rethink sustainability
How can the circular economy provide a tangible response to the environmental challenges we face?
The circular economy transcends traditional models of production and consumption, which are still largely dominated by an inefficient, inequitable and dirty linear "take-make-waste" economy. The good news is that the circular economy is gradually being embraced by numerous industries and businesses, and is today one of the most tangible solutions for achieving the target under the Paris Agreement of net-zero emissions by 2050.
But what actual progress are we currently seeing? Is this a sustainable solution? To answer these questions and explore the subject, Lombard Odier invited an array of academic and financial experts in sustainability and the circular economy to speak at the event "The circular economy: the next revolution?", which took place in Lausanne last May.
The situation is alarming but not irreversible
Edoardo Chiarotti, Senior Researcher at the Enterprise for Society Center (E4S), stresses the urgency of the climate emergency, stating: "We have already crossed six of the nine planetary boundaries." One of the main reasons behind this is the linear economy, whose model is based on extracting finite natural resources, which we consume and exhaust, meaning that resources are used up faster than they can regenerate. Chiarotti declares that, in the eyes of the scientific community, "there is just one solution that can enable the planet's boundaries to be restored to avoid compromising ecosystems worldwide, and that is the circular economy." He adds that "this is because its generative model reduces the use of materials, extends the life of products, tackles pollution and regenerates natural systems."
Read also: The ten principles of a circular economy
Within Switzerland, there are initiatives taking shape to promote a circular economic model, such as the QoQa e-commerce platform, which favours short supply chains when selecting and distributing its products. Despite these efforts, however, the Swiss economy remains to a very large extent linear. Chiarotti explains that this translates into a large carbon footprint: "We emit a total of 12 to 15 tonnes of CO2 per inhabitant per year to support our lifestyle."1 This is one of the highest averages in Europe. Air travel is a major culprit: Swiss people fly three times as often as their neighbours to the big cities of Europe2 – this behaviour largely reflecting the correlation between higher incomes and bigger personal carbon footprints.3
Two possible future scenarios
The researcher believes that there are two conceivable scenarios at European level. The first is a pessimistic, business-as-usual scenario in which the linear economy remains the dominant model. Unsurprisingly, he concludes that under this trajectory, "it will be impossible to achieve the target of net zero by 2050, even reaching +2°C under a pessimistic scenario."
By contrast, under an alternative scenario in which we gradually transition towards the circular economy, "we can reduce our emissions much faster and achieve net zero between 2040 and 2050."4
So how can this actually be achieved in concrete terms? A large part of the equation is to significantly reduce demand for raw materials by reusing existing materials to create new products – this despite the growth in demand for minerals such as lithium, used in batteries for electric vehicles. Chiarotti explains that supporting the transition to a circular model "will allow demand for materials to be halved by 20505." Numerous sectors, such as automotive and luxury goods, are likely to transition to the circular economy in the near future, "driven both by increasingly tough regulations and by the economic opportunities that this presents6." To take one example, recycling rare metals reduces reliance on commodities from places like China and Africa, which brings exposure to price fluctuations, potential shortages and the risk of geopolitical problems affecting supply.
Read also: The rising role of metals recycling in the energy transition
QoQa and its community: an innovative circular model
There also remain unknowns about how the transition will work and how businesses can successfully adapt. In Switzerland, QoQa – an e-commerce platform for products and experiences – is one company helping to bring about the transition to a more sustainable economy. Its founder, Pascal Meyer, explains that "QoQa regularly runs offers in collaboration with local or national brands, along with total traceability of the products sold, with certification of the raw materials used." These initiatives are followed and appreciated by large numbers of Swiss people, with the QoQa community now numbering 1.1 million members.
Read also: New possibilities with plastics: opening up opportunities in the circular economy
QoQa's initiatives in relation to sustainability do not stop there: others include the selection of more durable and easily repairable products to combat built-in obsolescence, extended warranties to lengthen products' useful lives, the choice of business partners with short supply chains, etc. "65% of the products that QoQa sells are made in Switzerland or elsewhere in Europe," declares Meyer, who also notes the emergence of a new paradigm in consumption in which "the leasing of products is being democratised."
Leasing and reconditioning support sustainable consumption
Across the border in France, some large retail chains have taken another route towards the circular economy: for several years now, they have offered their customers the chance to hire items7 as an environmentally friendly alternative to buying. Leroy Merlin began offering DIY and gardening equipment to hire by the day in 20228. Meanwhile, the sports equipment company Decathlon has adopted a transition plan, under which it has invested heavily in the circular economy9, with cycle, ski and fitness equipment hire, and buy-back and repair schemes.10
Taking the circular model even further, the online electronics retailer Back Market sells, exclusively, repaired and refurbished smartphone, tablets and computers. This is a worthy and much needed initiative. After all, the lifetime carbon footprint of an iPhone is estimated at between 50 and 76 kg of CO211, of which 75% is generated during the design and distribution phase, i.e. before it even reaches the customer12.
