Imagine sitting in the dentist’s chair. After removing an old crown made of gold, he throws it into the trash. He then writes up an offer for a new crown, which among things includes the cost for 10 grams of new gold. Furious, you would presumably ask him why he threw away the gold from the old crown, and then charged you for new gold material, all the while making sure he understands how crazy this is.
Regardless if your teeth are still in good shape, or your health insurance provider refuses to pay for a gold crown, which forces you to decide on a cheaper alternative, we experience this situation on a daily basis – although it’s much less obvious to us. We have created an economy based on a very simple model: extract raw materials, manufacture products, sell them. With you as the consumer, the story then usually continues as follows: use, throw away. And unfortunately that’s where it ends.
And because in our economic system we’re all convinced that an increasingly better standard of living requires continued economic growth, only one option exists with this model: we’re encouraged to throw away, ever faster, as soon as the cabinets become full.
That’s why we should no longer be astounded to see more and more images beamed around the world in which trash heaps burn uncontrollably, or waste is thrown directly into the seas, which is then driven by global ocean currents into enormous islands of plastic. As the volume grows, the problem simply becomes more visible. And that’s also because we can no longer use the containers that we have been sending back to China as an elegant way to conceal our purported recycling capabilities; China closed its borders to our unsorted plastic and textile waste at the end of 2017.
When it comes to the careless or deliberately uncontrolled disposal of waste, it makes no sense to frantically initiate a search for the responsible individuals whose lack of a moral compass caused them to act this way. Or when we constantly try to quickly clean up our oceans. These are all just symptoms of a much larger problem. The reality is that we have a system flaw that will take the beaches that we have painstakingly cleaned, and pollute them again, as soon as we turn our backs on them.
Until today, our business models basically assume that we will always have an unlimited amount of raw materials and natural resources, regardless of the type. And even though we have long known that this is not the case, and that we have even to begin to think about where we can acquire enough sand to satisfy our rapidly increasing hunger for raw materials, so far we have failed to develop any financial instruments that could help us properly reflect such a risk factor in our corporate balance sheets. This also applies to process materials such as water. The enormous levels of water consumption and frequent lack of treatment facilities for industrial wastewater, especially in countries where there is already little natural water available, simply exacerbates the problems associated with supplying this vitally important asset and continues to induce social challenges. These issues don’t become economically relevant until production actually comes to a halt.
In this respect, we can give abstract thought to potential bottleneck scenarios for fossil-based raw materials, water or rare earths, and then discuss them in the form of risk analyses. The problem is, these analyses don’t flow into the budget planning because our conventional, simplified business models essentially do not account for them in their short term perspectives.
So we do what we always do: shut our eyes and simply hope the problem gets solved on its own, or we once again find new technologies that can solve the problem early enough.
This situation becomes even clearer at the end of the economic process. By definition, waste is not the manufacturer’s problem. As soon as the product leaves the retailer’s counter, it officially changes ownership. And with ownership shifts the obligation, including legally compliant disposal (albeit only for the owner), which takes effect the moment the consumer completes the purchase. No one is motivated to be interested in whether there are enough ways to sustainably dispose of or recycle the mixture of increasingly exotic raw materials that are often firmly bonded together during production; not even the company that is responsible for the product design and manufacturing process.
In many instances we certainly have ways to identify manufacturers whose cigarettes are mindlessly thrown away or whose plastic packaging is floating around in our oceans. There are meanwhile increasing numbers of intelligent “shaming” apps that can take over this job. However, as long as there is no proof that anyone is actually being harmed, it will be a long time before any legal recourse exists. On the contrary, companies, especially publicly-traded firms, actually have a legal obligation to ignore the issue as soon as the solution costs money. After all, these companies are duty-bound to maximize their profits within the framework of what is legally permissible. Whether the CEO cares about the issue or not, morals are not part of the equation here.
In 2019, Sympatex participated in a “plogging” event together with many other volunteers, collecting trash in the center of Munich. If we want to do more than just combat the symptoms of environmental contamination and pollution however, the system has to be changed.
What we can do is stop this process, but only if we change the system so that the executive levels are faced with concrete facts that recommend or force the use of an alternative business approach. Here, we have an enormous amount of catching up to do.
First off, it’s essential for companies to reflect the scarcity of raw materials in their financial reports. Requiring certified public accountants (CPA) to include this in their audits is long overdue. While they examine the stated inventories of every company in great detail to determine if they are in fact of value (sellable), or have to be written off, any current procurement risks are simply rubber-stamped without being analyzed. Sufficient data has been available for a long time, which could be used to compare each of the most important raw materials a company needs for its business model against global consumption data. From this you can derive the global risk factors for the so-called “going-concern assumption,” which is verification from management that a company will remain in business for the foreseeable future.
