Closing the Loop:
Climate Action through Circular Economy

“The code of our humanity is faithful service to that unwritten commandment that says we shall give our children better than we ourselves received.”                                    

Aaron Sorkin, The West Wing

Is our fidelity to this “unwritten commandment” simply a moral choice, or does some fundamental existential truth lie there? How do we, as a species, balance our desire to grow with the threat of depleting resources and global climate change? The answer to this is the essence of sustainable development: fulfilling our needs without compromising the ability of future generations to meet theirs.

The question is: how far ahead are we on this journey?

According to the findings of the World Meteorological Organization, 2023 has been the warmest year on record. The global temperature in 2023 was 1.45 degrees Celsius above the pre-industrial baseline, “dangerously close” to 1.5 degrees, the lower limit set during the Paris Agreement on climate change, beyond which scientists predict increasingly severe impacts on ecosystems, weather patterns, and human health.

This global warming has already had catastrophic consequences. Between  2010 and 2020, the most vulnerable regions to climate change, where 3.3 billion to 3.6 billion people live, saw humans die from floods, droughts, and storms at a rate 15 times higher compared to low-vulnerability regions. Global warming has also doubled the rate of global mean sea-level rise in the past couple of decades—from 2.27mm per year in 1993-2002 to 4.62mm per year in 2013-2022. This has affected the lives and livelihoods of more than 900 million people living in coastal zones and low-elevation areas, leading to massive displacement, loss of habitat, and severe impacts on global food and water security.

^{Source: The Sustainable Development Goals Report, Special Edition}

Clearly, the urgency to take action to manage the threat of climate change, not just at the level of governments but also at the level of individuals and businesses, cannot be overstated.

In this blog, we will explore how adopting circular economy principles helps mitigate the adverse impacts of climate change and examine how business organisations have integrated these principles into their sustainability policies. Before diving into these topics, we will look at the Sustainable Development Goals (SDGs) and highlight the importance of climate action for our survival.

In a historic moment of global cooperation, 193 member countries of the United Nations charted the course for moving towards a sustainable future. Between September 25 and 27, 2015, during the Sustainable Development Summit held at the United Nations Headquarters in New York, 17 ambitious Sustainable Development Goals (SDGs) with 169 targets were formally adopted. As an integral part of The 2030 Agenda for Sustainable Development, which calls for a collaborative partnership of all countries and stakeholders to stimulate action in areas of critical importance for humanity and the planet, these Sustainable Development Goals  are designed to “end poverty, protect the planet, and ensure that by 2030 all people enjoy peace and prosperity.”

A very important motivation for countries adopting the SDGs was the success of the Millennium Development Goals (MDGs) that ran from 2000 to 2015. Since the inception of the MDGs, over one billion people have been lifted out of poverty, and child mortality rates have dropped by half compared to 1990. These achievements set the stage for a more ambitious agenda that culminated in the adoption of the 17 Global Goals by the United Nations.

Although countries have made significant strides in their efforts towards the SDGs in the last nine years, they are still far from reaching their targets as highlighted in The Sustainable Development Goals Report 2023: Special Edition.

^{Source: The Sustainable Development Goals Report 2023, Special Edition}

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According to the World Economic Forum’s Global Risk Report, the first four of the top ten perceived global risks in the next ten years are all related to the environment. The four highest risks identified are extreme weather events, critical changes to earth systems, biodiversity loss and ecosystem collapse, and natural resource shortages. In light of this, concentrated climate action to combat climate change and its impacts is not only necessary but inevitable for our survival.

The essence of the Paris Climate Agreement in 2015, the same year the SDGs were introduced, aligns closely with the goals of SDG 13. Climate action refers to the efforts taken to fight climate change and its impacts. As outlined in SDG 13, climate action focuses on integrating climate change measures into the national policies of countries, improving education and awareness about climate change mitigation, and building resilience and adaptive capacity for climate-related hazards and natural disasters in all countries.

SDG 13 also aims to mobilise $100 billion annually from developed countries to support developing countries in their climate action efforts. Another important target involves promoting mechanisms for effective climate change planning and management in least-developed countries and small island developing states, with a special focus on empowering women, youth, and marginalised communities.

