scoping study for a route map to a circular economy … · dr dominic hogg thomas vergunst simon...

SCOPING STUDY FOR A ROUTE MAP TO A CIRCULAR ECONOMY IN LONDON

Final Report for the Greater London Authority (GLA) and the London Waste and Recycling Board (LWARB)

Dr Dominic Hogg

Thomas Vergunst

Simon Hann

Steve Watson

2nd June 2015

Report for Larissa Bulla (Greater London Authority) and Wayne Hubbard (London Waste and Recycling Board)

Prepared by Dr Dominic Hogg, Thomas Vergunst and Simon Hann

Approved by

………………………………………………….

Dr Dominic Hogg

(Project Director)

Eunomia Research & Consulting Ltd 37 Queen Square Bristol BS1 4QS

United Kingdom

Tel: +44 (0)117 9172250 Fax: +44 (0)8717 142942

Web: www.eunomia.co.uk

Acknowledgements

Our thanks to Larissa Bulla (GLA), Clare Ollerenshaw (LWARB) and Wayne Hubbard (LWARB) for comments on earlier drafts; Brian Smith (GLA Economics) for data related to London’s economy; the workshop attendees; and those who agreed to be interviewed as part of this work.

Disclaimer

Eunomia Research & Consulting has taken due care in the preparation of this report to ensure that all facts and analysis presented are as accurate as possible within the scope of the project. However no guarantee is provided in respect of the information presented, and Eunomia Research & Consulting is not responsible for decisions or actions taken on the basis of the content of this report.

http://www.eunomia.co.uk/

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Executive Summary

E.1.0 Approach

London is one of the world’s great cities. The city has an incredible energy that drives a thriving economy. This, in turn, attracts more people from diverse backgrounds to the city: population has been growing for the last 30 years, and is predicted to surpass its previous peak figure (from 1939) of 8.6 million, rising to 11.3 million by 2050.1 It is also a tremendously prosperous city, and its rising prosperity suggests that levels of consumption are likely to rise in future.

In many respects, these trends are mirrored in other parts of the world, albeit in different ways. There is a rapidly growing body of consumers, each one of whom has aspirations towards improved living standards. In the absence of a major shift, not just in the way we consume, but also, in the way we make the things we consume, the rising demands on resource use are set to place additional strain on the capacity of the planet to meet these demands. Furthermore, it seems likely that the capacity of ecosystems to provide the services upon which our survival depends will be increasingly compromised.

It was in considering London’s future needs that the Mayor’s Infrastructure Plan recommended, regarding resource management, that:

“The London Waste and Recycling Board will work with the private sector and the London Infrastructure Delivery Board to understand the regulatory and fiscal environment that needs to be in place to accelerate the move to a circular economy. It will do this by developing a Route Map to the Circular Economy for London which will identify partners, actions and opportunities along the path to the Circular Economy. The Route Map will be available early 2016”.

It does not require too much imagination to see that London is becoming an urban mine with enormous resource potential. Yet the things that consumers, businesses and industry consume still have a habit of finding their way into places where they have little or no value. It is true that London is recycling more waste from households and businesses than it used to, but vast quantities are still fated to end up at landfills and incineration plants. As London grows, there will be a growing demand for still more infrastructure, as noted in the Infrastructure Plan: this infrastructure itself can place demands upon resources, and the way this infrastructure is conceived will have

1 Mayor of London (Undated) Enabling Infrastructure: Green, Energy, Water and Waste Infrastructure to

2050, Undated, www.london.gov.uk/priorities/business-economy/vision-and-strategy/infrastructure-plan-2050, p. 4

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ramifications both for resource use, and for the nature of the place that London’s citizens inhabit.

London is not to be found wanting in its capacity to innovate: whether it be in design, media, high tech sectors, financial services, architecture, or social entrepreneurship, London is at the forefront of innovation. It has world class universities which nurture talent and ideas, ideas which are being supported by a thriving network of incubators and accelerators, all helping to develop the innovation ecosystem that thrives in the City.

E.2.0 The Opportunity

In making a transition to a circular economy, London will be reconceiving a major challenge, linked to its consumption, as an opportunity. This programme will, if it is to succeed, need to harness the City’s evident ingenuity in the programme of transforming the way it views, and manages, the materials and products that are currently being sent to landfill and incineration, and in some cases, also, those materials which are already being recycled.

London is not, in relative terms, a major centre for manufacturing: the key sectors of the economy are service sectors, with financial services prominent among these. Economic data from the Office for National Statistics (ONS) make this clear, with Figure E - 1 showing that the main contributions to London’s gross value added come from service sectors.

Figure E - 1 - Regional Gross Value Added by Sector

Source: Based on ONS data

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Employment data confirm the dominance of service sectors (Figure E - 2). In both Figures, construction is more important than all manufacturing sectors combined.

Figure E - 2 – London Employment by Sector


A superficial view of these data would be that there is nothing that London can do to influence the circular economy because it has such a limited manufacturing base. Yet for all sectors, the shift to a more circular economy implies considering:

1) What changes could be made to the sector itself (in terms of existing practices, such as management of IT assets, catering contracts, where appropriate, and procurement); and

2) What opportunities the sector could seize upon in seeking to facilitate the circular economy.

This latter facilitation role is particularly relevant in some of the key sub-sectors of London’s economy. For example:

Financial and insurance activities – new business models may demand novel forms of finance, or traditional forms, such as lease financing, applied in new areas. There may be areas where insurance industries develop specialisation in providing cover for companies selling reused / remanufactured products where these cannot be backed by more conventional guarantees;

Professional, scientific and technical activities – support services to advise and support businesses, and help to commercialise new ideas will be important if

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innovative ideas from entrepreneurs are not to be lost from the innovation ecosystem;

Information and communication – information technology is already driving new markets in the sharing economy, enabling consumers of these services to transact swiftly and conveniently. Information technology can also help to deliver smart logistics, which may be an important facilitator of the circular economy to the extent that efficient take back systems are at the cornerstone of systems which look to retain value in consumer goods through remanufacture, reuse and repair;

Wholesale and retail trade; repair of motor vehicles – under a substantial shift to a circular economy, the retail trade may, in some areas, come to (re-)consider how it relates to its customers. Retailing might, in some product areas, become less about volume of sales, and increasingly, if the aim is to retain value in products, about take back with a view to remanufacture and repair (either on site or remotely);

Education – clearly, this has an important role to play in equipping people with knowledge and skills to be drawn upon by other sectors, but also, as a source of research and innovation around the circular economy; and

Transportation and storage – as indicated above, logistics are likely to play an important role in the development of a more circular economy, whether in respect of recycling, or in respect of take-back models for reuse and repair of goods.

It is clear, therefore, that some prominent sectors in London’s economy have the potential to play a leading role in facilitating a transition to a circular economy. In this respect, fostering a circular economy in London may give rise to first mover advantages in these sectors which can become the engines of further economic growth in future.

Several reports have sought to identify, either for specific products, or for a range of products, the financial benefits associated with developing a more circular economy. It has not been possible to develop a London wide estimate of the financial benefits, not least since it is difficult to know the composition of what is consumed, and how this is being managed at ‘end-of-first-life’ within London.

Data are somewhat better for household waste. Figures for 2012/132 demonstrate significant opportunities for increasing the capture rates of a range of materials for recycling and for enhancing reuse. The materials captured for recycling (or reuse), and left in residual waste, are shown in Figure E - 3. Our analysis of these data indicates that the additional value available through enhancing existing recycling services could be between £24 million and £39 million per annum. This value can be used to reduce the net costs of capturing this materials.

2 Recycling data from WasteDataFlow, and composition data for all household waste from Resource

Futures (2013) National Compositional Estimates for Local Authority Collected Waste and Recycling in England, 2010/11, February 2013.

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Figure E - 3 – London Household Collected Waste 2012/13

Source: Calculated using arisings and recycling data from WasteDataFlow, and composition data for all household waste from Resource Futures (2013) National Compositional Estimates for Local Authority Collected Waste and Recycling in England, 2010/11, February 2013.

It goes without saying that the potential for waste prevention, and as part of that, reuse (and preparation for reuse), should not be overlooked. Of the materials making up the household waste stream, some of the textiles, furniture and WEEE will be eminently suitable for reuse. These three streams alone indicate that collecting more material and realising value through reuse could increase the overall opportunity from £24 - £39 million to £77 - £92 million at 25% reuse rates, with this rising to £130 - £145 million if reuse rates rise to 50%.3

In intensifying this activity, it is likely that there will be jobs created in the process. Notwithstanding the prosperity of London, unemployment levels, at 6.5% in the quarter from September to November 2014,4 are not as low as in some other regions of England. A recent report by Green Alliance indicates that the types of job that may be created through development of a circular economy (perhaps as many as half a million full time

3 These re-use rates are specified as a proportion of the additional material we have indicated might be

available for recycling. 4 Office for National Statistics (2015) Statistical Bulletin: Regional Labour Market, January 2015,

http://www.ons.gov.uk/ons/dcp171778_391464.pdf

http://www.ons.gov.uk/ons/dcp171778_391464.pdf

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jobs across the UK, with potential to reduce unemployment by over 100,000) can address the mismatch between the expected creation of employment, and the skill levels of the unemployed.5

None of this captures the benefits which might arise to businesses themselves. In the case of London, we have noted the relatively small contribution made by manufacturing to the economy. On the other hand, London’s commercial services and education sectors have much to contribute to shaping the circular economy through their potential influence in shaping demand through innovation on the supply side.

London is also a major consumer of goods and services. The collective purchasing power of public sector organisations is considerable and has the power to shape production through its influence on demand. In principle, therefore, it can contribute to shaping both supply and demand, even though it is not a major centre of manufacturing itself.

London’s population is more than double that of the next largest cities in the EU.6 The concentration of consumption in London provides the opportunity to implement systems of reverse logistics that will enhance the viability of reuse and remanufacturing of goods, and allow for such activity to develop on an industrial scale.

At present, Defra indicates that net exports of ‘scrap materials’ from the UK were of the order 12 million tonnes in 2012/13, valued at over £4 billion. Receiving ports include ports in the Netherlands. Rotterdam is an example of a port seeking to develop an approach to the circular economy, partly on the basis of wastes arriving at Dutch ports. Rather than the UK exporting materials for processing elsewhere, London could become a centre for remanufacturing, repair and reuse, and begin not only to reverse the outward flow of ‘scrap materials’ from the UK by adding greater value to them, but attracting materials into London from the rest of the UK, and from other countries via the port.

E.3.0 Proposed Measures for the Route Map

E.3.1 Policies Within London’s Competence

A range of measures have been proposed, following consultation with stakeholders and workshop discussions. The reader is referred to the main document for a description of the measures and their rationale. The measures are listed, along with their suggested sequencing and timing, in Figure E - 4. The plan depicted assumes that resources are

5 J. Morgan and P. Mitchell (2015) Opportunities to Tackle Britain’s Labour Market Challenges Through

Growth in the Circular Economy, London: Green Alliance, January 2015. 6 The whole Paris metropolitan area has a greater population, so the demarcation of the territory affects

the perspective. It should be noted, however, that the population density of the Paris metropolitan area, as defined by Eurostat, is much lower than for Greater London.

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available to support implementation of measures and that measures can be initiated quickly. To the extent that implementation resources are more limited, some prioritisation across actions will be necessary.

Figure E - 4: Timeline for Implementation of Measures

E.3.2 Policies Outside London’s Competence

There are a number of policy changes which lie outside London’s competence, but which London could express support for because of the important role they could play in moving towards a more circular economy. A non-exhaustive list includes:

Overhaul of producer responsibility for WEEE to facilitate improved design, collection and management of WEEE, and incorporate reuse targets;

Consideration / introduction of deposit refunds for small WEEE;

Introduction of producer responsibility for furniture, including reuse targets;

Introduction of deposit refunds for beverage containers;

Recommondation Measure Sub-measure

2015 2016 2017 2018 2019 2020 2021 2022

Cross cutting Intelligent Procurement Strategy

Consideration of

strategic approach to

procurement

x

Cross cutting Intelligent Procurement StrategyDevelopment of GPP

criteriax x

Cross cutting Intelligent Procurement StrategyTraining for

procurement officersx x x

Cross cutting Intelligent Procurement Strategy Roll-out x x x X X X

Cross cutting Ensuring the Use of Reusable Products at Public Events x x x x x x x

Cross cutting Behavioural Change, Consumption x x x x x x x

Cross cutting Circular Economy Business Support x x x x x

Cross cuttingReviewing State-of-the-art in Biowaste Treatment

Infrastructurex x x

Cross cutting Financial (and technical) Support for Key Trials x x x x x x x x

Cross cutting Financial Support for Relevant R&D Broadly scoped call x x x x x

Cross cutting Financial Support for Relevant R&D Narrowly scoped call x x x x x

Cross cutting Business Support for Circular Economy Start-ups Analysis x

Cross cutting Business Support for Circular Economy Start-ups Measures x x x x

Cross cutting Dissemination of the Circular Economy concept x x x x x x x x

Cross cutting Planning for a Circular Economy x

Data Improving the Quality of Data for Commercial (and Industrial) x x x

Sector Specific Plans Circularising Specific Sectors x x x x x

Local Authority Collected Wastes Review (short-term) of Local Authority Collection Methods Review x

Local Authority Collected Wastes Review (short-term) of Local Authority Collection Methods Roll-out x x x x x x x

Local Authority Collected Wastes Review (long-term) of Local Authority Collection Methods Review x x

Local Authority Collected Wastes Review (long-term) of Local Authority Collection Methods Trials x x

Local Authority Collected Wastes Review (long-term) of Local Authority Collection Methods Roll-out x x

Local Authority Collected Wastes Re-use targets for Local Authorities (furniture and EEE) x

Local Authority Collected Wastes Designing Out Residual Waste Analysis x

Local Authority Collected Wastes Designing Out Residual Waste Approches x x x x

Commercial Sector Strategic Review the Market for Commercial Waste Collection Review x

Commercial Sector Strategic Review the Market for Commercial Waste Collection Roll-out x x

Commercial SectorProvision of Support to BIDs Seeking to Procure Collection

Services Collaborativelyx x

Commercial SectorPresentation of Case Studies of Food Waste Prevention

Resulting from Adoption of Separate Collectionsx x x x x x x x

Commercial Sector Support for Reducing Food Waste through Auditing x x x x

Commercial Sector Support for Food Redistribution Schemes Analysis x

Commercial Sector Support for Food Redistribution Schemes Implementation x x

Construction Sector Refundable Compliance Bonds for Infrastructure Projects Design x x x

Construction Sector Refundable Compliance Bonds for Infrastructure Projects Implementation x x x x x x

Construction SectorImplement Planning Policies to Require Consideration of

Deconstruction and the Reuse of Materials x

Construction SectorEmbed Green Infrastructure within Infrastructure

Developmentx

Construction Sector Presentation of Case Studies of 'Circular Building' x x

The Reuse Sector Strategic Business Review of Reuse and Repair in London x x

Education Embedding of Circular Economy Thinking in Design Courses x x x

Timeline

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Implementation of electronic data collection to ensure better quality of waste data – it would be desirable to have data of far higher quality than exists today

Implementation of pay as you throw systems for households;

Move towards a concession-based model for commercial waste collection in specified zones;

Introduction of a requirement to sort (fractions of) commercial waste;

Measures to require supermarkets to offer excess food to food redistribution organisations;

An amendment of the animal-by-products legislation to allow for feeding of (some) food waste to animals;

A review of definitions of waste so that leasing / take-back models are not encumbered by regulation;

A review of competition law to allow for collaborative approaches to be developed in specified circumstances without fear of allegations of collusion;

Amendment of procurement law to readily facilitate the procurement of product service models;

Removal of all subsidies for primary materials exploration and extraction / harvesting

Revised VAT rates for products that have been remanufactured or reused, and on services designed to facilitate this;

Introduction of a tax on the use of materials, potentially differentiated by their primary or secondary nature.

Some of these measures may be considered in the recasting of the so-called circular economy package at the European level: the ongoing consultation seeks views on a variety of matters related to production and consumption activity.7 Others are likely to be possible only in the longer-term, notably the introduction of a broad based system of taxes on resources.

7 See the questionnaire at the following link - https://ec.europa.eu/eusurvey/runner/circular-economy

https://ec.europa.eu/eusurvey/runner/circular-economy

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Contents

Executive Summary ..................................................................................................... i

1.0 Introduction ................................................................................................... 1

1.1 Objectives, Scope, Context ..................................................................................... 1

1.2 Structure of the Report ........................................................................................... 3

2.0 What is the Circular Economy? ....................................................................... 4

2.1 Key Principles .......................................................................................................... 4

2.2 Rationale for Pursuing a More Circular Economy ................................................... 4

3.0 Potential Areas of Focus for the Route Map for London .................................. 6

3.1 Areas of Focus ......................................................................................................... 6

3.1.1 Economic Data.................................................................................................. 6

3.1.2 Waste Data ..................................................................................................... 10

3.1.3 Summary, Waste and Economic Data ............................................................ 11

3.2 What is the Opportunity? ..................................................................................... 12

3.2.1 Materials in Household Waste ....................................................................... 13

3.2.2 Other Waste Streams ..................................................................................... 16

3.3 Summary ............................................................................................................... 17

4.0 Stakeholder Engagement ............................................................................... 18

5.0 Potential Elements of a Route Map for London .............................................. 20

5.1 Steps Towards the Circular Economy ................................................................... 20

5.2 Policy Review ........................................................................................................ 21

5.2.1 Fiscal Policies .................................................................................................. 21

5.2.2 Producer Responsibility .................................................................................. 22

5.2.3 Public Procurement ........................................................................................ 22

5.2.4 Support for Innovation ................................................................................... 23

5.2.5 Legal Framework / Regulation ....................................................................... 23

5.2.6 Advisory Services ............................................................................................ 24

5.2.7 Education and Skills ........................................................................................ 24

5.2.8 Infrastructure Planning and Investment ........................................................ 24

5.2.9 Data ................................................................................................................ 24

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5.3 Summary ............................................................................................................... 25

6.0 Suggested Measures for Inclusion in the Route Map ...................................... 26

6.1 Proposed Approach for London ............................................................................ 26

6.2 Measures for Consideration in a Route Map ........................................................ 26

6.2.1 Cross Cutting Measures .................................................................................. 26

6.2.2 Data ................................................................................................................ 34

6.2.3 Sector Specific Plans ....................................................................................... 35

6.2.4 Local Authority Collected Wastes ................................................................... 36

6.2.5 Commercial Sector.......................................................................................... 38

6.2.6 Construction Sector ........................................................................................ 41

6.2.7 The Reuse Sector ............................................................................................ 43

6.2.8 Education ........................................................................................................ 44

6.3 Implementation Plan ............................................................................................ 45

6.4 Policies Outside London’s Competence ................................................................ 46

APPENDICES .............................................................................................................. 48

A.1.0 What is the Circular Economy? ......................................................................... 50

A.2.0 Key Drivers for the Circular Economy ................................................................ 61

A.3.0 Priority Areas of Focus in Previous Studies ....................................................... 68

A.4.0 Summary of Workshops .................................................................................... 73

A.5.0 Priority Areas for the Route Map for London ................................................... 77

A.6.0 Waste Data ........................................................................................................ 83

A.7.0 What is the Opportunity? .................................................................................. 95

A.8.0 Stakeholder Engagement ................................................................................ 102

A.9.0 Potential Elements of a Route Map for London .............................................. 113

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1.0 Introduction

Eunomia Research & Consulting (Eunomia) was commission by the Greater London Authority (GLA) and the London Waste and Recycling Board (LWARB) to undertake research which will inform the development of a circular economy route map for London.

