Background
Our current way of doing life, is to take resources, make products and then throw away the waste. This is a linear model, and is no longer working for businesses, people or the environment. In fact, in June 2020, some of the world’s business leaders, policymakers, academics, influencers and others signed a joint statement calling for a transition to a circular economy.[1]
“The circular economy is underpinned by three principles, each driven by design: eliminate waste and pollution; keep products and materials in use; and regenerate natural systems,”[2] as described by the Ellen MacArthur Foundation, who advises on how to close the loop. The hope is to have a no-waste world, where everything returns ashes to ashes, dust to dust.
Some of the nations in the world leading the circular economy charge are Germany who is reusing 95% of its produced waste with only the remaining 5% going to landfill; and aims to have banned landfilling while achieving a 75% recycling rate for all packaging waste and plastics by 2030.[3] The Netherlands aims to make the full transition to a circular economy by 2050, in biomass and food, plastics, manufacturing industry, construction sector and consumer goods;[4] The UK government has put a law-abiding regulation, world’s most ambitious target to cut emissions by 78% by 2035, by incorporating the share of international aviation and shipping emissions, with the aim to be net zero by 2050.[5]
Recently, UAE become the first country to sign the World Economic Forum’s ‘Scale 360’ initiative, “an innovative model for the development of a circular economy via the use of Fourth Industrial Revolution technologies such as Artificial Intelligence, Internet of Materials and blockchain-based solutions.”[6]
Another recent report suggests that “GCC cities could save $138 billion and 148 million tonnes of C02 emissions between 2020 and 2030 by adopting circular economy practices.”[7]
On Earth Day 2021, hosted by Capital Club Dubai, a panel of experts, led by Pedro Pereira of the Business Innovators Committee, spoke on various aspects of sustainability that are part of the Circular Economy
Moderator:
Pedro Pereira, Head of Climate Action and Responsible Innovation, SAP EMEA South
Panellists:
Antonio Miguel, Senior Vice President, Enterprise Risk Management, Mubadala
Monaem Ben Lellahom, Founding Partner and Group CEO, Sustainable Square
Anita Nouri, CEO, Business Development Director, Green Energy Solutions & Sustainability LLC.
Hussain Khansaheb, Director, Ministry of Climate Change and Environment, UAE
Introduction
To set the stage, Pedro presented some key points around the business agenda for sustainability strategies. “We will talk about what it takes to create a sustainability advantage in our businesses. And to achieve that, there are three main things for us to look at. The first is compliance, which is now driven by regulators and investors who are creating standards, frameworks and demanding sustainability metrics before releasing funds. The next is around increasing efficiencies by looking at ways to future-proof your business by better evaluating the resources used in making products and through operational models that are more long-term and include everyone in your supply chain, which leads to the third point around innovation. The business advantage is in unlocking many unexplored opportunities through inclusive innovation that takes all stakeholders into consideration, and this in turn also drives resilience.”
Key questions from the Audience
- How can we create a sustainability advantage in our businesses?
- Will the government need to bring in more regulations to push the private sector to comply with sustainable practices?
- Are businesses in the UAE ready to add a green premium to what they do in order to be sustainable?
- Will the government support and incentivise entrepreneurs that are making a positive impact in sustainable solutions?
- Does the private sector in the region realise the circular economy opportunities?
- Will responsible investors be able to nudge shareholders towards change?
Challenges
- The conversation around circular economy, is extremely complex and the scale is enormous. For example, if we look to replace plastic with an alternative, like cardboard or aluminum, we must consider the embedded carbon for each material, which in turn depends on the energy mix of where it is produced, where it is shipped to and how it is transported to consumers. Moreover, we need to consider a number of other issues such as durability, reusability, end of life impacts on land and marine life etc. “Before we can even deep dive into the facts, we will have lost the interest from most of the people. So, making this conversation happen and discussing solutions is a challenge. There are too many moving parts and interconnections,” explained Antonio.
