Photo by Leonid Stern/ Unsplash
24 Feb 2021 Hotuba Uchumi usiochafua mazingira

The circularity transition: leaving no one behind

Photo by Leonid Stern/ Unsplash

Speech prepared for delivery at the second annual Circular Economy Conference organized by Chatham House 

2020 revealed many fragilities in our societies, economies and relationship with nature. COVID-19 claimed lives and magnified inequalities. Economies are facing deep recessions. The pandemic is driving the world off-course from achieving the 2030 Agenda, with poverty rising. Of course, COVID-19 is only one strand of the three planetary crises that are putting our future in grave peril: the climate crisis, the biodiversity and nature crisis, and the pollution and waste crisis. The world continued to heat up in 2020, contributing to wildfires, droughts and floods. The loss of nature to agriculture, infrastructure and human settlements has not stopped. Pollution of the air, land and sea is claiming lives and poisoning ecosystems.

At the heart of these crises lies our unsustainable modes of consumption and production. We take, make and waste. Metals. Wood. Food. Fibre. Electronics. We are throwing away money, throwing away resources, throwing away our chance for a future of human health, prosperity and equity. Even worse, we know we are doing it. It is time to change our ways. It is time to make 2021 the year of action.

  • Through a sustainable and green pandemic recovery.
  • Through stronger Nationally Determined Contributions that make the Paris Agreement goals reachable.
  • Through an ambitious new biodiversity framework that includes actions by the whole of government, economy and society.

Scaling up circularity and sustainable consumption and production (SCP) has to be at the heart of these processes.

The benefits of SCP and circularity are well documented. Circular economies would retain the value of 95 per cent of the material value in plastic packaging that is lost each year. Applying circularity to how we produce and manage food resources could reduce emissions by 49 per cent. Circular economies could generate USD 4.5 trillion in annual economic output by 2030.  Momentum to grab these benefits is growing. In Africa, 34 of 54 nations have instituted bans of some kind on single-use plastic. The EU’s Circular Economy Action Plan foresees a cleaner and more competitive Europe. As of January 1, amendments to the Basel Convention mean that international shipments of most plastic waste face strict new controls. Countries facing limitations in exporting plastic waste will have to be smart in managing plastics. Importing countries will now be able to accept only plastic waste that is easy to recycle. This is all good news. But, as we move forward, we need to understand the full implications of the circularity transition. With this in mind, let me offer three reflections on aspects that will be discussed in today’s conference.

First, the transition to a circular economy should leave no one behind. According to the International Labour Organization (ILO), the pandemic caused lost working hours equal to 255 million full-time jobs. It is crucial that the transition creates new jobs. It is also crucial that the transition protects the world’s poor and vulnerable. Production in a circular economy is more labour-intensive than in a linear economy. The Club of Rome found that full adoption of circularity would create over a million jobs in just five European nations by 2030. But there will be losses as certain sectors wind down. If we are to bring everybody along, we need to answer some difficult questions:

  • How can we bring on board those employed in the sectors that will see job losses?
  • How can we ensure that jobs in the circular economy are decent, safe and attractive?
  • How can we upgrade or create the skills required for a circular economy?

I challenge this conference to begin answering these questions. Second, trade needs to be used to proactively advance the circular economy. International trade in material resources has skyrocketed. In 2017, over 35 billion tonnes of material resources were extracted to produce only 11 billion tonnes of directly traded goods. This causes emissions, environmental damage and waste. Trade is part of the problem. But it is also part of the solution. Multilateral trade rules and regional trade agreements can advance the circular economy. For example, the updated EU-Mexico Free Trade Agreement and the EU’s free trade agreements with Australia and New Zealand, under negotiation or awaiting ratification, include stipulations on circular economy cooperation. Trade must also address the lost export earnings for low-income, resource-dependent countries. These countries need to capture a greater share of value and diversify their economies – including in recycling and renewables. Trade agreements can help here by integrating support for circularity into development assistance, such as Aid for Trade. This assistance could help countries transition to circular economies and adjust to circular economy policies in the economies of major trading partners.

Third, financiers can and must make the shift to circularity. In economies based on consumption, there is a fear that circularity can negatively impact profits. In actual fact, the circular economy makes money. No debt and equity instruments related to the circular economy existed in 2017. But by mid-2020, ten public equity funds on the circular economy had been launched. According to the Ellen MacArthur Foundation, assets managed through such funds grew from USD 300 million to USD 2 billion in the first half of 2020, outperforming other funds in the same category. Other financiers are seeing the way the market is moving. Since 2019, at least ten corporate bonds to finance circular economy activities have been issued. Since 2016, there has been a ten-fold increase in the number of private market funds investing in circular economy activities. A similar trend is unfolding in bank lending, project finance and insurance. Movement, yes. But still not enough. Recent research from UNEP’s Finance Initiative outlined key actions that the finance sector can take to accelerate circularity.

The three big asks are:

  • Integrate the transition to a circular economy into the organization’s strategy.
  • Develop knowledge and identify risks and opportunities related to linear business models versus circular ones.
  • Disclose the level of financing for circularity on the balance sheet.

Friends,

A carefully managed transition to circularity and SCP will be critical as we seek to deliver on the Sustainable Development Goals, the Paris Agreement, and the biodiversity and pollution agendas. It will be essential to recover from the pandemic in a way that does not store up more problems for the future. It will be essential to lift people out of poverty in a way that keeps our species within planetary boundaries. You have the power contribute to this transition – through your networks, through your action and advocacy, and through the choices you make in your everyday lives. I call on you to use it.

Thank you.

Inger Andersen

Executive Director

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