Considerable progress has been made over recent years in managing materials in a more circular manner; however, substantial quantities remain in residual waste, and are lost through disposal or energy recovery. In the context of the Mayor’s Infrastructure Plan to 2050, the document, Enabling Infrastructure: Green, Energy, Water & Waste Infrastructure to 2050, noted:8

The London Waste and Recycling Board will work with the private sector and the London Infrastructure Delivery Board to understand the regulatory and fiscal environment that needs to be in place to accelerate the move to a circular economy. It will do this by developing a Route Map to the Circular Economy for London which will identify partners, actions and opportunities along the path to the Circular Economy. The Route Map will be available early 2016.

This study takes place in the context of the above commitment. In essence, the study provides the initial research to support the development of the route map, scopes out potential priority areas of focus, and identifies key actions which could help to overcome barriers and drive forward the necessary changes to improve the circularity of London’s economy. The work presented as part of this report will underpin the development of the route map which will be undertaken by LWARB during the course of 2015.

1.1 Objectives, Scope, Context

The aim of the project was to inform the development of a route map to the circular economy for London.

The approach to the study consisted of the following four stages:

1) Initial literature review; 2) Data gathering and analysis; 3) Engagement with stakeholders; and 4) Assessment of potential measures for accelerating the circular economy in

London.

8 Mayor of London (Undated) Enabling Infrastructure: Green, Energy, Water and Waste Infrastructure to

2050, Undated, www.london.gov.uk/priorities/business-economy/vision-and-strategy/infrastructure-plan-2050, p. 36

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A summary of the approach is presented in Figure 1. Although presented as discreet steps, the first three stages occurred simultaneously. These informed the development of measures which it was believed could be adopted to accelerate the transition to a circular economy in London.

Figure 1 - Overview of the Approach Taken

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STAGE 1 This stage involved a detailed review of the circular economy literature, with particular emphasis on reports and studies which have been published within the UK over the last five years.

STAGE 2

Relevant data was gathered and used to identify key priority areas for action. WRAP and GLA Economics provided input on this stage. The data was also used to derive some estimate as of the opportunity in London.

STAGE 3 Relevant stakeholders were engaged throughout the project, in the form of a roundtable discussion, two workshops, and a number of targeted interviews with key stakeholders.

STAGE 4

The final stage consisted of reviewing a range of measures which could be used to accelerate the transition to a more circular economy in London. This list was then critically reviewed to identify measures which were largely within the control of the Mayor, the GLA, the LEP or local government, and could be included in a route map for London.

KEY RECOMMENDATIONS

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1.2 Structure of the Report

The main body of this report acts as a summary of the key findings and recommendations which were made as part of the study. The critical review of the literature, as well as the research and analysis underpinning the study, has been included in the attached Appendices.

The remainder of the report is structured as follows:

Section 2.0 – What is the Circular Economy? -outlines the key concepts and principles which underpin the circular economy and what the literature suggests are the main drivers for change;

Section 3.0 - Priority Areas of Focus for the Route Map for London - uses a review of London’s economy and the wastes which it generates as the basis for suggesting priority areas for measures to foster a more circular economy in London;

Section 3.2– What is the Opportunity? seeks to understand what the potential benefits of a circular economy may be in London;

Section 4.0 - Stakeholder Engagement – provides a summary of the engagement undertaken with selected stakeholders;

Section 5.0 – Potential Elements of a Route Map to a Circular Economy –considers possible phases in developing a more circular economy, as well as measures suggested in the literature as likely to foster its development. We consider the extent to which London has control over these measures; and

Section 6.0 –Proposed Measures for Inclusion in a Route Map – proposes a list of measures for inclusion within the route map and suggests a timeline for implementation.

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2.0 What is the Circular Economy?

2.1 Key Principles

A review of literature is provided in Appendix A.1.0. The circular economy has a long history as a concept and is used in different contexts with different meanings. Versions vary in the extent to which:

1) They emphasise design; 2) They emphasise business benefits (as opposed to environmental ones); and 3) They are oriented mainly towards waste management.

In reviewing the literature, we have distilled some key principles which appear to characterise a circular economy in its recently articulated forms. These are as follows:

1) Conscious integration, at the design stage, of ways to ensure retention of value of the product / packaging, or components thereof, or the constituent materials, at the highest levels of use for as long as possible. Whilst recycling of materials might enable the retention of embodied energy, water and other resources within the cycle of use, repair, reuse and remanufacture also maintain the value added in the form of labour and craftsmanship (and, potentially, intellectual property);

2) Design to eliminate the use of materials that present hazards; 3) The elimination of residual waste, with recycling being the lowest in the hierarchy

of circular resource management; 4) For the so-called ‘technical nutrients’,9 following a hierarchy of repair, reuse,

remanufacture; 5) As appropriate, supplanting models of outright ownership with those based on

service delivery, or leasing; 6) Where organic materials are concerned, separate collection of the materials to

maintain quality of what is returned to land; and 7) The use of renewable energy sources as far as possible.

There are a number of similarities, in this respect, with the conventional ‘waste hierarchy’, but a key distinction is the strong emphasis on design as a means to ensure ease of reuse, repair and remanufacture.

2.2 Rationale for Pursuing a More Circular Economy

The literature gives a range of reasons as to why authors consider it worthwhile to work towards the development of a more circular economy (see Appendix A.2.0). Most

9 Models of the circular economy typically split the economy into ‘technical nutrients’, and ‘biological

nutrients’. Essentially, technical nutrients are those materials which not biogenic (or biodegradable), so they include plastics, metals, minerals, etc. (see Appendix A.1.0).

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studies cite the environmental benefits and the potential business benefits to be gained from the shift to a circular economy. Several studies argued at the time of writing that a key driver is, and will be, high and volatile commodity prices. It remains unclear, though, that volatile commodity prices can be relied upon as a mechanism to drive change over the long term. In the absence of this becoming a major driver, then the emphasis, in terms of what may drive the desired transition, falls upon:

1) Businesses / organisations who wish to be first movers in their field, potentially generating business advantage over competitors;

2) Businesses who see potential benefits from moving to a business model which is more aligned with the circular economy;

3) Changes in consumer behaviour, both through education and media campaigns, and through autonomous action by consumers to change producers’ behaviour; and

4) Those who effectively establish the framework for action in the form of policy and regulation, so that they may remove existing barriers and incentivise new actions in support of the circular economy.

The last of these – policy, and how it can support businesses and changes in consumer behaviour - is the main area of interest for this work.

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3.0 Potential Areas of Focus for the Route

Map for London

3.1 Areas of Focus

A general, guiding rationale for choosing products and / or materials upon which circular economy programmes should focus has not yet emerged from the literature. This is perhaps not surprising given that a rational approach to prioritising actions might imply ‘prospecting’ in respect of all sorts of products, materials, or sectors with a view to seeking the opportunities for which the business case is strongest. In some cases, what may look like opportunities can only be realised through changes which have not yet taken place, and the costs of which are not always well known.

In reviewing where priorities for a route map might lie in a city such as London, the specific characteristics of the City, and in particular, the nature of its economy have been considered. In addition, notwithstanding the fact that the development of a circular economy is based around designing out waste, the nature and sources of wastes generated in London are also of considerable interest as they suggest where opportunities for improvement may lie. Indeed, many studies have contrasted a circular economy approach with the value of materials being discarded as waste.

In this Section, therefore, we use key indicators of economic activity (essentially, based on gross value added, or GVA, and employment) and statistics on waste generation and management to identify priority areas of focus for a route map to a more circular economy in London.

3.1.1 Economic Data

In total, London accounts for 22% of the UK’s GVA whilst accounting for only 13% of households. London is most specialised in commerce and services; the one notable exception to this, where the sectoral specialisation (i.e. the proportion of UK sectoral GVA which is accounted for by London) is greater than the proportion of households, is the construction sector.

Figure 2 shows sectoral GVA in absolute terms. This reveals the dominance of service sectors in London’s economy even more starkly. Manufacturing plays a comparatively minor role, with the most prominent contributions coming from:

1) Food products, beverages and tobacco; 2) Wood and paper products and printing; and 3) Other manufacturing and repair.

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None of the subsectors of manufacturing contributes anything more than a fraction of London’s GVA, and it is clear that the obvious area of focus would be service industries. Construction also features strongly, contributing more or less twice the GVA of the entire manufacturing sector in London.

Figure 2 - Regional Gross Value Added by Sector (£ million, 2012)


Figure 2 is also of interest in that it highlights the key sub-sectors of the service industry. As with all sectors, the shift to a more circular economy implies considering:

1) What changes could be made to the sector itself (and there are more and less generic examples of this, such as management of IT assets, catering contracts, where appropriate, procurement); and

2) What opportunities the sector could seize upon in seeking to facilitate the circular economy.

The latter facilitation role is particularly relevant in some of these key sub-sectors. For example:

Financial and insurance activities – new business models may demand novel forms of finance, or traditional forms, such as lease financing, applied in new areas. There may be areas where insurance industries develop specialisation in providing cover for companies selling reused / remanufactured products where these cannot be backed by more conventional guarantees. Furthermore, to the extent that circular economy activities become more mainstream, a wider range

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of financial institutions will need to understand what is driving the changes being wrought, and how demand for remanufactured and repaired goods might constitute the basis for a strong business model;

Professional, scientific and technical activities – support services to advise and support businesses, and help to commercialise new ideas will be important if innovative ideas from entrepreneurs are not to be lost from the innovation ecosystem;

Information and communication – information technology is already driving new markets in the sharing economy, enabling consumers of these services to transact swiftly and conveniently. Information technology can also help to deliver smart logistics, which may be an important facilitator of the circular economy to the extent that efficient take back systems are at the cornerstone of systems which look to retain value in consumer goods through remanufacture, reuse and repair;


Education has an important role to play in equipping people with knowledge and skills to be drawn upon by other sectors, but also, as a source of research and innovation around the circular economy; and



Turning to employment, in Figure 3, we see the pattern repeated to some extent. Outside the service sectors, which are the dominant sources of employment, construction plays a role more important than all manufacturing, whilst the key manufacturing subsectors are, once again:


Figure 4 shows sectoral employment in terms of the index of specialisation, which compares the proportion of London’s employees in a given sector with the proportion for the nation as a whole. Sectors with an index value greater than 0.75 are deemed to be those in which London is ‘reasonably specialised’. The sectors shown are all service sectors, with the exception of construction.

9


Figure 3 – London Employment by Sector


Figure 4 - Index of Specialisation by Sector for Sectors Where Index >0.75


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3.1.2 Waste Data

3.1.2.1 Waste Arisings

Based on official data from Defra and the ONS it has been possible to estimate the waste generation situation in London for the following waste streams:

1) Commercial and industrial waste (C&I); 2) Construction, demolition and excavation waste (CDE); and 3) Local authority (LA) collected waste.

The 2012/13 data for each of these waste streams is presented in Table 1. More detailed tonnages and explanations of the methodologies used in reaching these tonnages are given in Appendix A.6.0.

Table 1 - London Waste Arisings, 2012/13

Waste Stream Apportionment of England total

based on 2009 C&I survey (tonnes)

Apportionment of England total based on London contribution to

sectoral GVA (tonnes)

C&I Waste 4,280,000 6,880,000

Quantity based on Employment

Share (tonnes) Quantity based on GVA Share

(tonnes)

CDE Waste 13,933,782 17,138,921

Quantity based on Defra data (tonnes)

LA Collected Waste 3,559,991

Source: Eunomia calculations based on data from Defra and ONS

These waste generation statistics tell only part of the story in respect of prioritising considerations for making London’s economy more circular. Some waste streams are better managed than others, and hence, can be said already to be managed in a more circular manner. The data is, however, poor in this regard, especially at regional level for C&I and CDE wastes (where it is more or less non-existent).

3.1.2.2 Treatment of Waste

Statistics from Waste Data Flow indicate that 34% of London’s household waste is being recycled or composted. While 75% of this recycled waste comes from kerbside collected recycling, only 33% of kerbside collected waste is recycled. On the other hand, while 21% of recycled waste comes from civic amenity sites, 63% of waste collected from these sites is recycled.

To derive an estimate of how waste from different C&I sectors are treated sectoral waste generation statistics provided to Eurostat under the Waste Statistics Regulation

11


(WSR) were multiplied by the average treatment shares for each of those waste types for England as a whole in 2012 (the C&I data are for the financial year 2012/13).10 This revealed that, of the manufacturing sectors responsible for producing most waste in London, only in the case of the manufacture of food products, beverages and tobacco is a significant proportion of material still sent to landfill and incineration (31%). In the case of services, on the other hand, the proportion being sent to landfill and incineration is higher still at 37%, and in absolute terms, far greater (by a factor of approximately 20). A detailed breakdown of calculated treatment tonnages by sector is provided in Appendix A.6.0.

CDE waste management was also investigated using the WSR data. This suggested a recovery rate of only 63%, although this rises to 76% if one includes ‘land treatment’ (which for the CDE wastes, relates primarily to dredging spoils). Defra data for C&D waste only show a much higher rate of recovery (86.5% in 2012) than is suggested in data submitted to Eurostat for CDE waste.

3.1.3 Summary, Waste and Economic Data

In summary, in terms of London’s economy being made more circular, some fairly fundamental points are worth bearing in mind:

1) London’s economy is dominated by services. The financial services sector is a significant part of the economy, but professional, scientific and technical services is the largest employer, followed by wholesale and retail trading;

2) Construction is very significant, employing more people than all manufacturing in London, and contributing more or less double the GVA of manufacturing; and

3) Of the manufacturing sub-sectors, the following are the most significant to London (although in relative terms, their contribution is minor when compared with the service sectors):

a. Food products, beverages and tobacco; b. Other manufacturing and repair; c. Wood and paper products and printing; and d. To a lesser extent, textiles, wearing apparel and leather.

Within the services sector, there are key roles that some prominent sub-sectors may be able to play in respect of facilitating the development of the circular economy.

The analysis regarding waste arisings and management tends to support the areas of focus highlighted through consideration of the economic data:

1) The service sectors appear to be worthy of much closer analysis given the quantity of wastes still being consigned to landfill and incineration;

2) Although the CDE sector generates a large amount of waste, official data suggests that at the level of England as a whole, recovery rates for C&D waste are high.

10

The data used were taken from Table 5.9 (published in March 2014) in Defra’s UK Statistics on Waste 2010-12. They refer to the year 2012. The data are reported to Eurostat every other year.

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The potential for further value extraction and environmental gain is unclear given the lack of good information relating to the capture of value from specific sub-streams of the C&D waste stream;

3) In respect of the few manufacturing sectors that generate moderate quantities of waste, the data reported under the WSR appear to indicate limited scope for further value extraction. On the other hand, the potential for improved management of the waste from the food manufacturing sector may still be reasonably high; and

4) There remains considerable scope for improvement in respect of household waste management. Relatively large quantities of materials of value remain in the residual waste stream.

The above comments focus mainly on opportunities for increased recycling. Evidently, there are likely to be opportunities for waste prevention, and for reuse / repair of products becoming waste. We expect there to be large quantities of relevant material in this respect from the commercial and household sectors, notably in respect of WEEE and furniture, but also, in respect of paint, carpet (in the commercial sector) and other materials.

3.2 What is the Opportunity?

In recent years a number of reports have suggested that there are considerable economic benefits to be derived from driving the economy in a more circular manner. Amongst the reports of interest are those which focus on:

1) The magnitude of the business opportunity presented by moving to a more circular economy;11

2) Specific ‘circles’ of the circular economy, such as remanufacturing;12 and 3) The opportunities for resource efficiency.13

11

Ellen MacArthur Foundation (2013) Towards the Circular Economy Vol.1: Economic and Business Rationale for an Accelerated Transition, January 2013, www.ellenmacarthurfoundation.org/business/reports/ce2012; Ellen MacArthur Foundation (2013) Towards the Circular Economy Vol.2: Opportunities for the Consumer Goods Sector, June 2013, www.ellenmacarthurfoundation.org/business/reports/ce2013; Ellen MacArthur Foundation (2014) Towards the Circular Economy Vol.3: Accelerating the Scale-Up Across Global Supply Chains, January 2014, www.ellenmacarthurfoundation.org/business/reports/ce2014; Green Alliance (2013) Resource Resilient UK, Report for The Circular Economy Task Force, July 2013, www.green-alliance.org.uk/page_816.php. 12

All-Party Parliamentary Sustainable Resource Group, and All-Party Parliamentary Manufacturing Group (2014) Triple Win: The Economic, Social and Environmental Case for Remanufacturing, December 2014, www.policyconnect.org.uk/apsrg/research/report-triple-win-social-economic-and-environmental-case-remanufacturing; Lavery Pennell, 2degrees, and Institute for Manufacturing, University of Cambridge (2013) The Next Manufacturing Revolution: Non-Labour Resource Productivity and its Potential for UK Manufacturing, Report for Next Manufacturing Revolution, July 2013, www.nextmanufacturingrevolution.org/nmr-report-download/.

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A review of recent documents reveals that in the majority of cases, the claims made regarding the potential upside tend to be based on the development of scenarios where underlying assumptions are not always well grounded, or extrapolated from more-or-less specific cases where the validity of the extrapolations is not conclusively demonstrated. This is not to say that opportunities might not be significant, more that the information available in these sources is insufficiently reliable to allow for a straightforward extrapolation to the case of London. For the same reason, there is a pressing need for meaningful trials to seek to validate the claims which have been made.

It is also worth highlighting the fact that the low hanging fruit does not always reside in seeking to capture those high value materials or products, assuming that high value materials in wastes can deliver large benefits. Yet this presumes that the costs of delivering the value identified are lower than the value itself. This will not always be the case, and indeed, the opposite may apply: the economic opportunities might be greatest where low or moderate value materials are concerned whose value can be readily extracted from the waste stream. Take, for example, the case of paper in London, for which the marginal cost of extracting more of the material might be very low indeed given that there is already infrastructure in place, whilst the avoided costs of disposal might be considerable and opportunities present for generating revenue through the sale of the material.

3.2.1 Materials in Household Waste

The data available on the collection of household waste in London for 2012/1314 demonstrates significant opportunities for increasing the capture rates of a range of materials for recycling. The materials captured for recycling, and left in residual waste, are shown in Figure 5.

