The case for the circular economy

Stef Kranendijk discusses responsible business and sustainability

Finding a way to boost world economic growth sustainably is one of the greatest challenges we face today.

For the past century, we have acted as if the Earth’s natural resources are infinite. But we are fast discovering how untrue this is.

If everyone lived like an average North American, we would need four planets to sustain our needs, according to the WWF’s Living Planet Report 2012.

There is a paradox here. On the one hand, globalization in recent decades has helped to lift hundreds of millions out of poverty. But on the other hand, the ever increasing extraction of resources and economic activity has placed increasingly unsustainable pressures on the environment upon which we all depend.

A recent World Economic Forum Report noted this paradox, stating that in recent years an estimated 450 million people had been lifted out of poverty. But in the same period, about 21 million hectares of forest had been lost, 9.1 billion tons of municipal solid waste was generated and some 50 billion tons of fossil fuels were consumed.

On the positive side, there is an opportunity for businesses to take advantage of future consumer demand from the new middle classes in the rising economies. By 2025, annual consumption in emerging markets may reach US$ 30 trillion – the biggest growth opportunity in the history of capitalism, according to McKinsey. Some 440 cities in the emerging markets, identified by McKinsey in its recent report on the urban world, could end up contributing to 47% of global growth to 2025. They forecast as many as 1 billion new consumers in emerging markets to 2025.

So, how can responsible businesses compete for this prize in the decades to come without damaging the planet and putting greater pressure on scarce resources?

The answer, I believe, is in the concept of the circular economy. One route taken by Desso and other companies is to shape a Cradle to Cradle^® strategy, inspired by the book Cradle to Cradle: Re-Making the Way We Make Things. The authors, Michael Braungart and William McDonough, have given businesses a great challenge. Inspired by nature, they call on companies to develop manufacturing and product design systems that are healthy and regenerative.

With interest in the circular economy gaining ground, we may see more and more companies exploring this option.

Author: Stef Kranendijk is Chairman of DESSO and is participating in the World Economic Forum Annual Meeting in Davos.