Chile’s road to the circular Economy
September 07, 2020
After participating in the seminar “Chile’s Road to the Circular Economy: European Strategies and Visions”, organized by Eurochile July 23, in this exclusive interview Freek van Eijk, the director of Holland Circular Hotspot, deepens into the scope of the current scenario, the changes that are generating, and in explaining why the circular economy offers an answer to these problems.
“If you are not yet working on the circular economy, now is the time to start”
We, as a planet are facing some major challenges today. Climate change, loss of biodiversity, “the plastic soup” and providing access to resources for our industries are just a few of them, to this we can add COVID-19 that has made the dependencies and interconnectedness of supply chain painfully clear, says the director of Holland Circular Hotspot, Freek van Eijk. In this context, he adds that today’s crisis is a ‘wakeup call’ for other risks just beyond the horizon that are Climate and resource related.
After participating in the seminar “Chile’s Road to the Circular Economy: European Strategies and Visions”, organized by Eurochile July 23, in this exclusive interview the director of Holland Circular Hotspot deepens into the scope of the current scenario and the changes that is generating, and in explaining why the circular economy offers an answer to these problems.
We are close to reaching irreversible tipping points and floods, droughts, forest fires, sea level rise and desertification are going to hit us hard and lead amongst other to more migration and resource related tension. Doing more of the same cannot be the answer!, he affirms.
You have said that the circular economy is the best alternative for our future, both economically and socially. What makes it the best alternative?
A transition to a Circular Economy (CE) definitely makes more sense in these circumstances. A CE is often explained as a way to keep resources in circulation much longer and at the highest possible value. For me and many of the CE practitioners, it is not only about keeping materials in the loop but also about renewable energy, preservation of biodiversity, social inclusiveness and new coalitions. It is another way of designing, producing, consuming and dealing with waste. It is a new economic model, a system change with a fantastic spin-off to sustainability. It means working on the Sustainable Development Goals and Climate Goals, not as a cost but as a business model.
Today is all about circular economy but in the Netherlands they have learned by doing, how has this process been and what role do entrepreneurs play in this, the disruptive models that start on a small scale?
Working together is in the Dutch DNA, we just had to in order to literally “keep our feet dry”. The Dutch live in a challenging delta area and had to be innovative and collaborative to make our densely populated and early-industrialised country a vibrant and liveable place over the last centuries. These traits make that our country today is a perfect living lab to pioneer city solutions for global challenges. The first circular movers were forward looking multinationals and start-ups.
Former DSM CEO Feike Sijbesma (among the largest Dutch companies in the world, also present in Chile) said “we cannot be successful or call ourselves successful in a society that fails”. As a multinational you know that R&D can take at least 2 years, permitting and building a new plant can take another 2-3 years. A plant is likely to be in operation for the next 20 to 30 years. You don’t have to be a rocket scientist to know that in 20 years we will live in a society where the societal acceptance for pollution and injustice will be quite different. It is about your future licence to operate. Pollution, including CO2 will have a price. This is about your future markets and you have to anticipate today as first movers will have the biggest advantage.
In this, companies that start on a small scale, but with great ambition, have also played an important role.
Like in every country there is also a new, well-educated, connected and impatient generation with fresh ideas on how we can do thing different and better for us and the planet. They created a circular bottom-up movement with recognisable local and scale-able solutions.
This involvement of entrepreneurs is crucial as they (big and small) are the main actors of a transition to a Circular Economy. They show guts, take risks, invest and accelerate. But they cannot do it alone, we need all actors on board.
When the Dutch government noticed this movement from large and small companies in 2016 they decided for our “moonshot” circular economy ambition. The Dutch ambition is to become a fully functioning CE by 2050, including a 50% reduction of non-renewable raw materials by 2030. This seemly unreachable target, to me is inspirational and I believe we will get close. Now that this Dutch ambition was agreed on, it helped companies make the right investment decisions for the future, as it offered a clear direction of where the market needs to go.
