The Circular Economy - opportunities for European investors, producers and consumers - Main contents

The Circular Economy is not just another environmental initiative. Its effects clearly reach beyond such a narrow perspective, to touch upon the economy at large. There is, of course, no doubt, that the environmental benefits of shifting towards a circular economy will be huge. But the economic potential - the business opportunities - are just as big.

McKinsey & Co estimate, that by 2030, five billion people will live in cities, compared with 3.6 billion today. That will be 5 of a total population of 9 billion. In business opportunity terms that means almost 3 billion new middle class consumers. The challenge that faces us is how to cater to those new consumers, while protecting our planet's limited resources.

For decades we have been using resources in a very unsustainable manner. Our approach was to "take - make - consume - and dispose". We are learning at our own expense, that this is not sustainable.

European Commission initiatives - such as the Environmental footprint life cycle assessment - have partnered with 300 businesses and industry associations to gather evidence. This will be a reliable source to measure impacts, right from the extraction of resources, to the very end life of a product. We already know that the European Union is in many ways “skills rich but resource poor”. To compete, we need a stronger and a more efficient resource base. So, what if we gave a second life to our products?

In 2013, the Ellen MacArthur Foundation made a bold statement about the EU manufacturing sector. They calculated that it could benefit from net material cost savings worth up to between €4 to €5 billion per year by 2025. How - Simply by stimulating economic activity in the areas of product development, remanufacturing and refurbishment.

Today the imperative is keeping the added value in products and materials for as long as possible - and eliminating waste. Therefore the circular economy is a game changer.

But in talking to the business community, I know that I am in many ways preaching to the converted. 'Project Mainstream' for example shows just how invested major multinational companies have already become. Companies such as those under the 'Project Mainstream' umbrella have already realised the opportunities. If we manage the transition properly, we reckon that waste prevention, eco-design, re‑use, recycling could bring net savings of €600 billion, or 8% of the annual turnover of businesses in the EU. And, at the same time, they can reduce the total annual greenhouse gas emissions by 2-4%.

So what can be done to encourage, and indeed facilitate this shift?

Well, first things first. By the end of the year the Commission will present a new package on the Circular Economy.

Right now, as part of the preparation phase, we are evaluating the responses to our successful online public consultation on the main options of the plan.

The circular economy is what we should aspire to. And it will be a big step forward. But let's remember that it is part of a bigger picture.

The place our natural capital occupies in our economic and business models remains pivotal to long-term sustainability. There can be no sustainable economy without full integration and protection of our natural capital, be it on land or at sea. This is why green growth respects and builds upon our biodiversity and the services rendered by our ecosystems. That is why blue growth taps into the immense potential of the seas and oceans - just think of ocean energy, ocean resources, marine biotechnology, aquaculture, or coastal tourism. Our ecosystems, our oceans, and biodiversity present tremendous economic opportunities - but they also present enormous environmental responsibilities.

In our quest for sustainability, economic opportunities and environmental responsibilities are not only complementary, but are more so mutually reinforcing. In any business opportunity, the main stakeholders are the consumers. Today’s consumers are becoming ever more demanding. Our society is becoming smarter, more autonomous and innovative. And, above all, we are moving towards a “sharing society”.

Let me give you one example. Who would have predicted even 5 years ago, that buying a car would be anything other than a standard individual purchase? A product, by the way, that statistically is used 8% of the time. Now the concept of a car being a service you use, rather than a product you own, is becoming more prevalent. Sometimes the market opportunities are in the service provided rather than the product itself. Such is the new 'sharing economy'. Consumers must be the conduit through which products are given their 'second lives'. And now the new European Fund for Strategic Investments (EFSI) opens a new funding avenue for circular economy projects. It can help entrepreneurs and provide the right infrastructure.

Let's make sure that circular economy is a benefitting opportunity for European resources, European manufacturing and European consumers. I can assure you the Commission initiative will be significantly ambitious. To be successful, it will need support. Investors can support by capitalising on innovation; industry can support by being flexible and efficient; consumers can support by adopting new habits.

This article was originally published in Formiche Magazine in October 2015