Triodos Research winter e-zine

The role of stakeholders in a circular economy

Case Study

Companies cannot create a circular economy on their own, and relevant stakeholders have an important role to play. Whilst most manufacturers will need to change business models, regulatory environments need to provide appropriate frameworks, and consumers need to shift their mindset. Who should be doing what?

The circular economy is not only good for society and our planet, but it’s also a business opportunity, especially in the long term. Companies that adapt to a circular economy will ensure that the resources and materials they need in the future will still be available. It strengthens the commercial viability of their business, and ultimately their financial success, while at the same time increasing their sustainability. But they can’t do it on their own, and relevant stakeholders have a role to play.

Authorities to create frameworks

Governments play a central role in the collaboration that will close the resource loops. By setting the scene, they can steer the economy to a circular future, for instance by introducing new tax regulation, including higher taxes on unsustainable products to mitigate their negative impact, and lower taxes on labour to promote repair services. They can also introduce labelling requirements to enable consumers to judge the sustainability of the products they buy.

Local and regional authorities can also stimulate and enable companies and consumers to contribute to a circular economy. For example, in 2015, the city of Amsterdam investigated the opportunities of a circular economy and found that it creates new business activity, has a positive economic impact and contributes to a sustainable society. As a next step, the city created a circular programme of municipal projects and established a platform for circular initiatives in the city. Under the project name of Westas , the city works together with Schiphol Airport, Amsterdam Harbour, the Dutch government, the regional authorities of Noord-Holland and two other municipalities to make a transition to the circular economy. Projects include the processing and exchange of building materials, creation of a network for heat and CO2, and circular workplaces. Because of these efforts, Amsterdam City won the World Smart City Award  for circular economy on 16 November 2017.

Consumers to shift demand

Whether the circular economy will work depends largely on consumers. They need to change their behavior, and stop buying things that they don’t really need and throw away products which still suffice. It’s a big challenge in a society that’s focused on consumption, short-lived fashion trends and rapid replacement. Few consumers will be able to make that step on their own, but new initiatives to help them are emerging. Services such as repairing and refurbishing are growing, providing alternative choices to replacing broken or out-dated consumer goods. The option of sharing is also gaining momentum, for example sharing appliances with neighbours, instead of every house having the same equipment lying around. This shift in consumer mindset will hopefully help motivate companies to distinguish themselves by offering products that can easily be repaired, instead of those made from components that are no longer available. Or by offering appliances (for example a washing machine) for which the consumer pays for the use instead of for the ownership. They can then be replaced or refurbished when its end of life is near, or when the consumer’s situation changes and requires a different product.

Shareholders to stimulate action

Shareholders need to foster and support the transition to a circular economy. Triodos wants to use its’ influence as a long-term shareholder to steer the companies we invest in towards a more circular model. Our Socially Responsible Investment (SRI) funds  invest for positive change in companies that contribute to the transition to a sustainable society. We engage with companies to help them accelerate their contribution to the society we envision. A circular economy is well-aligned to our vision of a sustainable society; a society that promotes human development, social inclusion and protection of the earth.

 

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