13

Oakdene Hollins (2011) The Further Benefits of Business Resource Efficiency, research Report Completed for Defra; AMEC Environment & Infrastructure and Bio Intelligence Service (2014) The Opportunities to Business of Improving Resource Efficiency, Final Report to the European Commission, February 2013. 14

Recycling data from WasteDataFlow, and composition data for all household waste from Resource Futures (2013) National Compositional Estimates for Local Authority Collected Waste and Recycling in England, 2010/11, February 2013.

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Figure 5 – London Household Collected Waste 2012/13

Source: calculated using arisings and recycling data from WasteDataFlow, and composition data for all household waste from Resource Futures (2013) National Compositional Estimates for Local Authority Collected Waste and Recycling in England, 2010/11, February 2013.

In the analysis in Table 2 below, we have set out assumptions in respect of maximum capture rates and unit values from the perspective of the authority, using ranges to represent the value of materials. These indicate a potential additional value available of £24 - £39 million per annum. This value can be used to reduce the net costs of collecting these materials.

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Table 2: Value of Materials that could be Captured from Household Residual Waste

Material

Current Recycling

Rate (%, est.)

Proposed Potential Recycling Rate (%)

Potential Additional Quantity

for Capture (tonnes)

Unit Value (£/tonne, LA perspective)

Low High

Paper 61% 90% 123,799 40 80

Plastic Film 11% 25% 16,180 30 50

Glass 60% 90% 61,919 -5 20

Textiles 10% 60% 44,947 200 300

PTTs 14% 50% 28,562 45 60

Metals 41% 75% 38,801 80 130

Furniture 4% 75% 43,917 30 40

Other dense plastic (non-packaging) 12% 50% 24,729 45 60

WEEE 24% 80% 41,341 28 40

Card 79% 85% 9,297 55 90

Plastic Bottles 61% 85% 12,804 70 100

TOTAL WEIGHT (tonnes) AND VALUE (£ millions)

- - 446,297 £23.50 £39.20

The discussion above has focused mainly on the effectiveness of systems in capturing materials for recycling. It goes without saying that the potential for waste prevention, and as part of that, reuse (and preparation for reuse), should not be overlooked. From the circular economy perspective, producers could play a role in improving prospects for reuse, preparation for reuse and recycling, whilst prevention could be assisted by light-weighting and judicious choice of materials and packaging.

Of the materials making up the household waste stream, textiles, furniture and WEEE will be eminently suitable for reuse. The current and potential capture rates for these materials are shown in Table 3. If one assumes that 25% of the additional textiles captured are suitable for reuse, then using the average of figures from a WRAP report for reuse for export, and reuse in the UK, the additional value generated would be £19 million, albeit this might require some additional preparation not accounted for in this. If the reusable fraction was increased to 50%, the increase in value would be £37 million, more than the total from recycling of all the materials considered above (albeit conservatively estimated).15

15

See Oakdene Hollins (2013) Textiles Flow and Market Development Opportunities in the UK, Final Report to WRAP, September 2012 (updated 2013),

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Table 3 - Tonnages of Materials Suitable for Reuse that Could be Captured from Household Residual Waste

Material Current Recycling Rate (%,

est.) Proposed Potential Recycling Rate (%)

Potential Additional Quantity for Capture

(tonnes)

Textiles 10% 60% 44,947

Furniture 4% 75% 43,917

WEEE 24% 80% 41,341

Regarding furniture, if one assumes a (probably conservative) value of £500 per tonne for reuse, then if one assumes that 25% of the additional furniture captured is suitable for reuse, then the additional value generated would be £5 million. If the reusable fraction was increased to 50%, the increase in value would be £10 million.

In respect of WEEE, assuming reuse values as in a report for the LGA,16 then if one assumes that 25% of the additional WEEE captured is suitable for reuse, then the additional value generated would be £29 million. If the reusable fraction was increased to 50%, the increase in value would be £58 million.

In total, therefore, these three streams alone indicate that shifting to reuse would increase the overall opportunity from £24 - £39 million to £77 - £92 million at 25% reuse rates, with this rising to £130-£145 million if the rate of reuse rises to 50%.

It should be recognised that achieving this additional value might not be completely costless. Even taking into account the avoided costs of disposal, there may be additional costs incurred in capturing some components of this value.

3.2.2 Other Waste Streams

As the composition of waste streams within the service sector are not well known it is difficult to estimate the opportunities for recovery existing in the commercial sector; however, it seems reasonable to assume that the potential for value extraction is likely to be high. For example, the prominent role of IT intensive business in London (such as the financial sector) should present opportunities for the reuse, repair, and remanufacture of electrical and electronic equipment.

We have attempted to make some estimate of the value of discarded EEE in London. In the UK, there are, according to WRAP, around 1.4 million tonnes of EEE discarded

www.wrap.org.uk/system/files/private/Textile%20Flows%20and%20Market%20Development%20Opportunities%20Updated%20June%202013v2.pdf. Note that a separate report suggests UK re-use prices for clothing are ‘typically £26/kg, premier grade clothing £40/kg and vintage £90/kg’, so that the study uses a figure of £35/kg (see Ricardo AEA and Cambridge Econometrics (2013) Economic Impacts of Resource Efficient Business Models, Final Report to WRAP, March 2013). 16

LGA (2014) Routes to Reuse: Maximising Value from Reused Materials, March 2014, London: LGA.

http://www.wrap.org.uk/system/files/private/Textile%20Flows%20and%20Market%20Development%20Opportunities%20Updated%20June%202013v2.pdf


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annually. Of this, 7% is sent for reuse, 55% is sent for open loop recycling, leaving 38% in residual waste.

Based on WRAP figures, and assuming that management practices in London are as in the rest of the UK, then we estimate that 245kt of EEE is discarded in London, and that (in line with WRAP figures17) the value of the materials in the stream is just under £200 million and the value of the materials still being sent to landfill or incineration is around £75 million per annum.

3.3 Summary

Understanding the magnitude of the opportunity that the circular economy presents is not a trivial task. The task is made all the more difficult due to the absence of data which indicates how materials are currently being managed in some key waste streams.

Notwithstanding this fact, it is clear that there are opportunities in respect of ‘value to be gained’. In the household waste stream alone, plausible improvements in recycling could realise an additional £24 - £39 million of revenue. Increasing the focus on making materials available for reuse could, just for three materials (textiles, furniture and WEEE), increase the overall opportunity from £24 - £39 million to £77 - £92 million at 25% reuse rates, with this rising to £130-£145 million at 50% reuse rates.

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4.0 Stakeholder Engagement

As part of this work, two small workshops were held. The first focused on the nature of prioritisation for action in London, whilst the second, focused on measures that could be considered as part of the route map. The workshops are summarised in Appendix A.4.0.

Workshop 1 was followed by a series of interviews. Key messages from the stakeholder interviews with relevance for the development of a route map for London are as follows:

1) Construction: a. In principle, it would be desirable if all buildings were designed with

deconstruction in mind. Modular design and construction might facilitate this;

b. In terms of use of materials, materials reuse (through selective demolition) would be desirable where appropriate, whilst there may also be possibilities for leasing materials for use;

c. In the context of public procurement, awards regarding structures which are likely to be more permanent should take account of whole life costs; and

d. The sector would benefit from presentation of best practice case studies. 2) Food and Drink:

a. The hospitality sector could make its activities more circular through (inter alia) leasing kitchen equipment, reuse of furniture / cutlery /crockery, and grey water reuse;

b. In order to ensure cost-effective collection systems are delivered, consideration should be given to mechanisms whereby businesses can jointly procure services from a single provider, for example, through Business Improvement Districts; and

c. In order to foster take up of separate food waste collections, case studies highlighting the prevention-related savings flowing from food waste separation should be developed.

3) Retail: a. For retail, the potential issues associated with take-back of a wide range

of products suggests a need for different forms of store, and for examining the logistics which might be required to serve them; and

b. Models for reuse already exist, with stores working with networks of local service providers.

4) Textiles: a. For high quality clothing, reuse is clearly the most preferable option; b. There is scope for supporting innovation in closed-loop recycling of

textiles; and c. This would lead to greater interest in kerbside collection of textiles of a

range of different qualities in future.

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5) EEE: a. In order to ensure the quality of specific material streams, greater

streaming of collection systems is required; b. Different companies adopt different approaches to the reuse and repair

of products. For example, some maintain materials within their own sphere of influence, whilst others have an understanding with asset recovery companies to help ensure they have access to manuals to facilitate repair;

c. There is further scope for encouraging product/service models in business to business transactions (and probably in households too);

d. The likely levels of consumption in financial services, and the clustering of such activities in specific parts of London, suggests that these areas would be appropriate places for trialling new systems of logistics for take-back and reuse / repair / recycling; and

e. The industry’s products can play a role in facilitating the transition to a more circular economy.

6) Waste: a. Decision making by planners needs to be more supportive in respect of

waste facilities; and b. The laws governing liabilities to which waste companies are exposed

when they allow third parties to engage in reuse act as a barrier to its further development.

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5.0 Potential Elements of a Route Map for

London

5.1 Steps Towards the Circular Economy

While a number of policies and actions have been put forwarded in the literature and interviews in respect of fostering a circular economy, for many proponents of the concept the emphasis remains on business itself leading the way.

In the words of the Ellen MacArthur Foundation:

“Although we see businesses themselves as the primary driver of a shift towards circularity, the public sector may also have a role to play. Specifically, governments can help stimulate fast-track adoption of circular business opportunities by adjusting the enablers to shift the rules of the game.”

The Foundation breaks down the ‘government/regulatory approach’ into five different areas:

1) The re-design and scale up of collection systems; 2) A tax shift away from labour and towards resources and pollution; 3) Increasing education, innovation, and entrepreneurship; 4) Providing a suitable international set of environmental rules; and 5) Leading by example, such as local authorities engaging in green procurement.

The consultancy Rabobank has sketched a picture of the path to a circular economy more closely aligned with transition theory.18 They suggest a four stage transformation of the economy, moving from a state where circular economy activities occur at the margins, through intermediate stages of improved waste management to a state where the norm shifts to near zero-waste and the emergence of new markets, to a final stage of the emergence of the circular economy.

For both the Ellen MacArthur Foundation and Rabobank the role of government is deemed to be secondary to the role of business. While this seems plausible in a situation where volatile commodity prices and resource scarcity force businesses to act differently, if this is not the case, then the role of government becomes potentially more significant in maintaining momentum behind the move to a more circular economy. The question that still arises for governments, however, is which aspects, from a social perspective, of the circular economy should they seek to stimulate, and with what policy instruments.

18

Port of Rotterdam and Rabobank (undated) Pathways to a Circular Economy.

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5.2 Policy Review

In order to survey the proposals being made for policy change in respect of the circular economy, as well as the two reports mentioned in the previous section, we reviewed reports by six different authors, chosen because of their strong policy orientation. Key observations are made in the following sub-sections.19

5.2.1 Fiscal Policies

All but one of the studies proposes the removal of environmentally harmful subsidies (which often target raw material extraction). This is, in our view, eminently sensible and can potentially happen in the relatively short-term, though of course, vested interests are strong. It is a measure widely recommended by international bodies such as the OECD, IMF and European Commission.

A second, very popular, fiscal measure, mentioned in five of the seven studies, is to make changes in the system of VAT to help foster the circular economy. Reduced rates on reused or refurbished products are proposed, whilst some also propose the removal of VAT from the service activities – maintenance, repairs, refurbishment and product service systems – themselves. While apparently attractive, there is no clear evidence of impacts relating the use of variable VAT charges for waste prevention (not least since there are few examples of the instrument’s use for this purpose).20

These fiscal measures are of potentially great significance, but they are outside the competences of London to deliver.

19

The reports are: Chatham House (2012) A Global Redesign? Shaping the Circular Economy, March 2012, www.chathamhouse.org/publications/papers/view/182376; Green Alliance (2013) Resource Resilient UK, Report for The Circular Economy Task Force, July 2013, www.green-alliance.org.uk/page_816.php; Green Alliance (2015) Circular Economy Scotland, January 2015, www.green-alliance.org.uk/circular-economy-scotland.php; CIWEM (2013) Less Is More: A Lifecycle Approach to Waste Prevention and Resource Optimisation, March 2013; Policy Studies Institute at the University of Westminster, Institute for Environmental Studies, Ecologic, BIO Intelligence Service, and Institute for European Environmental Policy (2014) Scoping Study to Identify Potential Circular Economy Actions, Priority Sectors, Material Flows and Value Chains, Report for DG Environment, European Commission, August 2014, www.psi.org.uk/site/project_detail/scoping_study_to_identify_potential_circular_economy_actions_priority_secto; TNO Consulting (2013) Opportunities for a Circular Economy in the Netherlands, Report for Netherlands Ministry of Infrastructure and the Environment, October 2013, www.government.nl/documents-and-publications/reports/2013/10/04/opportunities-for-a-circular-economy-in-the-netherlands.html; A Wijkman and K Skanberg (2015) The Circular Economy and Benefits for Society Swedish Case Study Shows Jobs and Climate as Clear Winners, an interim report by the Club of Rome with support from the MAVA Foundation and the Swedish Association of Recycling Industries, April 2015. 20

See Institute for Environmental Studies (2008) The Use of Differential VAT Rates to Promote Changes in Consumption and Innovation, Report for the European Commission Directorate-General for Environment, June 2008, http://ec.europa.eu/environment/enveco/taxation/pdf/vat_final.pdf; Eunomia (2011) A Comparative Study on Economic Instruments Promoting Waste Prevention, Final Report to Bruxelles Environnement, 16 December 2011.

http://ec.europa.eu/environment/enveco/taxation/pdf/vat_final.pdf

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5.2.2 Producer Responsibility

Another common area for policy proposals across the studies is producer responsibility. The range of proposals in this regard includes:

1) A shift away from recycling targets and towards those set either for reuse and recycling, or to include remanufacturing;

2) Either design codes to encourage reuse, for ease of dismantling, or the specification of collection and disassembly requirements, or requirements for products to be designed such that they were suitable for repair or remanufacturing (variants on this theme cover the provision of disassembly instructions and bills of materials);

3) Strict Individual Producer Responsibility (to encourage the above); 4) The specification of collection and disassembly requirements for products

containing critical materials, including expanding take back requirements to cover store delivery and internet retailers;

5) Measures to address issue of intentional obsolescence, such as extended warrantee/guarantee periods; and

6) Bonus / malus type arrangements, where specific products / packaging could be levied additional payments, or be given payment reductions, according to whether or not they were repairable, recyclable, amenable to disassembly, etc.

The relevance of these for London is, we would suggest, partial. London could make use of information from reuse / repair organisations within its own boundaries to understand the ease of repair of some items, and whilst it might not be able to enforce standards across industry, it could use this as a basis for influencing procurement decisions (see below).

5.2.3 Public Procurement

While being a potentially powerful mechanism, it might be difficult for public sector bodies to justify (if only on cost grounds in some cases), purchasing only ‘resource-efficient and cradle-to-cradle products’, however these are defined. One potentially interesting approach – to the extent that it does not already happen – is to ensure that goods and services are procured based on total cost of ownership. Products that have been designed for reuse and ease of disassembly may last longer because they are more easily repaired, and they may have a higher end-of-life value. To the extent that they are able, procurement systems should take these lower lifetime costs into account when choosing between products.

Clearly, this is an area where London has the capability to act. The nature of the approach, however, should be carefully considered with due regard to value for money, not least given the expected further squeeze on public spending which is anticipated. This is also likely to require some re-training of procurement professionals.

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5.2.4 Support for Innovation

Various authors highlight the role to be played by innovation. The Green Alliance suggests that:21

“…the 'led by industry for industry' model is likely to encourage shorter time horizons, more incremental innovation and a focus on lower risk near-to-market opportunities. Existing industry is quite rightly embedded in solving today's problems. New technologies and business models for a circular economy are more likely to arise from a focus on longer-term opportunities rather than existing business pressures.”

In light of this IPS et al recommends that governments:

“…support further R&D and innovation (e.g. through the Horizon 2020 and COSME programmes, leveraging both public and private financing and building on existing efforts such as the European Innovation Partnerships (EIPs).”

Another study pushes for action at a European level to promote product-service models.

This is an area where London can play a role. London is one of the leading regions for innovation in the UK, and has world-leading universities as well as design colleges and agencies, some of which are already engaged in activities related to the circular economy.

5.2.5 Legal Framework / Regulation

Several studies appeal to the need to change specific regulations. Two areas of interest are in respect of:

1) The need to review the potential legal implications, related to competition law, of company-to-company collaborations. Some have proposed that the European Commission should clarify competition law to reinforce exemptions for environmentally beneficial co-ordination; and

2) The need to review definitions of waste, in order to clarify whether products taken back for repair / replacement count as waste.

Another interesting, although less frequently cited, area was developing collection standards for reusability (implying that those involved in end-of-life collection systems for appliances should be trained to ensure that the way they handle appliances maximises reuse potential).

None of these represents an area where London could obviously take action under its own steam. It could, on the other hand, work with key stakeholders in London to improve collection services with a view to delivering higher quality materials for recycling, and facilitating reuse.

21

Green Alliance (2015) Circular Economy Scotland, January 2015, www.green-alliance.org.uk/circular-economy-scotland.php

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Other suggested changes, of greater interest to London because of the role London could play, relate to buildings, especially new ones. In this respect, a number of public authorities have set standards which publicly funded projects need to meet. London could play a role in seeking to ensure that new buildings incorporate circularity within their design, either through procurement, or land-use planning, or a combination of the two.

5.2.6 Advisory Services

One of the studies recommended that support should be available to companies to help them improve resource efficiency. Another study suggested that support should be available to companies regarding alternative uses for their by-products.

This is an area where there is scope for London to take action. It could also move beyond conventional models of ‘resource efficiency’ and make the activities more ‘circular economy-relevant’.

5.2.7 Education and Skills

Only one study highlighted a need to develop skills and training in the current and future workforce in respect of activities such as refurbishment or remanufacturing. The potential to do this through the European Social Fund was highlighted.

London’s Enterprise Panel has highlighted the need for the dissemination of new skills across the labour force if unemployment is to fall in London. There is a clear opportunity to tie in skills related to the circular economy within this broader framework of activity.

5.2.8 Infrastructure Planning and Investment

Recommendations from the literature include:

1) The development of sector specific road maps using the industrial strategy model for government and industry collaboration, piloted through the delivery phase of existing industrial strategies;

2) Improved collection infrastructure; 3) Support for industrial symbiosis and best practice platforms which connect

companies and other actors, including municipalities; and 4) Systematically exploring the potential to use other EU funding instruments such

as LIFE+, European Fisheries Fund, and the CAP, to support the transition to the circular economy, with investments that run counter to the circular economy being outlawed.

In respect of infrastructure, and planning for this, London clearly has a role to play. It can influence both the what, and the how. The Mayor’s Infrastructure Plan makes this clear.

