Preface – World Economic Forum
World Economic Forum
World Economic Forum
A confluence of various global trends, statistics and fresh economic analysis has accelerated this agenda. Three billion middle-class consumers are expected to enter the global market by 2030, driving unprecedented demand for goods and services. Commodity prices overall rose by almost 150% from 2002 to 2010, erasing the real price declines of the last 100 years. Experts have calculated that without a rethink of how we use materials in our linear ‘take-make-dispose’ economy, elements such as gold, silver, indium, iridium, tungsten and many others vital for industry could be depleted within five to fifty years. If we remain in our ‘business as usual’ mode, price volatility will continue to surge, alongside the probable inflation of key commodities. Business leaders are in search of a better hedge to avoid these risks, and are moving towards an industrial model that decouples revenues from material input: the circular economy.
The economic case for the circular economy is tangible. The cost of remanufacturing mobile phones could (for example) be reduced by 50% per device if the industry made handsets that were easier to take apart, improved the reverse cycle, and offered incentives to return devices that are no longer needed. High-end washing machines would be accessible for most households if they were leased instead of sold. Customers would save roughly a third per wash cycle, while manufacturers would earn roughly a third more in profits. The economic gain from materials savings alone is estimated at over a trillion dollars a year. A shift to innovatively reusing, remanufacturing and recycling products could lead to significant job creation. 500,000 jobs are created by the recycling industry in the EU alone.
In short, the economic case for shifting to a circular economy is compelling. The economic impact of this change would be evident for business and consumers in both industrialized markets and fast-growing economies. Cheaper phones and washing machines are just two of a myriad of benefits that could swiftly materialize for tomorrow’s global consumers. For governments, this shift to circular economic activity could help address the global job gap of 600 million that the International Trade Union Confederation forecasts by 2030 if business as usual continues.
But how can change be catalysed on such a scale? The economic gain can be realised only if multiple players across business and research communities come together and reconceive key materials flows and manufacturing processes, supported by policy-makers and investors. The transaction costs of shifting the status quo are extremely high: no single entity can make this happen on its own. A large-scale, business-led collaboration is required.
At its Annual Meeting in Davos this year, the World Economic Forum hosted over seventy leaders from industry, government, academia and civil society to discuss exactly this problem: how can the circular economy be scaled up?
Many of the participants at this session were inspired by the work of the Ellen MacArthur Foundation, which has emphatically set out the trillion dollar economic case for a circular economy. Many had also been involved in the World Economic Forum Sustainable Consumption Initiative 2008 – 2012, or in other World Economic Forum communities, initiatives and global agenda councils focused on sustainability and circular economy issues. The Young Global Leaders (YGL) Circular Economy Innovation and New Business Models Taskforce is one example, or the Global Growth Companies Sustainability Champions, Technology Pioneers, and the Global Agenda Council for Sustainable Consumption. The discussion also covered a wide range of national sustainable growth initiatives—notably the Dutch Sustainable Growth Coalition, and public sector institutions ranging from the European Commission to the Brazilian National Development Bank. A common thread ran through all of these groups: a critical mass of leaders prepared to voice their desire for action, ready to ‘break pack,’ and eager to become first movers in scaling up the circular economy.
The plea to the World Economic Forum at that meeting was clear: given the compelling economic case for action, could the Forum help architect collaboration to scale up the circular economy?
I am delighted to say that this report and the proposal for collaborative global action it contains is the response to the challenge set by those leaders who met in Davos in January. Based on extensive new research, this report sets out the business as well as the economic case for action, and identifies where industry leaders’ energy may best be focused to catalyse change. Over 30 business leaders and experts from the networks of the World Economic Forum’s leading companies and the Ellen MacArthur Foundation’s Founding Partners and CE100 were interviewed in the course of this work, ensuring that any plan for action would be have a sound, practical foundation.
The subsequent chapters in this report set out key areas of the research and its findings, and present a detailed plan of action.
