NZ$300 million in value. Examples include creating new products from organic waste, biochemical extraction or biogas generation.

The Transport system in Auckland, as in the rest of New Zealand, is carbon-intensive and inefficient. There are many attractive areas for investment including rideshare and the refurbishing of commercial vehicles. Initiatives also include innovations for on road congestion management and reduction.

Previous analysis by SBN identified six key drivers to overcome barriers to the emergence of the circular economy. Let’s take a look at those investment opportunities.

Designing for a circular economy rather than retrofit solutions

There is already investment going into making the current system more efficient. These include investments in waste, recycling, or reducing cost and carbon emissions from production and transport. The long-term impact of such investment is arguable. If we do not tackle the root causes of waste and inefficiency there will always be more work to do to improve efficiencies in the system.

The really smart money is to develop products, systems and services designed for the circular economy from the outset. This means research and development  focused on  longevity and modularity. For example, the Decibel Bluetooth speaker being developed by the Module Project.

Products that incorporate repair, upgrading, reuse and disassembly are likely to become increasingly competitive. End of life harvesting and reutilisation of high value materials is a growth opportunity. An early example of this is Mint Innovation, which harvests gold and other precious metals from electronic waste.

Generating demand for circular economy solutions

Making radical change in a culture requires transformation of the culture itself. Today this means investment in smart advocacy and multi-media campaigning. Investors will be looking for companies that do this well. For an example, check out Patagonia’s promotion of its Worn Wear repair and second hand sales initiative.

This could also include initiatives like Revolve Scotland’s quality standard for second hand shops. Revolve boosts the mainstream adoption of second hand shopping. It does this by setting certifiable standards for second hand goods.

Stimulating local systems of reclamation and reuse is another option. For example, at Vinnie’s Re Sew in Wellington, volunteers remake waste clothing into useful products. This creates jobs and builds community resilience. More commercial takes on such ideas are just around the corner.

Marketing is the art of convincing you that you need to buy shit you don’t want. Maybe now they can work to convince you not to buy shit you don’t need.

Develop the infrastructure required to support a circular economy

Much of what makes up our current economic system is ill-suited to a circular economy. In New Zealand there is a dire need for innovation and investment in the way we move things around the country. This needs to plugged in to a circular economy. Efficient and effective reverse logistics systems will enable new circular economy business models.

Product stewardship requires support in our relatively small and dispersed population. Early investors could start to build brand loyalty and market leadership. They could also avoid the cost of waste and the associated regulation.

There is a role for investing in technologies and services for cooperation and collaboration. These will be vital for creating the connections that make the circular economy work. Loomio is an early example of this. But it could also extend to things like licensing lawyers and IP professionals. How can we change ownership models themselves to build in shared value?

Developing and promoting new business models

The business ideas behind this shift, and the systems that facilitate their adoption, need support. This would include investment in research and knowledge sharing. The Circular Economy Accelerator working to hasten the transition is one example. Further think tanks, research organisations and expert groups on the circular economy are likely to emerge. Early adopters will benefit from the circular economy tipping into the mainstream and as organisations demand the expertise they need to participate.

Harnessing new technology

Opportunities abound in uniting circular economy thinking with technology. If properly targeted technology will help realise new circular systems across the entire economy. AI-driven traffic management systems will ease congestion. They will help enable a wider choice of transport modes. Sensory systems will enable the smart use and sharing of products. Blockchain technology will enable unprecedented supply chain monitoring, management and transparency. Much of this is heading for ubiquity in the circular economy in a similar way that IT did during the personal computer revolution.

Developing and supporting enabling policy

Radical change requires changes in legal and regulatory structures. Investment is needed in the research and advocacy to enable that.

Any investment cognizant of the inevitable emergence of the circular economy is likely to perform better in the long term than those that are not.

The circular economy has already gained widespread acceptance, particularly in the EU and China and New Zealand too must play a leadership role in this transition and realize the economic opportunity.

At a recent Zero Waste Zero Carbon Conference in Edinburgh, it was interesting to learn that New Zealand, after languishing for the last decade is now regarded as an early leader in the zero waste movement ahead of some other developed countries. As momentum returns we could become an exporter of circular economy expertise, systems and technology and help create solutions the whole world needs.

About the author

Rachel Brown
Rachel Brown

Rachel Brown, ONZM is Founder & CEO, Sustainable Business Network Inc 2002 (SBN).

Rachel has played a critical role in advancing sustainability for more than 20 years. The network includes approximately 600 members and represents a range of organisation sizes and sectors. SBN runs the largest national sustainable business awards programme and a successful series of business events across the country.

Rachel’s work has seen the introduction to SBN of critical transformation areas in which New Zealand can lead the world. She has overseen the creation of systemic collaboration projects including: Million Metres Streams (a crowd funding platform linking donors to community waterway restoration projects); The Circular Economy Accelerator; and the Now Crowd. With her team they focus on capability building in the areas of sustainable business leadership; procurement; smart transport; restorative food; tourism; and the circular economy.

Rachel sits on government panels to inform on policy leavers, or signals, which support the transition to low carbon economy. She currently sits on the Board of the Small Business Council; WWF New Zealand, on the Reference panel for the Green Investment Fund and is on the business advisory panel for All of Government Procurement.

In 2009 Rachel was personally trained by Al Gore to present The Inconvenient Truth (part of the global climate change education programme). In 2012 she was invited by Al Gore to join an elite group of international presenters to be part of the Climate Reality Project broadcast. The broadcast reached over 3 million people across the globe.

As a regular presenter, collaborator, investor and driver of action within NZ communities, Rachel is committed to the role business plays in supercharging and transforming NZ’s economy into one that is smarter and more sustainable.

In 2018 Rachel was awarded the New Zealand Order of Merit for years of service to sustainable business.

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