5.2.9 Data

Surprisingly few studies focus on the need for better data. Only one of the studies reviewed highlighted the need to ”increase knowledge and awareness of raw materials

25


in each value chain.” Given the absence of quality data in the value chain post consumption, rather more could be done than has been proposed.

London is in a position to understand this better than it does, albeit that it may not have all the tools to require the changes it might ideally ask for.

5.3 Summary

It is clear that London does not have the means to implement all the above policies. On the other hand, if the transition to a circular economy is deemed to be sufficiently important, then London may wish to exert what influence it can in support of measures such as these.

In seeking to propose measures which may be appropriate for inclusion in a route map, we have considered the literature, the second workshop and the information gained from interviews to develop a list of policy proposals. In the next Section, we propose a series of measures which are focused principally on those that are in London’s gift to implement. We also suggest measures which London might support (or even lobby for) because they appear to have a strong, if not, pivotal role to play in driving forward a circular economy.

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6.0 Suggested Measures for Inclusion in

the Route Map

6.1 Proposed Approach for London

London is, insofar as the data enables one to develop a reliable picture, becoming a more circular economy. It is doing so in respect of recycling, and to a lesser extent, reuse. The extent to which it is making progress regarding repair and remanufacturing is not easy to understand on the basis of available data. However, it seems reasonable to assume that progress in this regard is not as far advanced as it could be. For a start, for household waste, which is the waste stream for which reasonable data is available, we know that around two-thirds of the waste stream still finds its way to landfill and incineration – described as ‘leakage’ in the well-known butterfly diagram in the reports of the Ellen Macarthur Foundation.

London does not – as has been made clear from the policy review in Section 5.0 – hold all the levers which it would ideally hold if it was determined to drive the economy in a more circular fashion, so it cannot assume that the policies required to drive the economy circular will be in place at any point in time. London also does not possess (anything like) all the information it would ideally have in its possession in order to make appropriate choices regarding prioritisation. A step-wise approach, which allows for periodic stock-taking and for prioritisation in the context of changes in the wider policy environment, seems appropriate.

The following section considers specific proposals for measures which London could commit to, and then implement, in the short-term, albeit some will take longer to implement. This list has been developed following a small workshop, where those present commented on an initial set of proposals.

6.2 Measures for Consideration in a Route Map

6.2.1 Cross Cutting Measures

Measure: Intelligent Procurement Strategy

Objective: To use the purchasing power of public procurement to call forward more circular products, or product-service models of provision.

Rationale: Although there are guidelines and targets at the EU level in respect of green public procurement (GPP) (for some goods), these are not always fully implemented, and the emphasis tends to be on the procurement of goods rather than the provision of the service that the good provides. The aim is to facilitate fair competition so that new business models, and products which are remanufactured or repaired, are not discriminated against in the market. The revision in approach requires a coherent strategy.

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Responsibility: Part of the strategy would be to consider how best to organise public procurement in London to deliver the best value solution across the public sector. This review could be undertaken through an independent study let through the GLA.

Outline Description: As well as considering the framework for procuring goods and services generally, there are, as noted above, a range of sub-measures which would need to be undertaken:

Consideration of strategic approach to procurement: as indicated above, the framework for delivery of any procurement strategy deserves to be considered. There are likely to be some areas of procurement where joint, or cooperative, procurement makes sense (across the various public sector bodies engaged in such activities in London). This would give greater power in the market, and give rise to the possibility to develop specifications which drive forward innovation in the provision of goods and services.

Development of GPP criteria: It is suggested that the existing list of products considered under the EU’s GPP programme should provide the starting point for a review of those criteria as perceived through a ‘circular economy’ lens. It may be possible to work with existing reuse and repair organisations, in the absence of clear standards for all products, to understand the extent to which existing products can be considered ‘easy to disassemble’, or ‘easy to repair’.22

Note that there are likely to be specific considerations regarding construction projects. These should be encouraged to consider design for disassembly where buildings are not expected to be long-standing. Where they are of longer term standing, lifecycle costs should be considered in evaluation processes.

Training for procurement officers: this would be necessary to ensure professionals understand the opportunities for greening public procurement within a circular economy context. It would make sense for this to follow the development of GPP criteria for an initial range of ‘goods’. This would require them to consider issues such as procuring reused / remanufactured goods, or ensuring that their procurements were open to models of delivery of the product as a service. The last of these might prove challenging under existing EU procurement law, which requires notices to be identified in terms of their being for goods or for services (and CPV codings by and large reflect this). It might be difficult, and potentially, undesirable (from the perspective of value for money) to frame procurement as ‘having to be’ in the form of services rather than products. As a result, approaches are likely to have to consider bids to provide goods, but with different financing mechanisms. As indicated in the policy review, criteria for award could include

22

The way in which some projects have specified criteria for ‘ease of disassembly’ has been to refer to the time taken to remove key components (see, for example, JRC (2012) Integration of resource efficiency and waste management criteria in European product policies – Second phase, November 2012, http://sa.jrc.ec.europa.eu/uploads/ecodesign-Application-of-the-projects-methods-to-three-product-groups-final.pdf ).

http://sa.jrc.ec.europa.eu/uploads/ecodesign-Application-of-the-projects-methods-to-three-product-groups-final.pdf

http://sa.jrc.ec.europa.eu/uploads/ecodesign-Application-of-the-projects-methods-to-three-product-groups-final.pdf

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lifecycle costs rather than the cost of purchase, so as not to discriminate unfairly against those who seek ‘to do the right thing’ in terms of product and service design.

Roll-out: the strategy would be rolled out once GPP criteria had been established and training of professionals had been undertaken. If institutional changes are considered necessary as a result of the above review, these would follow, but the move towards an approach to procurement which reflects circular economy principles can proceed without these having taken place (though they would be expected to enhance the effectiveness of the approach).

Timescale: The criteria and training may take some time to develop and to deliver. We estimate a period of two to three years would be necessary. Following that, roll-out could occur, with the time needed for institutional changes reflecting the magnitude of these.

Measure: Requiring the Use of Reusable Products at Public Events

Objective: To reduce the extent of waste generation at public events.

Rationale: At public events, there is considerable potential to reduce the use of disposables and replace them with durable items. These can act as totemic measures to demonstrate support for more circular approaches.

Responsibility: Mayor / GLA and local authorities; implementation by event organisers (though potentially with support from central provider).

Outline Description: The main intervention is to mandate all public events falling within a specified definition to resort to the use of reusable containers and crockery (effectively, banning the use of disposables) so that waste is prevented. This approach is already adopted in some cities, such as Vienna and Munich. Typically, the scope of the requirement covers drinks containers, bottles and plates. As well as preventing waste, the measure tends to reduce littering where deposits are applied to the reusable items. The obligation has, in some other jurisdictions, been set such that it applies only to events above a specified size. For materials not covered by the measure, the events management tool created by WRAP in partnership with LOCOG may be useful.23

Timescale: The measure could, in principle, be implemented relatively swiftly, though it would make sense to announce the measure in advance of its entering into force. Furthermore, it could be phased in for different sizes, or classes of events.

Measure: Behavioural Change, Consumption

23

http://www.wrap.org.uk/content/sustainable-event-management

http://www.wrap.org.uk/content/sustainable-event-management

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Objective: To raise awareness and understanding, and enhance acceptance, among consumers, of the potential of consuming in new ways, for example, through sharing or leasing models, or through purchasing remanufactured goods.

Rationale: To bolster demand for the products from the circular economy so that those considering new business models can invest with greater confidence.

Responsibility: GLA/ LWARB / London Enterprise Panel / Nesta / Innovate UK.

Outline Description: There is rising participation in the so called sharing economy, which has grown significantly in recent years.24 The sharing economy has been propelled, in part, by the ease with which mobile devices make it possible for users to access shared resources.

IT solutions are becoming enablers of circular economy models, and the potential for further development in this regard is considerable. London has capabilities in this area, with a significant high tech cluster in East London. There is scope for innovation to a) highlight, in attractive ways, the existing means of reducing consumption through sharing / leasing options; and b) become an enabler of market transactions for circular products. As part of its Green Capital Programme, Bristol recently ran a Green Digital Challenge, which resulted in 11 teams competing in a hack weekend to develop software applications and games which might tackle environmental challenges. Similar challenges oriented around the circular economy would be used to call forward innovative solutions to help support the shift to consumption patterns consistent with the circular economy.

Timescale: This could be an ongoing measure throughout the period. The first challenge could be operated within a year.

Measure: Circular Economy Business Support

Objective: To enhance business resource efficiency and increase engagement with circular economy business models.

Rationale: To support businesses to think how to design out waste in their product development and in their consumption behaviour.

Responsibility: LEP, with delivery by cross-disciplinary practitioners (design, materials specialists, resource management and economics).

Outline Description: Business support in respect of the environment has generally focused on the efficiency of use of resources by a given company in its commercial and

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According to PwC, the sharing economy is currently worth £9bn globally with this set to rise to £230bn by 2025. Five subsectors of the sharing economy in the UK are worth around £500m now, and could be worth up to £9bn a year by 2025 (see http://pwc.blogs.com/press_room/2014/08/five-key-sharing-economy-sectors-could-generate-9-billion-of-ukrevenues-by-2025.html )

http://pwc.blogs.com/press_room/2014/08/five-key-sharing-economy-sectors-could-generate-9-billion-of-ukrevenues-by-2025.html

http://pwc.blogs.com/press_room/2014/08/five-key-sharing-economy-sectors-could-generate-9-billion-of-ukrevenues-by-2025.html

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industrial activities. It has not always focused on how the company’s way of doing things, and its consumption behaviour, might be better aligned with the circular economy.

The London Enterprise Panel recognises the value of business resource efficiency in its strategy for allocating ESIF funds:25

‘Although resource efficiency makes business sense, a range of barriers limit take-up such as a lack of time and capital to implement new practices, limited awareness and understanding of the benefits and how to realise them. ERDF will finance initiatives that will help SMEs overcome these barriers, with a focus on applying more efficient technology and integrating best practices to improve resource efficiency and productivity within the business.’

Some of the funding allocation for this activity should be used to trial a new form of business support of a cross-disciplinary nature, designed to help businesses re-think their strategy in line with circular economy principles. The potential for purchasing remanufactured / reused goods, and for using more secondary materials would also be highlighted alongside broader resource efficiency objectives.

Timescale: The calls for ESIF funds are already being issued. A first step would be to prepare a suitable call through ESIF, with suitable match funding being made available for bidders. The support could last for the period for which funds are available (to 2020, and potentially, to 2023).

Measure: Reviewing State-of-the-art in Biowaste Treatment Infrastructure

Objective: To maintain a watching brief on the state of biowaste treatment technologies (as part of a strategy to ensure appropriate investments are made).

Rationale: Developments in the bioeconomy may mean that London invests too heavily in technologies which are ‘behind the curve’.

Responsibility: LWARB / universities / BIS.

Outline Description: In order to ensure that London capitalises on opportunities to generate most value from biowaste streams, it should maintain a clear understanding of the state of development of technologies in respect of biorefining. It should consider the relative costs and benefits of processes as they are commercialised, and seek to understand their suitability for dealing with specific biowastes.

Timescale: Low intensity effort in the short-term, but becoming more intensive in five years or so.

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London Enterprise Panel (2014) 2014-2020 European Structural & Investment Funds Strategy for London, January 2014, https://lep.london/sites/default/files/documents/publication/London_LEP_ESIF_Strategy_201420.pdf

https://lep.london/sites/default/files/documents/publication/London_LEP_ESIF_Strategy_201420.pdf

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Measure: Financial (and technical) Support for Key Trials

Objective: To support real-world trials so as to unlock potential actions in support of the circular economy.

Rationale: To accelerate progress towards the circular economy, especially where there are blockages to developing ‘the right system’.

Responsibility: LWARB / WRAP / stakeholders (private sector, reuse organisations, design agencies) / Innovate UK.

Outline Description: Some aspects of the emergent circular economy rely upon a number of pieces of the jigsaw to fall into place at the right time. These ‘system’ problems require coordinated actions to become unblocked.

At the level of process, this measure involves: a) identifying where action is being frustrated; b) bringing relevant parties together; c) understanding what is needed to ‘unlock’ potential; and d) designing the approach which unlocks that potential, and the circumstances where it might best be trialled.

One such example mentioned in the stakeholder interviews is in respect of the way in which EEE is managed in financial services companies. The likely levels of EEE consumption in the financial services sector, and the clustering of such activities in specific parts of London, suggests that these areas would be appropriate places for trialling new systems of logistics for take-back and reuse / repair / recycling.

The aims would be to conduct significant scale trials through co-ordinated activity. These would likely require considerable preparation, and hence, some resource would be required for the concepts to be fully elaborated.

Timescale: This activity could be ongoing, with periodic trials used to demonstrate the potential for scale-up.

Measure: Financial Support for Relevant R&D

Objective: To support R&D in areas which underpin the circular economy.

Rationale: To use the research excellence of London universities and colleges in pursuit of innovation in the area of the circular economy.

Responsibility: London Enterprise Panel / Innovate UK / Research Councils.

Outline Description: There are clearly some areas of research and development which can help to support the development of the circular economy. The nature of innovation being as it is, these might not always be readily identifiable in advance. In some cases, there may be clear areas for support: one of the areas suggested through the stakeholder interviews was the scope for supporting innovation in closed-loop recycling of textiles. ‘Circular economy thinking’ is, much like sustainability, a cross cutting discipline. Innovations could occur in design of products, design of processes for, or which enable, ease of dismantling, product remanufacturing techniques, innovations supporting the development of smart logistics, innovations in logistics services,

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innovations supporting the development of markets where they did not previously exist at scale, developments in asset tracking, innovations in biorefining, biogas extraction, nutrient stripping from digestate, phosphate recycling from sewage, and much else besides.

Two approaches suggests themselves: a) a broadly scoped call, generally seeking to support R&D in areas which can demonstrate a relevance for the move to a more circular economy; and b) narrowly scoped calls for R&D in areas where there is deemed to be a specific and pressing need for technologies or processes that solve a specific problem.

Timescale: Calls designed to bring forward proposals for R&D could be developed relatively swiftly. They could be developed using EU-SIF funds. The London Enterprise Panel has earmarked ESIF funds to support innovation. It notes:

“London Higher Education Institutions are a major asset; they are a hotbed for innovation and technological advancements and will play a pivotal role in delivering local growth. To this end, ERDF in London will seek to harness the interface between London’s university base and the rest of London’s ‘innovation ecosystem’ (including entrepreneurs and investors). ERDF will help to increase the level, supply and exploitation of knowledge and innovation to SMEs by improving knowledge exchange mechanisms and business access to knowledge and technology transfer services. The LEP will also encourage the development of new business models that will enable emerging technologies to be more rapidly commercialised. This will enhance collaboration across the research, teaching and business/clinical base, with a stronger focus on translation of ideas into practice and commercialisation.”

This is a positive agenda which should be harnessed in support of (amongst other things) the move to a more circular economy.

Measure: Business Support for Circular Economy Start-ups

Objective: To support entrepreneurs to move innovative ideas from conceptualisation to the market place.

Rationale: Start-up enterprises frequently lack access to finance, relevant commercial advice, information about securing intellectual property, and other essential components to enable them to scale-up their activity, and become successful businesses in their own right. In the absence of such support, start-ups may never flourish and excellent ideas may be lost, or may never be developed.

Responsibility: London Enterprise Panel, RSA (Great Recovery) Innovation Hub, other existing incubators and accelerators, private sector companies, Innovate UK.

Outline Description: Many business incubators and accelerators have focused on the digital sector. These concepts have been sufficiently successful that several corporately backed accelerators now exist. The aim of this measure is to ensure that start-up companies with offerings of relevance to the circular economy are able to benefit from

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advice that incubators offer, and in due course, to seek support (potentially from private companies) for accelerators which focus on developing companies in the circular economy.

The RSA’s Innovation Hub (in collaboration with FabLab London, near Bank Tube in EC2) is itself an important innovation in this space. It deserves support, and opportunities for extension should be explored. Crucially, the ideas and potential businesses that could be developed on the back of the type of thinking that FabLab inspires need to be nurtured and helped to develop.

It makes sense, therefore, to review what already exists in this space. A report by Telefonica in 2014 indicated that there were 12 incubators and 24 accelerators across London (though incubators and accelerators are opening – such as the RSA Innovation Hub - and closing all the time). Some of these may already support, if not explicitly, businesses with offerings relevant to a move to a more circular economy. On the basis of such a review, the extent of any need for additional activity should be appraised, with the intention being – as far as possible – to build on what already exists where that is successful. This review might also be helpful in signposting businesses to the most relevant incubators or accelerators for them.

Timescale: The review could take place in the short-term. The actions which flow from it need to be determined on the basis of that review. It may be that no action is required, but that would imply that a well-functioning support mechanism exists for those developing ideas of relevance to a more circular economy for commercialisation.

Measure: Dissemination of the Circular Economy Concept to Businesses

Objective: To enhance awareness of the concepts underpinning the circular economy through signposting.

Rationale: Although a number of businesses have grasped the concept of the circular economy (or are in the process of doing so), probably the majority have had limited exposure to the underlying ideas. To heighten awareness, and to normalise discussions around circularity, and to enhance the likelihood and extent of action, some dissemination is proposed over and above the more targeted business support indicated above.

Responsibility: GLA / LWARB, London Enterprise Panel, EEF, Innovate UK, Nesta, existing business incubators and accelerators.

Outline Description: There is a growing number of websites hosting tools and information about moving towards more circular business models. It should not be the intention to replicate these, rather, to signpost businesses to the most useful sources of information. Because London intends to move towards a circular economy, it seems likely that there will be relevant information around that. This measure envisages making hyperlinks from the relevant webpages on ‘London’ sites to useful sources of information, and engaging with actors, such as business incubators and accelerators, as

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well as other partners coming into regular contact with London businesses, to help raise awareness of relevant concepts.

Timescale: This is a measure which would be ongoing but which would involve working with organisations already engaging with businesses in London.

Measure: Planning for a Circular Economy

Objective: To ensure that planners reflect the ambition to develop a more circular economy in articulating their vision and in their site allocations.

Rationale: If plans are developed as though the economy will not become more circular, the economy is less likely to become more circular.

Responsibility: Mayor / GLA / planning authorities.

Outline Description: This work arises from the Mayor’s Infrastructure Plan. Moves to a more circular economy have implications for all infrastructure, not just waste infrastructure. Where waste is concerned, allocations for facilities need to be made for a ‘transition to a more circular economy’ scenario. This would likely imply: a) less waste, reduced requirement for residual waste disposal / recovery; b) more capacity for facilities with the intention to repair and reuse; c) a continuing (possibly reducing) requirement for management of dry recyclables (reduced quantities in waste, but a higher proportion captured); d) and a continuing (possibly reducing) requirement for treatment of food waste (reduced quantities in waste, but a higher proportion captured). Such scenarios should be worked up for consideration in future plans.

Timescale: This work will become more significant as strategic planning documents come up for review. However, it might be suitable to project forward under more and less optimistic scenarios within the route map document, recognising the difficulties inherent in long-term forecasting of waste generation.

