Circular economy to reduce waste 

Our total waste mountain is growing at an unprecedented rate. The EU alone produces more than 2.5 billion tonnes of waste every year. Studies suggest that the global waste mountain may have grown by 70 percent by 2050. ‘Urbanisation and steady growth in both the population and wealth are exacerbating this rise’, adds Jonas Theyssens of KBC Asset Management.   

The exponential growth of single-use plastics continues. The use of plastics has increased over the past 70 years from around 2 million tonnes per year in 1950 to 390 million tonnes today. If nothing changes, a fourfold increase is projected by 2050.  

44% of all plastic waste comes from consumer goods. The figures for the construction, automotive and electronics sectors are 18%, 8% and 7%, respectively. This undermines any perception of industry as being the culprit in terms of plastic pollution. The biggest culprit turns out to be the packaging in which every consumer takes home their daily necessities. This means that both the producers of these plastic containers and the consumers who purchase them can help reduce that 44% figure.

Recycling is essential, but in reality still happens too little. ‘Of all the plastic produced since the 1950s, about 30% is still in use, 10% has been incinerated and barely 5% has been recycled’, says Jonas Theyssens of KBC Asset Management. ‘The remaining 55% has ended up in landfill or in the environment.’ 

Recycling is important not only from the perspective of pollution, but also in terms of making prudent use of natural resources. The increasingly early 'Earth Overshoot Day' - the day when humans will have used up all the available ecological resources the Earth can produce in a single year - is a clear warning signal. It means that from that day on, we will be drawing on reserves that are needed by future generations. 

Depletion of mineral resources and fossil fuels is irreversible and therefore permanent. Social pressure against waste is therefore strong. Consumers are demanding more sustainability at source, as well as in the finished product. The mindset for a transition to circular economy is right. 

‘The linear economic model of 'take, make & dispose' is outdated’, argues Jonas Theyssens. ‘A circular economy closes the loop. It is a model of production and consumption in which existing materials and products are shared, rented, reused, repaired, refurbished and recycled so that they last as long as possible. This not only extends the life cycle of products, reducing the need for new raw materials and resources, but also reduces the amount of waste.’ 

Governments are promoting the circular economy with new regulations. Around 1 100 regulations on the circular economy have come into force worldwide. The European Union is leading the way with 339 active laws in 44 European countries. The UK and the US are catching up. Some countries are setting the bar even higher for themselves than the European regulations require.  France, for example - in addition to the existing European ban on plastic packaging for fruit and vegetables - has introduced further measures for fast food and yoghurt, which must now be sold in reusable packaging.  

Through a combination of fines for disposable packaging and recycling targets, governments are putting the onus on manufacturers. The increasing regulatory burden thus acts as a catalyst for a more sustainable production process and - by extension - more sustainable business operations.

Investors looking to capitalise on a circular economy can do so in several ways. 

• They can look for companies that recycle materials. Recycling rare materials, in particular, such as lithium for batteries, can provide a good business model. Companies active in other waste management, such as food waste, are also becoming increasingly important. 
• In addition, companies that incorporate recycled materials in different end products are a useful addition. Did you know that outdoor terraces are also made from recycled plastic? Or that the plastic from old refrigerators is given a new life in Playmobil figures?  
• Companies which are making their production processes more sustainable should also be on this list. Think of companies that are reducing waste or going a step further by manufacturing organic and biodegradable alternatives. 
• Companies focusing on wastewater reuse are also on the radar. Might the circular economy also be part of the solution to the water problem? 'As a result of climate change, both water scarcity and flooding are now a reality. This has placed water more prominently on the political and economic agenda and has led companies to find innovative solutions to meet their water supply needs. These include more efficient membranes for water filtration and a Water-as-a-Service business model where water treatment can be rented as a service. Solutions such as these create a circular model which enable companies to meet their own water needs’, concludes Jonas Theyssens of KBC Asset Management. 

Sources:  

• https://www.plasticsoupfoundation.org/plastic-feiten-en-cijfers/ 
• https://www.unep.org/news-and-stories/story/plastic-planet-how-tiny-plastic-particles-are-polluting-our-soil 
• https://www.greenpeace.org/belgium/nl/story/28150/earth-overshoot-day/ 
• https://www.europarl.europa.eu/news/en/headlines/economy/20151201STO05603/circular-economy-definition-importance-and-benefits 
• Circular Economy: impact on European equities, Berenberg ESG, 18 January 2023