The Covid-19 pandemic has had far-reaching economic and social implications. Developing countries, where the crisis overwhelmed vulnerable health systems and exacerbated both poverty and inequality, have been hardest hit.
Calls for a green recovery from the economic downturn prompted the World Economic Forum to propose The big reset in Davos 2021, a set of initiatives aimed at laying the foundations for a more sustainable and resilient world. In the Asia-Pacific region, one of the main axes of this transformation must be the accelerated adoption of global circular economy principles.
The reasons are obvious: On the production side, the region is a key driver of global manufacturing and is deeply integrated into global supply chains, with many countries being key suppliers of raw materials and producers of goods. consumption and equipment. Consumption, already high, is expected to increase exponentially with more than 3.5 billion Asians expected to be part of the middle class by 2030.
A circular economy is an economic concept that defends material recovery at the end of the product life cycle to redirect resources to production and eliminate waste. While circular business models have been widely adopted in European countries like Denmark, Finland, Belgium and the Netherlands, the circular economy remains largely a buzzword in many parts of developing Asia.
Perhaps due to increasing social pressure and the focus by investors on environmental, social and corporate governance issues, the term has been loosely used by the public and private sectors to signal their social commitments to stakeholders.
However, Singapore-based consulting firm AlphaBeta’s engagement with organizations in the region suggests that behind closed doors there remains some resistance and questions around large-scale circular adoption.
Here are three immediate steps governments across the region can take to facilitate circular transformation.
1. Raise awareness
The first is to aggressively raise awareness of the benefits of a circular economy in government units, businesses, the public and civil society. This requires extensive studies to determine these benefits.
Indonesia is leading by example in this regard. Southeast Asia’s largest economy continues its plans to develop a national circular economy roadmap and recently launched a study, led by Bappenas – the country’s development ministry – and the United Nations Development Program (UNDP), to understand the potential impacts of a circular transition.
The results of this research gave weight to the many policy recommendations calling for a green economic recovery. For example, the circular economy is significantly positive for the economy and is estimated to add US $ 45 billion (on a business-as-usual scenario) to Indonesia’s GDP per year by 2030. Despite With some degree of job losses expected in some sectors, the transition will create 4.4 million net jobs for Indonesia, of which 75% will likely go to women.
As part of awareness campaigns, it is also necessary to show businesses that there is a wide range of circular opportunities available to them – many of which are not technically prohibitive and could be easily accessible.
Using local case studies will certainly provide inspiration in helping the opportunities appear more familiar, easier to understand, and achievable. For example, the Indonesian study cited CupKita, a Jakarta-based start-up that provides a reusable container service with the aim of eliminating the use of single-use plastic cups. Another example is PT Sigin Interactive Indonesia which provides repair and overhaul services for used electronics and appliances, DOA (Dead-on-Arrival) products and printed circuit boards.
2. Involve small businesses
Second, it is essential to involve micro, small and medium enterprises (MSMEs). In South East Asia, the vast majority of registered businesses (almost 90% in some countries) are considered MSMEs – failure to involve them in the circular transition will result in sub-optimal adoption and benefits.
Although MSMEs may face barriers such as access to capital, they may be better placed than large companies to adopt circular economy practices. Since companies that succeed in a circular environment typically have operations that are adaptable to changing business environments, the small size and built-in flexibility of MSMEs could be an advantage. Large companies, on the other hand, often lack the flexibility to reorganize their production systems and supply chains to adapt to a change in their economic environment.
To support MSMEs in the circular transition, governments in the region could draw on lessons learned in other countries. For example, in the UK, the London Waste and Recycling Board (LWARB) created the Advance London Program to help local SMEs explore new markets, revenue sources and circular economy business models.
Some Southeast Asian countries have made good progress in this regard. In Vietnam, for example, the Global Green Growth Institute created a manual on green growth priorities and also provided low-interest loans to SMEs with “green” projects.
3. Create favorable policies
The third step that countries could take is to develop an enabling environment to promote innovative financing approaches to support the circular economy.
The study by Bappenas and UNDP showed that a complete transition to a circular economy in Indonesia requires a substantial investment of around US $ 20 billion over the next decade. While the required investment could be partially funded by savings that businesses could benefit from as they transition to circularity, some larger projects will require additional investors.
With over US $ 30 trillion in sustainable investment assets under management around the world (and that number is growing rapidly), there is no shortage of funds. But it is the responsibility of developing countries in Asia to implement the necessary capital market reforms to access these financing opportunities.
Indonesia is a good example of proactivity in this space, with the government passing legislation that led to the publication of the first sovereign green sukuk (a bond whose terms and structure comply with Sharia law), raising over US $ 1 billion.
The Indonesian government also worked with the OECD to launch the Tri Hita Karana (THK) Roadmap for Blended Finance in 2018 – a unifying international framework for mobilizing additional business capital towards the Sustainable Development Goals (SDGs).
The Covid-19 pandemic has underscored the importance of improving resource security, prioritizing environmental conservation and improving socio-economic equity, especially in developing countries. This could be an opportunity for developing Asia to accelerate its transition to a circular economy and help build a more resilient economy, society and environment.
With strong commitment, active participation and strong collaboration between the public and private sectors, circular economy concepts could go from a buzzword to delivering concrete and tangible benefits in the years to come.
Bingxun Seng is a director at AlphaBeta, a Singapore-based strategy consultant serving clients across the Asia-Pacific region.
Mohak Mangal is a partner at AlphaBeta.
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