During her record-breaking solo circumnavigation of the globe in 2005, Dame Ellen MacArthur had a revelation.
Battered by the winds and waves of the Southern Ocean, and more than 2,000km from land, she knew that if her supplies ran out, she’d have access to no more and die.
The same principles, she realised, could be applied – on a macro level and over a longer-term – to the world and its resources.
Continued reliance on a decreasing supply of fossil fuels seemed to bode ill, so in 2010 she established the Ellen MacArthur Foundation, whose raison d’être is to promote the switch to a wholly different economic model: one that is circular.
This means moving away from the make-use-dispose model of a linear economy – which citizens of the Western world have been familiar with since the Industrial Revolution – towards a “circular” model, based on reuse, regeneration and designing out waste.
If there is any doubt about whether it is needed, consider the following. By 2050, there will be – by weight – more plastic in the sea than fish. Only 5 per cent of plastic is recycled effectively while its production is set to quadruple by the middle of the century – to around one billion tons a year.
The concept of circular economy (CE) has been around for some time. The Swiss economist and architect, Walter Stahel, advanced it in a paper he wrote for the European Union in 1976, albeit under the different name of “cradle to cradle” manufacturing – whereby goods are made, dismantled and re-made into new products.
However, in recent years CE has come into its own, probably because there’s a growing financial case to match the environmental one. A report published by the European Monetary Fund, in partnership with McKinsey, suggests a switch to circular economic practices would result in a net benefit of €1.8 trillion in Europe alone by 2030.
Ellen MacArthur, founder of the Ellen MacArthur Foundation and Carlo Messina, Intesa Sanpaolo’s CEO
In 2015, the Italian bank Intesa Sanpaolo became a global partner of the Ellen MacArthur Foundation. The companies the bank works with include H&M and Cisco. Used garments are increasingly being converted by the former into textiles, while parts of used electronic devices are increasingly being redeployed by the latter in new electronic devices.
“It’s surely the most promising way ahead for businesses,” says Massimiano Tellini, head of circular economy projects at Intesa Sanpaolo.
“The combination of a growing consumer society and an ever-depleting supply of finite raw materials means there’ll be little choice but to rethink the way business has been done up to now. The current way is a dead end”
Massimiano Tellini, head of Intesa Sanpaolo’s Circular Economy Project
“CE considerably lowers the risk in a company’s business model by lowering its reliance on external factors, such as geopolitical uncertainty and a sharp change in commodity prices. It also reduces loss of value through waste, some 11 billion tons of which are amassed in the world each year.”
But abandoning a linear economic model for a circular one isn’t achieved lightly. Think of the numerous pressures, such as quarterly results intensifying the need for fast returns. Isn’t there a risk that circular economy becomes a buzz phrase, something companies publicly shout about but never truly adopt?
“It perhaps won’t be an instant transition or an entirely straightforward one,” says Tellini, “but the combination of a growing consumer society and an ever-depleting supply of finite raw materials means there’ll be little choice but to rethink the way business has been done up to now. The current way is a dead end.”
To bear out Tellini’s point, 18 months ago the European Investment Bank – the European Union’s lending institution – set aside £24bn of EU money for CE projects before 2020. Those it already supports include recycling scrap tyres to make noise-reduction panels for urban roads and railway lines, and the use of slag waste from the steelmaking industry for the construction of roads.
Carlo Messina, Intesa Sanpaolo’s CEO, says the bank constantly strives to support its customers’ growth through innovation. “The circular economy is one of the most important new developments to that end. It enhances a company’s resilience and we foster its principles for all types of businesses we work with – from small family enterprises to international corporates.”
The Ellen MacArthur Foundation maintains a directory of the top 100 companies that are “actively pursuing the vision of the circular economy”, a list that includes Apple, Coca-Cola and Ikea. It’s not just fledgling, environmentally-conscious start-ups embracing it, then.
“What’s increasingly obvious is the number of CEOs and CFOs with a readiness to adopt the circular-economic model, aware that this is an international trend with profitable consequences” – Massimiano Tellini
Tellini, for one, is not surprised. “As a bank, we work with a wide variety of clients, each of them at a different moment on a different path to CE, if they’re on one yet at all. But what’s increasingly obvious is the number of CEOs and CFOs with a readiness to adopt the circular-economic model, aware that this is an international trend with profitable consequences.”
CE often entails relatively small adjustments to ways of living and working – when compared to the big consequences they can have. It integrates economics into the bigger issue of what the planet we live on can support and sustain.
Even the Nobel Prize-winning economist, Simon Kuznets, who formulated the method of calculating GNP, argued “welfare can scarcely be inferred from a measure of national income”.
With the world’s resources being used up apace, any economic growth is taking place on borrowed time. Can CE offer a solution? Its proponents say we haven’t too long a wait to find out.
A new paradigm for social and economic development that aims to redefine production processes with the purpose of attaining zero waste, the circular economy focuses not just on sustainability but also looks to radically reformulate the processes of business and society. Intesa Sanpaolo’s Innovation Centre has taken up the challenge of the circular economy, looking at new business solutions in collaboration with its partners. In 2015, the banking group was the first Financial Services Global Partner of the Ellen MacArthur Foundation, a global player for the transition to a circular economy.
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