Circular Economy

Baroness Jones of Whitchurch Excerpts

Thursday 3rd March 2016 Lords Chamber

Asked by

[Baroness Jones of Whitchurch]

To ask Her Majesty’s Government what steps they are taking to promote the principles of the circular economy, based on the re-use, repair, refurbishment and recycling of existing materials and products, to protect the environment, give new growth opportunities and avoid waste.

[Baroness Jones of Whitchurch (Lab)]

My Lords, I am very grateful to noble Lords who have put their names down in such numbers to join in this debate today. It reinforces an increasing view that this is a concept whose time has come. I am also very grateful to organisations such as the Ellen MacArthur Foundation, WRAP and the Green Alliance, who have taken the seed of an idea and fertilised it into a fully-grown, evidence-based new business model.

It starts from a simple principle. Current consumption is linear. Companies use raw materials to make products which are sold to consumers who then discard them when they are no longer valued or useful. The circular economy replaces that model with a virtuous circle, replacing the concept of waste with the concept of disassembly and reuse, so that materials are used again and again. It is a simple principle, but one which could transform industrial and service processes for the future.

Why is this transformation so necessary? At a global level, the challenge of providing food, clothing and shelter for a growing population is becoming ever more pressing. The global population is set to increase from 7 billion to 9 billion by 2050, many of whom will be joining the new middle classes, with new levels of consumption. In the next 20 years we will need 40% more energy and water, and three times more material resources. In 2010 some 65 billion tonnes of raw materials entered the economic system globally. This is expected to rise to about 82 billion tonnes by 2020.

Meanwhile, scarce supply and increased demand are driving up prices. As the Green Alliance has said:

“Over the past decade world food prices have doubled, metal prices have trebled and energy prices have quadrupled”.

Yet at the same time as that is happening the UN estimates that, for example, electronic waste, globally, is increasing by 2 million tonnes a year, with less than 16% of it diverted from landfill. This results, globally, in landfill mountains of potentially recyclable materials worth some £34 billion. This includes huge quantities of precious metals and rare earths which are really needed for future production.

Clearly, this is not sustainable because we are running out of resources and because the extraction and use of those scarce resources is having a major detrimental effect on climate change. This is a global problem to which businesses, environmentalists and politicians are finally waking up. It is a global problem which the circular economy can help to resolve.

It also has unique and specific applications in the UK. We currently recycle less than 50% of our waste and are in danger of missing our EU recycling targets for 2020. This is exacerbated by complex and inefficient collection systems, with more than 300 different systems across the UK, which even the Minister, Rory Stewart, has described as absurd.

At the same time, we have failed to develop robust markets for recyclable materials, so they do not achieve their true market value. For example, a couple of years ago, I was excited to visit a new factory in Redcar which was taking recycled plastic bottles and creating new plastic materials from them. However, that factory subsequently folded because it could not guarantee a regular-quality waste stream of plastic bottles and it could not compete on price with virgin materials. That clearly does not make sense. Recycled glass and paper businesses suffer the same challenges of maintaining quality and markets.

Yet, at the same time as that is happening, manufacturers are being rocked by the fluctuating price volatility of raw materials, making profitability and growth projections difficult. This is why there is a growing realisation of the opportunities that the circular economy can deliver. It flows from necessity but also heralds innovation, creativity and the potential for competitive advantage.

What does that mean in practice? The businesses in the forefront of this revolution realise that they have to design products differently. There is much talk about designing out waste completely. New products will be designed for a longer life, with easily available spare parts and repair. For example, I recently heard a Samsung executive setting out its plans to strengthen its product repair offer to consumers, training a new generation of service engineers and delivering a local and responsive service to them. New products might be leased rather than sold, with the advantage that the raw materials go straight back to the original manufacturer for stripping out and reuse rather than via any third parties. New products might consist of innovative new materials that are less environmentally damaging. For example, Jaguar Land Rover recently reported that it is experimenting with sustainable flax and cashew nuts as a replacement for plastics in some of their fittings. New products might be designed with reuse in mind. For example, IKEA now claims that 98% of its home furnishings can be recycled and it has established a take back service for used mattresses. New business models are often product sharing rather than purchasing. I say this as a contented member of the City Car Club, a car-sharing scheme in Brighton which is now expanding nationwide.

I give these examples not to suggest that the problem has been solved or that a sea change has taken place but as an indication of some of the radical new thinking which is now occurring. However, these developments and opportunities need to be nurtured and championed, and I look forward to hearing from the Minister as to how the UK Government intend to do this.

It is not only business opportunities we need to recognise but the enormous consumer benefits which can accrue from more sustainable business practices. For example, a recent report estimated that this has the potential to create somewhere between 200,000 and half a million new jobs depending on the rate of expansion. In addition, business would need to develop longer relationships with their customers and provide a higher quality of service. The practice of building in premature obsolescence would end, bringing down costs. Trends in consumer behaviour through leasing or sharing products rather than purchasing them would provide more customer choice. Of course, the ultimate consumer prize is that we would all live on a healthier and more sustainable planet.

However, consumers also need help to think about consumption in different ways, to value goods because of their function rather than because of any fashion or brand support and to reject a throwaway economy. Governments can play a role in this and I look forward to hearing from the noble Lord how he thinks his department might help.

What else can the UK Government do to facilitate these changes? First, at UK level, we recently mentioned in a previous debate the excellent work that WRAP has done on food waste, but it is also creating ground-breaking voluntary agreements with manufacturers and retailers in electronics and textiles through the electricals sustainable action plan and the Sustainable Clothing Action Plan. I commend the Government for continuing to fund these initiatives, although, as the Minister will know, their funding has been considerably reduced, which means that the sectors in which they can work are limited.

Secondly, as the Minister will be aware, the EU has produced its revised circular economy package which, when adopted, can provide crucial leadership and leverage for ongoing work. I am sure we could entertain ourselves at the expense of the EU leave campaigners by pointing out how reliant on the EU we are to drive forward the UK waste and resource efficiency agenda, but I am taking it as read that, certainly among noble Lords joining in this debate, we can all agree on that matter.

The EU circular economy package is a great step forward. It provides vision, an action plan and proposals on eco-design which will build in repairs, durability and recyclability. It also calls for economic incentives for greener products and signposts additional funding from the Horizon 2020 and structural funds. It specifically builds in EU targets for recycling 65% of municipal waste and 75% of packaging waste, and sets a maximum of 10% of goods going to landfill by 2030.

Perhaps I may ask the Minister for an update on the UK Government’s response to the EU draft. How will the Government’s emphasis on less regulation and greater subsidiarity affect our implementation of that package? Do we welcome the specific targets in the package? Are we confident that the UK Government would meet them?

I am pleased that the noble Lord, Lord Gardiner, is replying to this debate because I know that he shares many of our ideals. However, to be successful, the principles have to be embraced across government, particularly in BIS and the Treasury. I hope that he can reassure us that the Government are embracing these issues across government and are serious about adopting them. I look forward to his response.