How do we actually create a circular economy?

A couple of days ago I was speaking at a conference and one of the participants asked me whether we need regulations to establish a circular economy? My answer is there will be a mix of market forces, government policy underpinned by regulations. Market forces are already beginning to play out with plastics and packaging as brands are increasingly under pressure to use recycle content. This demand will result in improvements in recycling collection and reprocessing facilities together with design for new packaging solutions and materials.

As for government regulations and policy four Asian countries, China, India, Japan and Singapore have passed circular economy or similar resource sustainability regulations or as is the case in India issued a draft paper called the National Resource Efficiency Policy. How do these compare and, more importantly, do they hit the circularity mark?

To embark on an analysis of four different resource management regulatory or policy frameworks is really an exercise in definitions — how does each country comprehend and define the circular economy within the context of their past and future? How have they managed resources and development in the past and how well will they administer resources in relation to changing societal and economic needs in the future?

Yet the bigger question here is how do each of these countries see their position within a complex global resource finite world? After all businesses and the trade of resources has no boundaries and for a country like Singapore their contribution to the international flow of (secondary) resources should be weighted equally to that of China, India and Japan. For the circular economy it is not the size of the country but the volume of raw material usage, savings, recovery and reprocessing that is key.

Furthermore any legal system is a reflection of a country’s political economic development. This can be seen in the type and structure of the Acts and Regulations in force. Language also plays a crucial role in how a legal document is composed. For example, both China and Japan use a legal language that is rather opaque and open to interpretation by any number of government officials. While this may be frustrating for those people more used to English Common or Napoleonic Law, the cultural and social hierarchy of Confucianism is the over-riding influence for these two countries.

Japan

Starting with Japan’s ‘The Basic Act for Establishing a Sound Material-Cycle Society’, promulgated into law on 06 January 2001, clearly establishes the framework for the exemplary recycling system we see in action today. The intent of the law can be seen through the language in such phrases as ‘“circulative resources” are useful things among wastes’; ‘what can be reused must be reused’; ‘what can be reclaimed must be reclaimed’; and ‘increasing the durability of the products, containers…and by strengthening systems for conducting repairs to these goods’.

Everyone has a role to play in the country of a Sound Material-Cycle Society. The Act includes clauses related to the responsibilities of business operators, local governments, citizens and policies of the state. While laws are drawn up and debated in the corridors of power the real action is in implementation and enforcement. To identify the weakest links the first step toward the establishment of a sound material-cycle society is to understand the material flows in the economy — i.e., how much resources are imported or mined, consumed and discarded.

Although a little dated, research published in the International Journal of Earth & Environmental Sciences released the material flows for 2014 in a report “Current State and Trend of Waste and Recycling in Japan” states “Japanese total waste volume in the 2014 fiscal year was 437 Mt (million tons), with 89.9% industrial waste and 10.1% municipal waste. The amount of recirculated resources derived from this waste was 50.6% of the total waste volume. The final landfill amount of the total waste was only 3.4%.”

This is exactly the kind of analysis and statistical data all countries need to generate to get a new and circular perspective of their country’s circular economic potential. However in practice Japan has not managed to reprocess as much of their recyclable resources domestically as they would like. For example manufacturers and distributors are required to collect and recycle four large types of home appliances — TVs, air conditioners, washing machines, and refrigerators.

In 2016 approximately 25 million units were sold but only 11 million were recovered for reprocessing. Therefore it is suspected that many used appliances are illegally processed or being transferred abroad as waste under the name of second hand goods. In the worst case, they are becoming ‘high-tech trash’ expanding environmental contamination to other countries.

The Basic Act for Establishing a Sound Material-Cycle Society does set out a broad vision for a resource efficient society. The corresponding regulations such as the Home Appliance Recycling Law and the Small Home Appliances Recycling Law should be the framework for the vision yet economics of cheaper labour in neighbouring countries undermines Japan’s ability to keep these valuable resources at home.

This Act is nearly 20 years old, and came into effect 10 years before the circular economy started to hit the headlines. It is not that this document is dated but rather the imperative to deliver the principles has yet to become more pressing.

