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Visualized: The Circular Economy 101 – Visual Capitalist

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The principles of a circular economy trace back as far as 3,000 years.

Archeological evidence shows that Romans recycled trash following the eruption of Mount Vesuvius in 79 AD. Roughly 200 years later, people recycled glass during the Byzantine Empire. Fast-forward to today and circular economy strategies are projected to generate trillions in economic output by 2030.

But how does the circular economy work? This infographic from MSCI provides a guide to circular economies—from circular business models to circular technologies.

No Time to Waste

First, let’s start at the root of the problem, our current consumption trends:

  • Raw Materials: Global extraction is projected to double by 2060.
  • Textiles: 85% of clothing and textiles are discarded.
  • Waste: Global waste is projected to rise 70% by 2050.
  • Water: 80% of global wastewater is untreated or reused before returning back to the ecosystem.

To change consumption patterns and reduce waste, consumer behaviors, business models, and policies will need to change. But the big question is how?

To answer this problem, the concept of a circular economy is gaining traction.

What Is a Circular Economy?

A circular economy is centered on the idea of resources being kept as long as possible within the economic system, where materials that have undergone an entire lifecycle, from production to end stage, are returned to the economic system as an input.

Above all else, a circular economy is based on sustainable life cycles.

Circular Economy Growth

In 2019, BlackRock launched an inaugural Circular Economy fund. Since then, it has attracted $2.1 billion in investment. A number of the world’s largest asset managers have followed suit.

Policy-driven agendas are also focused on the circular economy shift:

  • Paris Climate Agreement
  • UN Sustainable Development Goals (SDG 12, 11, 9, 13)
  • European Green Deal Circular Economy Action Plan
  • 2019 African Durban Declaration
  • China’s 5-Year Circular Economy Plan
  • Circular economy strategies across Latin American countries

Given the steep cost of linear economic models, governments are beginning to pay attention to the merits of a circular economy.

The Upside of a Circular Economy

Circular economy principles aligned with sustainability offer the following advantages:

  • Reducing GHG emissions: 9.3 billion tonnes of CO₂e could be prevented by 2050 if circular economy strategies are applied across the steel, aluminum, cement, food, and plastic sectors.
  • Preserving long-term biodiversity: ~50% decrease in harmful effects on farm-level biodiversity through applying circular strategies.
  • Improving ocean health & water quality: 80% reduction in plastics entering the ocean globally by using reclamation, recycling, and reduction strategies, among others.
  • Economic growth & job creation: $4.5 trillion global economic opportunity by 2030 through spurring innovation in waste reduction.

Importantly, circular strategies, technologies, and transition companies are looking beyond traditional economic models.

5 Business Models in a Circular Economy

From alternative energy to bio-based and recyclable materials, the most effective circular business models are ones that create obvious value.

Let’s consider five circular economy business models and where they can be applied in the supply chain. Additionally, some of the models can be adapted to any part of the supply chain.

Business Model Supply Chain Example
1. Circular supplies/Circular design Product design/R&D

Procurement/raw materials acquisition

2. Resource recovery
(Recycle, Waste as a resource)
Reverse logistics

Material & product manufacturing

3. Product life extension
(Remanufacture, Resell, Upgrade)
End-of-life

Sales & marketing

Product use

4. Share Product use

Material & product manufacturing

5. Product as a service Logistics

Product design/R&D

Today, circular models present opportunities in fashion, food systems, mining and metals, among others.

How are Circular Economy Indexes Created?

A circular economy theme is built on two key dimensions:

1. Smarter technologies: Providing circular technologies

  • Single-use plastics alternatives
  • Digital technologies that replace resource-intensive products

2. Resource efficient processes: Maximizing materials and minimizing impacts (e.g. emissions)

  • Improved package materials
  • Efficient processes that reduce land degradation and promote diversity

Then, MSCI identifies areas of innovation that support a circular model. Consider the following circular technologies, which are produced by companies that contribute to a circular economy theme “end-state” through their products and services.