By placing this type of restriction on the report of independent accounts through the CPA, companies would immediately be forced to develop sustainable alternatives, either by consuming fewer raw materials or by utilizing their own or third-party waste streams as a source of raw materials. And it would be crucial that we assess those risk factors not only in terms of physical availability, but ecological acceptance. Otherwise, we might quickly come up with the idea of creating collateral damage for the sole purpose of getting our hands on new sources, much like we have already done with fracking in the US or with the exploitation of tar sands in Canada, in order to further inflate our crude oil reserves. With fossil-based resources, the global availability factor should be restricted in this way to a maximum of 15 percent of the known reserves, because this corresponds to the maximum amount of CO2 that we can release by 2050 in order to keep the earth’s average temperature from rising more than 2° and to further curb climate change before domino effects allow it to take on a life of its own.
As a second measure, it’s time that we make companies responsible for the waste they create, a concept that the EU established as early as 2008 in its 2008/98/EG directive. This legislation includes a package of rules and changes that are designed to optimally promote the recycling of waste. Article 8 clearly specifies that “Member States may take legislative or non-legislative measures to ensure that any natural or legal person who professionally develops, manufactures, processes, treats, sells or imports products (producer of the product) has extended producer responsibility.” Despite the fact that this directive provides each country the possibility to resort to legal measures in order to “demand the acceptance of returned products and of the waste that remains after those products have been used, as well as the subsequent management of the waste and financial responsibility for such activities,“ little has happened in more than 10 years.
While politicians attempt to deflect attention from their massive failures through activism such as bans on plastic straws and plastic bags, the real problems continue without being addressed. Plastic bags account for less than one percent of the world’s plastic waste for instance. On the other side, regulations that actively promote misguided developments, such as the tax exemption on aircraft fuel, have yet to be changed.
Instead people once again throw around “killer arguments“ – whether it’s the collapse of the economy or raising the price of our hard-earned holiday trips to Mallorca – as a political excuse for why nothing is being done. But it should have been clear to us long ago that these problems will only become bigger the longer we wait. They certainly will not disappear on their own. And as the problems become bigger, the costs will grow exponentially as well, as we experienced during the last financial crisis with the implosion of bad loan packages.
Waiting is not the answer – on the contrary. If we would immediately decide to transform our economy using a controlled but timely approach, there would be enough time to develop the necessary technologies that make these solutions economically viable as well. But if we don’t begin soon, the pressure that we need to innovate will eventually abate. The pain will be felt only after we started to run into the first walls.
The solution for addressing our waste problem has been available for a long time. Like the paper and aluminum industries began to do decades ago, well-thought-out technologies for recycling materials such as plastic have been around for a while. What’s missing is the planning security, which would allow investors to make the financial resources needed for the extensive development of such a recycling system into a highly-attractive investment opportunity. After all, as far back as the Middle Ages, turning waste into gold was one of the highest aims of alchemists and kings. We now have the chance to finally realize this goal.
By itself, the textile industry puts 47 million tons of plastic annually into circulation with its synthetic materials, which account for two-thirds of what it uses. At more than 10 percent of the worldwide plastic production, this is a rapidly-growing trend. 80 percent of these synthetics is polyester, a material that we have long been technologically-capable of converting back into a raw material. In some countries, even the necessary collection systems are already in place with adequate coverage. Taking the next step – equipping sorting plants with adequate sensors that rely on artificial intelligence to rapidly learn how to precisely sort textile waste – really shouldn’t require any magic.
This is just a tiny drop in a very large trash bucket. But our aim is to demonstrate that the previously-mentioned economic and business reasons, which to date have served as a convenient excuse for not moving ahead with the transformation, do not exist at all.
What would really help at this point is for governments and CPAs to finally live up to their obligations and create a plan outlining when both ends of the current business model have to be merged. This creates an equal opportunity for all players and generates enough pressure to make the changes that will spawn the necessary investments and innovations.
10 years should be enough time for such a transformation. And besides, we don’t have much more time if we want to avoid littering our waters and landscapes for centuries.
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Thanks for a great article with some hard-hitting (and important) ideas. The headline/title seems misleading though... Did you intend it to be critical of the circular economy?
Dear Catherine, Thanks for your comment! In fact, we criticize the previous practice and see a solution in the circular economy.
Glenn A. Mance
Thanks for the great article & POV, dead on! It also needs start with local governments implementing real actions & supporting them. For example in New Haven CT which is where I have a studio, commercial buildings aren't required to sort basic culprits from the garbage such as cans, bottles & paper!