Circular Economy Explained and ESG Strategy

For more than 50 years, we've seen a push for green initiatives, such as the concepts of circular economy and ESG. And on first glance, they all sound complex and daunting.

Nowadays, you will often spot the term ‘zero waste.” Just from that wording, you can pretty much understand the basic gist of it. The term has something to do with recycling or reducing waste. 

The zero waste movement is one that governments of the world and multimillion-dollar corporations take seriously. As someone who is new to zero waste, you might feel the need to understand these terms. This article is here to help you with that. We will cover the basics of both the circular economy and ESG investing, and how they can be intimately connected in modern zero waste discourse. 

Defining the Zero Waste Movement

But first, you might be wondering who started the zero waste movement, and what exactly it is. Well, to put it simply, zero waste is an initiative to reduce the amount of waste material we produce. And yes, this applies to every single facet of life, from the way we live to the way we conduct business.

Let’s take a look at the facts about waste. In the US alone, for example, around 30‒40% of all food we produce ends up wasted. Furthermore, an average American will throw away a whopping 37 kg of clothes each year, resulting in tons and tons of fabrics in landfills. 

Then let’s look at electronic waste. Despite it making 2% of all waste in the landfills across the US, it accounts for a staggering 70% of all toxic waste. And the stats don’t stop there, either:

• In 2017 alone, the US generated more than 12 tons of furniture waste
• A single passenger vehicle produces 4.6 metric tons of CO2 on a yearly basis 
• In 2018, landfills contained 30.5 million tons of waste that came from product packaging.
• One-third of food produced for humans is lost or wasted globally-- almost 1.3 billion tons per year.
• Global e-waste reached a record high of 53.6 million metric tons in 2019. Up 21% in just five years.

Those numbers are alarming. That’s why everyone, from the typical homeowner to the corporate CEO, started looking into greener ways of living. One such result was the circular economy approach.

Circular Economy 101

Circular economy is a relatively new concept, and in a lot of ways, it functions like a regular, linear economy, but with a few key differences. For instance, in a linear economy, the manufacturing process is simple — a concept we call take-make-use-dispose. 

Along the supply chain, a manufacturer acquires raw materials from the source and converts them to make a product. The product is used by consumers for a specific amount of time. Once they are done using it, they dispose of it in a landfill or it is incinerated. At this stage, the product and materials used to create it pollute the environment.

On the other hand, a circular economy tries to keep any resource within the economic system for as long as possible. For instance, during the ‘take’ stage, you don’t have to mine for fresh raw materials. Instead, you can focus on reusing some of the material you already have, or recycling it from old, disposed of products. During the ‘make’ stage, when designing a product, you can focus on the following waste-reduction elements:

• Use renewable resources to reduce pollution when the product ends up in a landfill
• Make the product easy to disassemble to harvest raw materials again
• Make the product easy to repair and long-lasting, so it doesn’t end up as waste quickly

Using recyclable materials is also key since it will make the disposing stage just as quick and painless. Of course, if individual parts of the product can be reused for a different purpose, you can only recycle the parts you don’t need. Overall, circular economy principles are incredibly efficient, since it saves a lot of time, money, and energy for the manufacturer.

ESG In a Nutshell

For the past few years, businesses worldwide have been heavily adapting their practices around a set of standards called ESG — Environmental, Social, and (corporate) Governance. To put it simply, these three factors provide a basis for investors and other stakeholder to determine how a business positively contributes to the environment and society. More and more often, ESG and financial reporting are released together, with investors placing high importance on the evaluation of ESG performance.

Broadly speaking, the ESG speaks to the following issues:

• Environmental — climate-related risks and opportunities and ecological impact of organizations
• Social — diversity, equity, consumer protection, human rights, and employee health and safety
• Governance — business ethics, employee/labor relations, executive compensation, and leadership/board diversity

Why Do ESG Investing and Circular Economy Matter?

As a business owner, you stand to benefit in many different ways by adopting a circular economy system and investing in ESG. A circular manufacturing system will enable you to make products quickly and allocate resources in a safe, cost-effective way. Moreover, you will not waste any resources on acquiring fresh raw materials or transporting them. 

Companies with high ESG performance enjoy reduced stock price volatility and lower costs of borrowing. More importantly, you will retain your workforce by tying jobs to a clearly articulated mission, giving your company viral word-of-mouth promotion.

But the biggest benefit, by far, will be the fact that your company helps keep the environment safe and clean. By producing less waste, you will directly contribute to reducing carbon emissions, as well as the emissions of toxic substances and pollutants.

Final Thoughts

Zero waste economies are definitely beneficial. However, you should keep in mind that you won’t achieve any positive results overnight. Switching over to a circular economy and developing a comprehensive ESG strategy takes a lot of time and effort. You will have to face some trial and error as you progress. But in time, if you remain true to your cause, you can become a leading expert in circular economy business and lead other companies like yours by example.

Author Bio 

Shannon Bergstrom is a LEED Green Associate, TRUE waste advisor. She currently works at RTS, a tech-driven waste and recycling management company, as a sustainability brand manager. Shannon consults with clients across industries on sustainable waste practices and writes for Zero Waste.

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