The proposal focuses on materials and some aspects of product design—one of the four building blocks of a circular economy (the other three being new business models, global reverse networks, and enabling conditions). This is an important and practical starting point as it will enable creation of a new palette of materials for building a regenerative economy. Our core proposal is inspired by how a de-facto standard for polyethylene terephthalate (PET) in packaging has emerged across multiple beverage companies since the 1970s, driving the recycling and remanufacturing of PET products to a high degree. This proposal focuses on catalysing a similar outcome for a signature group of materials stocks that permeate our global supply chains: polymers (particularly polypropylene) and paper & cardboard are examples. Three future-focused signature materials will also be examined, noting how the global materials market is likely to change radically in the coming decades. These include bio-based materials (for packaging for example), materials for 3D printing (set for explosive growth in the coming decade), and carbon dioxide recovery. This latter initiative overturns the concept of CO2 as a pollutant, instead exploring how it could become a valuable economic asset for other businesses, serving as a feedstock for polymers and other materials currently dependent on oil.
We hope that bringing together experts from corporations and research organizations will generate a new wave of collaboration across industries and geographies to develop the blueprint for a large, steady and pure materials stream for each of the materials selected. The aim is to ensure that all players can capture the value of multiple recycling and remanufacturing easily and quickly. The project will trigger action to implement the rollout, tracking the innovation, jobs, economic value and environmental gain that can be tapped as a result. The practical role policy-makers, the R&D sector and investors can play to help accelerate the process and harness its economic benefits will be explored in parallel.
The initiative will support 24 months of activity across these various issues, involving task forces of senior executives and technicians as well as representatives from government, academia, investors and civil society from multiple geographies and sectors. Success factors at the end of this period will be threefold:
A new list of pure signature materials together with their building blocks, conversion methods and reverse setup, co-designed and agreed informally by enough key parties around the world to change the global economy in that field
Proof of concept in two or more signature materials categories, demonstrating how to make the change happen by working with leading businesses, their suppliers and customers of that material to anchor the new materials specifications
A set of practical suggestions from all the stakeholders involved reflecting how they have learned to accelerate and enable the process in their particular field, and how they are benefitting from the resulting innovation.
All the outcomes will be captured in a comprehensive report extrapolating the core economic case surrounding this change effort. As with all World Economic Forum initiatives, we will also convene a CEO-led steering board to govern and steer the work at a strategic level.
If successful, the project offers profound impact on scaling circular economy benefits. The collaborative waves across four to five materials flows has potential to trigger net benefits of at least $500 million and 100,000 new jobs, as well as to avoid/valorize 100 million tonnes of materials waste within 5 years.
To realise this ambitious initiative, the World Economic Forum is delighted to have entered into collaboration with the Ellen MacArthur Foundation, and with the global management consulting firm McKinsey & Company, which acted as project adviser and provided the analytics for this report. The high level of input and enthusiasm from both the Ellen MacArthur and the McKinsey teams to drive the work forward has been exemplary, and lays a strong foundation for the collaboration ahead. Alongside the many to whom we owe our deepest thanks (detailed in the Acknowledgements), we are indebted most of all to Ellen MacArthur herself for championing this initiative, and for driving the circular economy agenda so passionately across and among the global business community.
The Forum would like to acknowledge the leadership and interest shown by so many of its industry members to help shape and drive the development of this work. Fifteen leading World Economic Forum’s Strategic Partners, Industry Partners and Global Growth Companies were interviewed to provide input for the report and help design the focus of the proposal. They are mentioned overleaf: the project team offers their sincerest thanks for the time and effort each invested to assist this work.
The project team would also like to express its gratitude to the various New Champion communities of the World Economic Forum, including the Young Global Leaders Circular Economic Initiative. It particularly extends its thanks to Peter Lacy and David Rosenberg, leaders of the YGL Circular Economy Taskforce, the Global Growth Company community, the Technology Pioneers, and the Social Entrepreneurs.
The work ahead will represent a truly collaborative effort, and we look forward to drawing on all the combined networks of the World Economic Forum and the Ellen MacArthur Foundation. I can think of no more appropriate stage for presenting the proposal and launching this initiative than the Annual Meeting of the New Champions—the Forum’s ‘Summer Davos’ in China, which is taking place in Dalian this year.
I hope you enjoy the report and the proposal for action it contains, and we look forward to engaging with you on this pivotal initiative.