How are these models later transferred, that different way of doing things, to the market in general?
Companies often start small with waste and resource management. Pretty quickly you will realise that just working in your own back garden there are limits to optimization. You have to work upstream and downstream in your value-chain to make a real impact. If your supplier would for example redesign his product you might be able to do much more. It is about circular value chains and circular ecosystems. But if you focus on resource optimization only you will soon find out that there are circular and digital models from start-up’s on the market that are disrupting your market. Maybe a bad circular example, but remember how AIRBNB has changed the hotel market and in less than 4 years and today is more valuable than the Hilton Group without owning a single apartment!
You have to keep moving towards new circular business models with for example circular supplies, sharing platform models, products as a service, product life extension or resource recovery.
It makes sense for business to go circular. Isn’t saving resources, energy or water in production not directly lowing your costs? Besides, as the CE is collaborative, by working intensively together and mutual dependency in a chain you also reduce risks.
What is required for the transition to the circular economy to be complete?
To make the transition to a complete circular economy actions are required from all stakeholders and new cross-sectoral partnerships are inevitable. Government sets the ambition, conditions and allow experimentation. Cities and regions are the place of action. Knowledge institutes develop new insights, enable valorisation of their knowledge and create awareness. Awareness and collaboration is key: the transition towards a CE is probably 80% about social innovation. Local entrepreneurs show guts, take risks, accelerate and are the main actors of a scale-up. Involvement of citizens/consumers and the leaders of tomorrow, is crucial. Resource flows are international and the challenges are global; to create a full circular economy, we need to go beyond national borders, working together with pioneering partners on a shared mission.
What role do multinationals, industrial sectors play in this, thinking that they are the ones that can carry out the change towards a circular economy on a larger scale?
Forward looking multinationals were among the first movers in the Netherlands. Now during COVID-19 we see an unprecedented economic support package from our government. The amount of open letters from business leaders and from the knowledge community warning not to recreate the old but to use the crisis to create a new normal has positively surprised me. There is also action. In the case of the multinationals, the Fossil Fuel Giant Shell stepped up its climate goals. On April they introduced a net-zero emissions target, adopting new measures to reduce their carbon footprint despite huge financial pressures from the coronavirus pandemic and oil price collapse. It plans to become a net zero-carbon company by 2050 or sooner. Philips is on track to generate 15% of global sales from circular products and services in 2020. DSM want that 30% of the raw materials its sources for resins to be biobased or recycled.
Do you think this will maintain once the crisis is over?
After COVID-19 the need for more resilience and circularity will only increase. A multinational has market power and they can impact their (global) value-chain. Let me give you an example. At the WEF in Davos leading brands have taken a commitment to make their plastic packaging either biobased or recyclable. Coca Cola for example aims to make our global packaging 100% recyclable by 2025 and plans to collect and recycle a bottle or can for everyone they sell by 2030. For countries were still more than 90% is landfilled this is a highly relevant commitment.
So that this reaches a large scale of people, changes in legislation, incentives, and regulations are also required. How has this been approached in the Netherlands, what role do governments have in this?
As mentioned earlier Government sets the ambition, conditions and allow experimentation and Cities and regions are the place of action. Bringing public and private stakeholders together, the Dutch set up 5 transition agendas, focusing on the market segments biomass and food, construction, manufacturing, plastics and consumer goods. For these market segments four year plans were developed with goals, milestones and responsible actors. This clear focus allows attracting a critical mass of stakeholders that are needed to scale-up. Furthermore, conditions for change were created by choosing a set of interventions using market instruments, providing access to financing, stimulating innovation, tackling the behaviour component and international collaboration. Holland Circular Hotspot is pivotal in the last item.
And how can local governments contribute?
