It's Time for a Circular Economy

The sanitary and economic emergency triggered by the Covid-19 pandemic revealed the seriousness of the crisis humankind must face climate change, pollution, and resource depletion, caused by an extraction-driven non-sustainable production and consumption model.

In many places worldwide, initiatives are being carried out for the so-called "circular economy" to eliminate pollution and waste, circulate materials and products, and regenerate nature.
This new concept suggests a paradigm change in how we produce and consume through a constant inflow, circular dynamics, in which wastes can be reused as resources to be re-entered into the economic system.

First steps in America

American countries have been undergoing their first experiences in a circular economy for some years now. In 2021, the Latin America and the Caribbean Circular Economy Coalition was formed as a platform for exchanging experiences and agreeing on common strategies between governments and businesses in the region.

Countries such as Chile and Colombia have already started implementing public policies to promote a circular economy in their production systems. Others —such as Uruguay, Costa Rica, and Peru—are doing so in several areas.

"There have been some critical progress points in Latin America in the last 4 or 5 years, but there is still the need to gain scale and speed towards that transition. Voluntary commitments are not enough. Instead, we need governments to adopt measures in line with this vision and make them into global policies or treaties," says Luisa Santiago, Executive Director at Ellen MacArthur Foundation, which, since 2010, has guided companies and governments in their transition to a circular economy.

In North America, the US government has been promoting the Plastic Treaty since 2020, which aim is to reduce by 2025 the pollution caused by wastes of materials produced from polymers, which globally reaches 272 million metric tons, 7 of which go into the oceans, not only damaging the environment, but also food safety, tourism, and sea transport.

Multiple advantages

A circular economy brings about many varied benefits. It protects the environment by reducing the consumption of natural resources, waste generation, and greenhouse gas emissions. Also, reusing waste strengthens local economies as it reduces import dependency. It also stimulates innovation, develops new jobs, and increases profitability for companies.

A recent report elaborated by the World Economic Forum on the automotive industry states that circularity might improve profitability in the sector by 50% and generate income between 15 and 20 times higher than the original sale price of the vehicle.

In addition, a survey by Gartner points out that 74% of supply chain leaders who have adopted circular economy strategies in their organizations expect to increase their profits between 2022 and 2025.

Technology's role

Convinced that the need to take action to look after the environment and the planet is increasingly urgent, many organizations have also set up circular economy strategies in their production systems.

In that sense, technology plays a key role. According to a report published by the Organization for Economic Co-operation and Development (OECD), technologies such as blockchain, internet, or cloud storage will be necessary to develop a circular economy that is respectful of the environment and more efficient in the use of resources.

Also, artificial intelligence (AI) and the Internet of Things (IoT) are technological tools to which companies resort more to improving their circular businesses, as can be read in a recent study by StartUs Insights.

Today, the market offers companies solutions customized to the needs demanded by the transition to a circular economy. For example, SAP launched this year SAP Responsible Design and Production, a solution to design products in a sustainable way, which adds to the varied portfolio of software applications the company already offers to help businesses improve their data management capacity and to be more sustainable.

Other technological enterprises have implemented projects fostering the circular economy, such as SEIDOR, a member of United VARs, which, together with companies such as Utingal, Enso, Moveratus, and Ecoplast, have launched the first intelligent solution to recycle polyamides —through the REPLAY initiative— to recycle plastic waste from different sectors in the industry to give them a new use.

The road is more circularity

According to the last report by Circle Economy, more than 100 thousand million tons of resources are used yearly on our planet. Of this amount, only 9% is reused. The rest, more than 90%, turns into waste and pollutes our environment.

Should there not be a root change in our current linear economic model based on the "take, make, consume, and dispose" pattern, there will be an increase from 100 billion tons to 184 billion tons in 2050.

In the face of this gloomy scenario that threatens the future of humankind, governments and companies must confront this vast and urgent challenge of implementing even more deeply circular economy strategies, getting all the economic agents involved in the final destiny of the products, making the most out of the tools and solutions offered by technology, and, thus, building a fairer and more sustainable world.