Is the Circular Economy the answer to Asia’s textile and industrial growth challenges? (continued mfr. series)

Is the Circular Economy the answer to Asia’s textile and industrial growth challenges?

Two articles of the Fung Global Institute, Hong Kong have caught our attention. The authors Pamela Mar and Andrew Morlet were evaluating the Circular Economy in view to answering Asia’s growth challenges

The first article is titled “The Circular Economy – Understanding the Business Case”, and the second is named “Can the Circular Economy Inform Asia’s growth challenges ?”.

As we have already explained in our series “The changing landscape of manufacturing”, there are many aspects that will revolutionise the way we will produce goods in the future. Examples from businesses around the world are underpinning that the changes are already well on way, creating new opportunities for new resilient markets capable of delivering sustainable property in the long term.

The jeans example

We are already well aware, that the circular economy thinking can drive changes in business models and expand a company’s product offerings. The two authors give the example that customers of Mud Jeans, a small apparel retailer in the Netherlands, can buy their jeans outright, or lease them for EUR 5/month. In the latter case, after one year, the user has three options, one is to swap their jeans for a new pair and continue leasing for another year. The second is to pay for four extra months at EUR 5 each and keep the jeans for as long as they like. The third possibility is to end the relationship completely by returning the jeans to the company. Mud jeans are made of high end organic cotton, which uses a lot of water. Since they are hard to source, it makes business sense to retain the jeans within its supply chain for as long as possible, they are, when they are returned, cleaned and re-used multiple times until they need to be recycled.

The Asian prerogatives

The experiences of Mud and others prove to be instructive for businesses looking to innovate, as well as for policymakers seeking to promote such practices. Of course it is evident, that for Circular Economies it takes the root, skills in design thinking, disassembly, remanufacturing, as well as the supporting logistics need to be developed on a wider scale. It is also a fact, that large multinationals may be able to invest in building such capabilities. On the other hand, in Asia, where the vast majority of global supply chain players are SMEs small to medium size enterprises, this knowledge may need to be built, shared, and disseminated within industrial clusters or ecosystems. Collaborative networks seem to be crucial.

Other aspects

The success of the Circular Economy will also depend on the adoption by both business customers and individual consumers of new types of products and services, such as remanufactured products and pay-per-use models. Usually remanufactured goods are less expensive, but they have to undergo the same or even more stringent tests as new parts.

The authors conclude that on the consumer side, however, trust issues may arise when it comes to products that have had multiple useful lives or businesses that apply a new ownership model. Mud Jeans markets its “rent” payment system as expensive clothing made affordable. It has also p9ositioned the worn appearance off reused jeans as “vintage”. Competitors, on the other hand, are still spending money and energy to replicate the second hand look.

By helping companies rethink traditional models of production and consumption, Circular Economy thinking may point to solutions tackling economics, as well as environmental challenges, while uncovering new opportunities and markets.

The changing landscape of industrialisation

According to the authors, the last 150 years of industrialisation have been dominated by a one way, linear model of production and consumption, in which goods are manufactured from raw materials, sold, used, and then discarded as waste. This “take-make-dispose” system, an estimated of 80 % of fast moving consumer goods, such as fashion clothing, end up in incinerators, landfill or wastewater.

The authors continue: Supported by the rise of global supply chains, this model has made available a wide variety of consumer products, and at prices that have expanded consumers’ choices, and, arguably, improved their lives. However, it has also place significant stresses on natural resources and the environment. The external costs of such large amounts of waste generated under such as short time, and the water and air pollution brought along, are only beginning to be understood.

The collateral damage and other effects

Declines in soil fertility are already estimated to cost around USD 40 billion globally. Global solid waste collection costs are also expected to grow from today’s annual USD 205.4 billion to about USD 375.5 billion by 2025, with four to five-fold increases in low and lower middle income countries. This makes clear that we need to better manage our natural capital and acknowledge constraints with strategies that decouple material extraction form economic growth.

It is obvious, that our current model is inherently uneconomical for much of the waste still contains value that is lost once disposed. Raw and synthetic materials can be brought back into the economy, especially rare metals; reusable parts can often be remanufactured and reassembled, at a fraction of the energy input necessary to produce the same parts from virgin materials.

The Circular Economy might deliver the right answers. A Circular Economy is an economic system restoring and regenerating by intention and design.