6.2.2 Data

Measure: Improving the Quality of Data and Understanding for Commercial (and Industrial) Management of End-of-life Materials

Objective: To develop better data on commercial wastes, and in particular, their management, so as to inform the types of actions that can be taken to move towards a more circular economy.

Rationale: The quality of data regarding commercial waste generation and management is unacceptably low. In the absence of the ability to make specific demands of waste carriers and treatment facilities, attempts to derive better data are essential.

Responsibility: LWARB / WRAP / Environment Agency / Defra.

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Outline Description: Whilst it would be desirable to have quality data on the arisings and management of commercial waste in London, past experience suggests that survey approaches which are diluted across a wide range of sectors are unlikely to improve matters greatly. It is likely to be more effective to identify key sectors and to work with those to understand better what wastes they generate and how they deal with them. Key sectors in this regard are likely to be those service sub-sectors, such as financial services, which would seem to be potential sources of material for remanufacturing, repair and reuse. More detailed bottom-up survey work within these key sectors, aimed at understanding the issues confronting the businesses concerned, is likely to provide far more useful data for the purposes of informing how those sectors are rendered ‘more circular’. Such exercises can become part of the strategy to ‘circularise’ sectors, rather than simply trying to generate a low-resolution depiction of what happens across all waste generators. The approach suggested would deliver information on (at least) quantities generated by businesses, how they are managed and by whom, and what is the composition of the materials leaking to landfill and incineration.

Timescale: The data collecting starts, preferably, as soon as possible. We suggest that priority sectors are, in the first instance, financial services and hospitality.

6.2.3 Sector Specific Plans

Measure: Circularising Specific Sectors

Objective: To embed circular economy thinking within key sectors of London’s economy.

Rationale: The key sectors in London’s economy have a dualistic relationship with the circular economy. On the one hand, they are consumers and waste generators, and have the ability to adjust the way they consume to support the development of the circular economy; and on the other, they produce ‘things’, sometimes goods, more often, services which can be produced in ways that are better aligned with circular principles, but whose range can potentially be expanded through recognising opportunities which the circular economy presents.

Responsibility: GLA / LWARB / WRAP / London Enterprise Panel / Sector bodies / private companies.

Outline Description: Following on from the previous measure related to sector-focused data generation, engagement with the key sectors identified would continue with a view to highlighting the potential for change, and to discuss what opportunities the sectors identify for themselves in respect of facilitating the circular economy. For example, regarding financial services, new business models may demand novel forms of finance, or traditional forms, such as lease financing, applied in new areas. To the extent that circular economy activities become more mainstream, a wider range of financial institutions will need to understand what is driving the changes being wrought, and how demand for remanufactured and repaired goods might constitute the basis for a strong business model.

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Sector discussions might usefully take place on site, and be based on collaborative thinking with a view to trialling different approaches.

Timescale: This would logically follow from the data gathering exercise, and might lead to additional activities with the potential for their being supported under other measures proposed in this document.

6.2.4 Local Authority Collected Wastes

Measure: Review (short-term) of Local Authority Collection Methods

Objective: Increase recycling of local authority collected waste.

Rationale: Collection services operated by or on behalf of local authorities in London vary significantly in the quality and scope of delivery. This has frequently been highlighted as an obstacle to improved recycling performance, especially in respect of a mobile population.

Responsibility: LWARB and WRAP, with the waste collection authorities within London.

Outline Description: To achieve greater harmonisation in the services delivered by local authorities across London. In doing so, to reduce / eliminate confusion across householders regarding what can and cannot be recycled. As a result, to enhance participation and capture of materials, and allow for city-wide communications campaigns. The review should consider how to enhance ‘streaming’ of collections into specific streams, as well as the means through which collections could facilitate product reuse. It would be expected that the harmonised services would include separate food waste collection, as well as consideration of the collection of textiles.

Timescale: This activity is already underway. Whilst initial review can be undertaken in the short-term, roll-out of a more harmonised service might have to take place over the contract review cycle (7 years).

Measure: Review (long-term) of Local Authority Collection Methods

Objective: To maximise the extraction of value from local authority collected waste.

Rationale: Waste collection systems are not best designed to deliver high quality materials that can readily be recycled and reused (or prepared for reuse).

Responsibility: GLA / LWARB and the waste collection authorities within London.

Outline Description: Following on from the relatively near-term review, with a view to harmonisation, this review would adopt a more ‘blue skies’ approach. It would consider what approaches to collecting waste materials could maximise the benefits from recycling and reuse, and what forms of logistics would enable that.

Timescale: Review to be undertaken in the medium-term. Recommendations to be implemented over the longer-term following trials (as necessary).

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Measure: Re-use Targets for Local Authorities (Furniture and EEE)

Objective: To increase the amount of local authority collected waste which is prepared for reuse / reused.

Rationale: In the absence of the ability to establish reuse targets through existing, or new, producer responsibility schemes, this measure is proposed as a means to increase attention paid to the potential for reuse, especially at civic amenity sites, but also, at bulky waste collections and in kerbside collections offered to households and other customers.

Responsibility: Mayor to implement measure, waste collection (and disposal) authorities within London would be responsible for delivery, GLA / LWARB to monitor.

Outline Description: The GLA would set targets, in the first instance, for EEE and for furniture, which could be based on the per capita quantity that is prepared for reuse or reused.

Timescale: basis for targets to be considered in the short-term. The targets would be announced shortly thereafter, possibly with escalating rates of performance being sought, with the first targets entering into force a further 4 years or so after announcement.

Measure: Designing Out Residual Waste

Objective: To reduce the amount of local authority collected waste which is incapable of being recycled using current systems.

Rationale: Although the UK has a system of producer responsibility in place covering a range of packaging and products, the reality is that there is little or no incentive for the obligated producers to have regard to the recyclability of what they sell. The aim is to change that through cooperative working. A similar approach has been adopted by (the very much smaller) Campanori municipality in Italy.

Responsibility: GLA / LWARB to conduct analysis: LWARB to follow up with challenges to those responsible for producing / selling non-recyclable items in residual waste, Great Recovery Innovation Hub, other design agencies.

Outline Description: The intention is to understand what materials, products and packaging are most common in residual household waste. This would involve undertaking a representative analysis of residual waste with a view to identifying the most prevalent non-recyclable items in London’s waste stream. Following this, LWARB would seek to engage with the relevant producers / manufacturers with a view to explaining the rationale for the approach, and supporting product re-design to ensure the materials were recyclable in future. LWARB’s approach could be made alongside one of the many design agencies already working on such matters in London, with a view to funding, either fully or partially, some of the agencies’ time. London is blessed to have a

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number of agencies already active in this space (e.g. Agency of Design, Remakery, Raw Studio, Useful Simple Projects).

Timescale: The analysis of the prevalent materials could be done within a year. The collaborative approaches might be undertaken in a staggered manner initially, to ensure learning in the early stages. Thereafter, the approaches could be stepped up in time.

6.2.5 Commercial Sector

Measure: Strategic Review of the Market for Commercial Waste Collection

Objective: To increase recycling of commercial waste and improve the functioning of the commercial waste market. To understand, in the absence of powers to compel commercial businesses to sort certain waste streams (as in Scotland) how best to ensure that all commercial businesses are in receipt of a high quality recycling service (and that they use it).

Rationale: The commercial waste market is fragmented at present and does not always deliver high quality collection systems. The market does not support those looking to deliver such systems.

Responsibility: LWARB / WRAP.

Outline Description: This measure sets out to understand the scope for creating conditions in the commercial waste collection market which are more conducive to delivering quality services that can ensure high recycling and reuse rates of materials being discarded. This review should include the nature of collection services related to WEEE, which is covered by producer responsibility obligations. It should also cover the involvement of local authorities in commercial waste collections, and the extent to which their services (including civic amenity sites) can be sold to / used by commercial waste generators.

Timescale: We understand that some work is ongoing in respect of local authorities’ offerings in respect of commercial waste services. It may be that this covers the main issues discussed above, but equally, the ongoing work could be broadened / supplemented so as to capture some of the wider issues around the commercial waste collection market. Roll-out of the implications should not be so encumbered by contracts as in the local authority collection market.

Measure: Provision of Support to BIDs Seeking to Procure Collection Services Collaboratively

Objective: To increase the quality, and value for money, of collection services received by commercial companies.

Rationale: Provision of commercial waste services is not always focused on high recycling, and where it is, it may be relatively expensive.

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Responsibility: LWARB / consultants.

Outline Description: Some good examples (in Bath and Northeast Somerset, for example) already exist of instances where Business Improvement Districts (BIDs) have acted to collaboratively procure waste collection services. Because they have set a specification and clubbed together to buy collection services for a suitable period of time, the tenders for the provision of the service tend to be competitive because the tender is attractive to the bidders. This can deliver high quality services at prices that are lower than would otherwise be the case

Timescale: Subject to the outcome of the review above (which could make this unnecessary, depending upon its conclusions), BIDs could be offered support for the development of the procurement they wish to undertake. Action should follow the review, not pre-empt its findings.

Measure: Presentation of Case Studies of Food Waste Prevention Resulting from Adoption of Separate Collections

Objective: To increase the take up of separate food waste collections by commercial enterprises, notably the hospitality sector.

Rationale: There is insufficient appreciation of the potential savings which can be prompted as a result of engaging in separate collections of food waste.

Responsibility: LWARB, Sustainable Restaurant Association (SRA), WRAP’s Hospitality and Food Service Agreement.

Outline Description: The aim is to provide attractive case studies, highlighting cases where hospitality businesses have generated savings as a result of food waste prevention initiatives that followed their adoption of separate collection. LWARB could work with the SRA to disseminate these case studies widely, perhaps through WRAP’s Hospitality and Food Service Agreement.

Timescale: The initial set of case studies could be delivered over a short period of time, although it might be useful to maintain a (growing) number of these over time.

Measure: Support for Reducing Food Waste through Auditing

Objective: To provide businesses engaged in catering activities with measures of their current food wastage and advice on reducing the amounts of food wasted.

Rationale: There is evidence that simply measuring food waste can provide a strong incentive towards its minimisation, through raising awareness. This incentive is bolstered and supported when coupled with organisation specific, targeted advice on waste minimisation.

Responsibility: LWARB / Advisors.

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Outline Description: Businesses can be provided with clear objectives and actionable steps towards food waste reduction through comprehensive audits of areas such as inventory spoilage, preparation waste, and customer plate waste. Such a scheme has recently been carried out with success in London through the Food Save project.

Timescale: The Food Save project, which ran for two years, has recently come to a close. LWARB should review the results of the project and asses the viability of continuing or building upon the project in the medium- to long-term.

Measure: Support for Food Redistribution Schemes

Objective: To maximise the quantity of food which is made available to low-income households through food redistribution.

Rationale: The Trussell Trust notes that in 2013/14, foodbanks fed over 900 thousand people across the nation.26 FareShare’s work across the UK in 2014/15 led to thecollection of 7,360 tonnes from industry, which became 15.3 million meals for vulnerable people.27 Redistributing food that would otherwise go to waste ensures that the embodied water, energy and nutrients in food are maintained for consumers, whilst also fulfilling an important social function.

Responsibility: LWARB / GLA / FareShare / Feedback / charitable organisations / those determining health and welfare budgets.

Outline Description: In principle, there is a hierarchy of possibilities in respect of this measure, not all of which are mutually exclusive:

1. To the extent that powers allow, the Mayor could seek to adopt an approach similar to that taken recently in France, whereby supermarkets (and other stores) are forced to donate surplus food to charity28;

2. A voluntaristic approach might be to promote adoption of the principles underpinning the Food Waste Pyramid.29 This could be supported through allowing participating stores and restaurants to publicise their engagement in food redistribution to display a suitably designed logo (so as to inform consumers); and

3. Financial support could be offered to redistribution projects in lieu of avoided health and welfare costs which the absence of such schemes might imply. As such, those with responsibility for health and welfare budgets ought to be involved.

This matter deserves a suitable review, and exploration of, the powers available to the Mayor, as well as innovative funding arrangements to support such a network.

26

http://www.trusselltrust.org/foodbank-projects 27

http://www.fareshare.org.uk/infographic-2014-15-in-figures/ 28

http://www.foodbev.com/news/french-lawmakers-adopt-bill-banning-supe#.VW2W989Viko 29

See http://feedbackglobal.org/get-involved/are-you-a-business/

http://www.trusselltrust.org/foodbank-projects

http://www.fareshare.org.uk/infographic-2014-15-in-figures/

http://www.foodbev.com/news/french-lawmakers-adopt-bill-banning-supe#.VW2W989Viko

http://feedbackglobal.org/get-involved/are-you-a-business/

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Timescale: The review envisaged could be started straightaway with measures being implemented on the basis of that review as soon as possible thereafter.

6.2.6 Construction Sector

Measure: Refundable Compliance Bonds for Infrastructure Projects

Objective: To ensure high rates of material reuse, low rates of waste generation and high rates of recycling of waste generated in construction projects.

Rationale: Although specific projects, such as the London Olympics, have been cited as highly resource efficient, the pace at which best practice is disseminated across construction projects has been too slow. The approach would complement the development of the procurement strategy.

Responsibility: Mayor / GLA, the boroughs (as local planning authorities), Environment Agency.

Outline Description: This measure has been applied elsewhere, including in California. Under this arrangement, contractors would be required to pay, to the local authority, a financial sum related to the size of the project at its commencement in addition to a small administrative fee (intended to cover the administrative costs of the system). The financial sum would be retained as a bond to ensure that the project exceeded a specified recycling rate, which could be set higher (in line with green procurement principles) for public sector projects.

The size of bond paid would vary by project size, and all of the bond, excluding the administrative fee, would be returned on demonstrating that the desired recycling rate had been achieved. A proportion of the fund would be refunded for partial compliance with the desired target.

The mechanism would require materials from the project to be sent to authorised facilities, which had demonstrated that they could recycle the proportion of material suggested by the developer. As such, a procedure for authorising the reprocessors who receive the material would be required. This authorisation procedure would be appropriate for the Environment Agency to undertake, with the principle aim being to highlight the potential of a facility to deal with materials in a particular way. It would be expected that developers would need to prepare site waste management plans in order to demonstrate how they planned to meet the specified recycling targets.

Timescale: This measure would take some time to design and implement. It would require some streamlined audit mechanism for the projects concerned. It could be in place within 3 years or so. The links between the two prime candidates for implementation – the planning system, and green public procurement – would need to be considered.

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Measure: Implement Planning Policies to Require Consideration of Deconstruction and the Reuse of Materials

Objective: To ensure developers consider (for specific classes of buildings) deconstruction from the outset, and that they increase the extent to which they reuse materials.

Rationale: To reduce CDE waste and improve prospects for reuse of building structures.

Responsibility: Mayor / GLA and the boroughs (as local planning authorities).

Outline Description: In principle, it would be desirable if all buildings were designed with deconstruction in mind, where it was appropriate to do so. Modular design and construction might facilitate this. In terms of use of materials, materials reuse (through selective demolition) would be desirable where appropriate, whilst there may also be possibilities for leasing materials for use in construction. The intention would be to ensure that developers demonstrate that they have given adequate consideration to this when making their planning applications. This would be achieved through enacting planning policies to require that this is done for specific types of building.

Timescale: This would need to take place at the next revision of the relevant plan document(s).

Measure: Embed Green Infrastructure within Infrastructure Development

Objective: To maximise the extent of provision of services through green infrastructure, and as a result, to enhance the sense of place, and contribute to public health.

Rationale: Infrastructure is generally developed to provide services. Green infrastructure is capable of delivering a wide range of those services in specific contexts, ranging from climate regulation to a reduction in the prevalence of non-communicable diseases.

Responsibility: Mayor / GLA and the boroughs (as local planning authorities).

Outline Description: The National Planning Policy Framework requires planning authorities to plan positively for green infrastructure, and London already aspires to increase tree cover across the capital by 5% in the coming years (with aspirations to go further in the Infrastructure Plan for 2050). To the extent that the circular economy focuses on design with a view to eliminating waste, then at the macro scale, the design element, as applied to infrastructure, would seek to maximise the extent to which natural capital is relied upon for the delivery of the services that ‘hard infrastructure’ might otherwise provide. (Note that this also has clear relevance upstream of London on the Thames in respect of adaptation to climate change).

The measure would be enacted through plan policies designed to ensure that all options for incorporating green infrastructure had been considered, and that its contribution to delivering services had been fully appreciated in the proposed development

Timescale: This would need to take place at the next revision of the relevant plan document(s).

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Measure: Presentation of Case Studies of ‘Circular Building’

Objective: To help the construction industry to appreciate the potential benefits of more circular models of building.

Rationale: Stakeholder interviews indicate that progress in understanding more circular models of building is likely to be enhanced through the elaboration of exemplar case studies.

Responsibility: LWARB.

Outline Description: The aim is to provide attractive case studies, highlighting key features and important learning points, of building projects that demonstrate the benefits of following a more circular approach to building. The cases would ideally demonstrate the benefits to the various parties involved in the building project, including the developer and the users of the building. The Ellen MacArthur Foundation is working on a suite of case studies to demonstrate opportunities for more circular behaviours within the built environment sector. The first case studies are to be published by September 2015, so will contribute to this effort.

Timescale: The initial set of case studies could be delivered over a short period of time, although it might be useful to maintain a (growing) number of case studies as more come to light, and as a means to demonstrate different features / issues.

6.2.7 The Reuse Sector

Measure: Strategic Business Review of Reuse and Repair in London

Objective: To build on London’s existing reuse and repair networks so as to develop a major reuse and repair sector with the aspiration to import materials for reuse / repair and remanufacture from other parts of the UK and other countries.

Rationale: The reuse and repair sector handles a significant quantity of materials in London at present. In a move to a more circular economy, the sector will have an enhanced role to play, and could become involved in remanufacturing activities. The ‘density’ of products available in London makes London a logical place to locate reuse and repair organisations.

Responsibility: LWARB / WRAP / London Reuse Network / London Community Reuse Network / private sector companies involved in EEE and furniture (manufacture and retail), logistics companies.

Outline Description: The existing reuse sector in London faces a number of opportunities. The stakeholder reviews indicated that whereas some companies who make specific pieces of electrical equipment are comfortable allowing others to engage in asset recovery, there are others who prefer to retain that material within their own systems (with brand-specific centres for repair and reuse). One retailer also indicated

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that in respect of furniture, its strategy was to work with local networks of reuse organisations around each of its stores.

In principle, it might be desirable for the logistics of any take back scheme to operate at scale. Some investigation as to the most appropriate form of logistics for large-scale take-back of, for example, WEEE, with reuse and repair in mind, seems warranted. The resolution of a key question – whether products should be kept within brand-specific loops or not, or whether the two options should co-exist, as now – might be expected to have a bearing on how logistics might be best designed to ensure efficient capture of products in such a way that they are suitable for reuse.