For Pascal Meyer, "businesses need to be more proactive and push communities of consumers to adopt more sustainable products from the circular economy," stressing that a transition on a massive scale to a sustainable economic model is crucial to achieving the net-zero target by 2050. "There is a huge amount of education required," he declares.
Fortunately, the transition to an economy that is Circular, Lean, Inclusive and Clean (CLIC®) is undeniably underway – and gathering pace. As Elise Beaufils, Deputy Head of Sustainability Research at holistiQ Investment Partners (holistiQ), Lombard Odier Investment Managers (LOIM), explains, "there are four major systems undergoing fundamental economic realignments: energy, consumers, materials and healthcare. Today, holistiQ is in the process of identifying the most promising areas to grow in the coming years within these key systems."
Reforming the plastics industry is a huge task for the environmental transition
Within the materials system, the plastics industry is one of the sectors in need of fundamental reform: it is one of the main causes of pollution worldwide. This problem is particularly acute in the oceans, with the Ellen MacArthur Foundation forecasting that they could contain more plastic than fish by 2050.13 The OECD puts worldwide production of plastic at around 460 million tonnes per year. This figure has quadrupled in 30 years, and two-thirds of the output is single-use plastic14. Without swift action, production could triple by 206015, making reform of the plastics industry a major and pressing challenge.
Eradicating plastic waste is therefore a top priority for the environment, and the circular economy could offer one solution. The timing is critical, with Guillaume Chapuis, Senior Investment Manager at LOIM, attesting that "the plastic value chain and plastic itself are today at a tipping point. The discussions led by the United Nations have given rise to various regulations and tax deterrents on single-use plastics, forcing the ecosystem to evolve towards more sustainable forms of use."
This is the mission that the Paris-based start-up 900.care has taken upon itself. The company, which specialises in personal care products, enables its customers to adopt a zero plastic waste approach via its subscription-based shower gel and shampoo refill model. This initiative is bearing fruit: five years on from its foundation, 900.care has more than 90,000 active customers who have prevented four million items of plastic waste from being created. That equates to 1.5 million kg of CO2.
There are increasing numbers of positive signs: numerous new circular economic models are emerging, while consumers are becoming more and more alert to what their plastic packaging is made of16. These evolving behaviours are forcing the retail sector to move in the right direction too: "All the big brands have announced ambitious recycling aims," says Chapuis. A transition is already in progress in many sectors and is constantly gathering speed, as it strives to forge an economy that is more sustainable and more respectful of the planet.
1 Government statistics: Carbon footprint per person | Federal Statistical Office (admin.ch)
2 COP28: Why do the Swiss emit so much CO2? (francetvinfo.fr) (not available in English)
3 How green are the Swiss? – SWI swissinfo.ch
4 https://e4s.center/wp-content/uploads/2024/02/Present-and-future-of-cicular-economy-in-Europe_E4SWP2024-2.pd
5 https://e4s.center/wp-content/uploads/2024/02/Present-and-future-of-cicular-economy-in-Europe_E4SWP2024-2.pdf
6 https://www.manutan.com/blog/en/circular-economy/how-regulations-have-an-influence-on-the-deployment-of-circular-economy-in-europe
7 How to be profitable with circular business models? (not available in English) – ZeTrace – omnicommerce transformation consultants
8 Leroy Merlin trials online hiring of DIY tool hire – Retail strategy > Retail – EcommerceMag.fr (not available in English)
9 Going circular – Transition towards a circular economy (decathlon.com)
10 Going circular – Transition towards a circular economy (decathlon.com)
11 What is the carbon footprint of an iPhone? – Largo blog article (not available in English)
12 Report on the replacement of mobile phone devices and sales practices – Reflections – Report to the government dated 3 June 2021 (July 2021) (arcep.fr) (not available in English)
13 Plastic in the ocean: the facts, effects and new EU rules | Topics | European Parliament (europa.eu)
14 Plastic pollution is growing relentlessly as waste management and recycling fall short, says OECD (oecd.org)
15 Global plastic waste set to almost triple by 2060, says OECD (oecd.org)
16 20210211_Citeo_Synthese-etude-shopper.pdf
Important information
This document is issued by Bank Lombard Odier & Co Ltd or an entity of the Group (hereinafter “Lombard Odier”). It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a document. This document was not prepared by the Financial Research Department of Lombard Odier.
Read more.
share.