Circular economy principles add value to Nordic used textile industry

24 March 2017 Consultancy.uk

The export of used textiles from the Nordic region, using circular economic principles to guide its policy efforts in the area, is found to add value to the vale chain and environment, reducing the region's GHG output by 193,000 tonnes CO2e and water use by 72 million cubic metres.

In line with the reality of a finite set of resources and the destructive effect of their poor utilisation, from excessive waste to abusive exploitation, other options for economic growth and human wellbeing are being considered. One of the possibilities is the circular economy. The model focuses on limiting waste in the wider economy by reducing, reusing or recycling goods. This can be done by creating goods that are, among others, durable, repairable, upgradable, leverage sustainable materials and are recyclable down to the last screw.

The value chain of a range of goods are open to transformation to meet circular economic principles, with some closer, in terms of practicalities, to being transformed than others. In a new report produced by Ramboll, titled ‘Exports of Nordic Used Textiles: Fate, benefits and impacts’, commissioned by the Nordic Council of Ministers, trends in the export of used clothing from Nordic countries to Europe and the rest of the world are considered in some detail.

Typical post-sorted composition of exported Nordic textiles

Reuse and recycle value chain of textiles

More than 100,000 tonnes of used textiles are collected each year in the Nordic states. The used clothing is collected through a range of charity organisations, that themselves use proceeds from the sale to fund their wider charitable activity.

By weight the largest portion of the textiles (46%) are exported to Europe, Africa and the Middle East, the next largest segment, representing 15% of total weight and the lowest quality for reuse, are exported to Asia. 10% of the material by weight is used for industrial wipes, 8% for mechanical recycling and 8% for incineration. Around 10% of the weight represents the ‘cream’ of the crop of clothes, which end up for reuse in Europe.

First destination of Nordic exports of used textiles in 2014

In terms of the destination for Nordic exports of used textiles in 2014, Poland was by far the largest beneficiary at around 19,000 tonnes. Lithuania comes second, at around 11,000 tonnes, followed by Bulgaria and Estonia on around 7,000 and 6,500 tonnes respectively.

Turkey is the only West and Central Asian country in the top ten, with Pakistan, in Eastern Asia, taking the number ten spot. African countries dot the list, with Malawi, Somalia, Ghana and Mozambique.

The necessity of squeezing every cent from used textiles

The increase in supply of used textiles to the market has seen prices fall significantly in recent years. Resellers are increasingly needing to utilise the whole stock, including lowest quality for reuse and even the plastic bags in which produce comes, to improve their margin, which particularly in the upper bound can amount to $0.05 on per kilo.

Environmental and social impact of textile supply chain

The research found that the introduction of circular economic principles into the wider value chain of second hand textiles had a number of beneficial environmental impacts. In 2014 the practice led to an estimated net annual saving of 193,000 tonnes CO2e and 72 million cubic metres of water use, as well as wider mitigation of environmental impact that comes with the wider value chain of textile production.

Benefit to the environment does come with a number of externalities however, particularly to African textile producers, whose products are undercut by cheaper, and often better quality, used goods from Europe. However, while textile producers saw their operations negatively affected, the authors found that the processing of used imported textiles for wider redistribution into the regional populace across Africa created around 9,000 jobs directly, 1500 in sorting, 2000 in wholesale and 5500 in retail, and a further 10,000 in the informal sector, including market sellers and their families. David Palm Resource and Waste Management export at Ramboll, adds, "it was clear that even without used-textile imports, domestic African production would have been wiped out by cheap Asian imports anyway.”

He further points out that used textiles are “now sold either directly to distributors in Eastern Europe, Africa, South America or Asia, or via commercial sorters in Europe. Selling the textiles rather than donating them means there is less risk that they will immediately become waste in the recipient country, although the issue of imported recycled textiles competing with domestic production still remains a possible concern.” He adds, “That said, it was clear that even without used-textile imports, domestic African production would have been wiped out by cheap Asian imports anyway.”

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Private equity firms ramp up sustainability focus

19 April 2019 Consultancy.uk

In line with business leaders across the industrial gamut, private equity firms are increasingly on board with sustainability projects. According to a new study, the investment arms for major funds are implementing a number of strategies aimed at supporting sustainable economic development in line with global goals.

While the business world has finally begun to acknowledge the danger of climate change, effective action plans remain difficult to achieve. The Paris Agreement has stipulated a clear target for the decades leading up to 2100, although massively reducing emissions while not crashing the economy could be a tall order.

Businesses that are able to acquire capital can use it to boost productivity and output, thereby creating a virtuous cycle of development. However, some businesses are better able to utilise resources than others, both in terms of their relative productivity, as well as the value of the respective outcomes relative to costs (including environmental harms). Financing can therefore provide an avenue to select businesses that are aligned with various global sustainability goals, while shunning those that drive little or unsustainable social value creation.

Top moves made by investment arms towards responsible investment

Profit has for the longest time been the central criterion for investment decisions. Yet profit at any cost is increasingly seen as creating considerable social harms, while often delivering only marginal value. As a result, the private equity sector, which was initially sluggish to change its ways with regards to sustainability, has started to see the topic as an opportunity as much as a challenge.

A new study from PwC has explored how far sustainability goals have become part of the wider investment strategy for private equity (PE) firms. The report is based on analysis of a survey of 162 firms and includes responses from 145 general partners and 38 limited partners.

Maturing sustainability

Top-line results show that responsible investment has become an issue for 91% of respondents. For 81% of respondents, ESG (environmental, social, and corporate governance) was a board matter at least once a year, while 60% said that they already have implemented measures to address human rights issues. Two-thirds have identified and prioritised Sustainable Development goals that are relevant to their investment segments.

Change in concern and action on climate-related topics over time

While there is increasing concern around key issues, from human rights protections to environmental and biodiversity protection, the study finds there are mismatches between concern and action. For instance, concern among investment vehicles around climate change has increased since 2016.

In terms of risks to the PE firm itself, concern has increased from 46% of respondents in 2016 to 58% in the latest survey. However, the number who have taken action remains far below those concerned, at 9% in 2016 and 20% in 2019. Given the relatively broader scope of investment opportunities, portfolio companies face higher risks – and more concern – from PE professionals, at 83% in the latest survey. However, action is less than half of those concerned, at 31%.

Changing climate

In terms of the climate footprint of the portfolio companies, 77% of respondents state concern in the latest survey. 28% of respondents are taking action through the implementation of measures to mitigate their concerns.

Concern and action taken on ESG issues

In terms of the more pressing issues for emerging responsible investment or ESG issues, governance concern of portfolio companies comes in at number one (92% of respondents), while 60% have taken action on it. Firms have focused on improving awareness – setting up policies and a range of training modules for their professionals around responsible investment decision making. Cybersecurity takes the number two spot, with 89% concerned and 41% implementing strategies to mitigate risks.

Climate risks take the number three spot in terms of concern for portfolio companies (83%), but falls behind in terms of action (31%). Health and safety track records are a key concern at 80% of businesses, with 49% implementing action. Gender imbalance within PE firms themselves ranks at 78%, which is being dealt with by 31%. A recent survey from Oliver Wyman showed that there is gender balance at 13% of GP teams in developed countries.

Biodiversity is also an increasingly pertinent topic, with risks from pollution and chemical use increasingly driving wider systematic risks around environmental outcomes. It featured at number eight on the ranking of most likely global risks for the coming decade, with its impact at number six. As it stands, biodiversity is noted as an issue at 57% of firms, with 15% implementing action.