7 Circular Technologies Example
1. Renewables & energy efficiency Replacing oil-based plastic with compostable materials
2. Sharing economy Peer-to-peer accommodation
3. Future mobility Electric vehicles
4. Internet economy Online markets
5. Water sustainability Wastewater treatment systems
6. Plastic sustainability Companies using only one type of polymer for packaging
7. Biodiversity Phytotechnologies

It also looks at circular transitions, which are companies that enable the shift to a circular economy through their management of related issues.

3 Circular Transitions Example
1. Natural resources management Deforestation
2. Water resources management Smart metering devices
3. Plastic transition Biodegradable plastics

As a result MSCI has created a range of Circular Economy related indexes:

  • Natural Resources Stewardship
  • Sustainable Water Transition
  • Plastics Transition
  • Renewables & Energy Efficiency
  • Sharing Economy

It’s worth noting that what is measurable today will likely only expand, considering the evolving regulatory frameworks and thinking around a circular economy,

The Value of a Circular Economy

Through looking at circular economy innovation, we yield three important insights:

  • Competitive earnings
  • New economic models
  • Sustainable solutions

For a growing number of investors, companies, and researchers, a circular economy provides a wide scope of opportunities ranging from single-use plastics alternatives to water sustainability.

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Venezuela Holds Rare Call With Bondholders as Economy Recovers – BNN

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(Bloomberg) — Venezuela’s government is making a fresh attempt to open channels with international investors, presenting potential deals in the oil and tourism sectors and talking up new economic growth data. 

Advisers, led by top economic aide Patricio Rivera, held an hour-long call on Wednesday with at least two dozen bondholders and fund managers from the U.S. and Europe, according to four people with direct knowledge of the conversation. The call was organized by the Venezuela Spain Chamber of Industry and Commerce. 

Rivera, a former Ecuadorian Finance minister who is spearheading reforms aimed at liberalizing Venezuela’s economy, briefed the investors on policy shifts and the government’s commitment to become more market friendly, the people said. He also said the government was open for investments in several sectors, from oil and minerals to tourism, the people said.  

Rivera did not respond to a request for comment. 

Venezuela has had limited contact with debt holders since it defaulted on bonds in 2017. It owes at least $60 billion plus interest on those defaulted notes. The call comes as the country breaks a seven-year recession, posting economic growth of  7.6% in the third quarter of 2021, according to preliminary data, and as it exits a four-year bout of hyperinflation. 

Despite the new outreach, Venezuela remains under U.S. economic sanctions that pose an important roadblock to American bondholders. 

©2022 Bloomberg L.P.

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Xi resets policy priorities to boost economy – The Tribune India

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Yogesh Gupta

Former Ambassador

China’s Central Economic Work Conference (CEWC), held at Beijing from December 8 to 10, 2021, decided that all stakeholders should work actively to maintain stability in the macro-economy in view of new challenges as the country holds the Winter Olympics from February 4 to 20, 2022, and the 20th Congress of the Communist Party of China (CPC) later this year. What made the economic planners to rethink the policy direction was the sharp dip in China’s GDP growth rate from 18.3% in Quarter 1 of 2021 to 7.9% in Q2, 4.9% in Q3 and 4% in Q4.

Structural changes ordered by President Xi Jinping such as reducing loans to the real estate sector, lower emission targets resulting in power cuts and the zero tolerance to Covid-19 had played an important role in decelerating the economic growth. Xi is personally involved in directing the real estate policies as he considers the unchecked growth of this sector as posing a threat to China’s economic stability.

New measures undertaken by the Xi regime included severe restrictions on giving bank loans, allow hugely indebted developers to default to rein in large unproductive expenditure and announcement of a property tax on a trial basis in certain provinces to discourage the purchase of multiple properties to curb speculation. Given that the real estate sector accounts for 29% of the Chinese economy, these measures, according to some economists, may reduce China’s GDP growth by about 0.5% in 2022 and thereafter. These restrictions have strained the local government’s finances, as selling land is an important source of revenue. Several local governments slashed the salaries of their staff, weakening the consumption.

