A circular economy: more than just another green initiative

in Industry Insights, 22.08.2014

In times when we have already learnt and acknowledged that earth’s resources are limited and that we globally consume in an unhealthy way, we are virtually non-stop fed with information about green initiatives and sustainability. We sometimes perceive it as “getting flooded” or even “spammed”. Activities around recycling, ecofriendly consumption, waste avoidance and renewable energies today influence almost all aspects of our life.

So, why do we need this “new” Circular Economy initiative then? Hasn’t everything been thought and said about how to protect the environment? Why is this initiative so highly supported by the OECD and why does it appear regularly on top of the agenda of the World Economic Forum in Davos? The Circular Economy initiative differs strongly from other green initiatives! The concept is not about making things “less bad” but about making things “much better” – and not only from a sustainability point of view.

What is it about?

The concept of a Circular Economy comes in response to growing ambitions for sustainable growth in the context of the increasing pressure that production and consumption are having on global resources. Up until now, the economy has mainly operated on a “take – make – dispose” model, representing a linear approach. At a time when the global population is rapidly growing but resources and materials are simultaneously in decline, an alternative approach has to be found. The appropriate reaction to this challenge is to make better use of available resources and to shift the focus to reusing, repairing and refurbishing products and recycling existing raw materials.

But it goes far beyond the idea of a more efficient use of materials. The circular model requires thorough planning at the design phase of product conception in order to create a meaningful disassembling process that makes economic sense. Lastly, the producer aims to get the materials back to reuse them again in new products. This new thinking process at the design stage provides a unique opportunity to reflect on other important aspects of the production cycle as well, like using materials that are more energy efficient and avoiding harm to users’ health. Such improvements contribute to significant savings of capital investments – which turns out to be very attractive for investors in this sector.

Gone with the “own”, in with the “use”

The concept basically calls for broader considerations including thoughts about “using” instead of “owning”. In this context, the term “leasing society” refers to a general trend towards paying for a service and not necessarily a product. People are prepared to discuss, for example, if they really need to buy a window for their home or if it would be an acceptable alternative to receive the service “daylight” and “isolation” and pay a fee for this service.

Sooner or later a shift to a circular model will be unavoidable, solely due to further scarcity of materials. At KPMG Luxembourg, we acknowledged this evolution and decided to actively drive the initiative with our experience and our established network. With the Luxembourg EcoInnovation Cluster we signed a Memorandum of Understanding that sets the framework for our joint effort to develop a Circular Economy in Luxembourg. Our activity aims to ensure that the financial sector is involved in the process and can give its input. We strive to raise awareness of the concept of the Circular Economy and to stimulate stakeholders in the financial sector to draft strategies and design products that support the development of this concept. The participation of the financial sector is crucial. In the past, the sector has always proved to be open to new business ideas and innovation. Starting from this point, we are looking forward to fruitful discussions and interesting events that we will organize with the key players of the financial sector in the coming year.

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