In the Netherlands a lot of Cities have mapped the potential for circular development in their region and have set-up a roadmap for action. For cities it is important to involve businesses from the start and give room for experimentation and to understand the barriers to circularity and start addressing them. They can facilitate interdisciplinary and cross-sectoral collaborations by organizing workshops and giving a platform to frontrunners and showcase best practices in their city. By circular procurement they can also lead by example. Public procurement is typically 20% of GDP. To involve the young generation, the leaders and consumers of tomorrow, it is important to introduce and mainstream circular thinking into all education and trainings.
You have said that the coronavirus is the wake-up call we needed. Has there been a change, a major advance towards the circular economy after the crisis?
COVID-19 has made the dependencies and interconnectedness of supply chain painfully clear. Today’s crisis is a ‘wakeup call’ for other risks just beyond the horizon that are Climate and resource related. We are close to reaching irreversible tipping points and floods, droughts, forest fires, sea level rise and desertification are going to hit us hard and lead amongst other to more migration and resource related tension. Doing more of the same cannot be the answer!
We are experiencing a global crisis due to COVID-19. Business is taking in a heavy beating because of the lockdown and disrupted supply-lines. Businesses reopening after lockdown might find more border restrictions and possibly a greater customer preference for local over global products and services. They will have to work on resilience in their supply chain and source closer to home to ensure continuity.
CEO Frans Muller from Supermarket chain Ahold Delhaize expects that sustainability will get momentum due to the crisis. Recently he mentioned that Corona has created more awareness and critical attitude at consumer level on items like food spillage, energy, deforestation, logistics and companies will have to act to this trend. There is a direct fit with circular economy where resources are renewable or circle as long as possible at their highest value, where biodiversity is respected, where the energy is renewable and social equality is part of the system.
During COVID-19 we see an unprecedented economic support package from our government. The number of open letters from business leaders and from the knowledge community warning not to recreate the old but to use the crisis to create a new normal has positively surprised me. There is also action.
In short there is economic need to make our economy more resource resilient and sustainable. For companies it might not only be an opportunity to be more resilient, but also to be ‘a force for good’. In post COVID-19 times shareholder value should not be the only corporate value. The pressure from investors to include environmental, social, and governance factors in valuing a business is likely to expand to incorporate resilience to outside shocks. “If you are not yet working on the circular economy, now is the time to start.”
It seems that the circular economy has not yet managed to leave the waste part to fully enter the design of products and changes in the value chain towards a service economy. There are examples, sure, but not a massive change. What can be done to advance in this matter?
The Dutch started with waste management around 1875. We had an initial focus on public health and hygiene with a focus on collection with public landfills for residual waste and private collectors for valuable. Around 1975 we moved to a focus on environmental protection. This was all about control and technical fixes with for example leachate control for landfills, flue gas cleaning for incinerators. Later in the 1990’s we moved to a more integrated policy and diversion from landfilling. This was about professionalizing, recycling, solving institutional & responsibility issues, setting up Extended Producer Responsibilities systems, landfill bans & taxes. Today we landfill less than 2% of our waste and it is all about Circular Economy (CE). From the initial 3 R’s; Reduce-Reduce Recycle, we now focus on 9 R’s. We make and use products smarter by Refuse, Rethink and Reduce. In the use phase we focus on Product and parts life extension by re-use, repair, refurbish, remanufacture and repurpose. Today’s focus is predominantly on Valorisation of materials, recycle and recover. In a circular economy that should be the last step.
Countries like Chile do not have to wait 150 years to start with circular economy. Dealing with waste is dealing with the past. Nothings stops you from keeping products and materials in circulation today and by working on design you are working on the future.
Waste management is a logical and understandable first step and can be a catalyst for a circular economy. Waste managers will have to refocus; from volume to value.
Chile is still a country whose economy depends on its natural resources, like many Latin American countries. What opportunities are there in the region, and in this country, to move quickly towards a circular economy?
There are quite some countries, both developed and developing, that have abundant natural resources. In a linear economy where externalities are not priced in, the (negative) impact of production, like mining or agriculture, is in the resource country and the resource wealth is being exported to other countries that are taking the benefits of it or adding value to it.
