Today I submitted written evidence to the Environmental Audit Committee regarding the importance of creating a true circular economy. Offering real world examples of its application, with supporting facts and figures. My submission is below.
About the committee – The remit of the Environmental Audit Committee is to consider the extent to which the policies and programmes of government departments and non-departmental public bodies contribute to environmental protection and sustainable development, and to audit their performance against sustainable development and environmental protection targets. In the previous Parliament (2005-2010), the Committee’s programme included inquiries on climate change and environmental fiscal measures (‘green taxation’), as well as sustainable development and environmental protection. Unlike most select committees, the Committee’s remit cuts across government rather than focuses on the work of a particular department.
What is possible?
1. As European Sustainability Director at Interface, I have been privileged to see at first hand what is possible in this area. Interface is the inventor of carpet tiles and the world’s largest manufacturer, and since 1994 – thanks to the vision of its late founder Ray Anderson – has pursued a goal of producing zero negative impacts by 2020, which has transformed not only the economy but the rest of our industry including our competitors and suppliers.
2. Since 1994 Interface Europe has cut its own carbon emissions by 90% (without offsetting). Two important strategies have helped us forge ahead: increasing efficiencies and switching to alternative energy sources. Faster and more efficient production lines, and developing innovative technologies have reduced energy demand by around 60%. The remaining 30% of reductions have come from converting to green electricity and, more recently, to biogas.
3. Interface’s experience shows the importance of having radically ambitious goals. Back in 1994 Mission Zero seemed outrageous and unattainable, but by setting itself such a difficult challenge the company was forced to make tangible differences swiftly – and to think in new ways.
4. Modest, pragmatic targets – as most companies set – can generate results. But they are unlikely to provide the step change we need in business if we are to move quickly towards a circular economy.
5. Too often companies and countries constrain themselves by establishing sustainability objectives on the basis of what is already technically achievable. Managers and politicians are afraid of failing and want to ensure compliance with targets. That limits the vision to what they think it’s feasible. The only way to push boundaries is to set seemingly impossible targets that pushes people to look for better ways of doing things. Once you aim for radical ambitions you become released from the technology of yesterday, it takes you away from the ordinary, and challenges you to widen your scope – to look for alternatives that you didn’t know were possible.
6. The Mission Zero goal forced Interface to venture into the unknown, to search for technologies it never dreamt could exist. We found that applying technology from the aerospace industry using ultrasonic knifes we could cut carpet at doubled output and reduced waste by 80% (now we send absolutely no waste to landfill). The technology already existed, but we didn’t know about it – nor did anyone else in the carpet industry. Our engineers found it because our outrageously ambitious goal forced them to look in new directions. We only managed to crack the nylon-recycling conundrum for the same reason.
7. In the 1990s, the inventors of nylon told us that it was impossible to recycle nylon. Today, two of our suppliers, produce nylon with recycled content. One of them, Aquafil, saw the market opportunity and developed a big de-polymerization plant and produce yarn with 100% recycled nylon. This yarn does not go only to Interface, the biggest carpet tile manufacturer, but also to other players in the industry.
8. The nylon recycling processes from Aquafil not only allowed us to recycle nylon from carpet but look at start becoming restorative by recycling waste fishing nets, which are also made from nylon. We started a programme with the Zoological London society in the Philippines to clean up beaches while providing strong socio-economic benefits to the local community.
9. Today 44% of our global raw materials are recycled or bio-based. We think we can get to 100% by 2020.
10. The message is that very ambitious low-carbon and waste targets are achievable and can dramatically increase profitability and productivity. They must be set if the circular economy is to come into existence.
The importance of life cycle thinking
11. The key to creating a circular economy is to focus on the life cycle of a product. Most companies still concentrate primarily on the environmental performance of their own operations. Yet for many businesses that focus is mismatched with their true impacts, which lie outside their operations and fall instead within the lifecycle of their products.
12. When you view a company in terms of the products it makes – as opposed to its offices and employees – you soon discover that the vast majority of environmental impacts occur outside its operational boundaries. In many cases the impacts associated with raw materials extraction and processing, product use and end life far outstrip any ‘in-house’ impacts.
13. For Interface’s carpet tiles, for example, around 68% of the impact is associated with the production of raw materials, while only around 10% can be attributed to in-house operations. Sometimes the figures can be quite spectacular. For a consumer goods company such as Unilever, around 95% of a product’s impacts typically come from outside the company’s own operations.
