Closed loop – open opportunities

The world must find a solution that would reconcile the growing needs of people with the scarce available environmental resources. Could a circular economy be this solution?

Calculations show that even a minimal change in the Polish economy – 1 per cent savings in the cost of materials and energy – may result in an annual GDP growth of PLN 19.5 billion.

However, despite the existing examples of profitable business models, the circular economy will not emerge on its own.  State authorities have an important role to play, in particular in setting a clear strategic direction for the country and creating a friendly regulatory environment.

During the EEC Green conference in Katowice, the report entitled „Closed loop – open opportunities” prepared by Deloitte in cooperation with its strategic partners – ING Bank Śląski, Adamed Pharma and Żywiec Zdrój S.A. – and with the support of AmRest and Veolia will be published.

The report shows the opportunities and benefits that the transition to a circular economy can bring to Poland and Polish companies, provides the data and arguments necessary to continue the debate, as well as indicates the directions of development and available public policy instruments. Below we present selected observations and conclusions from the report.

Growth of the global population and of consumption threatens to deplete the planet’s natural resources, as we use them inefficiently. The solution is to move to a circular economy, which aims to avoid waste and ensure the longest possible circulation of raw materials. This helps reduce exploitation of the natural environment and curb negative climate changes.

Thus, building the circular economy helps achieve the Sustainable Development Goals and is in line with the global climate policy. The transition to the circular economy may help reduce CO2 emissions related to consumption in the European Union by at least one third, or their equivalent (Deloitte, Circular economy potential for climate change mitigation, 2016).

“Our commitment to sustainable development and to the circular economy is an expression of our personal convictions, as well as the prospects of creating a multi-billion market related to this part of the economy,” says Brunon Bartkiewicz, President of the Management Board of ING Bank Śląski.

“We are deepening our knowledge and gathering experience, because we believe that this will be the future. We want to contribute to building a circular economy by properly shaping the bank’s balance sheet and product offer as well as promoting pro-environmental attitudes among our employees and customers,” stresses Brunon Bartkiewicz.

The main areas in which Poland deviates from the circular economy model and which could significantly benefit from its introduction are (based on Eurostat and UN data):

– Poland records the third largest consumption of materials among the EU members, and the material efficiency in our country is 3.5 times lower than in the European Union, which is due to the high share and low added value of industry in the economy;

– Poland is a leader in Europe in terms of the use of fossil fuels, which generate as much as 90% of primary energy used in Poland;

– Poland’s economy is more than twice as energy-intensive as the EU average, and the share of energy from renewable sources is low (11.3% in 2016), which contributes to Poland’s leading position among European emitters of greenhouse gases. We are responsible for 9% of greenhouse gas emissions in Europe;

– Waste management in Poland is not very efficient. We generate a lot of waste and little of it is being recycled compared to the EU. As much as 45% of all waste is generated by coal mining (hard and lignite coal) and metal ore mining;

Use of renewable energy sources and materials, sharing, dematerialisation of consumption, efficient waste management or the design of products for longer use, with the possibility of their easy repair and reprocessing of raw materials, among other things, contribute to limiting the consumption of natural resources.

While making the transition to a circular economy, local conditions are very important as they determine both the current use of raw materials in the economy as well as the level of circularity and support for this economy. For this reason, preparing a national strategy requires a comprehensive diagnosis of local opportunities and challenges for the development of a circular economy.

“Discussions regarding the circular economy focus on legal regulations, and often omit the subject of new business models. I am convinced that circular economy can really help create new potential of the Polish industry,” points out Maciej Adamkiewicz, President of the Board of Adamed Pharma.

“However, this requires cooperation and partnership between business and the widely understood state administration. Only through joint implementation of circular economy-related objectives is it possible to gain a competitive advantage and bring out the potential hidden in Polish companies,” emphasizes Maciej Adamkiewicz.

Positive impact of a circular economy on the productivity and innovativeness of enterprises has been confirmed by scientific research. Even minimal changes in the materials economy in Poland may free up huge funds for additional innovations in the economy and improvement of productivity. Reducing the consumption of materials and energy by 1% in all sectors would generate added value of PLN 19.5 billion. Bio economy as well as the chemical, electromechanical and transport industry have the largest share in this amount.

At the same time, our analysis shows that the reduction of material consumption costs in Poland can be much greater than 1 percent. The bio economy, construction and transport sectors have a particularly large potential here. The analysis of the benefits drawn from investing the costs saved by 20% lower materials and energy consumption in these sectors (i.e. 92 billion PLN) shows that there is a chance to generate additional PLN 167 billion of GDP per year.

Examples of numerous companies in the world, but also in Poland prove that building a company’s strategy around the concept of circular economy not only brings benefits for the environment, but also helps build real and effective business models. The key to success turns out to be identification of promising areas in the value chain and adopting a structured approach to the process.

Deloitte’s proprietary methodology „10 Types of Innovation” allows to plan in practice tactical changes in the areas of the company’s operation, its offer and customer experience.

“Żywiec Zdrój supports the idea of a circular economy, striving to increase the level of plastic packaging recycling in Poland. We declare the continuation of the activities undertaken so far, so as to ensure that the amount of plastic collected from the market and processed will be systematically growing,” declares Frédéric Guichard, General Manager of Żywiec Zdrój S.A.

“At the same time, Żywiec Zdrój will also increase the share of rPET in its packaging. In this way, the company wants to increase the effectiveness of the packaging recovery system in Poland,” adds Guichard

6 . The circular economy will not be built from the bottom up, as market imperfections stand in the way. Systemic state intervention is needed.

Market imperfections such as the problem of a common fishing ground, asymmetry of information and external effects prevent a spontaneous, bottom-up construction of a circular economy. Therefore, systemic state intervention, which will correct these imperfections and impose general rules of the game that will contribute to the creation of  circular economy, is necessary.

This intervention should be designed on the basis of behavioural sciences, which provide tools for influencing people’s behaviours and decisions, for example through the so-called social proof, creation of personalised information, provision of feedback, or  change in the default option.