The UN's goal to deliver sustainable production and consumption requires a drastic transformation of current business models - can the green economy deliver?
Humans used more resources than nature was able to replenish inside one year for the first time back in 1970. Since then, the date that Earth's biocapacity is breached - dubbed "Earth overshoot day" has crept forward each year. This year, it fell on 29 July.
Loss of natural resources on a mass scale have grabbed headlines, making the sight of Australian towns with no more than six months' of water left or raging forest fires across swathes Latin America a regular feature in the world's news bulletins. Meanwhile, plastic waste has reached every corner of the planet, seeping into insects and animals, snowfall, and even drinking water supplies, tarnishing everywhere from the peaks of the Himalayas to the depths of the Mariana Trench.
Beyond the clear environmental impacts, the wastefulness that is baked into the global economy comes with significant commercial implications. The linear extract-make-dispose model that defines so many industries comes with a complex web of reputational, regulatory, and resource security risks, not to mention the inherent problems that arise from relying on finite resources and dumping polluting externalities on the natural world.
It is these myriad challenges that the UN's 12th Sustainable Development Goal sets out to tackle. Necessarily wide-ranging in nature, the goal to "ensure sustainable consumption and production patterns" incorporates a raft of targets designed to drastically reform business models in order to minimise waste and create more circular resource flows. Under the goal, governments have signed up to a suite of 2030 targets, including pledges to halve food waste per person at both retail and consumer levels, and reduce food losses along production and supply chains; sustainably manage chemicals and waste throughout their life cycle; and reduce waste generation through reduction, reuse, and recycling.
But it also extends beyond internal business practices, calling on organisations to engage with consumers to ensure they too make more sustainable choices. As such the goal includes targets to encourage the provision of information for consumers to help them make more sustainable choices, provide support for developing nations to give them the capacity to drive sustainable production and consumption, and develop a more sustainable tourism industry.
Consequently, SDG12 is one of the most business-focused of the 17 UN goals, with the private sector in a position to directly influence the majority of the targets and sub-targets in SDG12 through their operations and products. And as with all of the SDGs delivering more sustainable production and consumption practices can aid the achievement of other SDGs, in particular, those focused on banishing poverty and hunger, and those that promote sustainable management of life on land and below water and tackling climate change.
For example, the World Business Council for Sustainable Development (WBCSD) found that just eight materials - steel, aluminium, plastic, cement, glass, wood, primary crops and cattle - are responsible for 20 per cent of greenhouse gas emissions (GHG) emissions, 95 per cent of water use, and 88 per cent of land use, demonstrating that strong action to minimise the environmental footprint of just a few materials could make a huge contribution to sustainable development across multiple fronts.
A climate imperative
The impact of more sustainable production and consumption on reducing greenhouse gas emissions and delivering on the UN's 13th SDG on climate action, has been highlighted in particular by a slew of recent reports. A study by the Ellen MacArthur Foundation and Material Economics in September concluded that it would not be possible to reach net zero emissions by 2050 without the mainstream adoption of circular economy business models, where materials are constantly cycled back through the value chain for re-use, resulting in less energy and resource consumption.
Moving to renewable energy could deliver only 55 per cent of required greenhouse gas emissions reductions, the report found. However, adopting circular business models across five key areas - steel, plastic, aluminium, cement and food - had the potential to reduce 9.3 billion tonnes of greenhouse gas emissions by 2050, it calculated, the equivalent of eliminating current emissions from all forms of transport globally.
A report by social enterprise the Circle Economy in January similarly found that 62 per cent of greenhouse gas emissions are released during the extraction, processing, and manufacturing of goods to serve society's needs, while only 38 per cent are emitted in the delivery and use of products and services. However, only nine per cent of materials are then reused globally, while circular economy measures are barely considered by governments in the national climate change plans they submitted as part of the Paris Agreement, the report found.
The evidence is stacking up in support of more resource efficient business models, with a growing body of work showing that more sustainable production practices can curb raw material costs while minimising resource security and supply chain risks. Moreover, it is clear more sustainable production and consumption patterns can deliver a raft of social benefits such as improved health and well-being, helping to tackle everything from air pollution and poor diets to mental health and income inequality.