These appear to be strategically important questions for the sector and its evolution. There is a need for collaboration along the ‘reverse supply chain’ to test options in respect of the collection logistics and the locations for reuse and repair facilities, with a view to offering the best prospects for scale up of repair and reuse activity. There may be merit in engaging with the participants in the Electrical and Electronic Equipment Sustainability Action Plan to carry forward this work in respect of EEE.

The review should be undertaken with a view to supporting the transformation of the sector into a major player in the delivery of the vision for a circular economy in London, capitalising on the amount of material available in the capital to develop a thriving industry that attracts suitably collected products from other locations.

Timescale: The review could commence swiftly but is likely to take time to conclude. It needs to engage a wide range of actors. The review could lead to the funding of trials (see above), with a view to delivering on a coherent strategy for the sector (which is likely to include skills support for those delivering reuse, and managing reuse organisations).

6.2.8 Education

Measure: Embedding of Circular Economy Thinking in Design Courses

Objective: To ensure design education in London reflects circular economy thinking.

Rationale: London has some world leading universities and colleges where design is concerned. Some are already engaged with the concept of the circular economy, and the aim here is to deepen the engagement across all further education establishments and in secondary schools.

Responsibility: LWARB / Design Colleges and Faculties / DfE / local authorities.

Outline Description: Sustainable design continues, somewhat surprisingly, to be considered too often as a last minute thought, if it is considered at all. The Great Recovery report from RSA proposes making sustainability a matriculation criterion in every design and engineering degree. It sees a need to encourage multi-disciplinary learning based on an understanding of the lifecycle of the products and services that we create. RSA proposes that further and higher education modules are developed to integrate design for circular economy and systems thinking into a wide range of design

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curricula. It might be more appropriate to seek to ensure that this is made part of all higher education design curricula.

The same can be said of secondary school qualifications for those seeking design-related qualifications, with DfE being a key target in this respect.

The RSA also highlights the need for cross-disciplinary learning. It might be possible to have circular economy modules in disciplines such as engineering, with these being modules which design students are requested to attend.

Timescale: This requires working over a period of time with higher education establishments and with DfE.

6.3 Implementation Plan

The suggested sequencing and timing of measures is shown in Figure 6. This plan assumes that resources are available to support implementation of measures and that measures can be initiated quickly. To the extent that implementation resources are more limited, some prioritisation across actions is likely to be necessary.

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Figure 6: Timeline for Implementation of Measures

6.4 Policies Outside London’s Competence

There are a number of policy changes which lie outside London’s competence, but which London could express support for because of the important role they could play in moving towards a more circular economy. A non-exhaustive list includes:

Overhaul of producer responsibility for WEEE to facilitate improved design, collection and management of WEEE, and incorporate reuse targets;

Consideration / introduction of deposit refunds for small WEEE;

Introduction of producer responsibility for furniture, including reuse targets;

Introduction of deposit refunds for beverage containers;

Implementation of electronic data collection to ensure better quality of waste data – it would be desirable to have data of far higher quality than exists today

Implementation of pay as you throw systems for households;

Move towards a concession-based model for commercial waste collection in specified zones;

Recommondation Measure Sub-measure

2015 2016 2017 2018 2019 2020 2021 2022

Cross cutting Intelligent Procurement Strategy

Consideration of

strategic approach to

procurement

x

Cross cutting Intelligent Procurement StrategyDevelopment of GPP

criteriax x

Cross cutting Intelligent Procurement StrategyTraining for

procurement officersx x x

Cross cutting Intelligent Procurement Strategy Roll-out x x x X X X

Cross cutting Ensuring the Use of Reusable Products at Public Events x x x x x x x

Cross cutting Behavioural Change, Consumption x x x x x x x

Cross cutting Circular Economy Business Support x x x x x

Cross cuttingReviewing State-of-the-art in Biowaste Treatment

Infrastructurex x x

Cross cutting Financial (and technical) Support for Key Trials x x x x x x x x

Cross cutting Financial Support for Relevant R&D Broadly scoped call x x x x x

Cross cutting Financial Support for Relevant R&D Narrowly scoped call x x x x x

Cross cutting Business Support for Circular Economy Start-ups Analysis x

Cross cutting Business Support for Circular Economy Start-ups Measures x x x x

Cross cutting Dissemination of the Circular Economy concept x x x x x x x x

Cross cutting Planning for a Circular Economy x

Data Improving the Quality of Data for Commercial (and Industrial) x x x

Sector Specific Plans Circularising Specific Sectors x x x x x

Local Authority Collected Wastes Review (short-term) of Local Authority Collection Methods Review x

Local Authority Collected Wastes Review (short-term) of Local Authority Collection Methods Roll-out x x x x x x x

Local Authority Collected Wastes Review (long-term) of Local Authority Collection Methods Review x x

Local Authority Collected Wastes Review (long-term) of Local Authority Collection Methods Trials x x

Local Authority Collected Wastes Review (long-term) of Local Authority Collection Methods Roll-out x x

Local Authority Collected Wastes Re-use targets for Local Authorities (furniture and EEE) x

Local Authority Collected Wastes Designing Out Residual Waste Analysis x

Local Authority Collected Wastes Designing Out Residual Waste Approches x x x x

Commercial Sector Strategic Review the Market for Commercial Waste Collection Review x

Commercial Sector Strategic Review the Market for Commercial Waste Collection Roll-out x x

Commercial SectorProvision of Support to BIDs Seeking to Procure Collection

Services Collaborativelyx x

Commercial SectorPresentation of Case Studies of Food Waste Prevention

Resulting from Adoption of Separate Collectionsx x x x x x x x

Commercial Sector Support for Reducing Food Waste through Auditing x x x x

Commercial Sector Support for Food Redistribution Schemes Analysis x

Commercial Sector Support for Food Redistribution Schemes Implementation x x

Construction Sector Refundable Compliance Bonds for Infrastructure Projects Design x x x

Construction Sector Refundable Compliance Bonds for Infrastructure Projects Implementation x x x x x x

Construction SectorImplement Planning Policies to Require Consideration of

Deconstruction and the Reuse of Materials x

Construction SectorEmbed Green Infrastructure within Infrastructure

Developmentx

Construction Sector Presentation of Case Studies of 'Circular Building' x x

The Reuse Sector Strategic Business Review of Reuse and Repair in London x x

Education Embedding of Circular Economy Thinking in Design Courses x x x

Timeline

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Introduction of a requirement to sort (fractions of) commercial waste;

Measures to require supermarkets to offer excess food to food redistribution organisations;

An amendment of the animal-by-products legislation to allow for feeding of (some) food waste to animals;

A review of definitions of waste so that leasing / take-back models are not encumbered by regulation;

A review of competition law to allow for collaborative approaches to be developed in specified circumstances without fear of allegations of collusion;

Amendment of procurement law to readily facilitate the procurement of product service models;

Removal of all subsidies for primary materials exploration and extraction / harvesting

Revised VAT rates for products that have been remanufactured or reused, and on services designed to facilitate this;

Introduction of a tax on the use of materials, potentially differentiated by their primary or secondary nature.

Some of these measures may be considered in the recasting of the so-called circular economy package at the European level: the ongoing consultation seeks views on a variety of matters related to production and consumption activity.30 Others are likely to be possible only in the longer-term, notably the introduction of a broad based system of taxes on resources.

30

See the questionnaire at the following link - https://ec.europa.eu/eusurvey/runner/circular-economy

https://ec.europa.eu/eusurvey/runner/circular-economy

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APPENDICES

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A.1.0 What is the Circular Economy?

Although the term ‘circular economy’ has acquired some prominence in recent years the concept has a long history. The term was promulgated by academics as early as the 1960s and 1970s.31 A range of concerns have been identified in support of an expressed need to shift towards a more circular economy, these including resource scarcity, pressures on ecosystems, climate change and volatile commodity prices. There appears to be support for the notion that economies need to become “restorative or regenerative by intention and design”.32

One way in which many authors and studies have sought to situate the concept of the circular economy is to contrast it with a linear economic system which, it is argued, currently defines much of the economy (Figure 7). It is suggested that a linear economic system takes renewable and non-renewable resources, makes them into manufactured products, which are then used by consumers before being disposed. A circular economy, on the other hand, ensures, at the very least, that products and packaging, and the materials within them, are recycled once they are used rather than being disposed of. Depending on the model of the circular economy being considered, a circular economy may not mean ‘just’ recycling but might mean dealing with technical nutrients in one of a range of circles, the preferred options being the innermost circles. This is, therefore, a hierarchical model.

31

Chatham House (2012) A Global Redesign? Shaping the Circular Economy, March 2012, www.chathamhouse.org/publications/papers/view/182376, p. 3 32

Ellen MacArthur Foundation (2013) Towards the Circular Economy Vol.1: Economic and Business Rationale for an Accelerated Transition, January 2013, www.ellenmacarthurfoundation.org/business/reports/ce2012, p. 7

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Figure 7: A Simplified Illustration of a Linear Economy

Source: Policy Studies Institute at the University of Westminster, Institute for Environmental Studies, Ecologic, BIO Intelligence Service, and Institute for European Environmental Policy (2014) Scoping Study to Identify Potential Circular Economy Actions, Priority Sectors, Material Flows and Value Chains, Report for DG Environment, European Commission, August 2014, www.psi.org.uk/site/project_detail/scoping_study_to_identify_potential_circular_economy_actions_priority_secto, Figure 2, p. 5

There are two general problems with this presentation:

1) the first is that no economy is actually entirely linear, and probably, none ever has been. Many of the presentations describing the circular economy give the impression that the linear economy describes the majority of what is happening. But in the UK, for example, this appears not to be the case. The Sankey diagrams in Figure 8 and Figure 9 show representations from WRAP of the UK situation for 2000 and 2010. (.33 Even so, the 2010 figure indicates that marginally less than 50% of waste is recycled. In reality, given that over 70% of construction and demolition waste is already reused, recycled or recovered for beneficial use, and given that more than 50% of commercial and industrial waste is recycled or

33

Note that the Figures appear to include some errors and omissions: C&I waste quantities are overestimated, and the recycling figures exclude exports, but include imports. For many materials, the UK is known to be a net exporter of recyclables, with Defra reporting a figure of 12 million tonnes for net exports in 2013 (see Defra (2015) Digest of Waste and Resource Statistics – 2015 Edition, January 2015.

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recovered as material (for example, through landspreading), and given also that more than 40% of local authority collected waste (LACW) is recycled, then it seems likely that well over 50% of all waste is being recycled or recovered as material (with the current UK total generation figures for C&D, C&I and LACW being of the order 200 million tonnes). In summary, considerable strides have already been made, and continue to be made, towards an economy which is more circular. To be sure, much more could be done, but the reality is that the economy is nowhere near as linear as it was twenty years ago. Note that these figures almost certainly do not adequately reflect what is already happening in respect of remanufacturing and reuse (not least because the graphics on the ‘fate’ side are derived from waste statistics, and products which are reused or remanufactured do not become ‘waste’);

Figure 8 - Sankey Diagram for Material Flows, 2000

Figure 9 - Sankey Diagram for Material Flows, 2010

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2) Second, whilst the depiction of the linear economy is ‘singular’, and depicts something which, although it does not represent what actually happens, can clearly be identified as such (all material is disposed), there is no description of ‘the circular economy’. Rather, there are principles which might be followed. When the economy could be said to be ‘fully circular’ is not clear. Consequently, there can be no route map to a circular economy, only a route map to an economy which is more circular than it currently is, or than it otherwise would be.

The question still arises as to what changes are more or less preferable to make the economy ‘more circular’. The Circular Economy concept has been interpreted and articulated in various ways by different authors.34 The Ellen MacArthur Foundation, for example, has described the concept as follows:

“A circular economy is an industrial system that is restorative or regenerative by intention and design… It replaces the ‘end-of-life’ concept with restoration, shifts towards the use of renewable energy, eliminates the use of toxic chemicals, which impair reuse, and aims for the elimination of waste through the superior design of materials, products, systems, and, within this, business models”.35

In most respects, this has parallels in the well-established waste management hierarchy, with an important shift being the emphasis on intent to ensure that waste is eliminated as far as possible. At least within the UK, the emphasis on renewable energy sources is consistent with broader attempts to decarbonise the electricity generating system.

Green Alliance has described the concept as follows:

“At its best, a circular economy restores old products, parts and materials back to their original use in a way that uses the least resources to deliver the same function. Usually, this means direct reuse. Where a product needs repair or reconditioning before it can be used again, remanufacturing preserves the most value. These are the tightest closed loops within a circular economy”.36

At the root of the Circular Economy there tends to be a distinction between ‘technical materials’ and ‘biological materials’. The two groups of materials are broadly defined as follows:

34

See, for example: Policy Studies Institute at the University of Westminster, Institute for Environmental Studies, Ecologic, BIO Intelligence Service, and Institute for European Environmental Policy (2014) Scoping Study to Identify Potential Circular Economy Actions, Priority Sectors, Material Flows and Value Chains, Report for DG Environment, European Commission, August 2014, www.psi.org.uk/site/project_detail/scoping_study_to_identify_potential_circular_economy_actions_priority_secto, Annex 1 35

Ellen MacArthur Foundation (2013) Towards the Circular Economy Vol.1: Economic and Business Rationale for an Accelerated Transition, January 2013, www.ellenmacarthurfoundation.org/business/reports/ce2012, p. 7 36

Green Alliance (2013) Resource Resilient UK, Report for The Circular Economy Task Force, July 2013, www.green-alliance.org.uk/page_816.php, p. 15

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Technical materials – these typically include non-renewable, non-biodegradable resources such as minerals, metals, glass, and hydrocarbon derivatives (e.g. plastics); and

Biological materials – these are renewable, biodegradable materials that are derived from the world’s biological systems, for example, agriculture and forestry products.

The strategies and approaches to ensuring the circular flow of technical vs biological materials naturally vary and this is widely recognised in the literature. It can be noted in Figure 10 and Figure 11 below that there is a clear distinction between the two types of materials with different circular flows and processes being described for each. From the processes described in these figures it can be seen that there is some ambiguity when dealing with materials such as bioplastics, paper and manufactured wood products, which could reasonably follow either of the two pathways (i.e. technical material or biological material pathways). Indeed, this uncertainty is reflected in the literature.37 The somewhat dichotomous representation also might give rise to questions regarding which type of material should be used where there are competing options. For example, in its first report, the Ellen Macarthur Foundation noted:

While many long-lived assets such as buildings and road infrastructure consist largely of metals, minerals, and petroleum-derived construction materials (i.e., technical nutrients), there is also a significant role for bio-based materials such as various kinds of wood. Whatever the source and character of the nutrient, we see that the circularity potential for such long-lived assets has gone largely untapped, resulting in a great loss of volume and value, as discussed earlier in this text.

37

Policy Studies Institute at the University of Westminster, Institute for Environmental Studies, Ecologic, BIO Intelligence Service, and Institute for European Environmental Policy (2014) Scoping Study to Identify Potential Circular Economy Actions, Priority Sectors, Material Flows and Value Chains, Report for DG Environment, European Commission, August 2014, www.psi.org.uk/site/project_detail/scoping_study_to_identify_potential_circular_economy_actions_priority_secto, p. 7

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Figure 10: A Simplified Illustration of a Circular Economy

Source: Policy Studies Institute at the University of Westminster, Institute for Environmental Studies, Ecologic, BIO Intelligence Service, and Institute for European Environmental Policy (2014) Scoping Study to Identify Potential Circular Economy Actions, Priority Sectors, Material Flows and Value Chains, Report for DG Environment, European Commission, August 2014, www.psi.org.uk/site/project_detail/scoping_study_to_identify_potential_circular_economy_actions_priority_secto, Figure 3, p. 5

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Figure 11: Ellen MacArthur Foundation’s Depiction of the Circular Economy

Source: Ellen MacArthur Foundation (2013) Towards the Circular Economy Vol.1: Economic and Business Rationale for an Accelerated Transition, January 2013, www.ellenmacarthurfoundation.org/business/reports/ce2012, Figure 6, p. 24

Many of the reports highlighting the potential for a circular economy identify the need for businesses to adopt new models of operation. These are somewhat misnamed since good examples of most of the approaches already exist, albeit they might not exist in all sectors where their implementation is possible. Somewhat surprisingly, most analyses are rather lacking in much by way of a discussion of the reasons why the economy – or parts of it - has evolved in more linear lines than might seem desirable.

Reports often suggest that business models will have to change to ones which promote the delivery of services rather than the outright ownership of products used to deliver them (there will have to be a reciprocal shift in consumer willingness to shift towards being users of products rather than buyers). Products will need to be designed for durability, refurbishment and disassembly; schemes for industrial symbiosis will have to be promoted and enhanced; and consumer attitudes will have to shift to create demand for reused, refurbished and recycled goods and products. In essence, a circular economy represents a:

“…development strategy that enables economic growth while optimising the consumption of natural resources, deeply transforming production chains and consumption patterns and re-designing industrial systems… A circular economy

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goes beyond the pursuit of waste prevention and waste reduction to inspire technological, organisational, and social innovation throughout the value chain in order to ‘design-out’ waste from the beginning, rather than relying solely on waste recycling at the end of the chain”.38

The hierarchical approach of the Circular Economy can broadly be represented as in Figure 12 below for technical nutrients, with design taking on a far more prominent role in ensuring that what is consumed can be reused, repaired, remanufactured, and at worst, recycled with ease.

Figure 12: Circular Economy Hierarchy for Technical Nutrients

A.1.1 Guiding Principles

A recent review conducted on behalf of the European Commission suggests that the ‘cradle to cradle’ principle (Box 1) and ‘industrial symbiosis’ are at the heart of the

38

Policy Studies Institute at the University of Westminster, Institute for Environmental Studies, Ecologic, BIO Intelligence Service, and Institute for European Environmental Policy (2014) Scoping Study to Identify Potential Circular Economy Actions, Priority Sectors, Material Flows and Value Chains, Report for DG Environment, European Commission, August 2014, www.psi.org.uk/site/project_detail/scoping_study_to_identify_potential_circular_economy_actions_priority_secto, p. 3

Designing out waste

Other forms of prevention

Repair / Preparation for reuse

Remanufacturing

Recycling

Recovery

Disposal

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Circular Economy concept.39 These principles are defined by the concentric circles shown in Figure 10 and Figure 11. It is important to note, however, that the cradle to cradle concept – at least as it has been articulated by Braungart and McDonough – does not only cover the sustainable use of resources but is much broader. In their book, Cradle to Cradle, Braungart and McDonough describe how the design of materials and products needs to take into account not only economic and environmental concerns, but those of (global) social equity too.40 The broader social aspects of the circular economy within the UK have been considered in a few studies (mostly in relation to employment opportunities), but this still appears to be an area which has not received much attention to date.41,42,43

Box 1: Cradle to Cradle (C2C) Framework

The C2C framework does not reach for sustainability, as typically defined. In the industrial sector, sustainability is often understood as a strategy of “doing more with less” or “reducing the human footprint” to minimize troubling symptoms of environmental decline. From an engineering perspective, conventional sustainability too often suggests simply retrofitting the machines of industry with incrementally cleaner, more efficient “engines” to secure ongoing economic growth. But this strategy is not an adequate long-term goal. While being eco-efficient may indeed reduce resource consumption and pollution in the short term, it does not address the deep design flaws of contemporary industry. Rather it addresses problems instead of the source, setting goals and using practices that sustain a fundamentally flawed system.

