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New China-EU agreement accelerates shift towards a global circular economy

Published: 1 August 2018
Author: Kelly Cooper

Collaborative accord: signalling change towards a new economic plan

In July this year, two of the world’s largest economies earmarked momentous progress towards the adoption of a global circular economy. At the 20th EU-China Summit in Beijing, a joint memorandum of understanding (MoU) on Circular Economy Cooperation was signed by China and the European Union (EU). The alignment between both markets is a giant step forward towards a global system shift to a resource efficient, less wasteful and more environmentally friendly global economy – while Europe has an ambitious agenda to transition the EU economy into a circular model, China is one of the first countries in the world to adopt circular economy legislation. The cooperation and alignment from China and the EU to define what is meant by circular product, as well as which products will be allowed onto the market in a circular economy system, forms the base for accelerating the universal adoption of a circular economy.

Opportunities to business and society: a circular economy system

The China-EU agreement ratifies the circular economy as a tool for sustainable economic growth, resource efficiency and sustainable development at global scale. A McKinsey Centre for Business and Environment and Ellen MacArthur Foundation joint report, found that adopting circular-economy principles in Europe could not only benefit the EU environmentally and socially, but could also generate an annual net economic benefit of €1.8 trillion by 2030. In China a circular economy could make goods and services more affordable and offer healthier lifestyles for inhabitants of Chinese cities. Changing models in cities to become sharing, exchanging (modal shifts, electric vehicles, and substituting to a healthy food chain), and optimising (urban planning, energy efficiency, and digital supply chains) could reduce impacts associated with city dwelling existence, such as traffic congestion and air pollution.

Figure 1: A circular mobility system would reduce costs, require less finite material consumption, lower traffic congestion and CO2 emissions. (Source: McKinsey Centre for Business and Environment (2015) Growth Within: A Circular Economy Vision for a Competitive Europe)

The Ellen MacArthur Foundation was launched in 2010, with the mission to accelerate the transition towards a circular economy, at that time the term could hardly be found anywhere but in Chinese policy. China was the third country in the world to legislate the circular economy, after Germany and Japan, respectively. A discussion between Jocelyn Bleriot, Executive Officer at Ellen MacArthur Foundation and Director of Circular Economy projects at China’s National Development and Reform Commission (NDRC), Mr. Yang Chun Ping, uncovered that a closed loop system in business has been adopted in China for over 15 years. Through target setting, financial measures and legislation, China recirculate waste materials to support the adoption of a circular economy in a systematic way, as well as by mobilising society towards a shared goal.

Opportunities in circular business

Research carried out by the Ellen Macarthur Foundation highlights the opportunities to business, which exist through the uptake of circular economy thinking. In a circular economy system, the value of products and materials is maintained for as long as possible, meaning that products are designed for durability, reuse, remanufacturing, and recycling to keep products, components, and materials circulating in the economy2. This can be achieved by:

At design phase, producers designing waste and pollution out of products and materials, and subsequently the system
Infrastructure is put in place by business to re-use a product once it reaches end-of-life, which not only reduces waste and unnecessary resource, but can bring boundless opportunities and increased value to business

Designing-out waste in fashion supply chains: the rise of responsible value chains

Under the MoU, a key area for cooperation between China and the EU, is the exchange of strategic information on management systems and policy tools, such as eco-design, eco-labelling, extended producer responsibility and green supply chains. Such discussions turn the circular economy into an innovation agenda. One sector, which is offering trailblazing measures into circular innovations is the fashion industry. As a significant sector in the global economy, the textile and fashion industry employs over 300 million people worldwide. Due to its linear model of production, distribution and disposal, the fashion industry is one of the top polluters in the world and wastes over USD 500 billion of value, each year. In recent years, global brands and retailers, alongside a range of small scale organisations (NGO’s and social impact businesses) have innovated around circular economy downstream solutions, where producers take responsibility for product at end-of-life, by recycling and up-cycling, as well as upstream innovations, such as designing waste out of the system through bio-design.

Hong Kong based NGO, Redress has championed sustainability, particularly with regards to waste reduction in fashion supply chains for over a decade. Believing that the fashion industry can be more economically, environmentally and socially sustainable, in 2017 Redress launched a social impact business, The R Collective (formerly BYT), to scale-up its impact and take control of downstream waste, transforming it into luxury upcycled fashion. Globally, businesses are reacting to a pervasive shift in consumer behaviour by implementing product-to-service strategies and innovative business models3. Adidas, through Adidas x Parley shoes, are showcasing the profitability that upcycled ocean plastic can bring to brands reputation and bottom line. Patagonia also adopts a sustainable mix of fabrics, including recycled materials, showcased in their Recollection. Patagonia is progressing towards reducing their carbon footprint as well as creating closed-loop recycling systems within fashion supply chains.

Building a circular economy requires large and complex efforts to address the hurdles and transition costs associated with all of the major opportunities. Large-scale system change can only be achieved with relevant policy frameworks, system innovation and coordination at a global level. The China-EU MoU signals accelerated action at the global level, removing barriers to international alignment and coordination of a circular economy, backing the likelihood of circular economy business filtering down regionally and locally.

Continue the discussion: CSR Asia Summit 2018

Join social impact The R Collective, founders Redress along with big name sustainable brands at the CSR Asia Summit 2018 in Hong Kong, to discuss the systemic changes being made towards the creation of a more sustainable fashion system. Companies have a critical responsibility to make better decisions about resource use, waste reductions, provide added value for business, and decide, which information to disclose to their customers and how transparent their value chain operations should be. This session explores the new economic models and technological advances, which are increasing transparency of global supply chains, as well as the industry collaborations paving the way for responsible value chains and an informed consumer base. For more information contact kelly.cooper@elevatelimited.com.