Economic System Incentivises Waste, Slows Circular Economy Transition-Report

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by KnowESG
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The joint report from the Sustainable Business Network and consultancy Grant Thornton said for years, economies had been built around extracting the Earth's resources and the profit generated was regarded as the measure of success.

It said the current financial paradigm incentivised a linear, take, make, waste system because it was cheaper than a circular economy, where products and materials were kept out of the landfill and given a new life over and over again.

Grant Thornton sustainability and impact leader Michael Worth said businesses would not move from a linear model until their sustainably produced products could compete at the checkout.

"So, we need to tilt the playing field the other way.

"Current regulation, taxation, and accounting practices don't provide the necessary carrots and sticks to support a circular economy, but there are highly effective ways to incentivise businesses to adopt circular business models."

The report suggests that the first step towards a circular economy required a more pragmatic approach from the government, which had been "slow" so far in its progress.

"Government should exercise its power to enforce financial rewards and penalties to expedite the right attitudes and mindsets needed to nurture and grow a circular economy," it said.

This could include implementing recommendations from the Tax Working Group, such as increasing the coverage and rate of waste disposal levies, advancing the use of congestion charging, or considering other options, like a scaled tax rate for circular businesses, levies on the use of "virgin" materials and rebates for businesses that support environmental protection and regeneration.

It also suggested that the government might need to step in to help build "an ecosystem to support circular business models" that rely on the sale and purchase of second-hand materials for disassembly, refurbishment, repair or reprocessing.

The report mentioned a manufacturer that said it could sell recovered materials from their production lines, but there was no "common infrastructure" to tap into at scale, and it would be a huge investment for one business to build this system from scratch.

Throughout the report, there was a prevailing theme that the concept of value needed to be redefined within the context of a circular economy.

The current epoch was criticised for measuring economic success by profit growth, emphasising ownership over-sharing, and treating the repair or repurposing of products as a cost rather than retention of value.

"We can re-write what we value and how we value it.

"We can move away from the traditional use of GDP and simple profit, towards a sustainable future where value is ascribed to what we leave behind, what we save, and what we re-use," the report said.

Source: RNZ

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