Meanwhile, an Oxfam study in 2015 put the spotlight on "carbon inequality" by providing estimates of the lifestyle consumption emissions of rich and poor citizens in different countries. While emissions were rising fastest in developing countries, the report noted that much of the surge in emerging economy emissions was driven by the production of goods consumed by citizens in rich nations. As a result, the emissions caused by the vast majority of people in developing countries are still far lower on average than those of their counterparts in wealthier countries.
Oxfam is currently updating its analysis, but the outsized environmental footprint of citizens in industrialised nations remains a constant. "There's no reason to believe that anything has changed, if anything carbon inequality will have become more stark because incomes continue to rise, and we can assume that as incomes rise at the top, emissions also do so," says Oxfam's head of food and climate policy, Tim Gore. "We won't see any change in that until we see much more aggressive efforts at tackling income inequality in the global economy."
Climate policy has tended to focus on tackling the generation of emissions, but increasingly society needs to have more of a demand-side approach to climate mitigation, he argues, which for businesses equates to a counter-intuitive new imperative to identify ways to reduce consumer demand.
However, in its latest SDG progress report, the UN noted that although there were 303 sustainable production and consumption policies in place across 71 countries and the EU, overall progress towards SDG12 was being "seriously jeopardised". Worldwide material consumption has continued to expand rapidly, since the SDG's adoption in 2015, as has per person material footprints. The total amount of raw materials extracted to meet final consumption demands has risen 113 per cent since 1990 climbing from 43 billion metric tonnes to 92 billion in 2017. The growth rate for material consumption has also accelerated since 2000 and is projected to reach 190 billion tonnes by 2060.
Indeed, the global material footprint is increasing at a faster rate than both population and economic output, meaning that there has been no decoupling of material footprint growth from either population or GDP, the UN report noted.
For example, the material footprint per person has risen by 50 per cent from some 8.1 metric tonnes of natural resources in 1990 to 12.2 tonnes in 2017, with those in high-income countries using 27 tonnes per person, 13 times more than those in the lowest income countries.
Inevitably, increased material consumption is widely regarded as evidence of increased wealth, increased economic activity, increased development, and ultimately increased well-being. Globally, people have got richer, millions more people have been pulled out of absolute poverty, and as such are able to consume more. This is, on multiple levels, extremely good news. But as such SDG12 gets to the heart of the development goals' raison d'être: the need to shift towards development models that are sustainable and no longer crash up against the Earth's physical limits.
Consequently, the negligible progress towards meeting SDG12 is ringing alarm bells for governments, campaigners, businesses, and investors alike. Current economic and business models are struggling to capture the environmental and social gains delivered by more sustainable production and consumption patterns, while market failures and weak regulations mean it often remains cheaper for firms to cling to take-make-dispose models rather than invest in more circular approaches. At the same time, while some businesses embrace new consumption models that seek to dematerialise products and foreground services, many others continue to regard the idea of 'selling less stuff' as completely antithetical to commercial realities.
However, as part of burgeoning business engagement with environmental risks and the climate emergency, there are signs that a growing band of companies are starting to think seriously about how their production and consumption models need to evolve.
Businesses from a wide variety of sectors have been taking steps towards SDG12 targets, with half of the UN Global Compact (UNGC) member companies reporting action in this area, according to the pact's 2019 SDG progress report. Three quarters have policies and practices promoting responsible use of resources, while more than half have objectives for cleaner and safer production, it found.
The UNGC is encouraging members to transition from a "take-make-dispose" linear economy, to a circular economy, including through working with companies to build more sustainable supply chains. Emerging technologies in material science, sorting and recycling technologies, and sensors that monitor assets for extended use, are all combining to help enable more circular resource flows, it notes.
Similarly, a range of collaborations and programmes to curb waste levels have been established across multiple sectors. For example, food waste is a major focus of SDG12, and not only has its own sub-target, but also one that is quantified. Momentum is building in support of the target to halve food the 1.3 billion tonnes of food lost or wasted each year by 2030 as retailers and food companies prioritise ambitious waste reduction programmes, according to a World Resources Institute (WRI) report published in August. However, progress is again not yet at the pace and scale needed, it noted.