14. The important thing, therefore, is for a company to carry out life cycle assessments (LCAs) for all of its products. An LCA gives a complete picture of the total environmental impact of a product throughout its life, and allows you to act accordingly. This is what we have done at Interface, and the results have been spectacular.
15. Through LCAs, we discovered, to our surprise, that around 70% of the overall environmental impacts of our carpet tiles were related to the raw materials used to make them. Of these, the oil-based nylon yarn, just one single raw material, had the single biggest environmental impact. We therefore re-focused our efforts where they could make the biggest difference: reducing the amount of yarn used, finding ways to recycle old yarn into new, and looking for bio-based alternatives to nylon. As already noted, we now use 100% recycled nylon and have halved environmental impacts as a result.
16. The other good thing about LCAs is that they allow companies to produce an environmental product declaration (EPD) for each product, objectively stating ‘ingredients’ and environmental impacts across the lifecycle and enabling customers to compare products and choose the ones that have least impact.
17. Such product transparency can deliver significant changes, as the example of the European car industry has shown. The EU Car Labelling directive required that car manufacturers publicly disclose the tail-pipe (exhaust) emissions of their new cars as measured in grams of CO2 per kilometre driven (g CO2/km).
18. This forced companies to carry out LCAs and then to publish EPDs stating each car’s g CO2/km value. Then a 2009 EU-wide regulation required each manufacturer to decrease their average portfolio of emissions to 130 g CO2/km by 2015 and 95 g CO2/km by 2020. The transformation as a result has already been huge, with the UK Climate Change Committee highlighting cars as one of the few success stories in terms of carbon reductions in the UK.
19. Today there is carpet in the market with 20kgCO2 per m2 and carpet with 5kgCO2 per m2. Both pay the same tax, same VAT. Once uses recycled raw materials, the other virgin. What is the market incentive for manufacturers to switch to the high recycled, low carbon carpet. Once we start taxing embodied carbon, we will be favoring the circular economy.
20. Unfortunately the use of LCAs, though growing, is still not widespread. It cannot be stressed enough that this has to be the future if we are to move to a circular economy. One good piece of news is that the European Commission has now recommended the use of EPDs by companies throughout the continent, and has kicked off a three-year testing period to develop product and sector-specific rules that will govern their use. But we need more from national governments to push the concept of EPDs and to move the corporate focus on to products, where most of the difference can be made.
Economic, political, and systemic influences on recycling
21. Imposing a ban on landfill is key to promoting a circular economy. Many products containing valuable raw materials still end up in landfill because it’s too easy to throw them away. Landfill bans would encourage better collection systems and create economies of scale that bring down the cost of recycling.
22. The Green Alliance estimates that preventing textiles, food, wood and plastics from going to landfill would keep at least £2.5 billion worth of resources in the UK economy, significantly increasing its circularity (http://tinyurl.com/kodkmyu).
23. At Interface we know the difficulties associated with overly-free access to landfill. Although we now have the technology to recycle carpets, we find it difficult to compete with the non-recycled products of rivals because landfill costs are so low. In parts of Spain, for instance, it is possible to throw away a carpet almost without any charge, which means there is no incentive to recycle or to buy recycled. If the cost was increased (eg. UK landfill escalator), or better still if a ban on putting carpet into landfill was instigated (eg. German bans), then this would give signals to the market that machines for recycling carpet could be profitable to operate, to make, to be designed. It would create a market for circularity. That is local jobs, cannibalising the imports of virgin raw materials and energy.
24. There is a clear correlation between landfill bans and higher rates of recycling – Germany is a prime example. In the US, where there is no landfill ban on mobile phones, there is virtually no recovery of mobile phones, but in the UK, where a regulation came into effect in 2009, the rate of recovery is 25% and growing.
25. It is therefore important not only to improve recycling technology radically but to increase the costs of landfill and to impose more landfill bans. If we do both, we will soon reach a tipping point and behaviour will change.
26. We also need more mandatory end-of-life measures such as the EU’s End of Life Vehicles directive, which has significantly increased the recycling of cars. Thanks to this measure, Interface can now a source a substitute for latex from a material found in car windscreens, something that was not available to us when cars went into landfill. By creating a new market for recycled materials, the regulation has helped Interface to source additional, less carbon intensive raw materials. The power of this should not be underestimated: quite simply, there needs to be more intervention by politicians in this field.
