What are some of the circular economy opportunities and challenges in emerging markets?

Circular economy business model opportunities abound in the global south! TechnoServe's Business Advisors have helped brick making businesses in RSA replace an expensive input with a free byproduct from a local smelting operation. They've also helped a coconut processor in Kenya convert coconut husks into biochar! Lots of opportunities in this exciting space!

The global shift to a circular economy gains momentum, emphasizing sustainability over traditional linear models. While the focus has mainly centered on materials, environmental impact and the Global North, little research delves into enterprises that address both circular and social challenges, especially in the Global South. This is a missed opportunity. Circular business practices can empower social businesses and increase social benefits. Social businesses can foster inclusivity and reduce risks within circular economies, and increase the scale of the circular economy. More research on this topic is being developed by TechnoServe and partners.

Emerging and Frontier markets are the perfect settings to align the disparate parts of unstructured value chains to create multiple circular economic ecosystems. Opportunities are easier to find when looking into these under-developed countries as compared to industrialized nations and service-oriented economies since the sectors are largely unorganized, informal, and typically underbanked with higher costs of capital borrowed from usurous lenders and other structural inefficiencies.

In places where economies are still growing, using circular economy solutions means more than just making the most out of resources; it’s about changing the way we deal with and derive value from waste. By using technology, we can make recycling and getting rid of waste more efficient, letting everyone play a part in keeping the environment clean and green. These apps let people share their thoughts and ideas on how we can manage waste and tackle other environmental issues, making sustainability a team effort. By embracing such smart solutions, growing economies can boost their green strategies, focusing on reusing resources and keeping sustainability a top priority, all while encouraging everyone to take part in protecting the environment.

I completely agree with the sentiment expressed by Adnan. Circular economy business models often perform better in regions with lower labor costs because they typically involve a substantial amount of handling and processing. Co-locating various stages of the value chain is crucial to minimize the need for extensive logistics operations, which can counteract the sustainability benefits of a circular economy approach. Shortened supply and value chains are indeed pivotal in ensuring efficiency and reducing waste. Additionally, integrating circular economy practices with traditional small lot farms is essential, especially in the context of organics, to create a more sustainable and interconnected urban and agricultural system.

Implementing the circular economy in emerging markets has its hurdles. A big one is the lack of supportive rules and easy access to funds, especially for small businesses. But, I see these challenges as stepping stones rather than roadblocks. For example, collaboration between technology providers and local enterprises can be a game-changer, making it easier to access and adopt new solutions. Think about creating digital platforms to connect waste producers with recyclers, enhancing the efficiency and reach of recycling efforts. These challenges push us to think creatively, join hands with different sectors, and find innovative solutions together.

In the context of upstream innovation for CE, designing products can be technically challenging, especially when aiming for an optimal balance between functionality, circularity, and cost-effectiveness. Emerging economies are more likely to have a shortage of designers and engineers with expertise in circular design and material innovation. It may be due to a lack of regulations supporting circular design and material usage, which drive upstream innovation capabilities and their scalability.

Implementing the circular economy in emerging markets faces several hurdles. These include the absence of supportive policies, limited access to financing and technology, and a need for increased awareness among consumers and stakeholders. Additionally, the lack of coordination between different sectors and actors can present challenges. Overcoming these barriers will require a concerted effort involving government, business, civil society, and academia to align interests and incentives in pursuit of a more sustainable and circular economic model.

Policies in most emerging markets are slowly but surely catching up to integrate circularity in their economies. That leaves with lack of investment, awareness amongst the stakeholders and lack of technology as the key challenges to CE. Demonstrating success of existing indigenous circular systems in emerging markets is vital in attracting investment and scaling-up partners of these systems. Government leadership in identifying synergies to foster public-private partnerships is key to kick start indigenous CE efforts. Transparent and authentic impact reporting of indigenous CE efforts will encourage and de-risk local or foreign investments.

CE capitalising strategies are imperative in emerging markets. Three vital elements should dictate such strategies; in-depth local knowledge of existing and potential micro- and macro-circular systems, potential socio-economic and environmental value of these and finally the ability of such systems to evolve over time with changing needs. To ensure effective implementation of such policies, fairly incentivising the entire chain of stakeholders and cutting out middle men or agents all together is mandatory.

To successfully transition to a circular economy, emerging markets must craft tailored strategies. These strategies should involve assessing current resource usage, setting aligned goals, creating action plans, and engaging stakeholders. By following this approach, they can drive sustainable economic growth, reduce waste, and mitigate environmental impacts while considering local development priorities.

For example, with the high consumption of dairy products in the large metros of the Asian subcontinent, there exist tens of thousands of dairy farms in the outskirts that provide cheap dairy products (primarily homogenized milk) to the working classes who can't afford packaged milk. Animal waste management solutions are typically archaic and promote unhygenic disposal of the dung in pits rather than reuse as an energy source as is the case in rural areas. The methane-laden waste that is buried in these poorly or unlined pits seeps into the groundwater and aquifers which in turn causes diseases that can be fatal if not treated. A simple solution is the collection and conversion of the dung to bio-methane which is a carbon offset and dry ice.

Animal waste such as dung has use as organic fertilizer also, improving soil organic matter and fertility. Sensible and effective use of available resources will be the key going forward.

These real-world examples from emerging markets showcase the circular economy in action. Safi Organics in Kenya, Chakr Innovation in India, Conceptos Plasticos in Colombia, and Evoware in Indonesia are all pioneering innovative solutions to reduce waste, improve resource efficiency, and address local environmental and social challenges. These initiatives demonstrate the potential of circular economy principles to drive sustainability and economic growth in diverse contexts.

'Our Shared Understanding: a circular economy in the built environment' was published at the World Circular Economy Forum in Helsinki in June 2023. It brought together global leading experts from across the built environment sector (including buildings, infrastructure, construction, architects, engineers, digital, financers, insurers) with the Circular Economy community (including Ellen MacArthur Foundation, World Economic Forum, Doughnut Economics, Circle Economy, World GBC) to agree the core concepts that inform the transition to a circular economy. By holding these principles in common, we can align policies, strategies and initiatives, enabling the built environment industries to work together towards a more sustainable future.

There are helpful resources available for anyone who want to learn more about the circular economy: Ellen MacArthur Foundation: A global leader in circular economy advocacy, offering a wealth of information, case studies, and networking opportunities. World Economic Forum: A platform for engaging with stakeholders and accessing reports, insights, and initiatives related to the circular economy. Circular Economy Club: A global community of circular economy enthusiasts, providing events, courses, and resources for practitioners. Switch Africa Green project: A collaboration between the EU and UN supporting African countries in developing and implementing circular economy policies, with a focus on showcasing results and lessons learned.

The principles of Sustainable Development Finance are embedded in the concept and practice of a circular economy insofar as it will reshape the financial sector to be more aligned with long-term 'economic' value creation rather than shorter-term financial returns on capital deployed.Real socio-economic value gets created as we transition from an extractive 'take-make-waste' economic consumption model to an environment-sensitive ''reduce-retain-reuse-regenerate' economic additive model. Energy efficiency achieved from renewal/clean energy sources and in turn address half of global GHG emissions as per published reports.

The modern linear system driven by profit, creating needs (at times artificially) and material aspirations through homogenisation of ambitions across the world have had its life. Active evolution to this trend of profiteering, to more responsible trends of ROI needs government will above and beyond the personal or political aspirations.