Closing the loop: Ditching 'take, make, dispose' for a circular economy
For a long time, the world's economies have operated on a "take-make-dispose" linear model. With the growing focus on sustainability and environment concerns, attention has turned to a circular economy - where resources are maximised and kept in use for as long as possible. Money Mind reports.
SINGAPORE: Take, make, use and throw. For a long time, the world's economies have operated on a linear model where raw materials are taken and made into products before being used and thrown away.
With the growing focus on sustainability and environment concerns, attention is being turned to a circular economy - where resources are maximised and kept in use for as long as possible. It’s a new way of thinking – and one that could also pay off for investors.
One example of this closed-loop system can be found at Singapore company TRIA, which developed Bio24, a system to turn food waste and the container the food came in into fertiliser.
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TRIA’s push towards circularity is becoming increasingly important. That’s because the traditional “take-make-dispose” consumption model adopted by the linear economy is putting a strain on finite resources.
Currently, the linear economy consumes resources at 1.75 times the planet’s annual regenerative capacity.
During the two-month "circuit breaker", for example, Singapore households generated an extra 1,334 tonnes of plastic waste from takeaways and food deliveries. That’s the weight of about 90 double-decker buses.
And this, says Eco-Business founder Jessica Cheam, highlight the dangerous relationship we have with the natural world.
“We’re not respecting it, we’re not responsible stewards of the resources that are given to us and we are deforesting our forests and exploiting our environment. The use of resources is something that is super critical because our earth is not a never-ending supply of resources and we really need to be responsible stewards,” said Ms Cheam.
Circularity could be the much needed alternative. The circular economy is driven by sharing, recycling, re-using and waste management - and it is restorative or regenerative by intention and design.
Mr Holger Frey, a senior portfolio manager at RobecoSAM, an investment specialist focused exclusively on sustainable investing, said the global economy today is only 9 per cent circular.
“Up to 80 per cent of the environmental impact is determined at the design phase. And historically, environmental impact has not been considered as a key priority in product design, which is the reason why so many products still cling on to linear design principles," said Mr Frey.
"But now looking at the younger generation, there’s a general change in mindset and there’s more awareness of environmental impact and this also translates into new thinking in product and industrial design,” he added.
According to Accenture, the circular economy could generate US$4.5 trillion of additional economic output by 2030. This could lead to a myriad of opportunities for investors, including investing in the stocks of companies with a sustainability agenda, or in start-ups in the circular economy, said industry watchers.
Healthcare, industrials, consumer staples and discretionary staples are some of the sectors investment firms have highlighted. Other themes emerging include those around the built environment and mobility.
"We are interested in innovators, so like companies producing biodegradable consumer packaging or a sensor technology for sorting automation. On the consumption side, this is complemented by companies that excel really when it comes to sustainable sourcing of materials," said Mr Frey.
Ms Rebecca Somers, partner at McKinsey & Company, observed opportunities in the built environment and food-related industries.
“One is around building design, what we call the built environment and this is about the modular design and the use of building infrastructure where they are made of recycled materials. There’s a theme around mobility. And this is around making sure that the use of vehicles are net emission zero vehicles, making sure that the vehicles are made of refurbished or recycled parts and also shared mobility platforms," she said.
"There’s also a big theme around nutrition and food waste, so digital apps and platforms that track food, from farm to table, ensuring minimisation of food waste,” she added.
Experts say that these changes can drive value and thus ultimately be a winning proposition - not just for investor returns, but also for the long-term future of the planet.
"You should really think about where your money goes and what products and materials you’re buying because if we can help to support companies that support the circular economy transition, then we should be doing that," said Ms Cheam.
"We should not be buying products and services from companies who are still in that linear model where anything that you use gets disposed off in a very irresponsible manner. And if we can create that kind of movement among consumers, then we’re going to see the acceleration of that economy," she said.