- Collecting data is another the big challenge. You can measure your own energy usage and emissions, but how do you keep track of the carbon emitted by various members in your supply chain? The carbon footprint dashboard itself is quite complex, with tabulations for purchased energy, direct emissions, transportation emissions as well as from your different areas of your worldwide operations. To have real understanding of the impacts of your business, you need data on your own activities and supply chain.
- Plastic is often seen as the proverbial villain in this space, but Antonio asked, “How can we promote responsible use of plastic in some applications and encourage innovation to find alternatives for the applications that have the most detrimental impact”
- Anita explained emphatically that plastic is not biodegradable. “Unless it’s sitting on top of the landfill and under the sun, it will not degrade. However, as soon as it gets buried, it’s there forever.” She spoke about the major issues of landfilling that is still the waste disposal method in this region and was skeptical about the energy efficiencies of incinerators that are in the plans. Waste management and the landfilling challenge is a big one for this region.
- Hussain explained, “The purpose of the circular economy is to look at all the angles, however complex they maybe. However, we do have a challenge in the federal government. Any decision we make must be passed through a consensus from each of the seven different government jurisdictions, before being raised to the prime minister’s office for final approval. And it takes time to set out these decision and incentives.” The regulations to ban plastics did not pass in the Emirates, and the issue of plastics and the throwaway culture continues to be a problem in this region.
- Monaem encouraged the audience to take a step back and reflect on why we failed in fulfilling the millennium development goals (MDGs). “The problem is that the attitude has been ‘supportive’, and this does not work. The private sector has not invested in the change agenda. The UN then changed their modus operandi and introduced the sustainability development goals (SDGs), undergirded with the message that there are trillions of dollars of business opportunities. However, the private sector still did not take the bait and continued to engage from a ‘support’ perspective through corporate social responsibility or community agendas.”
- With many reporting standards and frameworks out there, like the GRIs, SDSs, ESGs, and new ones from Europe like the EU taxonomy (you cannot do business in Europe without this reporting), it is a real challenge for companies to know what to do. Using AI simulations in understanding what data is needed to help in the reporting is not easy. But more than the technology, the complexity is in aligning all the standards for the metrics. You have different data points from different dimensions, like principles of governance, data around the planet, people, prosperity. Is it possible for local and international regulations to become more standardised?
Solutions
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- “It was clear that the SDGs have been a nice to have for long time and the solution isn’t only focus on the SDGs, but rather incorporate legislation to enforce compliance and avoid the SDG greenwash,” Monaem explained.
- Antonio exhorted that how a company’s sustainability performance is an important factor in the financial value of a company and increasingly a key consideration by investors when making decisions. He also stressed that investors are also increasingly engaging with companies on those issues during the life of their investments. “In many cases, ESG is one of the main value drivers. As an investor, you can encourage the company to improve its sustainability performance and, as a result, mitigate risk, have a positive impact on the financial valuation of the company and your financial return. I find that change is happening quickly and in a large scale, and, although some aspects may be driven by policy and regulation, major change is often driven by customers. A case in point is the sustainable fashion industry in Europe that grew multiple times faster than the broader retail market in 2019 before COVID. So, sustainability also presents significant investment opportunities.”
- Businesses and investors have realised that ESG metrics are not an option anymore. “I think businesses in the Middle East have realised that these metrics attract investment, can help make them more resilient, drive competitiveness, attract new customers and embark into new journeys,” said Monaem.
- In the UAE, ESCA and both stock markets have mandated sustainability reporting, and more government entities are disclosing these as well. “It is inspiring to see that they are acting as the private sector,” said Monaem, “DEWA, Dubai Police, RTA, etc. are acting as sustainability advocates and reporting too, with the whole ecosystem is moving in the right direction.”
- Anita felt it would be good for companies to understand how to monetise their carbon reporting. For example, her company has over 300,000 tons of CO2 credits available which can be bought by the government supporting a company that relies on carbon reductions as a business.