The prerequisites

Firstly, a circular economy aims to “design out” waste. Waste does not exist, products are designed and optimised for a cycle of disassembly and reuse, and where this is not possible, recycled or used to generate energy.

Secondly, it differentiates between “biotoxical” materials that are at least non-toxic and can be safely returned to the biosphere – directly or in a cascade of consecutives uses – and “technical” materials, such as metals or polymers and the products relying on them, which are designed from the start to be reused, remanufactured, and reassembled.

Thirdly, the energy required to fuel this cycle should be renewable to the extent possible, in order to fight against resource dependence, pollution impacts and susceptibility of oil shocks, as well as materials price volatility.

Some examples

As indicated before, some materials can be ”cascaded”, for instance, when cotton clothing is reused first as second hand apparel, then crosses to the furniture industry as fibre fill in upholstery, which may later be used in stone wool insulation for construction. In each case, they become substitutes for an inflow of virgin materials into the industrial system, until the fibres are eventually safely returned to farming systems or the wider biosphere.

For more complex products, loops can be closed both locally and regionally. In the case of power drill, which involves some 80 separate components and over 10 raw materials, its three major components – the grip casing, the chuck, and the gear body – can each be remanufactured into new conditions, and eventually disassembled and recycled as discrete materials, and brought back into production loops. However, it will have occurred after the first choice option for reuse, maintenance, and refurbishment has been exhausted, thus, products would ideally be designed for such processes.

So far, the majority of these efforts are located in or driven by those in advanced industrial economies of Western Europe and the U.S. In emerging Asia, debate is relatively muted and raises the relevant question whether Asian companies and countries should take more than passing notice of this economic model.

What it means for Asia

No doubt, the search is “on” in Asia for new and improved models for promoting growth, and development aligning with environmental realities. Asia based supply chains are facing clear challenges on both input and output. In the last TextileFuture Newsletter of April 1, 2014, we cited the example of the international sourcing group Li & Fung, Hong Kong, adapting its business model to the new market requirements.

Asian consumption of scarce resources and fossil fuels is rising rapidly, depleting its natural resource base and generating more and more pollution and waste every year. Asia today accounts for 67 % of global steel production, 34 % of global fossil fuels consumption, and contains 12 of the world’s top 20 most polluted cities. Asia also has a severe and growing waste problem, generating 32 % of the world’s urban waste.

As Asia urbanises, and more Asians belong to the middle class, the demand for more infrastructure, consumer goods and industrial products will only increase and add stress to an environmental outlook that is already quite bleak, conclude the authors.

They continue: While some countries, such as China, have publicly said that they will slow down growth in order to improve environmental conditions, such sacrifices are questionable on a wide scale and over the long term. Asia still needs the “big bang” effect of fast, strong growth and industrialisation for the sake of 800 million Asians still living in poverty and the 1.3 billion people who lack reliable access to electricity. Stopping growth or slowing growth is an unpalatable option from a social perspective.

Improving Asia’s resource efficiency and reducing waste in turn, in an economically positive manner, it would be a big step forward for Asia’s industrial base and environmental security. For reference, the Ellen MacArthur Foundation calculates that in the EU net material cost savings in an advanced circular economy scenario could be up to USD 650 billion annually, roughly 3.9 % of the EU’s GDP Gross Domestic Product,  in the medium lived complex products segment alone. Benefits are particularly pronounced in the motor vehicles industry, one of the fastest moving for Asia, both electric and conventional.

Already, some Asian countries have adopted some aspects of Circular Economy thinking. Japan, for instance, has since 2000 taken steps covering upstream and downstream opportunities. AS a result, Japan’s recycling rate for metals is 98 %, and up to 89 % of materials in electrical products, and remains a global leader at this front.

TextileFuture has already given you an insight what China is planning in view to urbanisation, rural development and industrial parks. The latter are a prominent feature in the countries industrial upgrading. It aims to take advantage of the clustering effect of industries to allow for efficient waste materials recycling and reuse, to counterbalance the ecological impact such growth is expected to bring about.

These early efforts may provide the basis for embedding the Circular Economy mindset more firmly into Asia’s industrial base. TextileFuture underlines once more that in many of the cited efforts the textile and apparel industry will be at the forefront of the Circular Economy mindset.

www.fungglobalinstitute.org/en/

www.ellenmacarthurfoundation.org

 

 


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