The ‘OECD Global Material Resources Outlook to 2060’ projects a doubling of global primary materials use between today and 2060.
With a world that has experienced broken supply lines in 2020 because of COVID-19 and is turning circular and either virtualizing, localizing, substituting, dematerializing, reusing, repairing and remanufacturing and recycling materials these projections might see changes in demand patterns. The future will also see demand of new materials for a circular and low carbon economy. Furthermore, the resource exporting countries are not benefitting from the value created from their product. In short there will be a need for mining for a long, long time but the business model needs to be future proof.
From environmental impact of production perspective, it makes sense to minimize environmental impact in your own country and also increase operational efficiency by circular and restorative principles. Recycling water and valorizing waste streams are examples.
Responding to customer and societal demands for lower-impact products is another potential strategy to follow. There is a trend in certified organic food, there is a trend for responsible copper.
What potential do you see in Chile in this area?
In the world there will be a need for mining for a long, long time but the business model needs to be future proof. Also in Chile, recycling water and valorising waste streams are necessary first steps. From long term economic perspective, it makes sense to build in more resilience to the economy and keep more of the value at home for example by stronger collaboration with manufacturing or processing industry and embracing Circular Economy models. A moonshot idea for Chile might be to make better use of the huge sun-beaten desert in the north. Isn’t it a perfect place for both solar and wind energy? Couldn’t this green energy be used for green hydrogen production? Hydrogen is an energy carrier and a chemical building block for industry. The desert is close to the raw materials from the major energy-hungry mining sector and logistically convenient, not too far from the ocean linking it to export countries like China. As we are developing a hydrogen strategy in the Netherlands as well (in our case linking hydrogen production with offshore wind) sharing ideas and insights could be worth-while.
And in terms of waste management?
Waste Management can be considered urban mining. In this field Chile will have to catch up. Bottom-line waste management is a nett cost for society but if set-up properly waste management can be highly more efficient and catalyst for the circular economy by eliminating waste by design, keeping products and materials in the loop and by giving waste a new life. It took us 150 years to set-up waste management, making quite some mistakes down the road. Now we only landfill 2% of our waste. We gladly share our hard learned lessons!
To this is added today climate change, which is affecting sectors such as agriculture and industry. How can the circular economy help in this area?
Recycling of water, management of water balance, recovery of nutrients and energy is important for the industry; industrial symbiosis might help. In agriculture recycling of water and nutrients and water efficient irrigation systems are equally important. Treated wastewater can be reused or reintroduced in its environment.Circular water is also about the right amount of water in the right quality in the right time for the right application.
Circular Economy strategies are focused on minimizing food waste, recovering, reusing and cascading organic residues. Tackling organic waste by composting and digestion can solve waste, soil and air quality issues and is something that can happen locally and be scaled. You can additionally look to newer higher value applications as biobased materials or chemicals. Anticipating consumption patterns and diets and producing for example non animal based proteins is another way forward. If the countries where Chile is exporting its products to see an increase in demand in certified healthy, organic and biological food that is also packed in reusable, recyclable or biobased packaging than it is worth grabbing that opportunity.
What happens if we do not act today, if we do not make the change?
Both the business and societal cost for Chile of not acting will be much higher than acting today. First movers will have the biggest market opportunities. Former Unilever CEO Paul Polman called Climate Change the biggest business opportunity of the century.
What is your vision of the Eurochile seminar in which you participated regarding the work that our country is doing in circular economy?
Eurochile managed to get a fine and inquisitive audience together in a compact and content rich webinar programme. The momentum was well timed as Chile, according to me, is ready for Circular Economy. The work that Eurochile is doing on a Circular Roadmap towards 2040 is highly relevant in this perspective. We hope that the Dutch Embassy, Holland Circular Hotspot and a myriad of Dutch Entrepreneurs can walk alongside Eurochile on this road and offer inspiration.
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