"There's lots of work going on in Denmark, a new initiative being planned in the Netherlands, also some programmes in Australia, New Zealand and Canada," said Dr Liz Goodwin, senior fellow and director of food loss and waste at the WRI. "But these are not enough."
Moreover, while businesses are making progress, food waste from households is proving particularly tough to tackle, Goodwin acknowledges. The rising number of middle class households, the lower relative cost of food, and busy lifestyles that make it difficult for people to plan meals for the week, are all combining to make domestic food waste a particularly intractable problem. "Our lifestyles and expectation that we can buy any type of food at any time of day or night means that it has become a commodity item rather than something we value and treasure," Goodwin reflects.
However, she argues that there are encouraging signs that progress can be made, with the UK providing something of a template for others to follow. Resource efficiency advisors the Waste and Resources Action Programme (WRAP) have led several campaigns and initiatives in recent years in the form of the Love Food, Hate Waste initiative aimed at householders, the Courtauld Committment for retailers, manufacturers, farmers and the hospitality industry, and the Guardians of Grub campaign targeting the hospitality industry. At the same time its UK food waste reduction roadmap launched last year now has more than doubled its membership to 156 food businesses, representing more than half of UK food industry turnover.
Dr Richard Swannell, director of WRAP GLOBAL, said that implementing the roadmap's strategy to "target, measure and act" can make a difference, with signatories having already reduced food waste by seven per cent in the first year of the programme.
WRAP also runs a global network called Champions 12.3, a coalition of senior representatives from government, business, international organizations, research institutions, farmer groups, and civil society dedicated to mobilizing efforts to tackle food waste. Its progress report published in September showed that businesses had made some encouraging progress on minimising food waste, while governments had begun work, but had further to go.
Other waste streams targeted by industry groups include e-waste, such as consumer household appliances and electronics. Recycling of such waste has typically lagged far behind other sectors, with the industry struggling to process even 20 per cent of the 50 million tonnes of eWaste produced each year. The net result is a global eWaste mountain that results in millions of tonnes of lost resources and environmental impacts as toxic materials leach into soils and water courses.
However, again there are signs businesses are starting to step up efforts to tackle eWaste and embrace more circular models.
According to a report by technology manufacturers' industry body TechUK a shift in thinking is underway across the global tech sector. "The previous focus on marginal and incremental improvements in resource efficiency have made way for more systematic thinking about the use of materials, product design and valorisation at the end of life," it states. Software updates, cloud services, improved water proofing of devices, and improvements to hardware design are helping to increase the life of tech products, it said. The tech sector is increasingly collaborating with the waste sector when products are created so that they are designed for reuse and replacement, it noted.
Legislation is also playing a critical catalysing role. In Europe, laws requiring all TVs, monitors, fridges, freezers, washing machines, washer-dryers, dishwashers, and lighting products placed on the EU market to meet minimum repairability requirements, alongside existing energy efficiency standards, are set to come into effect in 2021. Where the EU leads, other jurisdictions are set to follow.
As a result, innovations such as the Fairphone - an upgradable, repairable mobile made from ethically sourced components - increasingly look like trailblazers for a new approach to product design where energy and resource efficiency are deemed a top priority. Faced with regulatory pressures, green consumer demand, and the reputational risk that comes from stories exposing how a brand's products are either reliant on conflict minerals or end up in developing world scrap yards, the tech industry is investing heavily in enhanced supply chain management, improved durability, and more sophisticated end of life processes.
However, many campaigners remain fearful that old habits die hard. For all the talk of more circular resource models, a shift towards more sustainable consumption patterns seems a long way off. The impulse to constantly replace existing products with upgraded alternatives every 18 months that can then be sold to consumers who are desperate to boast the latest device shows little sign of waning.
Even bigger challenges are being faced by a global plastics industry that serves virtually every single corner of the global economy and as such has become a bête noire for environmental campaigners and a significant chunk of the public. In the wake of shows such as Blue Planet II and high profile newspaper campaigns, calls for plastic products and packaging to be more recyclable or phased out entirely have reached a crescendo.
Businesses have responded with wide-ranging efforts to develop more sustainable production and consumption models for the most ubiquitous of materials. WRAP's Plastic Pact has provided a forum for top businesses to come together and attempt to create a circular economy for plastic packaging, by requiring signatory companies to use at least 30 per cent recycled content by 2025, with 100 per cent of packaging to be recyclable, reusable or compostable by the same date. Some 120 firms representing 85 per cent of plastic packaging in UK supermarkets have signed up, sending shockwaves through the plastic supply chain.
