A shift in the production paradigm

A shift in the production paradigm

UNIDO's Manuel Albaladejo answers questions about the circular economy and industry 4.0 in Latin America

30 Sep 2019

Interview by Daria Shumilova                                                                                                                                                                                             

                                                                                                                                                                                En español

There is an evident tendency to frame the circular economy as primarily to do with recycling and waste management. However, these are end-of-pipe processes that take place within the existing linear economy. A real circular economy entails changes in production – in design, concepts and processes – from the very beginning. What do you think about this misunderstanding?

Recycling can reinforce a linear model, as it feeds on waste. It is still considered as a ´circular´ practice because it somehow extends the lifetime of materials but, ultimately, recycling is just the tip of the circular economy iceberg. While we continue to mass consume and generate millions of tons of trash, waste management and recycling can, and will, play a role.

The oversimplification in the circular economy approach comes from the fact that many think that waste management and recycling are the solution, when they could in fact reinforce the problem.

To continue with the iceberg metaphor, the big chunk of what the circular economy is all about lies under the water and is often unnoticed. It is not about how we deal with the trash we generate and the impact it has, but rather about the fundamental societal changes needed to prevent trash. The circular economy is not so much about mitigating the wrongs we do, but primarily about preventing the wrongs altogether. The true circular economy is about zero waste. It is a paradigm shift because it entails deep structural changes in production patterns and consumption habits. Practices that reduce or eliminate waste represent the part of the circular economy iceberg that is below the water.

Where is Latin America at the moment on the path towards a circular economy? Can you assess the potential opportunities arising from linkages between a circular economy and industry 4.0 for Latin America?

In the last two years, several Latin American countries – Chile, Uruguay, Colombia and Ecuador – have embarked on the development of circular economy road maps. Pilot projects have been implemented to prove that circularity can lead to greater income and job creation at no cost to the environment. This has been supported by a new body of legislation, such as extended producer responsibility, waste management law, eco-design and efficiency standards, product prohibition (e.g. plastic) and environmental labeling. Definitely, in the coming years, we will see a stronger circular economy discourse and leadership in the region.

Industry 4.0 will play a fundamental role in the transition towards a circular economy. Four examples:

- additive manufacturing (i.e. 3D printing) is used to design out waste through prototyping for easy disassembly and reuse of materials;

- Building Information Modelling simulates the whole life performance of buildings at the design stage in order to minimize the use of resources, enhance space efficiency and recover up to 90% of materials for reuse;

- intelligent waste management systems rely on a sophisticated network of sensors, big data analytics and cloud computing to efficiently collect, sort and distribute urban waste to recycling plants and manufacturing plants;

- and, finally, there is the shift from selling products to selling services, which changes the way we understand ownership, and requires sensors and interactive data platforms to collect and analyze information on consumers´ preferences and habits.

Shifting towards a circular economy requires significant changes in design and production which also come at a substantial cost for business. There is also a criticism of the circular economy model as being suitable only for developed countries. How can businesses be encouraged to change their production approaches and methods in Latin America?

I am a strong believer in the role that public policy can play in facilitating the transition to a circular economy. Circularity principles work great in extreme conditions because options are limited. You are more likely to apply circular economy principles in Chile´s Atacama Desert, in Uruguay´s Antarctica research base or on the International Space Station than right in the uptown district of any city in Latin America. I see public policy as a way to artificially create the conditions to limit choices and gear businesses to pick the right ones. Public policies should regulate and ban (the ‘stick’ in the eyes of businesses) but also incentivize (the ‘carrot’). Businesses should not carry the load alone because any transition brings uncertainty and risk. The right mix of restrictive and conducive instruments are key for businesses to embrace circularity. For instance, taxation for landfill, carbon footprint, product and materials should be complemented with VAT exemptions, feed-in-tariffs, public procurement programmes and R&D eco-design programmes.

What is the role of industrial policy in respect of the development of the circular economy in Latin America?

The new industrial policy should build on the two megatrends that will shape the future of production and work in the context of the current environmental crisis: industry 4.0 and the circular economy. These two elements should make us rethink the concept of structural transformation. The advent of industry 4.0 and the circular economy has a strong impact on the way we understand vertical or sectoral industrial policies. Historically, vertical industrial policies have aimed at intersectoral transformation towards winning sectors on the assumption that some sectors matter more than others because they face higher productivity, innovation and learning curves. Industry 4.0 and circular economy come to ruin the party, not only because they cross-cuts all sectors but also because they can enhance value addition within sectors in a radically different way.

In my view, industry 4.0 and the circular economy reinforce the focus on intrasectoral rather than intersectoral transformation. For instance, Chile can apply industry 4.0 and circular economy to become a global supplier of lithium batteries for electric cars. Perhaps more than ever before, Chile is now thinking on how to make a better use of its mining resources rather than to move away from them. The same applies to agriculture, which conventionally was thought as a sector to move away from. Now precision agriculture using GPS and drone technology has changed the growth prospects of a traditionally low-productivity sector.

How do you see the role of UNIDO in promoting circular economy, particularly in Latin America?

UNIDO has to be at the forefront of the circular economy debate because it implies a shift in the production paradigm. I see UNIDO playing a role in three areas:
- Research to understand the market, institutional and policy conditions under which the circular economy works; and policy advice to support governments in the transition;
- Technical cooperation allows UNIDO to pilot circular economy projects and showcase them globally. For instance, UNIDO´s Biovalor project in Uruguay is a great example of the replicability potential of circular business models and technologies elsewhere in the region;
-  A global convener to bring together stakeholders at all levels to guarantee that the circular economy agenda becomes a global affair, a new and disruptive way to understand the production patterns of the future.

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See also: Making it circular: on the way to a circular economy in Latin America

Manuel Albaladejo is the Representative of the United Nations Industrial Development Organization (UNIDO) for Uruguay, Argentina, Chile and Paraguay. He is UNIDO’s project manager for Biovalor in Uruguay and a project to use organic waste for energy generation in agriculture and agro-industries in Argentina. He also supports the development of circular economy road maps and global fora such as the Foro De Economia Circular.