In the last two years, China has undertaken several measures to reduce its greenhouse emissions, including controlling of its coal-fired power plants to meet its targets of peaking carbon dioxide emissions by 2030, lower the carbon dioxide emissions per unit of GDP by over 65% (from 2005 level) by 2030, increase the share of non-fossil fuels and forest stock. Decrease in power generation by coal-fired plants and rationing since September 2021 disrupted industrial production in many provinces as several industries were forced to cut production and reduce jobs. Recurrent outbreaks of Covid in some areas and China’s zero tolerance approach again forced several businesses to close and confined about 20 million people at home. The working of several companies in technology, education and gaming sectors was adversely impacted due to the regulatory actions, resulting in lower earnings and loss of jobs.

At the CEWC, it was felt that new external challenges had arisen as President Biden had not only continued the policies of his predecessor but also taken a harder line with his allies towards China. The Comprehensive Investment Agreement with the EU had remained frozen and China’s relations with Australia and Japan had deteriorated. These countries had become more vociferous in criticism of China’s human rights record and applied a number of sanctions against the Chinese companies and individuals for investments and exports. Several Chinese leaders appeared nervous about the slowing of economic growth in 2022 as Xi is expected to seek an unprecedented third term as President. They advised him that priority should shift to maintaining growth and stability so that the Chinese economy could convey a picture of strength.

Amid deterioration in China’s external environment, the conference identified securing supplies of primary products such as food, soybean, minerals and energy as a priority to prepare for the post-Covid world. “The Chinese people’s rice bowl must be firmly held in their own hands at all times,” Xi emphasised. He underlined the need to establish a strategic materials reserve to secure minimum needs at critical moments and work on a comprehensive conservation strategy. Other four priorities agreed were “common prosperity, capital regulation, defusing major financial risks and carbon neutrality. Concerns were expressed at the high level of unemployment among the migrants, the youth and possible outflow of foreign exchange as the US dollar strengthened following rise in the interest rates.

In view of these reasons, it was agreed that the government would have to give bigger policy support to the economy. China’s central bank had also conveyed dovish signals, cutting the reserve requirement ratio to the banks in a departure from central banks in the developed countries. Though the policymakers remained committed to structural reforms, it was agreed to slow down the regulatory crackdown and provide targeted support to SMEs, first time homebuyers, more funding for technology innovation and green investments.

China’s foreign trade made impressive gains in 2021, reaching $6.05 trillion as it functioned as a supply house to the rest of the Covid-stricken world. Trade with the US soared by 28.7% ($755.6 billion) and India by 43.3% (total $125.66 billion, Indian exports $28.14 billion, imports $97.52 billion). The increased global demand was chiefly responsible for 8.1% growth of China’s economy in 2021.

Chinese leaders are worried that external demand may not sustain as other major economies come out of Covid and start exporting this year. Consumption in China has not moved beyond 55% of the GDP (54.3% in 2020) in recent years due to the saving habits of the Chinese people for expenditure on health, education and old age. The government is, therefore, forced time and again to resort to big investments to drive up the growth rates.

It is now trying to increase investments in research and innovation (its R&D expenditure reached 2.4% of GDP in 2020), adoption of intelligent technologies and digital economy. While these technologies will yield efficiencies and mitigate to some extent the adverse impact of declining workforce, these will not lessen the latter’s adverse impact on lowering consumption. China will, therefore, be forced to accept sub-5% economic growth in the coming years as it rebalances its economy away from non-productive expenditures and starts experiencing the negative effects of population decline.

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The so-called 'gig economy' is on the rise — here's what that means for Alberta workers – CBC.ca

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They’re the people who pick you up in an Uber or deliver groceries to your door — so-called gig workers, referred to as “independent contractors” by the companies for which they work — and across Canada, there’s an ongoing debate about the future of their industry.

Last month, a report from the Ontario Workforce Recovery Advisory Committee recommended that those who work in the “gig economy” — for example, working for apps such as Uber and Skip The Dishes — should be guaranteed a minimum wage, along with some other protections.