At the same time as co-operating on emerging best practices, blue chip companies are also vying for pole position in the race to phase out single-use plastics. Unilever last month committed to halve its use of virgin plastic, and collect and process more used plastic packaging than it sells by 2025, while Nestle, P&G, and virtually every major consumer goods brand and supermarket have set similar goals. The targets have sparked a wave of corporate innovation, with businesses trialling everything from compostable plastics and cardboard-based packaging to refill stations and latte levies.
However, there is still scepticism among campaign groups, with Greenpeace warning consumers to beware of "false solutions" to the plastics dilemma, such as switching cardboard or bioplastics packaging made from unsustainable feedstocks, or embracing chemical recycling, which it says are failing to move society away from single-use packaging and divert attention away from more resource efficient systems that prioritize refill and reuse.
More broadly, concerns remain that outside of a small band of genuine corporate trailblazers, too many firms are failing to recognise the scale of operational and business model transformation needed to deliver on SDG12 and build a genuinely circular and sustainable economy. This blind spot persists despite compelling evidence that more circular business models bring huge benefits and help tackle escalating risks.
For example, business opportunities from the circular economy have been estimated at $4.5 trillion by analysts at Accenture, while a WRI report has warned that many of today's business models will be put at risk by an increasingly resource-strained world, where the global middle class has swollen to three billion by 2030. Consequently, the amount of materials needed to meet customer demands is predicted to triple by 2050 compared with 2000, the report warns. The implications are stark. Without a change in current business models that are based on selling more goods to more people, environmental stresses will increase risks and costs, as competition increases over materials while supplies dwindle or become more expensive to extract, the WRI concludes.
Many commentators agree that the business case for more efficient resource use is very strong, and that more businesses are starting to understand the risks, even if many are yet to respond. Claire Brady, programme manager on sustainable business at Bioregional, warns: "I don't think we're seeing the price impacts yet, but I think we will. We just can't continue to use resources at the rate that we do."
She points to IKEA as a prime example of a business that is innovating across its business model to become more circular. The retailer has committed to designing all its products according to circular principles by 2030, meaning they can be reused, refurbished or recycled. It also plans to use only renewable or recycled materials across its entire range.
"IKEA has recognised that wood is a key resource, but that they can't continue their business on virgin stock alone, and that the price for the very sustainable sources that they want is going to increase as more and more businesses want access, relative to the supply," Brady reflects. "They're looking at how they can close the loop, by designing products so that those materials can be reused within their value chain."
With food waste, Goodwin argues the business case "couldn't be clearer". A report by Champions 12.3 found that tackling food waste resulted in a 14:1 saving for a medium-sized company. "The investment required up front was tiny, mostly less than £10,000, so for an easy saving to your bottom line it makes sense to take action," she says. "Why more businesses aren't is probably down to lack of awareness, or a perception that waste is just part of doing business."
However, public pressure is leading companies to realise that it they fail to act, the might not be in business in 10 to 20 years' time because people simply won't accept wasteful practices, Goodwin argues.
Brendan Edgerton, director of circular economy at WBCSD, agrees that consumers and investors are increasingly pushing businesses to act on resource efficiency - and some leading businesses are responding. The chief executive-led organisation runs a circular economy project called Factor 10, which aims to improve the efficient use of materials by ten-fold. Launched last year, the programme's membership has grown from 30 to 40 companies, representing 15 different industries and 17 countries. A key piece of work for the programme is the development of a common measurement system for circularity within a business.
"This is our most popular workstream," he says. "Companies see value in it because they're starting to get questions from customers and investors and the media, who increasingly want examples of what they've done to decouple resource consumption and business growth."
That interest is leading to a more formalised approach to developing and deploying circular economy models. "Companies are keen to have a common language and methodology for how this is done - if they all do different things, it's going to fail to mean anything outside of that company's four walls," says Edgerton. The final version of the group's new system will be launched in January 2020, and will be publicly available. The hope is that it provides a useful template for rapidly accelerating improvements in corporate resource efficiency.
