– By Anirudh Shingal and Chinmay Joshi
Technological advancements and the ICT revolution led to the unbundling of the manufacturing process, outsourcing of economic activities and the rise of global value chains (GVCs) in the 1990s. However, climate change, uneven development, the Covid-19 pandemic and geopolitical tensions have altered the narrative in favour of making value-chains more sustainable, resilient and regional. In this context, the circular economy (CE) has been discussed as a concept and a model that contributes towards closing material loops and helping design a less crisis-prone, resilient economy that can also create new job opportunities at home.
The CE framework was traditionally concentrated in countries having formal economies with robust regulatory mechanisms, especially in the ‘Global North’ i.e. Europe and the US. For instance, the consumption of recycled material in Europe is greater than in other parts of the world, with a circularity rate of 11.8% in 2023. However, CE initiatives are now being adopted extensively by economies in the ‘Global South’, including low-income countries functioning mostly within the unorganised sector. In countries such as Brazil, India, and Tanzania, for instance, the necessity-driven based CE model emphasises that locally-anchored and closely-interconnected formal and informal practices play a key role in sustaining the value of goods and material, driven by financial need and the potential for revenue generation (Korsunova et al. 2022). The adoption of such practices by countries in the ‘Global South’ assumes greater significance going ahead. Similarly, in the context of reorienting GVCs, there is a need for framing appropriate policies and relevant business models pertaining to CE aimed at achieving desired sustainability objectives.
Consistent with this realization, policymakers and enterprises are increasingly focusing on the idea of circular supply chains (CSC) wherein attention is given to the continuous reuse of materials, thereby minimizing waste and attaining a more optimum utilization of resources compared to the conventional linear model. The CSC model thrives to extend the lifecycle of a product and materials with the help of effective waste management, reuse, remanufacture, repair, recycle and refurbish which enables minimum damage to the resources, better capitalization, lessen the hazardous impact on the environment apart from the creation of nimble, robust and resilient supply chain networks.
In this context, it is worthwhile to note that several Indian companies as well as foreign multinationals operating in India, have implemented/are implementing the CSC model by adopting various initiatives. For instance, through its Gold Exchange Policy, Tanishq, India’s largest jewellery retail brand from TATA group, has helped mitigate environmental degradation by lessening the need for gold mining. Meesho, one of India’s top e-commerce companies, has also benefited in terms of growth potential, adaptability to changing paradigms, and consumer satisfaction by implementing an asset-light logistic model. Similarly, ITC’s Well Being Out of Waste (WOW) initiative aims to reduce land, river and ocean pollution and thereby achieve the goal of ‘Garbage-Free India’. At the same time, source segregation and recycling aim to reduce the volume of waste in landfills, ensure regular employment and income for waste collectors, and offer new avenues for recycling entrepreneurs. Another initiative by the company emphasizes reduction in single use and recycling of plastics to ensure availability of environment-friendly raw material for packaging and printing business.
Amongst other examples, Recykal founded in 2016, uses technology to connect waste generators, producers, recyclers and various other stakeholders. Saahas, established in Bangalore in 2001, provides end-to-end waste management solutions to waste generators to achieve the target of Zero Waste. A joint initiative by Mahindra Group and Johnson Controls has provided a platform for ‘Net-zero Emission Buildings in India’ offering ‘Sustainable Business Toolkit’ with an aim to reduce operational carbon in buildings. It is hoped that this will reduce the electricity consumption by 40-60% as compared to traditional building infrastructure. It is estimated that around 3% of world energy consumption or 200 million tonnes of carbon emissions originate from data centres. This has been projected to increase further by around 30% each year. To address this issue, the Indian IT giant Infosys has invested in sustainable ‘Green Data Centres’ to reduce the carbon emissions generated by data centres. This has resulted in a reduction of energy consumption by data centres by around 80% compared to before.
The Government of India (GoI) has also launched several initiatives to further the cause of the CE. It intends to provide solid and liquid waste management treatment facility to all villages, cities and states under the Swachh Bharat Mission scheme. The Waste to Wealth initiative supports effective use of technology for waste treatment in order to recycle materials and create energy. The National Resource Efficiency Policy (NREP) which was launched in 2019 helps in the promotion of sustainable consumption and production, use of recycled material, efficient resource utilization and lessening the negative effects of economic activity on the environment besides encouraging circular business models among others. The framework of Extended Producer Responsibility aims to ascertain the responsibility on manufacturers and producers for managing the post-consumer waste their products create. Similarly, the Atal Innovation Mission 2016, encourages a circular business model along with implementation of sustainable technological practices.
GoI has also offered various financial incentives in the form of subsidies, tax benefits, loans at lower interest rates etc. to encourage the cause of the CE model through efficient use of resources, reducing ill effects arising out of waste generation and adoption of environment friendly and sustainable use of technology. However, several challenges emerge in the form of lack of infrastructure facilities for waste management and waste processing, absence of appropriate incentives for corporates to implement CE practices in their establishments, insufficient understanding and limited awareness about the significance of the CE model among various stakeholders such as businesses, producers, consumers and policymakers. That said, CSC is clearly a framework whose time has come.
(Anirudh Shingal is a Professor, Economics, Bhavan’s SPJIMR, Mumbai; and Chinmay Joshi is a Research Associate, Finance and Economics, Bhavan’s SPJIMR, Mumbai.)
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