Rod Oram: A radical reinvention of our economy

Rod Oram writes in this week's column about the Productivity Commission's looming draft report on how to move to a low emissions economy, particularly now it has more ambitious terms of reference under the new Government

Next month we'll see the first draft of the most important report on the New Zealand economy in many years. It will recommend myriad ways in which we can make our nation deeply sustainable in economic and environmental terms.

While these are truly global challenges, each country will find the opportunities best for it. But even if we make the right choices, we'll fail if we only tweak our current systems. To succeed, we need to radically reinvent our business models, avidly adopt new technologies and enthusiastically improve our practices.

"…the shift from the old economy to a new, low-emissions economy will be profound and widespread, transforming land use, the energy system, production methods and technology, regulatory frameworks and institutions, and business and political culture."

That was the arresting verdict of the Productivity Commission in its issues paper last August on our transition to a low emissions economy. It received a raft of submissions from companies large and small, and other stakeholders advocating a range of actions.

As engaged as this response was, National's Climate Change Minister Paula Bennett had given relatively unambitious terms of reference to the commission for the project. Her emphasis was on minimising the costs and risks of cutting New Zealand's emissions by only 11 percent below 1990 levels by 2030, which is our Paris Commitment, and by 50 percent by 2050.

But the election significantly upped the ante. The new coalition government's Climate Change Minister James Shaw sent the commission much more ambitious terms. They reflected its campaign promises such as an independent climate commission to set carbon budgets and the goal of net zero emission by 2050, and with a greater emphasis on the opportunities for the economy created by the transition.

The new terms have given the commission scope to investigate more widely and recommend more challengingly in its draft final report due next month. Companies and other stakeholders will have the chance to up their game too in their next round of submissions before the commission produces its final report by the end of June.

But what does radical look like? A good guide is the Circular Economy work led by the Ellen MacArthur Foundation in the UK with partners such as McKinsey, leading corporates, the World Economic Forum, cities and other stakeholders.

MacArthur, who had seen plenty of ecosystem degradation in her years at sea as a record-breaking, long-distance solo yachtswoman, established the foundation in 2010. The essential concept at the heart of the Circular Economy is to ensure we can unmake everything we make.

The Circular Economy: Achieving deep sustainability by learning how to unmake everything we make. 
Source: Ellen MacArthur Foundation

By reusing, repurposing and recycling all the natural and human-made resources we use we can dramatically cut the inputs we consume and the pollution we create. Most important of all, we can help ecosystems regenerate, so they can be healthier and more productive.

A number of scientists and innovators have been working on these issues over the last three or four decades. Some of the most notable are Bill McDonough and Michael Braungart with their Cradle to Cradle disciplines and Janine Benyus and others with biomimicry. Related fields include industrial ecology, natural capitalism and regenerative design.

The foundation and its partners, though, have built on such work to develop the Circular Economy into a multifaceted, practical, insightful, powerful and beneficial methodology for radically reinventing the way we use resources, as the diagram at the top of this column describes.

This past week, the Sustainable Business Network hosted Andrew Morlet, the foundation's CEO, at a number of events here with companies and meetings with the government.

"The linear economy is ripe for disruption" was his key message.

SBN is working with a number of New Zealand companies in its Circular Economy Accelerator. Among them, EcoStock Supplies turns waste from food manufacturers into high grade animal feed; Woolchemy processes disused wool to create a superabsorbent wool fibre for the healthcare sector; and TradeMe's marketplace for used goods also delivers environmental benefits, some of which have been quantified in its Accidental Eco-Warriors study.

The foundation and McKinsey began scoping the massive scale of economic and environmental benefits of the Circular Economy in a trio of big studies beginning in 2013. Those focused on selected consumer sectors in the European economy.

These days, it works with large global sectors and key players in them, to start to fundamentally redesign the way they work.

The New Plastics Economy, for example, shows the weight of plastic packaging used globally increased 20-fold from 15m tonnes in 1964 to 311m tonnes in 2014. In 2014, packaging accounted for 6 percent of global oil use, 1 percent of the global carbon budget, and the weight of plastics in the oceans was about one-fifth of the weight of fish stocks.

Yet, in 2014, 40 percent of plastic waste went to landfill and 32 percent "leaked" into the environment. Only 14 percent was collected for recycling and 14 per cent incinerated. In other words, 95 percent of the value of plastic packaging material, worth US$80-120 bn annually, is lost to the economy.

If we continued with business as usual, by 2050 we'd use 1124 m tonnes of packaging globally, which would account for 20 percent of oil use, 15 percent of the carbon budget, and the weight of plastics in the sea would be greater than the weight of fish, assuming, against the odds, that global fish stocks will fall no further than they have to date.

In response, the New Plastics Economy project is seeking to redesign the global plastics packaging system. Major companies are deeply involved with Unilever, for example, committing to ensuring 100 percent of its packaging is reused, recycled or composted by 2025. Last year, the EU mandated that all companies reach that standard by 2030.

Similarly, the foundation and its partners are redesigning the global manufacturing of clothing in their The New Textiles Economy project. Again the trends are astonishing. The number of items of clothing sold globally doubled from some 50 billion in 2000 to around 100 billion in 2015. Meanwhile the typical number of times an item of clothing was used before it was disposed of fell by some 20 percent.

Among the corporate partners in the project, H&M, the Swedish clothing retailer with 4500 stores in 65 countries, has set itself the eventual goal of 100 percent recycling of clothes. To that end, it has started to trial discount vouchers for new clothes to customers who bring in old clothes made by H&M or any other company.

Other Circular Economy initiatives by the foundation and its partners include:

Project MainStream, which is led by the CEOs of nine global companies such as Philips, BT, Suez and Veolia. It focuses on systemic roadblocks in global material flows that are too big or too complex for an individual business, city or government to overcome alone, as well as on enablers of the Circular Economy such as digital technologies.

Circular Cities, which is working with major urban areas on reinventing their systems to enhance economic viability, resource sufficiency including food production, well-being and long-term prosperity. Already some 85 per cent of global economic activity is generated within cities, and the proportion of people living in cities is rising from some 55 percent today to 75 percent by 2050. Without radical change to address these extreme pressures, cities run the risk of failing.

The Circular Design Guide, in conjunction with IDEO of California, offers an interactive online guide to help designers understand and apply circular principles to the products and services they work on.

So, around the world the tasks are huge and the opportunities enormous across society, not just for business. Next month, the Productivity Commission will shed some light on that for us.

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