The C2C framework, on the other hand, posits a new way of designing human systems to eliminate conflicts between economic growth and environmental health resulting from poor design and market structure. Within this framework, which is based on the manifested rules of nature and redefines the problem at hand, eco-efficient strategies can serve a larger purpose.

The 12 Principles of Green Engineering

Principle 1: Designers need to strive to ensure that all material and energy inputs and outputs

39

Policy Studies Institute at the University of Westminster, Institute for Environmental Studies, Ecologic, BIO Intelligence Service, and Institute for European Environmental Policy (2014) Scoping Study to Identify Potential Circular Economy Actions, Priority Sectors, Material Flows and Value Chains, Report for DG Environment, European Commission, August 2014, www.psi.org.uk/site/project_detail/scoping_study_to_identify_potential_circular_economy_actions_priority_secto, p. 7 40

Braungart, M. and McDonough, W. (2009) Cradle to Cradle: Re-making the Way we Make Things, Vintage, London, United Kingdom 41

Aldersgate Group (2014) An Economy that Works - Strong Today, Great Tomorrow, December 2014, www.aldersgategroup.org.uk/asset/download/1187/An%20Economy%20That%20Works.pdf 42

Green Alliance (2015) Opportunities to Tackle Britain’s Labour Market Challenges Through Growth in the Circular Economy, Report for Waste & Resources Action Programme, January 2015, www.wrap.org.uk/content/employment-and-circular-economy 43

All-Party Parliamentary Sustainable Resource Group, and All-Party Parliamentary Manufacturing Group (2014) Triple Win: The Economic, Social and Environmental Case for Remanufacturing, December 2014, www.policyconnect.org.uk/apsrg/research/report-triple-win-social-economic-and-environmental-case-remanufacturing

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are as inherently non-hazardous as possible.

Principle 2: It is better to prevent waste than to treat or clean up waste after it is formed.

Principle 3: Separation and purification operations should be designed to minimize energy consumption and materials use.

Principle 4: Products, processes, and systems should be designed to maximize mass, energy, space, and time efficiency.

Principle 5: Products, processes, and systems should be “output pulled” rather than “input pushed” through the use of energy and materials.

Principle 6: Embedded entropy and complexity must be viewed as an investment when making design choices on recycle, reuse, or beneficial disposition.

Principle 7: Targeted durability, not immortality, should be a design goal.

Principle 8: Design for unnecessary capacity or capability (e.g., “one size fits all”) solutions should be considered a design flaw.

Principle 9: Material diversity in multicomponent products should be minimized to promote disassembly and value retention.

Principle 10: Design of products, processes, and systems must include integration and interconnectivity with available energy and materials flows.

Principle 11: Products, processes, and systems should be designed for performance in a commercial “afterlife”.

Principle 12: Material and energy inputs should be renewable rather than depleting.

Source: cited from McDonough, W., Braungart, M., Anastas, P.T., and Zimmerman, J.B. (2003) Applying the Principles of Green Engineering to Cradle-to-Cradle Design, Environmental Science & Technology, Vol.37, No.23, p.434A – 441A, p. 435-p.437

Our distillation of the key features of the circular economy is as follows:

1. Conscious integration, at the design stage, of ways to ensure retention of value of the product / packaging, components thereof, or the constituent materials at the highest levels of use for as long as possible. Whilst recycling of materials might enable the retention of embodied energy, water and other resources within the cycle of use, remanufacture, repair, reuse and remanufacture also maintain the value added in the form of labour and craftsmanship (and, potentially, intellectual property);

2. Design to eliminate the use of materials that present hazards. 3. The elimination of residual waste (so that all material is ‘at least’ recycled) 4. For technical nutrients, following a hierarchy of repair, reuse, remanufacture; 5. As appropriate, supplanting models of outright ownership with those based on

service delivery, or leasing; 6. Where organic materials are concerned, separate collection of the materials to

maintain quality of what is returned to land; and 7. The use of renewable energy sources as far as possible.

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These, to us, are the key features required for a shift to a circular economy.

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A.2.0 Key Drivers for the Circular Economy

The literature identifies a number of drivers which are acting, to various degrees, to encourage a transition to a circular economy. Some of the more commonly cited drivers include:

Rising commodity prices;

Increasing volatility of prices for commodities;

Resource scarcity;

Resource security;

Environmental pressures; and

Corporate social responsibility and public perceptions.

Broadly speaking, opinions in the literature appear to be divided into two main camps:

1) those that claim that a transition to a circular economy is inevitable as businesses respond to rising commodity prices and increased volatility; and

2) those that argue for the need for targeted interventions to combat market failures and push the circular economy agenda forward.

Although this is a simplification of the debate, this dichotomy is a helpful starting point given the emphasis that has been placed by some authors on rising commodity prices and volatility as the primary drivers for the circular economy. We discuss the views of both camps in the sections below.

A.2.1 Rising Commodity Prices and Price Volatility

The claim that rising commodity prices and price volatility are driving the circular economy transition warrants some consideration. A number of authors, most notably McKinsey and the Ellen McArthur Foundation, have argued that the case for the circular economy lies in the fact that resource scarcity, in the face of increasing demand from a burgeoning middle class, will push up commodity prices and that this will start to make the business case for the circular economy clear.44,45,46,47 The notion that rising commodity prices will drive a circular economy is attractive for its simplicity, and the fact that it places the onus on businesses to respond to the price signals. For example, Defra has stated that:

44

Ellen MacArthur Foundation (2014) Towards the Circular Economy Vol.3: Accelerating the Scale-Up Across Global Supply Chains, January 2014, www.ellenmacarthurfoundation.org/business/reports/ce2014 45

Green Alliance (2013) Resource Resilient UK, Report for The Circular Economy Task Force, July 2013, www.green-alliance.org.uk/page_816.php 46

Aldersgate Group (2012) Resilience in the Round: Seizing the Growth Opportunities of a Circular Economy, June 2012, www.aldersgategroup.org.uk/reports 47

Port of Rotterdam, and Rabobank (2012) Pathways to a Circular Economy: What is Possible in the Rotterdam/Delta Region, 2012, www.rabobank.com/en/images/Pathways-to-a-circular-economy.pdf

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“We believe a more sustainable and circular economy can and should be delivered with limited government intervention as industry responds to the clear business case for action”.48

Writing in 2014, the Ellen MacArthur Foundation noted:

“Circular business models will gain an ever greater competitive edge in the years to come because they create more value from each unit of resource than the traditional linear ‘take-make-dispose’ model. Accelerating the scale-up promises to deliver substantial macroeconomic benefits, as well as open up new opportunities for corporate growth”.49

It is important to note, however, that the authors of this report recognise the fact that – despite a clear business case for action – there are a number of market failures which are impeding the transition to a circular economy:

“Given the circular economy’s potential for resource arbitrage, it should take off by itself. However, it has not done so as a result of certain market failures and lack of mechanics, leading to significant leakages”. 50

Another issue may be that many businesses, where there is an (economic) incentive to do so, have already moved away from the “traditional ‘take-make-dispose’ model” of doing business. For these companies, the rational for going further may be less pronounced. As noted in Section A.1.0, speaking of a linear economy as being some kind of natural static state is slightly misleading – the circularity of our economy has changed substantially over time.

As noted above, a key argument put forward by a number of authors is that rising commodity prices will be sufficient to drive change. For example, analysis conducted by McKinsey suggests that:

“…the turn of the millennium marked the point when real prices of natural resources began to climb upwards, essentially erasing a century’s worth of real price declines”.51

The data underpinning this analysis are shown graphically in Figure 13. The red trend lines that have been shown in this graph appear slightly arbitrary and designed to tell a

48

Department for Environment, Food and Rural Affairs (2013) Prevention is Better than Cure: the Role of Waste Prevention in Moving to a More Resource Efficient Economy, December 2013, www.gov.uk/government/publications/waste-prevention-programme-for-england 49

Ellen MacArthur Foundation (2014) Towards the Circular Economy Vol.3: Accelerating the Scale-Up Across Global Supply Chains, January 2014, www.ellenmacarthurfoundation.org/business/reports/ce2014, p. 9 50

Ibid., p. 38 51

Ellen MacArthur Foundation (2014) Towards the Circular Economy Vol.3: Accelerating the Scale-Up Across Global Supply Chains, January 2014, www.ellenmacarthurfoundation.org/business/reports/ce2014, p. 12

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particular story. For example, one only needs to look at the graphic to see that if one had chosen 1920 as the starting point, prices would have been more or less flat.

Figure 13 - McKinsey Commodity Price Index (years 1999-2001 = 100)1

Note: 1. Based on arithmetic averages of 4 commodity sub-indices: food, non-food agricultural items, metals, and energy; Data for 2013 based on the first three months of 2013.

Source: Ellen MacArthur Foundation (2014) Towards the Circular Economy Vol.3: Accelerating the Scale-Up Across Global Supply Chains, January 2014, www.ellenmacarthurfoundation.org/business/reports/ce2014, Figure 1, p. 13

It is clear that there was a significant increase in commodity prices over the first decade of the 21st century. However, it was always likely to be risky to predicate that the transition to a circular economy could be driven by something as volatile as commodity prices. Commodity prices have fallen back from their late 2010/early 2011 peak (see Figure 14 and Figure 15). Price indices for the main commodity groups have fallen by more than 30% since their peaks of 2011. That is not to imply that prices might not rise again in the near future: the point being made, however, is simply that basing long-term decisions on a view of commodity prices is risky.

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Figure 14: Commodity Prices (1991 – 2014)

Source: World Bank

Figure 15: Commodity Price Indices, 2000 - 2014

Source: International Monetary Fund (2015) IMF Primary Commodity Prices, Date Accessed: 18 February

2015, Available at: www.imf.org/external/np/res/commod/index.aspx

The difficulty with relying on commodity price increases to drive the circular economy forward is that the case for change might be undermined in times when prices start to

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fall. A number of reports written over the last few years have suggested that elevated commodity prices were here to stay. However, the rapid decline in oil prices over recent months and the global decline in demand for many other commodities, largely due to the slowing of the pace of growth in China, indicate that commodity price increases in the early 2000’s might not be sustained. A clear example of how falling commodity prices undermines the circular economy is evident from the fact that the secondary market for plastics in the UK has been substantially undermined by the falling cost of oil (and thereby the falling cost of producing primary polymers).52

The notion of price volatility is seen as another important driver behind the circular economy. Green Alliance, for example, note that:

“The past decade has seen a dramatic increase in price volatility and the incidence of supply disruptions of a host of essential raw materials. Despite reduced demand caused by the recession, prices of a range of commodities have been persistently high and volatile”.53

In a similar vein, McKinsey claim that:

“… price volatility levels for metals, food and non-food agricultural output in the first decade of the 21st century were higher than in any single decade in the 20th century. If no action is taken, high prices and volatility will likely be here to stay if growth is robust, populations grow and urbanise, and resource extraction costs continue to rise”.54

The Ellen MacArthur Foundation reported that the cost of hedging “varies significantly depending on a company’s credit rating and the expected volatility of markets, but in the current market environment, a firm lacking a first-rate credit history could well spend 10% of the total amount it hedges on financial service fees”.55 The Foundation goes on to say that the cost of hedging is “not only a direct cost but also an opportunity cost—in less volatile markets, money is more likely to be spent on business projects, research, and innovation, potentially leading to growth”.56 The reasons for long-term price increases and rising price volatility are cited as being related to:

Demographic trends;

Infrastructure needs;

Political risks;

52

Let’s Recycle (2015) Falling Oil Price Fuels Uncertainty for Plastics Recyclers, Date Published: 7 January 2015, Date Accessed: 24 February 205, Available at: www.letsrecycle.com/news/latest-news/falling-oil-price-fuels-uncertainty-plastics-recyclers/ 53

Green Alliance (2013) Resource Resilient UK, Report for The Circular Economy Task Force, July 2013, www.green-alliance.org.uk/page_816.php, p. 6. 54

Ellen MacArthur Foundation (2014) Towards the Circular Economy Vol.3: Accelerating the Scale-Up Across Global Supply Chains, January 2014, www.ellenmacarthurfoundation.org/business/reports/ce2014, p. 9, p. 12 55

Ibid. p. 18 56

Ibid. p. 18

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Globalised markets; and

Climate change.

A number of reports examining changes in commodity prices and volatility have been published over recent years. These reports recognise the volatility of commodity markets since the turn of the century. When placed in a longer term context, however, the level of volatility does not appear to be so exceptional. For example, a report by the G20 Study Group on Commodities in 2011 stated that:

“Recent trends in the price level and volatility of major commodity groups appear less unusual in a long term perspective. In real terms, the level of many commodities is still below their averages in the first decades of the post-war era and well below their historical highs and it is not clear whether the recent increase marks an end, or even a reversal, of the secular decline in real commodity prices observed during the last century”.57

The authors of the report, however, do note that “what seems to be different from earlier commodity price cycles is the large amplitude of price swings for a broad range of commodities”.58 It is noted that the change in prices has, to a large degree, been due to substantial imbalances between demand and supply. Until recently, there was a rapid growth in demand for a wide range of commodities, with supply unable to keep up over the short term. At the time of writing, this situation appears to have changed somewhat as supply of many commodities is outstripping demand.

Writing in relation to agricultural products the OECD has stated that:

“This study places recent commodity price spikes and changes in an historical context. Indeed, there is a widely perceived view that because of recent price spikes and rapid declines, commodity price volatility has increased over time. However, from this analysis it is not clear that price volatility in the recent period is much different from price volatility in earlier periods over the past 50 years excepting for wheat and rice”.59

Furthermore, analysis of 45 individual commodities by the World Bank found that:

“First, the timing and number of breaks in volatility vary considerably across individual commodities. This result cautions against broad generalizations and the use of commodity price indices to analyze changes in volatility. Second, the three most significant breaks common to most (but not all) commodities, are the

57

G20 Study Group on Commodities (2011) Report of the G20 Study Group on Commodities Under the Chairmanship of Mr. Hiroshi, November 2011, www.cmegroup.com/education/files/G20Nakaso-November202011.pdf, p. 10 58

Ibid. p. 11 59

Huchet-Bourdon, M. (2011) Agricultural Commodity Price Volatility: An Overview, OECD Food, Agriculture and Fisheries Papers No. 52, Report for the Organisation for Economic Co-operation and Development, December 2011, www.oecd-ilibrary.org/agriculture-and-food/agricultural-commodity-price-volatility_5kg0t00nrthc-en, p. 26

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two world wars and the collapse of the Bretton-Woods system. In recent years, however, there has been an uptick in price volatility in a number of commodities. During the last food crisis though, it is clear that volatility spiked, starting to rise before the actual increase in price levels especially for the most tradable commodities. However, the evidence suggests that structural breaks marking increased price volatility are subsequently followed by downward breaks in volatility so that there is no upward or downward trend in volatility over time”.60

The above cited studies would suggest that the current level of volatility is not unprecedented.

Given the above discussion it would appear to be at least questionable that commodity prices and price volatility can drive a large-scale transition to a circular economy.

Although there is unanimous agreement that the transition to a circular economy would result in environmental benefits and improved resource security, this might not be sufficient to garner widespread support from business as long as these environmental benefits are external to the financial decisions made by businesses. Awareness of the circular economy remains relatively low.61 The prospects for driving change would be enhanced where existing market failures were addressed through pricing in external costs through resource taxes and other measures.

In summary, it seems likely that rather than the circular economy being an inevitable consequence of high and volatile commodity prices, a number of conditions will need to be fulfilled before widespread adoption occurs. In this regard, Green Alliance notes that:

“The circular economy makes good business sense.[…] As this analysis shows, circular systems are enabled by many factors. No single intervention on its own will create the tipping point for a circular economy. It is a systems problem that needs a systems solution”.62

The circular economy is likely to require consideration of systems thinking to actively address a range of market failures and barriers which are preventing, or perhaps more accurately, limiting, the transition to a circular economy.

60

World Bank (2010) Are Commodity Prices More Volatile Now? A Long-Run Perspective, October 2010, p. 18 61

FUSION Observatory (2014) What do Europe’s Small and Medium Sized Businesses Think About the Circular Economy?, February 2014, www.bsk-cic.co.uk/fusion-observatory 62

Green Alliance (2013) Resource Resilient UK, Report for The Circular Economy Task Force, July 2013, www.green-alliance.org.uk/page_816.php, p. 28

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A.3.0 Priority Areas of Focus in Previous

Studies

The European Commission recently commissioned a review to identify potential circular economy actions and priority sectors, products and material flows.63 This study reviewed the available literature (covering 14 studies in detail) by:

3) Exploring which materials are considered as priorities in terms of their cross sectoral nature;

4) Mapping the overlaps between materials and key product sectors; and 5) Finally, using the material-products mapping to identify further priorities in

different product sectors.

The authors of the report note that:

“An important finding from reviewing this literature is that previous prioritisation exercises have not always provided a clear methodology of how they proposed the prioritisation that they have. The prioritisations will have been made from a particular perspective and will have weighted particular factors more heavily than others”.64

The Policy Studies Institute et al., using their own assessment criteria65, identified the following priority materials: agricultural products and waste, wood and paper, plastics, metals and phosphorus. Textiles, rock, fossil fuels, and glass and ceramics have been cited in the literature as priority materials, but these did not score highly enough in their assessment to be considered as priority materials within the study. Examples of priority materials and/or products identified in the literature are summarised in Table 4. This table also aims explain the rationale provided by the authors of the study for selecting the chosen materials/products.

63

Policy Studies Institute at the University of Westminster, Institute for Environmental Studies, Ecologic, BIO Intelligence Service, and Institute for European Environmental Policy (2014) Scoping Study to Identify Potential Circular Economy Actions, Priority Sectors, Material Flows and Value Chains, Report for DG Environment, European Commission, August 2014, www.psi.org.uk/site/project_detail/scoping_study_to_identify_potential_circular_economy_actions_priority_secto 64

Ibid. p. 15

65 The prioritised materials and sectors presented in the literature were scored against a number of

criterial which included: scarcity and economic dependence (materials only); environmental impact; potential savings (material, environmental and/or economic); feasibility; potential for job creation (sectors only); and overlap with priority materials and other sectors (sectors only).

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Table 4: Priority Materials/Products Identified in the Literature

Report / Study Priority Materials/Products Rationale for Choice

Ellen MacArthur Foundation and McKinsey & Company (2015)

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PET and Polyester; Paper and Paperboard

Industry experts and members of the project team developed a long list of materials (16 in total). The priority materials were shortlisted by the project team who assessed “user preferences, current leakage, value-add of MainStream, […] potential of impact (material savings, industry reaction time, scale), and […] feasibility of implementation” (p. 4).

