Finance and governments must follow circular economy business leaders

cc Flickr / Joan Campderrós-i-Canas

cc Flickr / Joan Campderrós-i-Canas

There are signs that circular economy thinking is moving into the mainstream. A quick look at some of the global companies taking action to conserve materials and resources and you’ll read off names like Philips or Renault.

Philips has made circular economy thinking part of its strategic vision, recognising that the companies who start doing so now will have a headstart over the laggards. The Dutch business has begun to offer lighting as a service rather than as a product. Business or municipal customers now pay for light while Philips takes care of the technology, the investment and the equipment.

In terms of re-manufacturing, the carmaker Renault operates a plant just outside Paris which takes cars back at the end-of- life stage. The cars are then disassembled, re-manufactured and can be sold again, which on average uses 80 per cent less energy, 88 per cent less water and cuts waste by 70 per cent.

But are finance and governments following suit? The short answer is not really.

For companies thinking about selling services rather than products, there are hurdles in dealing with their creditors. Banks still generally prefer short-term returns on investment versus long-term ones. In a more service-based business model, company cash flows will change as customers switch from paying a lump sum for a product to making a series of payments over the product’s lifespan, in turn slowing down the creditor’s return on investment.

ING might be one of the few banks that is seriously looking at the benefits of moving towards a circular economy model.

Governments around Europe are more outspoken about the benefits of circular economics. Many of them recognise that there is a need to more carefully manage our materials and resources. But, so far, actions do not match rhetoric.

There is no better illustration of this than at EU level. Despite roadmap after roadmap, there is still no concrete European action to move towards a circular economy. In July 2014, the European Commission finally proposed its long-awaited legislative package only to confusingly withdraw it, saying it would issue a new, more ambitious set of proposals by the end of the following year. Now, 2016 could just be the moment EU member states started working towards a common goal of unleashing a circular economy by reducing financial or regulatory barriers – or it could be the year we got just more rhetoric.

By | 2017-04-28T13:31:22+00:00 August 6th, 2015|0 Comments