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Take, make, consume, dispose – that’s the old business model. Today it’s all about preserving resources by developing the “circular economy”. The concept has become very popular lately, almost like a fad. Numerous conferences from Davos and Brussels all the way to Beijing have been organised to address the issue. But what exactly is the circular economy? “The circular economy goes far beyond just recycling,” says Adrian Deboutière, project manager at Institut de l’Économie Circulaire in Paris. “It’s all about transforming the economy into an ecosystem where nothing is lost; where the very concept of waste no longer exists. Products nearing the end of their life are repaired, reused or transformed into something else. This is the end of traditional recycling as we know it. Almost a form of failure when there’s no longer a solution.”
So it’s a green utopia, then? Not really. According to a 2015 study by the consulting firm Accenture, if the circular economy is fully put in place, it could generate $4.5 trillion in additional revenue worldwide by 2030. But measuring the impact of such a radical paradigm shift is very difficult, so that figure should be taken with a grain of salt. Currently, only 9% of the resources needed to keep the economy running are reused in some way, according to the Circularity Gap Report, a study presented and published at the Davos Forum in January. The rest – roughly 85 billion tonnes – is taken from nature.
But things are getting better. In 1993, Patagonia was the first clothing brand to use a waste product as a raw material, producing a fleece jacket made from plastic bottles. Since then, the California-based company has been collecting PET bottles, unusable manufacturing waste and wornout clothing to develop its products. Others are following suit: brands like Adidas and H&M have also launched lines of clothing made from waste.
“Just a few years ago, people would give us funny looks whenever we’d mention the circular economy,” said Nicolas Hulot in June last year. The former television presenter and current French Minister of Ecological and Solidarity Transition added: “ Today, the concept is gaining traction and starting to have a much bigger positive impact.” In the political sphere, the European Commission presented its package of measures on the circular economy in December 2017.
In the private sector, more and more companies are showing support for a global change. McDonald’s, Evian and Coca-Cola all kicked off 2018 with ambitious announcements. The fast-food giant wants to recycle packaging at all of its 37,000 restaurants by 2025. For now, they’re only 10% of the way to reaching that goal. Coca- Cola said that it will recycle one can for each beverage sold by 2030. Evian (owned by Danone) will only use recycled plastic in its bottles by 2025. And these companies aren’t alone in making an effort to become more sustainable.
“The circular economy isn’t just a buzzword,” says Alexandre Affre, director of the Industrial Affairs department of BusinessEurope, an association that represents European companies. “We’re seeing a very strong dynamic right now.”
“Things are really starting to change. People are getting back into good habits”
Adrian Deboutière, project manager at Institut de l’Économie Circulaire
“This isn’t just greenwashing or marketing,” says Adrian Deboutière of the Institut de l’Économie Circulaire. “Things are really starting to change. People are getting back into good habits and making an effort to reduce waste. Scarcity means that companies have a financial incentive to reduce their consumption of energy and raw materials.”
Because the situation is becoming urgent. According to the Circularity Gap Report, extraction of the planet’s underground resources jumped twelvefold between 1900 and 2015, and is forecast to double again by 2050. With such intensive extraction, raw materials are becoming scarcer and prices are going up – not to mention the disastrous environmental and climate-related consequences.
“Our planet’s resources are not unlimited. But that’s not the only reason why people are starting to pay more attention,” says Alma Dufour of the association Friends of the Earth. “In 2010, when China decided to limit its rare-earth exports, which are highly coveted in the high-tech sector, the price of some of those chemical elements shot up 2,000%. That caused a huge shock worldwide, like the one caused by OPEC’s unilateral decision to increase oil prices in the 1970s. Countries like Germany and Japan decided that, for economic reasons, they would reduce their dependence on rare-earth imports. One solution was to try to use those resources more efficiently, and reuse them where possible.”
The circular economy can be summed up by the 4R strategy: reduce, reuse, remake, recycle. In order for it to work, manufacturers need to be thinking about the entire life cycle of a product as early as the initial design phase. This is called ecodesign. Michelin, for instance, developed lorry tyres whose outer tread can be replaced twice and whose frame can be reused (a process called “retreading”). Thanks to this technology, a tyre can last up to 660,000 km, versus 120,000 km for lower-end models. According to a 2016 study by Ernst & Young, this technology consumes 70% less material, which is great news because rubber is a scarce material.
The challenge for companies turning to the circular economy is to reinvent their business model
The main challenge for companies turning to the circular economy is to reinvent their business model so that they can maintain their revenue while selling less. Michelin’s retreaded tyres have a longer life, but are more expensive. While their price per kilometre is more or less in line with that of a normal tyre, the purchase price is too high for transport companies, who are more focused on the short term. Between 2010 and 2015, the retreading market in the European Union fell 20%, according to the Ernst & Young study.
To avoid this problem, companies need to completely change their business model and transition from an ownership model to a services model. The idea is to sell the use of an object, rather than the object itself. Michelin has developed a rental service for its tyres, where users pay for each kilometre travelled. This model is spreading to all sectors. Belgian company Tale Me, for instance, rents clothing for pregnant women and for children under the age of six. “This system is really appealing,” says Adrian Deboutière. “The company retains ownership of the object it has produced. So it has an incentive to make it last as long as possible to maximise profits. Plus, the rental system ensures predictable returns over the long term.”
And yet, while this model is growing in business-to-business (B2B) markets, it is having a tougher time winning over the general public (B2C). “People are aware that this is important, but we haven’t seen much change yet,” says Alma Dufour. “In B2C, consumption is even becoming more and more linear. Over the past 10 years, the lifespan of electronic appliances has been steadily declining. We’re still incentivising people to replace them.”
The prime example, of course, is Apple. The brand has been taken to court in several countries for having intentionally reduced the life of its products and is doing everything it can to make its products impossible to repair, or repairable at exorbitant prices. “There’s a major problem in terms of information. Companies don’t want to share the design of their devices for trade-secrecy reasons. But this makes them very hard to repair,” says Dufour. “Patents are a nuisance for the circular economy.”
And yet, according to a 2015 study by McKinsey, the circular-economy model has halved the cost of producing mobile phones, by collecting old devices. They are disassembled, and their materials are reused – including rare metals, which are becoming extremely valuable.
SWITZERLAND: A MOUNTAIN OF WASTE
“Switzerland is the world champion of recycling.” We hear that phrase all the time, but it’s not entirely true. Figures from Eurostat show that Switzerland recycled 52.7% of its urban waste in 2015. That’s pretty good – but it’s far behind Germany’s 66.1%, the best in Europe. Switzerland performs well when it comes to recycling glass bottles (93%), aluminium (91%), PET packaging (83%), paper (81%) and batteries (70%). But the country recycles only 10% of its plastics, versus roughly 50% in Germany. Plus, Switzerland is the third-biggest waste producer in Europe, generating 720 kg per capita in 2016. Norway (754 kg) and Denmark (777 kg) top the list. Germany and Luxembourg fare much better, both generating about 620 kg per capita each year.