Recycle, to Close the Product Lifecycle
The joint objective of public policy and corporate strategy concerning environmental sustainability has been making the economy as circular as possible.
The issue of circularity in production and consumption systems is not new. Two decades ago, Michael Porter argued that «pollution often is a form of economic waste. When scrap, harmful substance, energy forms are discharged into the environment, it is a sign that resources have been used incompletely, inefficiently or ineffective. Moreover, companies then have to perform additional activities that add cost but create no value for customers».
The consumerist model of disposable goods, which for two centuries has held sway, in now being put into question by burgeoning demand for what is a finite supply of metals and other raw metals. In the theorization first propounded by the
Ellen McArthur Foundation, the circular economy is an economy designed for self-regeneration: organic materials re-enter the biosphere, while technological devices are designed for maximum reuse, recovery, and recycling, i.e. to circulate across the flow of materials of the global economy with minimal loss in quality.
The geo study by Bocconi iefe
If we look at the current manufacturing and consumption system, and especially the state of the recovery and valorization of wastes, it's easy to see how the current situation is far from ideal and the economy is not closing its loop, i.e. we are currently foregoing to reuse, recovery and recycle all that's discarded: in fact, by 2020 another 82 billion tons of raw materials will habe been added by the global economy (double the current amount), while today only a third of the 60 metals most used in industrial activities have end-of-life recycling rates above 25%.
If the final objective is the reduction of waste and the increase in input productivity, what's preventing the circular model from becoming dominant?
The Green Economy Observatory (GEO) of IEFE, Bocconi's research center on energy and environmental economics, has conducted an in-depth study of the circular economy, starting from an identification of the main causes of leakages, i.e. all those points where no recycling is made and thus no closure of the economic loop, but there's only loss of efficiency due to the subtraction of still usable raw materials from the economic system.
The causes of for this lack of valorization of scraps and byproducts are manifold, and concern all the actors involved in the management of material flows across the lifecycle of a product on the market: information asymmetries about the environmental impact of a product/service, business short-termism, price bias (which is unable to reflect environmental costs), consumer habits, institutional innovation brakes inhibiting technical and logistic solutions that can enable high recovery rates of raw and secondary materials. There can also be regulatory barriers hampering circularity in industrial processes, e.g. restrictions on the use of secondary materials as inputs).
Incentives for firms and consumers
If there are no incentives for consumers, producing more recycled goods will be a vain effort. If there are no incentives for firms driving technological innovation in the use of new polymers coming from recycled plastics, the Italian market will be unable to take off, and will continue to be dominated by the sole use of PET as a secondary material.
This takes us back to our starting point, namely Porter's theory of competitiveness: «Properly designed environmental standards can trigger innovations that lower the total cost of a product or improve its value. Such innovations allow companies to use a range of inputs more productively, thus offsetting the costs of improving environmental impact».