The circular economy: lessons from a round-the-world record breaker

With the world’s resources under pressure, the global economy needs an urgent change of focus. Giulia Rhodes hears why Intesa Sanpaolo, partner in the Ellen MacArthur Foundation, is committed to a circular economy.

Giulia Rhodes

08/03/2016

Stepping off her boat in 2005 – with a new world record as the fastest person to sail solo around the globe – Ellen MacArthur was struck by a realisation.
In the southern Atlantic – battered by waves and winds, over 2,000km from land – she had known that if her supplies ran out there would be no more.

The same principle, she suddenly understood, applied to the global economy.

The continued reliance on decreasing reserves of fossil fuels seemed hard to reconcile with a long-term vision. In 2010, she established the Ellen MacArthur Foundation to promote a positive way out of this contradiction. The ‘circular economy’, which is an innovative paradigm for economic and social development, is based on the principle of designing out waste, in a system powered by renewable energy.

That’s why the circular economy is a regenerative cycle of growth.

A strategy for investing in the future

Intesa Sanpaolo is the only financial institution to become a global partner of the Foundation. “We have always prided ourselves on being one of the most sustainable banks in the world. It is in our very DNA,” says Massimiano Tellini, global head of circular economy at the bank. “The take, make, dispose linear model does not work any more, it is not compatible with the future, and we want to be ambassadors for the circular economy as a concrete alternative.”



Intesa Sanpaolo will work with the Foundation and its seven other industry-leading global partners – Cisco, Google, H&M, Kingfisher, Philips, Renault and Unilever – together with national and local governments and top universities to identify and facilitate circular economic innovation.

 

The collaboration, says Tellini, is not an exercise in self-contained sustainability or corporate responsibility such as might be seen from other banks, but rather a properly-validated systemic and strategic commitment. It’s for this reason that Intesa Sanpaolo decided to focus on circular economy through the Innovation Center.

“There is a paradox in being sustainable ourselves if our clients are not,” he says.

“As a bank we assume their risks. If we help make our clients more profitable, more competitive, more future-proof, then we ourselves are more secure.”

Last December the European Commission launched its Circular Economy Package to incentivise and legislate in favour of such an approach. The European Investment Bank earmarked €24bn to spend on suitable projects.

Collaboration: the way to create change

Anna Monticelli, circular economy project specialist, believes that the commercial banking sector has a crucial role to play. There are two initial priorities, she says.
The bank is focusing on raising awareness and understanding of the principles and obligations of circular economy internally, among clients and with academic and public bodies. At the same time researchers are in the early stages of identifying circular scalable projects.

“Ellen MacArthur realised that changing the entire economic paradigm is a challenge that can be achieved only by getting as many leading institutions as possible around the table,” she says.

“That way – with involvement from small start-ups through to multinational companies – new ideas can quickly be translated into tangible change.”

In the fashion industry – one of Italy’s key assets – Intesa Sanpaolo is working with Milan’s Bocconi University to assist the big brands in developing strategies for real change in production processes. “This would follow from the steps many are already taking in sustainability and reducing their environmental impact,” says Monticelli.

She cites the example of H&M, where the interaction of new technology and start-up innovation is increasingly allowing used garments to be regenerated into quality textiles and put back into the production cycle. “We are not looking for business as usual with an eye on sustainability but business which is actually regenerative, which does not negatively impact,” she explains.

Source: Ellen MacArthur Foundation.
Long term support, every step of the way

As a bank driven by relationships along the entire supply chain, rather than by individual transactions as many others are, Tellini believes Intesa Sanpaolo has a unique opportunity.

“The circular economy means a total redesign, a gradual decoupling from the use of non-renewable resources. It involves rethinking the distribution process, the production process, relationships with suppliers – and sometimes making significant investments. We are able to make sustained interventions at all these points for a long-term and systemic impact.”

“Many companies are beginning to lose control over key elements of the linear model. Fluctuations in the price of materials lead to huge unexpected and unsustainable costs.”

Last year – in an impassioned TED Talk – Ellen MacArthur insisted that a switch to a circular economy is not only necessary, but also starting to happen. She was inspired by the creativity, knowledge and engagement with new opportunities she had discovered.

“Now we can do anything,” she told her audience, “but more importantly we have a plan.”

The circular economy may be a lasting objective, says Tellini, but the move towards it is urgent.
Source: Ellen MacArthur Foundation.
Case study: redesigning the car industry

As a key user of fossil fuels and metals – 60 per cent of the world’s lead, for instance – the challenges facing the automotive industry are clear.

For Renault, one of the Ellen MacArthur Foundation’s global partners, engagement with the circular economy is long-standing. Since 1949, the company has been remanufacturing parts – for reuse in existing vehicles – at its Choisy-le Roi plant.

Today the profitable factory employs 325 workers in the remanufacture of six mechanisms. The parts – which are up to 50 per cent less expensive than new equivalents – prolong vehicle life, save energy and water (using at least 80 per cent less than traditional manufacture) and create jobs. No raw-material by-product is sent to landfill.

This commitment to re-use is, says Massimiano Tellini, a striking example of circularity in practice. On average in Europe, it has been reported, a car remains parked for 92 per cent of its lifetime. It carries two of the five people for whom it is made. “In terms of resources, design, production this is wrong. It is the destruction of value.”

In future, he suggests, access to mobility may be more important than ownership. “The industry cannot just produce cars because people want to buy them, they will need to supply a service. Renault’s example shows the capacity to address fluctuating prices and to fundamentally re-imagine consumption.”



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