27. Coming up with a way to measure circularity at product level is also important. Probably the easiest thing is to measure the post-consumer recycled content of products, as this assures that care has been taken to recycle something into a valuable product.
28. Another metric to consider is the extent of CO2 equivalent (kgCOeq) embedded in a new product. This takes into account the fact that post-consumer recycled materials are usually less carbon intensive than virgin materials (and if not, then the recycling process is badly designed anyway). Judging products on this metric would therefore favour the recycling of entire components rather than including bits of them in new components. As well as CO2, other indicators such as abiotic depletion could be utilised.
29. We also need to look at the idea of measuring recyclability, which is a tricky thing to do. At product level it is possible to measure the parts of a product that can be dismantled, with a focus on their value. At Interface we are planning to investigate this area further.
30. At macro (national and regional) level we also need metrics to measure circularity, but more important than circularity itself is dematerialisation. If, for example, we measure the amount of GDP generated against some measurement of ‘stuff’ this allows us to take into account the generally lower impacts of the service economy, and to adjust taxation policies accordingly, by redirecting taxes more towards products.
31. As mentioned before, the same applies to measuring the embedded CO2 in products or services. By measuring embodied CO2 and penalising high scoring products through taxation, legislators would indirectly be helping to encouraging more recycling. At present, for instance, we produce a carpet from recycled material that has 5kg of embodied CO2 per metre compared with 20kg in other non-recycled carpets in the market. Where is the incentive today for the market to move towards low embodied carbon products. Let’s think beyond carpet: cement, steel, the whole construction sector does not receive a single signal when it comes to embodied CO2.
The service economy is the circular economy
32. To most people the circular economy involves a scenario where products are still bought and sold, but where the materials that make them are reused and recycled and shifted around more efficiently, with little or no waste. But the ideal theoretical conditions for a circular economy are for products not to exist at all.
33. In other words, the service economy is the perfect circular economy – or vice versa. If we could reach a position where we could serve peoples needs without physical products, then we would have achieved true circularity.
34. Of course that outcome is highly unlikely, at least looking from where we stand today. But there’s no reason why we can’t move towards circularity by thinking more about how we can provide more services rather than wasteful products.
35. One interesting example of this can be found at an airport. If you spend a couple of hours there before catching a flight, what you really require – most of the time – is to be entertained for those two hours, or at least to fill the time productively. The waiting time should be a good opportunity to get a hair cut, or to take a Spanish lesson, or to listen to some jazz music. But what we are actually offered at an airport is the opportunity to buy endless lines of products – shoes, luxury goods, perfumes – that we probably don’t need. One of the reasons for this is that services rely heavily on labour, and labour is taxed more heavily than anything else. That makes it more difficult for individuals to offer hairdressing at an airport at a reasonable cost, and profitable for multinationals to sell us cuddly toys and bars of Toblerone. If we were to switch more of our taxation on to products rather than labour, then we could make our way much more quickly towards a circular economy based on a preponderance of services. That requires planning at a macro-economic level. And tinkering with the tax system is an elephant in the room for chancellors across Europe. We need to ask ourselves whether we want a circular economy or not.
36. In short, if we are to create a new, sustainable economy then we need to sell each other more services that have no physical impact. That doesn’t mean a zero growth economy, as some argue: it means unlimited GDP growth, but with no cost to the planet.
37. We can do that by selling more of the intangible stuff that people really need. For example, how do I deal with anxiety? I buy another ice cream or a KitKat. I buy them, I eat them and I regret 10 minutes after. How does my wife deal with it? She buys a pair of shoes. Again, a product. Maybe other people light up a cigarette. But answering anxiety with products costs too much to the environment and our health and in many ways we end up with products we regret later. The ice cream makes me fat and my wife throws away the shoes after a few wears. We buy these things impulsively and because they are easily available.
38. Could an innovative company come up with a service to address my anxiety and make money out of it? The economy that creates local jobs is the service economy: hairdressers, doctors, restaurants, aerobics classes. Services are more likely to serve end human needs than products. I would be much better sorting out my anxiety with a swim, or a visit to concert or a comedy club.
39. In order to achieve sustainability we need to move towards a service-based economy. Taxing products on the basis of their environmental costs would act as a huge favour to services. Unfortunately we are far from that scenario, as we can see by the ridiculous price of carbon. We are working with a few leading minds in Europe to help make this transition such as the Ex-Tax project.