A virtuous manufacturing circle makes environmental & economic sense

This article first appeared in Industry Europe

Manufacturing has lifted millions around the world out of poverty but the stock argument of ‘we’ll take environmental pain for growth now and worry about the environment later’ needs to change. Which is why PA Consulting, with the Department for International Development (DFID), is exploring how to make value chains more sustainable, instead of perpetuating ones that create pollution in developing countries before exporting it to richer ones.

Introducing the circular economy

One of the tools for achieving these goals is to create a circular economy (CE), which when compared to a linear take, make, dispose model, seeks to keep products, components and materials at the highest value and utility at all times. We often think about the Circular Economy through the lens of the final products we make, however, it can apply throughout each stage in a product’s value chain. Applying it to the actual manufacturing stage of a product’s journey can offer a route to decouple manufacturing from pollution in the developing countries. Part of this involves moving away from thinking of waste as waste and treating is as a useful and valuable by-product, then putting the structures and processes in place to access maximum value.

The CE can be applied to the manufacturing stage of a product’s journey specifically, through three key elements:

• substituting and removing harmful inputs (e.g. moving to water-based paints instead of solvents);
• improving process efficiency (by removing processes that slow throughput or use large amounts of raw materials);
• developing by-product capture and treatment (capturing waste liquids, solids or gases and reusing them).

The final element of capturing by-products offers up innovative new commercial opportunities, through being able to ‘loop’ the raw material and use it again. For example, Bangladeshi tanneries empty thousands of cubic metres of hazardous waste into rivers daily. If just some of this was captured and returned to the economy, it would have both economic and environmental benefits.

Brands can help build a healthier, wealthier world

Ensuring this ‘loop’ works offers the greatest opportunities for establishing new technical processes and entrepreneurial business models, such as Sri Lankan start-ups that turn waste fabric into everything from beanbags to interior design panels.

Many people in developing nations have been adopting circular economy practices, such as recycling materials, on a small, informal, scale for many years but we now have a chance to make these businesses a formal part of economies and grow them. CE provides a significant opportunity for low-income countries to achieve growth, prevent ecological damage and improve living standards.

Partnerships between governments, NGOs and global brands with developing-world supply chains will be essential to creating and fostering such initiatives. But widespread adoption of CE will not be easy. Governments, international donors and the private sector will play pivotal roles by developing environmentally friendly manufacturing legislation, building in-country CE capability and delivering initiatives that demonstrate economic and environmental benefits.

Four areas low-income countries should focus on are:

• overcoming CE barriers – building technical capability, identifying finance solutions and whole-system modelling to assess what effects your plans may have;

• defining new roles for government, donors and the private sector – building knowledge and capability, leading by example, developing and implementing legislation to encourage positive, circular, sustainable behaviours;

• adopting innovative business models by examining the whole value chain for opportunities –

including developing new flexible manufacturing approaches;

• encouraging emergent circularity – embedding a support system to help bottom-up circular entrepreneurial activities in regions with industrial waste resources but limited access to the necessary knowledge and technology.

Engage start-ups to make the circle whole

By supporting such initiatives while making their own manufacturing processes more sustainable, global brands have the potential to be catalysts for emergent CE industries. In helping incubate emerging circular businesses, brands will both address their sustainability objectives and leave a legacy that creates new social and economic value streams in the regions where they operate.

The OECD forecasts that, unless things change, material consumption will raise from 90 to 167 gigatons by 2060. Many developing nations, with an abundance of tech-savvy young people compared to their developed peers, have the opportunity to break this cycle of manufacturing despair and move swiftly to cleaner, safer manufacturing practices.

Whether you view these matters economically, environmentally, or from the standpoint of helping economies recover post Covid-19, CE manufacturing models make sense and developing economies are the perfect place for them to thrive.