'Aspire to something different'
The challenge for these many initiatives is the sheer scale of the SDG12 targets they have to overcome. It turns out that building genuinely sustainable production and consumption models and reforming business practices that have been established for centuries is a big undertaking.
Cynics will also argue that businesses will never truly embrace sustainable consumption patterns that inherently encourage consumers to buy less. Is sustainable consumption ultimately antithetical to existing capitalist economic systems?
Kevin Moss, global director at WRI's business centre, argues there is a way to square this particular circle whereby business growth increasingly become predicated on selling services and enabling customers to get value from a product for much longer, through repairing or sharing.
Some companies that cling to the extract-make-dispose model insist that they are merely responding to consumer demand for more products, but Moss believes they overlook the power they have to shift consumer desire. "For some companies, more than 50 per cent of their market capitalisation is in the intangible value of their brand, because investors understand how important that brand is in making people want their products," he argues. "These brands can help people aspire to something different. I'd like to think that in 2030 I can walk into those stores and a third of what I can spend money on are new products, one third are used, and the final third could be spent on repairing it, or upgrading it in some way that increases its value without me buying anything new."
Those businesses can still make money, he says, but without using more resources. The potential for far-reaching reform is already there in online retailing, as websites such as Amazon and Alibaba know what consumers have bought, and how long they have had it for, he says. "If they have the creativity, they have the potential to get that product back and sell it to someone else," he adds.
"Getting the product back" is currently a key barrier to making the economy more circular, as manufacturers cannot extract or disassemble the raw materials to make new products without having access to the old ones. Take back schemes in small electronics have delivered decidedly mixed results, with many people more likely to leave disused phones and laptops in a drawer or throw them in the bin than return them through official channels. Only 20 per cent of such e-waste is recycled, according to the Ellen MacArthur Foundation, and repeated attempts to improve recycling rates have struggled to scale.
However, innovative companies are developing new approaches which could provide models for others to follow, thus taking closed loop systems into the mainstream. For example, circular economy product and material experts Pentatonic in September launched a partnership with fast food retailer Burger King to incentivise customers to return unwanted free plastic toys to dedicated toy amnesty bins. It will then melt the plastic down and turn them into play areas and restaurant equipment such as trays.
The company also has projects with Starbucks to create furniture and textiles out of waste coffee cups and lids from its own stores. The chair can be flat-packed, and is mostly made of a single material - polyethylene terephthalate (PET) - allowing for easy recyclability into the next product.
Pentatonic's chief operating officer Philip Mossop says that all its recycled products will be incorporated into a high tech take-back service. For example, the chairs have embedded radio-frequency identification (RFID) chips, effectively enabling a deposit return scheme.
Such innovation is needed to avoid the dilemma of the "false circular", he says, whereby companies create a product that is more sustainable, but have no idea where it ends up and so cannot break it down and make it into a new item.
Similarly, outdoor equipment manufacturer and retailer Alpkit encourages customers to return products through its Continuum project. Functional items are donated to charities such as those supporting vulnerable and disadvantaged people to get outdoors, while those that are not are recycled. As part of a new sustainability push announced in September, Alpkit is also starting to design more recycled and recyclable materials into its products, with an aim that all product will have a proven destination at end of life.
It is currently working on more radical ideas to engage its customers in returning products. "For all the talk on the news about climate change, there's a massively weak link for the consumer to do anything about it," says Nick Smith, co-founder of the company. "We will take more of a positive step, and come up with a scrappage scheme where we pay someone for their old jacket. It's not enough to wait for the consumer to do it."
Designing and selling products that can be returned and transformed into a new product is "just so much more appealing as an environmental direction that anything else feels piecemeal," he adds.
It is this push to make sustainable, circular, and resource efficient products and business models attractive and appealing that is likely to hold the key to whether or not SDG12 can be delivered. An economy in which products are dematerialised, repaired and re-utilised, and generally transformed will look very different from the economy we have now. It will only evolve at the pace required if consumers and businesses are convinced that new approaches ultimately deliver a better experience. Because the alternative is watching Earth Overshoot Day creep ever earlier in the year, until it reaches the point at which the environmental foundations of the current economic system collapse under the weight of unsustainable consumption.
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