Circular economy in materials needed for sustainable growth

04 August 2017

Short-term profit-chasing has led the economy to face a chronic overuse of finite resources. The unsustainability of the current economic model has seen global businesses and governments consider more efficient forms of material utilisation, with circular economic models touted as a potential game changer. The system continues to allow customers to acquire key goods while promoting more efficient usage of materials. Simultaneously, an increase in focus on services that require lower levels of resources also offer additional opportunities for sustainable growth.

The increasing scarcity of many resources, is finally beginning to prompt action from economists, business leaders, governments and some consumers. The fundamental structure of the present economy, which tends to focus on the bottom line and profit above all else, is increasingly leading to environmental and economic uncertainty.

Warnings about the lack of longevity of current economic models have been made for some time now even while profit interests have held off change and transformation. Concerns, related in particular to climate change and other forms of waste such as plastic and environmental toxins, have prompted governments, consumers, and increasingly the business community itself to push forward change.

In recent years various economists and business leaders have begun to realise the need to change to mitigate the negative externalities of their business practices on the environment. One way forward in which consumption can continue in part, but through which the negative externalities are reduced or even eliminated, is through circular economic principles.

In contrast to a cradle-to-the-grave economic model, a circular economic model is, according to the Ellen MacArthur Foundation’s influential 2012 report 'Towards the Circular Economy', “... an industrial system that is restorative or regenerative by intention and design. It replaces the ‘end-of-life’ concept with restoration, shifts towards the use of renewable energy, eliminates the use of toxic chemicals, which impair reuse and aims for the elimination of waste through the superior design of materials, products, systems, and, within this, business models.“

Outline of circular economy

In a new report from Ecofys, now a Navigant company, titled ‘Circular Economy’, the potential benefits of a circular economy are considered. The report was commissioned by WBCSD, which is a CEO-led organisation comprising of over 200 leading businesses, with total revenues in excess of $8.5 trillion. While this report considers the effect that a circular economic model can have on the materials industry, another report released last year by Ecofys considers the impact of a circular economy on climate.


The study focused primarily on the use of metal ores, plastics, cement, glass, and biomass – including wood primary crops and cattle. The consulting firm modelled various key footprints of the various materials, to identify the effect of circular economic principles on their utilisation. The modelling included the supply chain of the extraction of the various materials.

In support of previous projections that circular economics could help meet sustainability targets, the study found that the total carbon footprint of the various materials studied stood at 7,538 MtCO2e, or around 20% of the global total emissions. The largest contributing segments were found to be cement (30%), cattle (26%), steel (23%) and primary crops (14%). The large contribution from cement and steel stemmed from their high energy requirement respectively, while the presence of cattle farming in the list was largely the result of methane emissions.

Contribution to water and land footprints

The materials also showed different impacts on two other externalities, water use and land use. In terms of water use, the eight materials contribute 95% of the global blue water footprint according to the study. Amongst these materials, primary crops used the highest amount by far, consuming 91% of the amount used by all eight materials.

In terms of contribution to land footprints, which create various negative externalities, from deforestation to desertification, wood, primary crops and cattle are the largest contributors from the various material considered.

In terms of mitigating the use of water, the study highlights various circular economic moves that can be made, including the reduction of food loss throughout the supply and consumption chains. Reducing food waste is also on the cards for reducing land-use, according to the study.

Inventory of circular economy

The study suggests various methods of reducing, reusing and recycling the various materials considered in the study. Substitution of meat for more environmentally friendly food products helps to reduce waste production, while reducing food waste and improving supply chains improves efficiency. Increased focus on materials with a lower environmental impact in various aspects of the supply chain for construction and goods improves initial impact and provides additional gains through improvements in product quality.

These improvements include a focus on longevity as well as the possibility for refurbishment and upgrades, which reduces the need for replacement – planned obsolescence is largely in contradiction to a circular economy, as are items of marginal quality. Consumption itself, as a principle, is also not in line with a circular economy as long-term ownership, including maintenance and respect, are necessary at the customer level.


More news on


Private equity firms ramp up sustainability focus

19 April 2019

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.