Circular economies – the key to commodity growth

Hermann Erdmann, CEO REDISA (Recycling and Economic Development Initiative of South Africa)

Today, the world has 1.8 billion middle-class consumers; within the next 20 years the world will be home to 5 billion consumers. This increase will mean a rise in commodities produced and an increase in materials we consider ‘waste’ ending up in landfills. The sooner we start revisiting the way we look at ‘waste’ and the more concerned we become about commodity efficiency, the better.

Manufacturers are happy to make products and consumers are happy to buy products, but the full monetary cost of a product is being understated because the selling price today does not take into account the cost of dealing with the product’s end-of-life. At the end of a product’s life, there is no-one to take responsibility for the product and it becomes waste that is dumped. Not only is this squandering of resources but the waste is also an expense to society in terms of environmental harm.

Consumers are ultimately paying the price as the cost can only be recovered from them. Society is subsidising manufacturers who are not driven to develop improved processes which manage their products’ end-of-life, nor to reduce emissions or reliance on raw materials. Consumers pay the price indirectly through air pollution, environmental degradation, overflowing landfills, and the resulting health and amenity impacts.

What we need is an insurance policy for the environment – one which ensures that those who create the end environmental problem pay to mitigate it and factor this into their cost of manufacture. The benefit of this approach is that a product’s total cost to society is made visible to manufacturers and consumers alike; manufacturers are incentivised to make more environmentally-friendly, longer-lasting products, built to be recycled and with recyclable packaging.

Instead of making a product for consumers to throw away, we need to extend the life of the product or its constituents beyond the consumer stage by recovering, recycling and reintroducing the product or its components or raw materials into the economy.

South Africa is the only country in the world that has made this a reality with 100% industry participation, using waste tyres as a proof of concept. Since 2013, the environment has been ‘insured’ against the negative impact of waste tyres.

The waste tyre management fee paid by the tyre producers is the means by which the cost of dealing with end-of-life tyres is incorporated into the manufacturing cost of the tyres. The money is directly and specifically applied to dealing with waste tyres, in an audited and accountable fashion. This makes it far more effective than a tax-based system where funds sink into the general Treasury. It’s simple, pure economics. And it works.

Organisations need to work together to analyse the world’s most important socio-economic problems and formulate innovative strategies to deal with these challenges. Through continued collaboration and work with partners in government and business, and with consumers and NGOs, we will be able to build more sustainable, efficient and long-term socio-economic solutions. While it is important for consumers to be more aware and to consider what they throw away, the manufacturers of products also need to ensure that they are designing products that can be re-used or easily recycled when they reach the end of their initial life-cycle.