Industry: the future is circular

Industry: the future is circular

The transition to a circular industry will be key in the fight against climate change

02 Sep 2021

by Manuel Albaladejo, Representative and Director of the UNIDO Office for Argentina, Chile, Paraguay and Uruguay.

Translated from the Spanish original published by Argentina's El Economista, 2 September 2021*.

Industry has always polarized public opinion. Over the last few decades, we have experienced intense debates for and against industrial policy. Today, following the adoption of re-industrialization plans promoted by wealthy countries that previously questioned it, there seems to be a certain consensus on the benefits of industry and the public policies behind it. Case closed.

The debate now gravitates between two poles: industry as hero or villain in the environmental crisis?

On one hand, industry generates almost a quarter of the world’s greenhouse gases and consumes, often inefficiently, a large part of the planet’s natural resources.

On the other, through the incorporation of cutting-edge technologies and the development of disruptive business models, industry can become a transformative force and position itself as one of the drivers in the fight against climate change.

From this pernicious industry to its antithesis, there is only one step: to move from the linear industrial model based on a “take-make-waste” mentality, towards a restorative and regenerative circular industry model, based on eco-design, servitization (service as a product), the efficient use of resources and the extension of product life cycle.

The discourse on climate change revolves around our dependence on fossil fuels, while the impact of linear production and consumption on the generation of greenhouse gases is often sidelined in the general public’s mind. However, a study by the Ellen MacArthur Foundation indicates that implementing circular practices in the cement, steel, plastics and aluminum industries would reduce their emissions by 40% by 2050.

If these predictions are correct, the transition to a circular industry will be key in the fight against climate change. This places industrialists at the centre of the debate. Of course, big oil companies, their lobbyists and governments in turn are to blame, but so are the production and consumption patterns derived from an unsustainable linear economy.

The argument in favour of a shift towards sustainable production, although altruistic and well-intentioned, has not been convincing in the eyes of many industrialists, since “what is good for the environment is not necessarily good for business”. It is precisely in these types of statements where the circular economy bites the dust. While this is not the place to present the evidence of numerous studies on the impact of the circular economy, I do want to mention some figures that may be of industrial interest.

In the non-ferrous metals sector, such as aluminum, processes using secondary inputs demonstrate greater efficiency than those based on virgin inputs. For example, for every kilogram of recycled aluminum produced, six less kilograms of bauxite, four less kilograms of chemicals and 14 less kWh of electricity are used.

The profitability of industrial waste has generated a highly dynamic global market for secondary raw materials, making us rethink the term waste. Are we not perhaps dealing with a resource that through circularity has become even more profitable than its virgin counterpart?

It is worth noting that the circular economy goes beyond the recovery and valorization of waste. For instance, the application of circularity in the construction industry can save up to 15% of material in the design phase, improve energy efficiency by up to 40%, allow for a more productive use of space, and replace demolition with deconstruction, significantly reducing the amount of construction waste that crams our landfills.

In the textile industry, the transition from fast fashion to a more sustainable and circular model through rental, repair and reuse (of second-hand items) holds an economic opportunity valued at US$560bn. I could go on giving figures on the impact of the circular economy in a plethora of different industries.

These impressive numbers may lead us to believe that a circular industry is only meant for large companies in wealthy countries. Nothing could be further from the truth. There is ample evidence of the implementation of circular industrial practices in Latin America's small and medium enterprises. I have had the privilege of working with or personally visiting some, such as:

  • Rincon de Albano, a circular dairy farm in Uruguay that, in addition to producing milk, generates biogas that it uses and also sells to the country’s electricity grid;
  • Uruplac, a Uruguayan company that produces furniture from non-recoverable plastic plates;
  • MIDAS, a company that engages in urban mining (among other activities) in a traditional mining country like Chile, producing aluminum ingots and copper powder derived from the recycling and recovery of e-waste;
  • Neptuno Pumps, a world-class Chilean company that remanufactures and redesigns large water pumps for the mining industry;
  • Daravi, an Argentine company that designs and produces diverse items from discards, among many others...

The transition towards a circular economy is reinforced by a series of incentives that confirm its universality and projection. On one hand, Green Deals and Circular Economy Action Plans have been endorsed by most industrialized countries. The business implications for trading partners are noteworthy. European Union directives on sustainable production, resource efficiency, the right to repair, and the fight against planned obsolescence and “greenwashing” can become both major opportunities and barriers to entry into the European market.

On the other hand, given the pressure from companies to implement circularity practices, ISO is developing a series of circular economy standards based on some existing ones such as ISO 14001/14006 and ISO 50001. Future certification, although optional, may attract partners and consumers who share a similar vision.

And finally, the financing market for the circular economy is booming. In just four years, private equity funds, led by the likes of BlackRock, Credit Suisse and Goldman Sachs, have gone from three to thirty.

At the United Nations Industrial Development Organization (UNIDO), the organization that I represent in the Southern Cone, we want to join in the celebration of Industry Day*, and we do so by identifying trends and supporting practices that can strengthen the sector within the context of increasing and much-needed demands regarding sustainability.

We cannot and should not excuse an industry that operates outside the current climate reality. It would be counterproductive for a sector that should be a hero when it comes to economic recovery and the fight against climate change. That is why, on a day like today, we should not only pay tribute to industry but also advocate for the kind of industry we want for the future. That future seems to be increasingly circular.

 * In Argentina, Industry Day is on 2 September 1857, commemorating the date on which the caravel San Antonio set sail from the port of Buenos Aires to Brazil, loaded with bags of flour and fabric. It was the first export of goods manufactured in Argentina.