7 questions about the circular economy

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The Finnish Innovation Fund Sitra has been spotlighting the circular economy in Finland for many years now. Kari Herlevi, Sitra’s Project Director, Circular Economy, and an expert in the field explains what the circular economy is.

1. What is the aim of the circular economy ?

The circular economy aims to keep our economy working within the limits set by planet Earth. Consumption in the circular economy is based on using – instead of owning – services and on exploiting digital solutions. The goal is to minimise the losses and waste caused by production, and to keep materials, and the value inherent to them, circulating for as long as possible.

2. Why is promoting the circular economy so necessary?

On a global scale, we are consuming over the long term more than planet Earth provides. Overconsumption is the root cause of climate change and the reduction in biodiversity. Loss of biodiversity means the extinction of species, a reduction of natural habitats and a decline in genetic diversity. This threatens the stability of ecosystems, so they no longer produce raw materials, regulate flooding, recycle nutrition or store carbon. Climate change brings unpredictable weather conditions and droughts that damage farmland, and also cause glaciers to melt. The circular economy offers us tools for solving these problems.

It is important to keep existing materials in constant circulation because resources are being depleted globally. The use of rare earth elements, for instance, has increased rapidly in recent decades, and the European Commission has expressed concern about their availability.

3. What sort of business opportunities does the circular economy have?

According to a study conducted by Sitra, in a few sectors the circular economy already offers Finland’s economy growth potential of EUR 1.5 – 2.5 billion a year. The actual opportunities could, in fact, be much greater. Good business can be found not only in re-use, recycling materials and improved efficiency in using resources, but also in the product-as-a-service model. When a product is not sold as a good but instead as a service, its lifecycle can be extended by servicing. This also generates a cash flow instead of a one-off sale. When the vendor retains ownership of the product, new ideas about developing it are found and new secondary markets created.

4. What do the sharing economy and the circular economy have in common?

In a sharing economy, resources can be use more efficiently by raising the utilisation rate of goods. For example, Über has increased the utilisation rate of cars by developing a digital sharing platform for its operations. I believe the sharing economy has a lot of growth potential for startups. It makes sense, also to address inefficiencies in traditional companies, where new solutions can radically change the internal infrastructure.

5. Why has Finland become a pioneer in the circular economy?

A decisive factor has been the Finnish parliament’s cross-party commitment to a circular economy. That is specifically laid down in the Government Programme. Achieving a circular economy in practice requires close collaboration between different players. That is often easier in a smaller country than, say, in federal states. In Finland, different parties work well together. There is still a lot of work to do, though, before we really transition to a circular economy model. On 13 March, under the direction of Sitra, Finland’s circular economy road map will be updated to show Finland’s next steps towards becoming a circular economy.

6. What still needs improving?

Carbon dioxide emissions need to be reduced. Even if all production used renewable energy, the emissions in the manufacturing phase would need to be reduced. Also, materials and raw materials are still not recycled adequately and, for instance, recycling plastics is very limited in Finland compared to other countries. We have to completely revise our ways of thinking and behaving so that buying a new article is not the first option, A lot also remains to be done towards renewing companies’ internal operating models.

7. Why haven’t we already advanced further?

Putting a circular economy into practice faces many types of challenges at different levels, starting with legislation. Laws and economic incentives could point the way towards a circular economy more effectively than at present. Administrative guidance in, say, recycling plastic also needs overhauling. A challenge for companies is to be bold enough to try new ways of working alongside their current business. In the public sector, procurement should be better harnessed to ecofriendly activities, which would also generate a market for circular economy solutions.

The value chains of a circular economy are global. Even if we do things right in Finland, we are dependent on the actions of others. Finnish companies need to keep an eye on market developments and try to influence them. Developing markets offer export opportunities, but they are also very challenging.

SMEs are not yet fully aware of the opportunities the circular economy offers. In September, together with Technology Industries of Finland and Accenture, we published a playbook for the circular economy. Companies can use it to view their business operations from a circular economy perspective. In May, we will update the “The most interesting companies in the circular economy” list, and we encourage companies to read it.

 

Check out:Circular economy business models for the manufacturing industry”.

Check outThe most interesting companies in the circular economy”.

 


Finnish road map to a circular economy

What it is: The world’s first circular economy road map set out Finland’s first steps towards a circular economy. Drawn up under the direction of Sitra in 2016. The road map collected the views of central players in Finnish society on the needs for change and the actions for bringing about change. Altogether some 50 stakeholders were involved. Inspired by Finland’s example, more than ten other countries have published a circular economy road map.

What has been done: Many development programmes and projects have been founded. Trials conducted on the circular economy in the food system. Circular economy teaching modules launched. The most interesting circular economy companies listed and published. Consortiums developing circular economy solutions suitable for funding identified and financed. Producing sustainable events promoted. Textile and fashion industry spurred on with its own development programme.

What comes next: An updated road map will be published in March 2019.

Events: The World Circular Economy Forum showcases global best practices for a circular economy. Sitra arranged the event for the first time in Helsinki in 2017. The following event was held in cooperation with the Ministry of the Environment of Japan in Yokohama in October 2018. The next World Circular Economy Forum will be held this year in June in Helsinki.