China

Moving next to China with the Circular Economy Promotion Law of the People’s Republic of China, which came into effect on 01 January 2009. Again we have a different approach in the definition of the circular economy with a heavy emphasis on the role of the State. Article 1 defines the rationale for the circular economy as “enacted for the purposes of facilitating circular economy, raising resources utilization rate, protecting and improving environment and realizing sustainable development.”

Article 17 moves into the realm of big data as the underlying foundation for circular economy decision making “The state establishes and improves a circular economy statistics system to strengthen statistics management in resource consumption, comprehensive utilization and waste generation, and discloses major statistical indicators to the public regularly.”

Throughout the whole document there is an unusual amount of activity by the State in how the circular economy will be realised. It is almost a proxy for economic development under the disguise of the circular economy. For example Article 21 explains ‘Enterprises in such industries as electric power, oil processing, chemical industry, steel, non-ferrous metal and building materials must replace fuel oil with clean energy, e.g., clean coal, petroleum coke, natural gas, etc. within the scope and time limit prescribed by the state, and must stop using fuel generator sets and oil boilers that fail to satisfy the relevant state provisions.”

John Ashlin, an Associate of the Norwegian company Circle Economy and long time resident of China, provides a perspective from the Road & Belt initiative “Whereas, when I look at the Chinese language blueprints for China’s Ecocities; domestic regional integration plans; and the New Silk Road initiative — which emphasizes ‘green’ and ‘circular’ development — they seem to have a more mechanistic & reductionist paradigm. Full of machine, engine, axle, metaphors with a focus on frameworks, belts, corridors and barriers; instead of emphasizing the importance of flows, diversity and scale. They also tend to be more top-down masterplan, as opposed to roadmaps for emergence.”

The Circular Economy Promotion Law has provisions for eco-design (Article 19) “Any entity or individual engaging in the design of process, equipment, product and packing material shall, in accordance with the requirements of reducing resource consumption and waste generation, give priority in choosing designs and materials that are easy to be recovered, dismantled and degraded, nontoxic and harmless or with low toxic or harm, in addition to complying to the mandatory requirements as prescribed in relevant state standards.”

And agriculture, construction and demolition, remanufacturing, innovation, R&D and public procurement (Article 47) “The state adopts a government procurement policy that is good for the development of circular economy. Entities and individuals purchasing goods with funds from the public finance shall give preference to energy-saving, water-saving, material-saving and environment-friendly products and recycled products.”

There are also several clauses specifically on enforcement as can be seen from Articles 49 ~ 56 starting with internal governance “Where any general administration for promoting circular economy or other competent department under the people’s governments above the county level is found violating the Law…the people’s government at the same level or the competent department concerned of people’s government at the next higher level shall order it to make correction and punish the person in direct charge and any others who have direct responsibilities.”

This is a document big on ideas and aspirations for a circular China yet it lacks real detail. Implementing the circular economy for any country, especially one the size of China, is not easy however the most important aspect is to remove ambiguity and reduce the amount of wiggle room for interpretation.

Singapore

On Wednesday 04 September 2019, the Singapore government passed the Resources Sustainability Act of 2019. This Act is written in the concise language of English Common Law providing a reasonable amount of detail on four components Singapore has decided to tackle in regards to resource and sustainability management.

These are (1) Electrical and electronic waste; (2) Food waste; (3) Packaging and (4) Producer responsibility schemes. The Act’s opening paragraph is an indication of the precise nature of this law “An Act to impose obligations relating to the collection and treatment of electrical and electronic waste and food waste, to require reporting of packaging imported into or used in Singapore, to regulate persons operating producer responsibility schemes, and to promote resource sustainability.”

It is not a circular economy roadmap nor does it promote resource sustainability but one that seeks simply to tackle waste. This can be explained from its heritage having been born from the National Environment Agency under the Ministry of the Environment and not the Economic Development Board.

There is not a lot to say about this Act within the context of the circular economy. For example with food waste it states “The building manager of a new building must cause all food waste disposed of in a facility mentioned in section 26(1) to be treated in the building.