No exact analog to that committee currently exists in Alberta. A spokesperson for Tyler Shandro, Alberta’s minister of labour and immigration, said the provincial government’s primary commitment is to support workers as the economy continues to recover.

“Alberta’s government continues to monitor the gig economy, as it is an evolving sector with unique needs,” said Joseph Dow in an email.

According to a study released by Statistics Canada in 2019, around eight per cent of all workers in Canada participated in gig work in 2016, up from 5.5 per cent in 2005. 

Uber Eats courier Spencer Thompson is shown in Toronto in a 2021 file photo. On the heels of new recommendations being made for gig workers by the Ontario provincial government, an Alberta labour leader says a conversation needs to be had around the future of gig work in the province. (Frank Gunn/The Canadian Press)

Efforts to update laws around how gig workers are paid and what benefits they are entitled to has been a contentious issue over the past few years. 

During the last federal election campaign, Conservative Leader Erin O’Toole said that the 1.7 million Canadians working in the gig economy were “left behind” during the pandemic.

An Alberta labour leader says despite the same issues existing for those participating in Alberta’s gig economy — low wages, insecurity and lack of benefits — no conversation is being had provincially about the supports available for these workers.

“I’m profoundly concerned about the shift towards gig work,” said Gil McGowan, president of the Alberta Federation of Labour.

“It’s bad for individual workers. But I would argue that it’s just as bad for the economy, because when people are faced with that kind of insecurity, they can’t participate in the economy in the same way as workers in other sectors.”

Brandon Mundy, a delivery driver with Instacart in Calgary, says working in the gig economy has helped him through some difficult times — but he’s hoping changes are introduced to mitigate the risks of working in a competitive and saturated market. (Helen Pike/CBC)

Brandon Mundy is a delivery worker with Instacart, a grocery delivery service.

He previously delivered with food delivery platform DoorDash, but said he stopped working for that service due to long periods of delays between orders.

“It can get incredibly competitive these days, because of how saturated the delivery driver industry is right now,” he said.

Even though Mundy said he tends to make more working with Instacart, he’s noticed smaller payouts recently. Plus, he’s been putting significant wear and tear on his vehicle.

“I would sure hope [Alberta] introduces support for gig workers,” Mundy said. “Especially with how popular it is now, especially through COVID.”

Efforts to unionize and departures of platforms

Those gig workers completing tasks for apps like Uber and Lyft are considered independent contractors by the companies. 

Therefore, the company isn’t obliged to pay minimum wage or other protections — but that is a “smoke screen,” said Jim Stanford, economist and director of the Vancouver-based Centre for Future Work.

“Courts and labour regulators in many countries around the world are recognizing that and saying, no, just because you assign the work over a smartphone doesn’t mean they’re not your effective employee,” Stanford said.

Brandon Mundy, a delivery driver with Instacart, says the time it takes to buy groceries from a store, and then deliver them to a home, isn’t always translating into reliable profits these days. He said an oversaturated market and mitigating concerns like vehicle repair can make things more challenging. (Helen Pike/CBC)

Uber Canada previously referred CBC News to a proposal that would provide a benefit fund to workers, adding that the company attempts to prioritize “what drivers and delivery people want: flexibility plus benefits.”

Efforts by workers to secure more benefits have also led to certain app-based platforms reconsidering their availability within Canada.

In 2020, food delivery service Foodora announced it would leave Canada in the wake of workers attempting to unionize. 

Stanford said such moves suggested that business models of gig platforms depended on the “exploitation of gig workers.”

“That should really be a warning sign for us that this is not a business model that we should encourage in Canada. We have to make sure that they’re subject to the same rules and responsibilities as any other employer,” he said. 

“Otherwise, this cancer, which is spreading through the labour market, will continue to undermine wages and working conditions in all kinds of industries.”

Ontario’s recent proposal did not include everything the union-backed group Gig Workers United called for, including for gig workers to receive full employee protections.

In early December, the European Union announced draft legislation that would provide employee rights to gig economy workers, a move that would affect millions of workers.

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