By Darren West, SAP Product Expert, Circular Economy, and delegate for WBCSD
Submitted by SAP
I may be paraphrasing, but this was the sentiment behind a speech given by Costa Samaras, a Chief White House Science and Technology Policy advisor, at an Ellen MacArthur conference earlier this year.
It’s an idea backed up by research. When it comes to cutting greenhouse gasses, the main focus is on improving energy efficiency and transitioning away from fossil fuels to renewables, but that’s only half the story (55% of greenhouse gas emissions). The remaining 45% are tied up in products, materials and food.
Key administrations are aware of this and are starting to act accordingly. Accelerating innovation in industrial products and fuels for a net-zero, circular economy is one of five priorities of President Biden’s Net-Zero Game Changers Initiative. Meanwhile, across the pond, the new Circular Economy Action Plan (CEAP) is one of the main elements of the EU’s European Green Deal.
One of the voices missing from the choir is the United Nations, which hasn’t explicitly positioned the circular economy as vital for achieving net zero. But what the UN is doing (which arguably no other organization has done before) is collaborating multilaterally to create policy to regulate a specific material. I’m referring to the UN Plastics Treaty, a consensus by 175 nations to develop a legally binding agreement to tackle plastic pollution by 2024.
This is significant because plastic has become fundamental to the products we create and the packaging we use to contain and ship them. It’s a wonderful light, cheap and versatile material. However, plastic also has an enormous impact on the environment due to the emissions involved in its creation and as a result of mismanaged plastic waste which pollutes the air, the oceans, our blood, our food, and has even been found in ice cores in the Arctic.
Currently, the linear economy dominates as only 7.2% of the world’s resources are reused or recycled. In the case of plastic, we take oil from the ground, turn it into products like toys, tech, clothing, furniture, and packaging. We use them, and once we’ve finished with them we bury them in landfill, burn them, or they get thrown in rivers and end up in the ocean. Continuing like this isn’t an option because we will run out of resources, worsen global warming and cause further damage to our ecosystem. The circular economy is about running the resources around in loops, so materials retain their value and can be reused again and again. This video sums it up perfectly.
Even if the UN hasn’t been as explicit as the US and the EU about the circular economy, the Plastics Treaty will have the effect of curbing emissions and reducing pollution by encouraging businesses to keep recycling and reusing plastic rather than binning or burning it.
It sounds logical, so why aren’t we doing it already? For three key reasons. The first reason is financial. In the long term, the circular economy will create jobs, cut costs, improve profitability and secure supply lines. Achieving this however, requires massive capital investment in the short term. Secondly, more data is required to help us understand the impact of our decisions and thirdly, we need a new, more collaborative way of working.
Capital investment-wise, we must invest in designing and manufacturing products with circularity in mind. We need to adapt and build machinery and systems to rescue resources from existing products and turn them into new items. The labour market must evolve to train people in the skills required and to make circular economy jobs attractive, with good remuneration and benefits packages. More wealth must also flow back up the supply chain to ensure the sustainability of raw materials, and to enable us to grow and make things without trashing the soil or the water systems. To help companies and financial institutions understand the benefits and necessity of the circular economy, more education is required.
Data systems need to evolve to give companies insights on material flow and traceability, help them avoid waste, extend periods of use, recover and regenerate materials and make informed decisions for their products and packaging. This is where SAP comes in. With 80% of the world’s businesses using SAP software, you could say we are fundamental to driving the transition to a circular economy. Take plastic again - Green Token by SAP allows businesses to trace plastics back to their source polymer to understand what type of material is used in every plastic element in a product. This helps companies prove the environmental credentials of a given plastic. SAP Responsible Design and Production software is used to understand how recycled and recyclable a component is, and helps a company understand the true “end to end” cost of a material. This is effective for regulating certain materials, for comparison and decision-making purposes, as well as helping businesses anticipate taxes and fees associated with their products (a result of the UN Plastics Treaty and other legislation).
I’ve explained above how we can interrogate the upstream supply chain data, which relates to what a product is made from. Downstream, we don’t yet have a complete picture of what happens to a product at its end of life. Recyclability varies wildly between countries and even counties. To understand how recyclable certain materials (like plastics) are in certain countries or jurisdictions, a partnership approach with national governments, local authorities, NGOs etc. is required to build a database that can inform companies which types of plastic to use (or avoid) for certain markets in order to achieve circularity. SAP can add value by collecting this data and pulling it into our solutions.
At the same time, to embrace the circular economy, our way of working must evolve. Instead of working in silos within our individual businesses and in vertical supply chains, we need to work collaboratively in groups to share the data, and bring the skill sets, and processes together to enable the materials to flow. For example SAP works with groups of companies such as the WBCSD to agree frameworks for exchanging data – we call this the SAP Sustainability Data Exchange. This started with the embedded carbon in products, but can be extended to track other important material information for the circular economy like recycled content, or water content.
Collaborations between businesses and non-corporate bodies such as government departments, intergovernmental organizations and NGOs accelerate progress. A clear example of this is how, by working with the WBCSD and the Ocean Plastics Leadership Network, SAP is able to respond by updating software to help its customers respond to the new requirements arising from the negotiations.
If we can achieve all of the above for plastic (and work is well underway), the ambition is to replicate this approach for other products such as steel, batteries, electronics, textiles and even food. With a circular economy approach across these industries, I’m convinced we can get halfway to net zero and if, in parallel, the energy experts continue to move the needle on energy efficiency and renewable power generation, we’ll get the rest of the way.
SAP’s strategy is to help every business run as an intelligent, sustainable enterprise. As a market leader in enterprise application software, we help companies of all sizes and in all industries run at their best: SAP customers generate 87% of total global commerce. Our machine learning, Internet of Things (IoT), and advanced analytics technologies help turn customers’ businesses into intelligent enterprises. SAP helps give people and organizations deep business insight and fosters collaboration that helps them stay ahead of their competition. We simplify technology for companies so they can consume our software the way they want – without disruption. Our end-to-end suite of applications and services enables business and public customers across 25 industries globally to operate profitably, adapt continuously, and make a difference. With a global network of customers, partners, employees, and thought leaders, SAP helps the world run better and improve people’s lives.
More from SAP