- Hussain invited the participation of the private sector. “We believe that sustainable initiatives will come from the private sector and prefer to incentivise with many opportunities. Maybe at a later stage, some enforcements will be applied.”
- In the UAE, the government is in the final stages of launching the circular economy policy, which is an interconnected policy between the ministry of climate change, ministry of economy, the office of the minister of the artificial intelligence, ministry of industry and the advanced sciences. The circular economy policy will focus on four sectors – sustainability manufacturing, the green infrastructure, sustainability transportation, and sustainable food consumption and production. These four main pillars were based on the discussions with the local entities in the UAE and the major federal government. “We’ll also be launching a lot of initiatives in capacity building and incentives for these four sectors, for the private sector to engage with,” said Hussain.
Concluding Thoughts
Antonio is optimistic about the rising interest in sustainability amongst investors and hopes that finance can be force for positive change. Regarding the circular economy, he explained how the circular economy would result in products being designed with a longer life, and be easier to refurbish, repair and reuse. This all will create opportunities for new services and new types of companies.
Monaem explained that the two key words for circular economy are ‘materiality’ and ‘prioritisation’. Innovation in new materials being created will be valuable, but it’s a complex ecosystem and we can’t do everything at the same time, but we will get there, one step at a time.”
Anita felt that since sustainability affected all of us, we need to be more thoughtful in our actions, especially regarding waste management. She believes that more community dialogues and open platforms for conversations would be very productive.
Hussain concluded with gratitude to the audience for supporting the direction of the government, who is listening to the private sector and is working very hard to make the changes. He said that he has understood the need for both enforcement and incentives as being very important, and he would share information about UAE’s circular economy policy with Capital Club Dubai and appreciate feedback from the members.
Pedro concluded the discussions by exhorting and encouraging the private sector. You’ve got to be exemplary and an enabler. Let’s start by walking the talk and enabling our ecosystem, our customers, and our shareholders to be take on goals of business responsibility. There are many hidden opportunities. The Global Commission on Adaptation in 2018 found that investing US$1.8 trillion globally in five areas[8] from 2020 to 2030 could generate US$7.1 trillion in total net benefits. Do we want to risk failing to seize the economic benefits of climate adaptation with such high-return investments?[9]
As the corporate sector, government and experts make ambitious plans to go circular, and break the link between economic growth and use of limited resources, and cut waste from the system, it is worth also heeding to the voice of reflective caution from the World Resources Institute. “The circular economy is not a silver bullet for employment, sustainability and prosperity. In the rush to realise the promise of a circular economy, we need to think through the possibility of unintended consequences. Will the jobs generated by circular innovations be better jobs? Who will get them? Circularity could reduce material extraction and waste through reuse—but at the cost of what other resources? Will circularity reduce consumption, or just maximize use of existing products?”[10]
[1] https://medium.com/circulatenews/a-new-measure-of-business-success-9e53b7aafafa
[2] Ibid.
[3] https://www.worldfutureenergysummit.com/en-gb/future-insights-blog/embracing-the-circular-economy-new-me-and-global-initiatives.html
[5] https://www.gov.uk/government/news/uk-enshrines-new-target-in-law-to-slash-emissions-by-78-by-2035
[6] https://www.economy.gov.ae/english/circular-economy/global-initiative/pages/default.aspx
[7] https://www.worldfutureenergysummit.com/en-gb/future-insights-blog/embracing-the-circular-economy-new-me-and-global-initiatives.html
[8] The five areas considered for this estimate are early warning systems, climate-resilient infrastructure, improved dryland agriculture crop production, global mangrove protection, and investments in making water resources more resilient.
[9] https://www.cgiar.org/news-events/news/what-can-covid-19-teach-us-about-responding-to-climate-change/
[10] https://www.wri.org/insights/heres-what-could-go-wrong-circular-economy-and-how-keep-it-track