The circular economy brings together the productive and environmental agendas

How do you see the development of the circular economy in South America as it faces major political and social changes in the coming decade?

The trend towards a circular economy is irreversible. We are seeing more countries in the region designing roadmaps, and companies are increasingly embracing circularity as a feasible triple impact business model. This paradigm shift, based on increasing climate pressures and the questioning of current growth patterns, is disruptive by nature. And in this context, Latin America, with its great wealth of resources and its urgent need to grow, cannot be left behind. The governments of the region are beginning to understand that the circular economy creates a meeting point between the productive and environmental agendas, two traditionally antagonistic agendas that today cannot be understood without each other.

Is the circular economy still favourable in view of the political context that several countries in the region are experiencing, some with changes of government, and others with recent social unrest, as is the case of Chile?

We must differentiate between short and medium/long-term priorities. The political context in Chile requires immediate emergency measures to alleviate the needs of the people. The circular economy, on the other hand, requires a medium- to long-term structural change agenda. We must not forget that what is happening in Chile, and in other countries, reflects a general discontent with the current development model that has generated great inequalities. The circular economy makes us reassess the current productive model to make it more inclusive and sustainable. This won’t be the solution for Chile, but it can accompany the rethinking of a new development model that goes beyond the economic dimension.

Can the circular economy be part of the solution to move towards a more sustainable and inclusive development model?

The circular economy is not a panacea. It must be understood as a tool that can help us conceive sustainable and inclusive growth models. For example, the mining sector in Chile can apply principles of circularity to become more efficient in the use of resources and to valorize the waste it generates. The energy transition to photovoltaic renewables in the north of the country has to consider, in advance, the management of technologies that will be obsolete in a few years. The circular economy helps us look ahead, seeking all possible areas of sectoral improvement, but with a more holistic approach. This is why the principles of circularity can be applied to all sectors of the economy.

What circular opportunities do you see in the different productive sectors which Chile should bet on?

The circular economy applies to all sectors of the economy, but I would like to mention two examples. Chile is a country with a lot of biomass production and one that also continues to use polluting, dangerous and health-damaging energy sources, such as firewood. Circular business models towards bioenergy production are feasible, such as a UNIDO project in Los Ríos and Los Lagos that supports small-scale dairy farmers in producing biogas. The food sector also has a tremendous circularity potential, especially as the world discards between 30-40% of its food – developing countries principally because of their post-harvest losses, and developed countries because of losses during the distribution and final consumption stages. There is a lot to improve the situation, beginning with raising public awareness, but also supporting the business sector in finding innovative solutions to structural flaws.

How does the circular economy modify the discourse on structural change?

The circular economy and the Fourth Industrial Revolution should make us change the way we understand the concept of structural change in the country. A few years ago, the discourse revolved around Chile's dependence on the extractive sector and the importance of diversifying into manufacturing. Although this is still relevant for Chile, we have to place this debate in the context of three major trends: the “commoditization” of manufacturing, with prices at historic lows; the growing demand for some resources of which Chile has large reserves (e.g. copper and lithium); and the emergence of the circular economy and the Fourth Industrial Revolution as new catalysts for inclusive and sustainable economic growth. For these reasons, the discourse of structural change goes from being a discourse of selection of sectors (winners and losers) to one of valorization of the existing sectors of the country. Today, I would find it impossible to imagine that Chile would disassociate itself from those sectors of high global demand, even if they were linked to the mining or food sectors. What seems much more coherent to me is to propose how the circular economy and the Fourth Industrial Revolution can make Chile a world leader in innovation and competitiveness in these very sectors.

How might this impact on a country’s employment level?