The building manager of any prescribed building other than a new building must, in relation to all food waste disposed of within the building -

1. cause the food waste to be treated in the building or within the premises on which the building is situated; or
2. engage a licensed waste collector to send the food waste for treatment at a licensed waste disposal facility.”

There is no mention how it will be treated in the building or at a licensed waste disposal facility, whether energy will be extracted for bio-gas or whether the food waste will simply become compost. The packaging section of the Act is really the legal framework to ensure compliance for compulsory reporting as an extension of the Singapore Packaging Agreement.

It is not clear if there will be any implementing rules to follow this Act.

India

India is taking a completely different approach by publishing a draft National Resource Efficiency Policy, 2019. For India resource efficiency means one thing “Resource efficiency means to create more output as products/services using less inputs. It reduces waste, drives greater resource productivity, delivers a more competitive economy, addresses emerging resource security/scarcity issues, and helps reduce the associated environmental impacts.

Circular economy keeps resources in use for as long as possible extracting the maximum value, recovering and regenerating products and materials at the end of each service life; so as to limit the extraction of natural resources to maximum possible extent.”

Vision:

• Reduce primary resource consumption to ‘sustainable’ levels, in keeping with achieving the Sustainable Development Goals and staying within the planetary boundaries
• Create higher value with less material through resource efficient and circular approaches.
• Minimize waste creation and loss of embedded resources at the end-of-life of products.
• Ensure security of material supply and reduce import dependence for essential materials.
• Create employment opportunities and business models beneficial to the cause of environment protection and restoration.

There is a lot going for this document. It sets out a clear vision implemented through a multi-stakeholder approach underpinned by existing regulations in Bio-medical Waste, Construction & Demolition Waste, E-waste, Plastic Waste Management and Solid Waste Management, which have been slowly rolled out from 2016 onwards.

Some of the supporting regulations will need amending, such as the Plastic Waste Management Rules which states “Carry bags made of recycled plastic or products made of recycled plastic shall not be used for storing, carrying, dispensing or packaging ready to eat or drink food stuff’. Recent advances in technology with chemical recycling where plastic waste is processed and used again for food and beverage containers makes this paragraph obsolete. The definition in the Rules states ‘Recycling means the process of transforming segregated plastic waste into a new product or raw material for producing new products’ making it more likely to pertain to mechanical recycling.

Publishing a well researched policy paper is a smart move and can be particularly useful to engage all the core stakeholders. Again with any initiative implementation is key. India is vast country with 1.3 billion people. It is unwieldy, dysfunctional and corrupt in parts with a slow legal system. For this policy to become a reality will require a massive pull from all size businesses and the political will for the long haul. The truth is climate change may be the one factor to bring all the players together.

Conclusion

Each of the four countries in this analysis has defined the circular economy within the context of their own vision of development and growth. In essence they are a shaping the circular economy to suit themselves. India may be the exception but execution to their National Resource Efficiency Policy will truly determine how much circularity they can achieve.

The circular economy is a disruptive force towards a new economic system. It is intended to shape policy and regulations and not the other way around. No one said changing a whole economic systems is going to be easy however there appears to be complete lack of any sense of urgency and a true understanding on the need to manage our finite resources.

All of these countries are committed to incineration for waste management as separation-at-source (focusing on behaviour change) seemingly remains too difficult and elusive. There is not enough collection infrastructure in place to truly reprocess the volume of secondary raw materials available and the tiny number of international companies who are future proofing their supply chain to retrieve valuable secondary raw materials to remain in business and competitive are attempting to set up their own reverse logistic operations.

The EU recently passed 11 eco-design directives covering 31 product groups which aims to increase energy efficiency and design out waste so products can be easily repaired and reprocessed at the end of the use-life. Will we see these kinds of regulations passed in any one of these Asian countries in the near future? Unlikely.

Climate change, increasing population growth, added pressure for finite resources and environmental degradation will bring us to the point of collapse before the urgency for change and the true value of circular economy will be recognised.