We primarily live in a linear economy. In this system, raw materials are extracted from nature to make products, which are then discarded as waste after use. Sometimes the waste is recycled; however, according to the Circularity Gap Report, only 7.2% of the used materials are cycled back into the economy. This means more than 90% of materials are either “wasted, lost, or remain unavailable for reuse for years.” The circular economy, on the other hand, focuses on extending the lifecycle of products through recycling, reusing, and refurbishing. This minimises waste and reduces the need for new raw materials. By creating closed-loop systems, the circular economy aims to keep resources in use for as long as possible. A circular economy also helps cut down on greenhouse gas emissions from manufacturing and landfill waste. Therefore, moving towards a circular economy is increasingly seen as a fundamental part of climate action.

^{Source: World Economic Forum}

Through responsible consumption and production, a circular economy also helps tackle the problem of resource depletion, as addressed by SDG 12. Indeed, our natural resources are depleting at an unprecedented rate. In fact, natural resources are depleting so fast that, according to estimates, resources equivalent to those of three planets would be required by 2050 to sustain our current lifestyles. Moreover, with material extraction projected to reach 170 to 184 billion tonnes per year by 2050, these activities could cause irreparable harm to the planet.

Research indicates that adopting a circular approach in four key industries—cement, steel, plastics, and aluminium—as well as within the food system, can achieve a 49% reduction in greenhouse gas emissions. Under the Paris Agreement, countries need to submit Nationally Determined Contributions (NDCs) to reduce greenhouse gas emissions and fight against the impacts of climate change. Adopting the circular economy principles into national policy is important for this goal.

The European Union which attempts to transition into a completely circular economy by 2050 has been leading this journey with a comprehensive Circular Economy Action Plan. It also requires financial market participants to disclose sustainability information through the Sustainable Finance Disclosure Regulation (SFDR) to “attract private funding to help Europe make the shift to a net-zero economy.” In fact, one of the objectives of the EU Taxonomy Delegated Acts is to transition to a circular economy. Putting climate action and sustainable principles in place, with aspects of circularity, has been at the forefront of the national agenda in other countries as well. The US Securities and Exchange Commission (SEC) in March 2024 adopted rules to enhance and standardise climate-related disclosures by public companies. The UAE through the UAE’s Green Agenda – 2030 as well as by bringing sustainability to the forefront of financial decision-making through mobilising private capital towards environmentally sustainable projects via the UAE Sustainable Finance Framework 2021-2031 is also moving towards that direction.

An important initiative in this journey towards circularity is the Capital Equipment Coalition (CEC) in Europe, which intends to accelerate the movement towards a circular economy. The Coalition’s endeavour is an essential part of their efforts to decarbonise the planet and take climate action. The Coalition includes some of the most prominent companies, such as ASML, Cisco, Dell, and Philips, among many others.

Philips has been one of the most prominent brands in the journey towards a circular economy. Their principles, “use less, use longer, use again,” applied across their value chain, capture the very essence of this commitment. They aim to generate 25% of their revenue through circularity by 2025. Additionally, they have implemented a policy to take back all professional medical equipment sold directly to clients for refurbishment or recycling. Dell has also made significant strides towards circularity. By 2030, for every metric ton of product sold, Dell has pledged to use one metric ton of reused or recycled products. They have also targeted 100% sustainable packaging materials and aim for more than half of their products to be made from recycled, renewable, or reduced carbon emissions materials by 2030. Dell is committed to reaching 100% renewable electricity in their global operations by 2040.

Companies such as Patagonia, IKEA, and Adidas have also implemented circularity principles in their operations. Patagonia’s “Worn Wear Program” allows customers to exchange used items for up to 50% of their resale value. Similarly, IKEA’s “Sell-back program” buys back used furniture for resale. Adidas has implemented the “Three Loop Strategy,” to combat plastic waste, which includes using recycled materials, designing remade products, and creating products from renewable resources. These initiatives significantly improved their brand reputation among consumers and investors.

With more and more people committing to the principles of responsible consumption and production and doing their part to combat climate change, the circular economy is also gaining prominence. Gartner has predicted, as cited in a World Economic Forum publication, that by 2029 supply chains will not be allowed to produce waste. Highlighting the rapid movement towards a circular economy, the article asserts that by 2030, “if your business model isn’t circular, you won’t be competitive.”

Adopting circular economy principles within a company’s overall sustainability framework through well-designed policies and initiatives not only helps businesses demonstrate their commitment but also reduces waste in their supply chain and operational processes. This eventually leads to a more efficient use of resources, lowering costs and environmental impact while enhancing business reputation among consumers and investors. By embracing these principles, businesses actively contribute to climate action by minimising their carbon footprint and promoting sustainable practises that mitigate the adverse impacts of climate change.

Discover how AKW Consultants can help you implement the principles of the circular economy into your overall sustainability policies and transform your brand into a leader in responsible business practises.