Paradigm changes pose both threats and opportunities for the labour market. On one side, we are conscious that many jobs will be lost. However, the opportunities will be many. For example, the Fourth Industrial Revolution, which will be a catalyser for an efficient circular economy, is already demanding a range of professional profiles which the formal education system does not yet cater to. The application of circularity principles will also be mainstreamed into many university degrees and vocational training. In the future, the market will demand industrial engineers with notions of eco-design and the use of 3D printing, and architects with knowledge of building information modelling (BIM) that allows the creation of digital simulations in the design of structures. In addition, I am very optimistic about the future of work because I am convinced that an unprecedented wave of social and digital entrepreneurs, committed to climate challenges, is coming. Just think about how new business models focused on the sale of services, instead of products, have nurtured entrepreneurship and generated new jobs.

Is the role of politics and of good public policies irreplaceable?

With regard to the role of politics in the circular economy, I always reflect on the same issue: have we stopped to think about where circularity works best? It works best in a context of limited resources and few alternatives. The great obstacle for the circular economy is having alternatives, and worse, alternatives that do not aim at the collective good. What should public policy do? Through incentives, disincentives and even prohibitions, public policy should reduce alternatives only to those that favour the common good. Therefore, public policy is absolutely necessary to establish the rules of the game that will encourage businesses and consumers to take the right path. For example, today we are already aware of the importance of design in extending the product lifecycle and minimizing the generation of waste. Instruments such as supporting research and development for sustainable design or the imposition of sustainable design certification are examples of how public policy can play a significant role.

What are the lessons learned from the circular economy projects you have managed?

There are many lessons. Perhaps the most important is to demystify the circular economy as the absolute solution to everything. As a systemic change, circular economy requires the alignment of many factors that are not always present. When you want to influence business models, but the regulatory framework is not conducive, then you are very likely to fail. One of the issues we tend to forget is the market for these new circular products: at what price do they come out, are they competitive, do consumers like them? If we don't have a change in the demand, it will be difficult to have a change in the supply.

All these lessons come from the projects we are implementing in Latin America´s Southern Cone. In some cases, we want to influence business models that were conceived in a linear way and that are impossible to make circular. In other cases, the economic viability of circularity is not applicable to the company, which has to rely on industrial symbiosis to make a good business case – for example, through the incorporation of a third party that can profit from managing waste from others. Let us not forget one thing, companies that follow circular models need the same factors of production as those that do not. If the production costs are high, infrastructure is poor and labour is unskilled, then we will have a competitiveness problem regardless of the business

How do you see Latin America positioned in relation to the circular economy?

I see a lot of movement and enthusiasm, perhaps a bit excessive because some would like to attribute magical elements that the circular economy does not possess. It is good that governments in the region are rethinking changes in production models and understand that the circular economy offers an excellent framework for bringing together environmental and productive agendas. I have no doubt that we will see more initiatives in the future that will hopefully translate into new regulatory frameworks, investment, businesses and, in short, new sources of growth.

From UNIDO´s viewpoint, we continue to invest in technical cooperation through demonstration projects and support for the development of roadmaps and regulatory frameworks. We are in the process of forming a Coalition for the Circular Economy in Latin America that would be bring together UNIDO, the United National Environment Programme (UNEP), the Konrad Adenauer Foundation and the Ellen MacArthur Foundation. This initiative aims to position the issue on the political agenda of governments in the region, and also hopes to generate synergies between entities that are already working in this direction.

There are two main lines that I believe will consolidate the circular economy agenda in the region. One is financing for the circular economy. For instance, the Global Environment Facility (GEF) and the Green Climate Fund (GCF) have begun addressing the circular economy in their programmes. Another example is the Climate Technology Centre and Network (CTCN) that is supporting many countries in the region to develop their circular economy roadmaps. Chile, Brazil, Mexico and Uruguay are currently receiving technical assistance. This means that the issue is present on the donors’ agendas.

The second aspect has to do with the increasingly stringent requirements of international markets for the marketing of goods and services. I have no doubt that the new trade agreements will emphasize new certifications and standards that include good environmental and labour practices as a requirement for entering the market. If the European Union is betting on a European Green Deal to become the first climate-neutral continent, it is to be expected that they will require their partners to share these principles. In this sense, we are committed to making circular economy a facilitator for the entry of Latin American products into the European market.