Policy Studies Institute et al (2014)

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Agricultural Products and Waste; Wood; Paper; Plastics; Metals; Phosphorus.

The authors reviewed the materials prioritised in 14 key circular economy studies. These materials were then subjected to further assessment and prioritisation based on: scarcity and economic dependence; environmental impact; potential savings (material, environmental and/or economic); and feasibility.

Green Alliance (2011)68

Metals; Phosphorus; Water

There is no clear rationale other than for the fact that large quantities are used and that there are significant losses along the value chain (p. 9).


Electronics; Plastics; Food No clear rationale for the choice of materials/products is provided (p.

66

Ellen MacArthur Foundation, and McKinsey & Company (2015) Project MainStream – a Global Collaboration to Accelerate the Transition Towards the Circular Economy, Report for World Economic Forum, January 2015, www.weforum.org/reports/project-mainstream-global-collaboration-accelerate-transition-towards-circular-economy 67

Policy Studies Institute at the University of Westminster, Institute for Environmental Studies, Ecologic, BIO Intelligence Service, and Institute for European Environmental Policy (2014) Scoping Study to Identify Potential Circular Economy Actions, Priority Sectors, Material Flows and Value Chains, Report for DG Environment, European Commission, August 2014, www.psi.org.uk/site/project_detail/scoping_study_to_identify_potential_circular_economy_actions_priority_secto 68

Green Alliance (2011) Reinventing the Wheel - a Circular Economy for Resource Security, October 2011, www.green-alliance.org.uk/page_77.php 69

Green Alliance (2014) Wasted Opportunities: Smarter Systems for Resource Recovery, Report for The Circular Economy Task Force, July 2014, www.green-alliance.org.uk/wasted_opportunities:smarter_systems_for_resource_recovery.php

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7).

Defra (2013)70

Food; Textiles; Paper and Board; Plastics; Electronic and Electrical Equipment;

No rationale provided in the Waste Prevention Plan (p. 22). However, it is presumed that the choice was based on consultation responses (this is not made clear in the cited document).

Ellen Macarthur Foundation (2013)

71

Medium lived consumer products: Mobile Phones; Smartphones; Light Commercial Vehicles; Washing Machines;

Short lived consumer products: Food; Textiles

“In contrast to long-lived products, such as buildings or bridges, the sectors we focus on products that are in use for a short enough timeframe that they are subject to frequent technological innovation, but long enough that they are not subject to one-off consumption. Most products in these sectors contain multiple parts and therefore are suitable for disassembly or refurbishment. Finally, this portion of the economy is quite large—the eight sectors we focus on account for about USD 1.98 trillion in final sales in the EU-27, or a little less than half of the region’s final sales from manufacturing” (p. 37)

Ellen Macarthur Foundation (2013)

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Fast moving consumer goods: Apparel; Beauty and Personal Care; Beverages; Consumer Health; Fresh Food; Home Care; Packaged Food; Pet Care; Tissues and Hygiene, and Tobacco

These fast moving consumer goods “represent 80 per cent of the total consumer goods market by value” (p. 6). There does not appear to have been a process of prioritisation.

Port of Rotterdam, and Rabobank (2012)

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Copper in WEEE; Plastic Packaging Key facts and figures are provided to justify the choice of materials.

70

Department for Environment, Food and Rural Affairs (2013) Prevention is Better than Cure: the Role of Waste Prevention in Moving to a More Resource Efficient Economy, December 2013, www.gov.uk/government/publications/waste-prevention-programme-for-england, p. 22 71

Ellen MacArthur Foundation (2013) Towards the Circular Economy Vol.1: Economic and Business Rationale for an Accelerated Transition, January 2013, www.ellenmacarthurfoundation.org/business/reports/ce2012 72

Ellen MacArthur Foundation (2013) Towards the Circular Economy Vol.2: Opportunities for the Consumer Goods Sector, June 2013, www.ellenmacarthurfoundation.org/business/reports/ce2013

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However, it appears as if a clear prioritisation process was not adopted to identify the chosen areas.

It can be seen from Table 5 that many studies have focused on metals, paper, food, textiles and electrical products. In many instances, as noted by the Policy Studies Institute et al., the rationale behind the choice of these materials is not very clear (or at least has not been made explicit in the final report).

Table 5 - Priority Sectors Identified in the Literature

Report / Study Priority Sectors Rationale for Choice


Oil and Gas; Food and Drink; Finance

The choice of sectors was “drawn from the growth sectors targeted by the Scottish Government Economic Strategy” (p. 4).

Defra (2013)75

Construction and Demolition; Healthcare

No rationale provided.

Port of Rotterdam, and Rabobank (2012)

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Energy Sector (gas and carbon); Aquaculture

Key facts and figures are provided to justify the choice of materials. However, it appears as if a clear prioritisation process was not adopted to identify the chosen areas.

The priority sectors identified in the literature are summarised in . From this it can be seen that many of the studies have tended to focus on materials and/or products, rather than sectors as a whole.

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Port of Rotterdam, and Rabobank (2012) Pathways to a Circular Economy: What is Possible in the Rotterdam/Delta Region, 2012, www.rabobank.com/en/images/Pathways-to-a-circular-economy.pdf 74

Green Alliance (2015) Circular Economy Scotland, January 2015, www.green-alliance.org.uk/circular-economy-scotland.php 75

Department for Environment, Food and Rural Affairs (2013) Prevention is Better than Cure: the Role of Waste Prevention in Moving to a More Resource Efficient Economy, December 2013, www.gov.uk/government/publications/waste-prevention-programme-for-england, p. 22 76

Port of Rotterdam, and Rabobank (2012) Pathways to a Circular Economy: What is Possible in the Rotterdam/Delta Region, www.rabobank.com/en/images/Pathways-to-a-circular-economy.pdf

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A.4.0 Summary of Workshops

A.4.1 Workshop 1: Approach to Priority Setting and

Criteria used for Prioritisation

Date and time: 23rd February 2015; 09h00 – 11h00.

Attendance: Wayne Hubbard (LWARB); Madalina Ursu (GLA); Brian Smith (GLA); Jonny Hazell (Green Alliance); Teresa Domenech (UCL); Dominic Hogg (Eunomia); and Thomas Vergunst (Eunomia).

Aim: To consider how best priorities for the development of a circular economy should be established and identify possible priority areas on which to focus.

Summary of workshop:

Dominic Hogg delivered an introductory presentation and noted that a circular economy could be approached from various angles. Previous studies have chosen to demonstrate the opportunity for a transition to a circular economy through either examining the potential surrounding individual material streams (e.g. food, metals, and plastics), products (e.g. electrical goods and vehicles), or sectors (e.g. food and beverage sector, oil and gas, and finance). It was noted that the rationale for choosing priority materials/products/sectors has not always been made explicit in the literature. There is therefore no consistent set of criteria being used for identifying priorities. In addition, it was stated that much of the UK literature on the circular economy has focused on the broader national picture and not at the level of individual cities. This may entail that a slightly different approach be taken at the city level were the availability and quality of data differs to that which is available at the national level.

Dominic Hogg’s introductory presentation highlighted the key economic sectors and waste streams within London. From this overview it emerged that some of the priority areas of focus could include:

1) infrastructure; 2) dealing with commercial and household waste streams (including improving

reverse logistics for reuse etc.); and 3) food waste.

Once the presentation had been completed the floor was opened for discussion. There was an initial discussion about the key principles which underpin the circular economy. Other points of discussion included:

This was followed by a suggestion that WEEE be considered as a further priority material, especially considering the size of the financial sector within the City. It was agreed that this would be considered further and possibly added to the above list. There was a consensus that the above listed items should be included

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within the route map (it was noted that the household and C&I waste streams included a broad range of materials and therefore had a relatively broad scope).

In connection with the above, there was some debate about whether value at the product level (whether financial or environmental) should act as a criteria by which priority materials/products are selected, or if it should instead be about total value in the waste stream. The two approaches are quite different and would lead to different materials being selected.

Green public procurement was also raised as a potential area of focus.

The development of a ‘master plan area’ for trailing the construction/development of innovative circular economy buildings/companies was also discussed in some detail.

The issue of data quality was also raised. It was proposed that there may be merit in considering this as a priority area of focus as improved data would be essential to measure progress towards a circular economy.

It was acknowledged that London’s influence over wider issues may be limited. However, it was felt that a holistic approach to the problem should be encouraged with efforts being made to engage politicians, designers, producers, lobbyists etc. in the process. In other words, to ensure that the route map adopted a broad and coordinated approach to the implementation of circular economy principles.

It was noted that infrastructure was important as the recommendation for a route map came out of the infrastructure plan. There was some discussion about London’s ability to be able to influence things in this area and what could be done going forward.

The issue of timespan was also raised and it was noted that the route map should extend out to 2050. In this context it will be necessary to know what actions can be taken now that will not impede on future, more ambitious, plans to improve the circularity of London’s economy.

A.4.2 Workshop 2: Measures for Inclusion in the Route

Map

Date and time: 2015; 14h00 – 16h00.

Attendance: Wayne Hubbard (LWARB); Brian Smith (GLA); XXXXXXX; Dominic Hogg (Eunomia); and Simon Hann (Eunomia).

Aim: To determine which measures might feasibly form part of a circular economy route map for London.

Summary of workshop:

Stakeholder workshop 2 (SW2) centred around a facilitated discussion primarily involving stakeholders with a background in policy development.

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The scene was set using statistics that demonstrated the key industries that should be the focus for circular economy activities based upon GVA and employment levels. To provide a focus for discussion a list of potential areas for action was circulated as seen in Table 6. The aim was to stimulate thought in these areas and allow the stakeholders to provide their opinions on whether the action areas were feasible by indicating whether we should keep them and the timescale necessary for implementation.

Table 6 – Stakeholder Workshop 3 Possible Action List

AREAS FOR ACTION Keep /

Remove Short/Medium/

Long Term

Acquisition of data and information

Tracking of all registered carriers

Linked to e-transfer notes

Review of the role of port

Investigation of what materials are evacuated from port of London

Intelligent (green) procurement

Support for procurement teams

Shift away from ownership

Collaborative procurement opportunities

Guidance for specifiers of packaging (possibly linked to accreditation)

Overhaul of existing WEEE PR scheme (stronger emphasis on reuse)

Overhaul other PR schemes (financial responsibility, reuse measures)

Introduce new schemes

Review of status of goods under leasing / take-back arrangements (are they waste)

Recognition by NICE of use of green prescriptions etc.

How best to deal with food waste (horizon scanning / infrastructure planning)

Enhanced Streaming (Household and Commercial)

Review of collection services for enhanced streaming

Standardise local authority collection across types

Re-use targets for local authorities (furniture and EEE)

What's in residual waste?

Pay as you throw

Deposit refunds for small EEE

Deposit refunds for beverage containers

Commercial waste collection licenses

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Requirement to sort (fractions of) commercial waste

Local authority involvement

Implementation of food waste hierarchy (change ABPR)

Infrastructure provision

Where public projects, intelligent procurement

Non-compliance bonds

Building in 'positive planning' for green infrastructure

Ensuring GI is considered 'part of' infrastructure

Green procurement met with universal agreement that such a mechanism would be something that London could implement easily in the short term although the shift from ownership to leasing may be more of a medium to long term goal. Investigating material movement via London’s ports was also seen as a useful way of gaining data necessary to help focus efforts. While many of the areas such as the overhaul of producer responsibility schemes were highlighted as out of London’s direct control, it was noted, however, that they could be made a focus for lobbying of government. Enhanced streaming and work to standardise and improve local authority waste collections across London were agreed to be an important part of circular economy implementation and a reasonable medium term goal. Pay as you throw was seen as a very political issue that may be difficult to implement and similarly, deposit refunds—although seen as important—would have to be coordinated on a national level. Sharing across London boroughs of communication and education was seen as an important step towards harmonisation and the economies of scale that could be achieved by London.

These comments and more, were collated and used to help refine and develop the list of actions that appear in this report.

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A.5.0 Priority Areas for the Route Map for

London

In seeking to develop a route map for a circular economy for London, an obvious question to ask is how one might prioritise actions within the proposed route map. Of the various documents that have advanced the case for a circular economy in recent years, the rationale for the choice of products or materials upon which to focus attention has not always been founded on a clear rationale. In their review for the European Commission, PSI et al noted the absence of clear and transparent methodologies for prioritising, or choosing, particular areas of focus.77 In work to identify areas for action in the Rotterdam delta, the report by Rabobank noted that there was no easy way of choosing the best place to start.78 A review of how prioritisation has been undertaken in other studies is given in Appendix A.3.0.

The absence of a clear basis for prioritisation in actions might not be so surprising: much of the interest in the circular economy approach stems from an interest in changing the way business is being done: a rational approach to prioritising actions might imply ‘prospecting’ in respect of all sorts of products, materials, or sectors with a view to seeking the opportunities for which the business case is, or appears to be, strongest. Given that some of these opportunities are premised on changes which have not yet taken place, any analysis of costs and benefits is, by its very nature, somewhat speculative. Prioritisation would ideally require prospective analysis across a full spectrum of products, materials and sectors (and, potentially, systems) such that the exercise would be both very time consuming, and even then, still, potentially, speculative in nature.

In reviewing where priorities for a route map might lie in a city such as London, it seems reasonable to consider the specific characteristics of the city, and in particular, the nature of its economy. It is, after all, London’s economy which London is seeking to drive in a more circular manner. In addition, notwithstanding the fact that the development of

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Policy Studies Institute at the University of Westminster, Institute for Environmental Studies, Ecologic, BIO Intelligence Service, and Institute for European Environmental Policy (2014) Scoping Study to Identify Potential Circular Economy Actions, Priority Sectors, Material Flows and Value Chains, Report for DG Environment, European Commission, August 2014, www.psi.org.uk/site/project_detail/scoping_study_to_identify_potential_circular_economy_actions_priority_secto;. It should be noted that a Circular Economy Policy Toolkit is due to be launched by the Ellen MacArthur Foundation on 25 June 2015. This will include a step-by-step methodology to explore and prioritise circular economy opportunities. A number of sector deep dives have been undertaken in Denmark covering food & beverage, construction & real estate, machinery, plastic packaging, and hospitals. 78

Port of Rotterdam and Rabobank (u.d.) Pathways to a Circular Economy.

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a circular economy is based around designing out waste, the nature and sources of wastes generated in London are also of considerable interest as they suggest where opportunities for improvement may lie. In this Section, therefore, we use key indicators of economic activity (essentially, based on gross value added, or GVA, and employment) and statistics on waste generation and management to identify priority areas of focus for a route map to a more circular economy in London.

A.5.1 Economic Data

In seeking to understand how to prioritise actions in London, we have used data on;

1) Economic activity by gross value Added (GVA) of industries; 2) Economic activity by number of employees; and 3) Amounts and types of waste generated in households and businesses.

Figure 16Error! Reference source not found. shows the proportion of the UK’s total Gross Value Added (GVA) that is accounted for by London broken down my market sector.

Figure 16 - Proportion to Sector-based UK GVA Made by London

Source: Based on data from ONS

In total, London accounts for 22% of the UK’s GVA whilst accounting for only 13% of households. As is shown in the graphic, London is most specialised in commerce and services; the one notable exception to this, where the sectoral specialisation is greater than the proportion of households, is the construction sector. ‘Accommodation and food services’ is the only other top ranking sector that deals in tangible goods through

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restaurants and catering. The highest ranked manufacturing sub-sector is the textiles industry, followed closely by ‘Food products, beverages and tobacco’, ‘Wood and paper products and printing’, and ‘Other manufacturing and repair’. Apart from these sectors, it is clear that the obvious area to focus on would be service industries. These will undoubtedly procure products and services that ‘circular thinking’ could be applied to.

The situation is reiterated in Figure 17, which shows sectoral GVA in absolute terms. None of the subsectors of manufacturing contributes anything more than a fraction of London’s GVA. The most prominent contributions from manufacturing are from:


Construction features strongly, contributing more or less twice the GVA of the entire manufacturing sector in London. The manufacturing sub-sector ‘Textiles, wearing apparel and leather’, does not feature so strongly when viewed in absolute terms.

Figure 17: Regional Gross Value Added by Sector (£ million, 2012)


Figure 17 is also of interest in that it highlights the key sub-sectors of the service industry. As with all sectors, the shift to a more circular economy implies considering what changes could be made to the sector itself, but also, what opportunities the sector could seize upon in seeking to facilitate the circular economy. This facilitation role is particularly relevant in some of these key sub-sectors. For example:

0

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20,000

30,000

40,000

50,000

60,000

70,000

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Financial and Insurance Activities – new business models may demand novel forms of finance, or traditional forms, such as lease financing, applied in new areas. There may be areas where insurance industries develop specialisation in providing cover for companies selling reused / remanufactured products where these cannot be backed by more conventional guarantees. Furthermore, to the extent that circular economy activities become more mainstream, a wider range of financial institutions will need to understand what is driving the changes being wrought, and how demand for remanufactured and repaired goods might constitute the basis for a strong business model;

Professional, scientific and technical activities – support services to advise and support businesses, and help to commercialise new ideas will be important if innovative ideas from entrepreneurs are not to be lost from the innovation ecosystem;

Information and Communication – information technology is already driving new markets in the sharing economy, enabling consumers of these services to transact swiftly and conveniently. Information technology can also help to deliver smart logistics, which may be an important facilitator of the circular economy to the extent that efficient take back systems are at the cornerstone of systems which look to retain value in consumer goods through remanufacture, reuse and repair;


Education has an important role to play in equipping people with knowledge and skills to be drawn upon by other sectors, but also, as a font of research and innovation around the circular economy; and



Turning to employment, in Figure 18, we see the pattern repeated to some extent. Outside the service sectors, construction plays a role more important than all manufacturing, whilst the key manufacturing subsectors are, once again:

1) Food products, beverages and tobacco; 2) Wood and paper products and printing; and 3) Other manufacturing and repair

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Figure 19 shows sectoral employment in terms of the index of specialisation, which compares the proportion of London’s employees in a given sector with the proportion for the nation as a whole. Sectors with an index value greater than 0.75 are deemed to be those in which London is ‘reasonably specialised’, and these are shown in Figure 19. There are no manufacturing sectors included in this figure, with only ‘Construction of buildings’, of the non-service sectors, featuring in the figure. The dominance of the service sectors is again apparent.

Figure 18 –London Employment by Sector


0

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600

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mb

er o

f Em

plo

yees

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usa

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s

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Figure 19: Index of Specialisation by Sector for Sectors Where Index >0.75


A.5.1.1 Summary, Economic Data

In summary, in terms of London’s economy being made more circular, some fairly fundamental points are worth bearing in mind:

1) London’s economy is dominated by services. The financial services sector is a significant part of the economy, but professional, scientific and technical services is the largest employer, followed by wholesale and retail trading;

2) Construction is very significant, employing more people than all manufacturing in London, and contributing more or less double the GVA of manufacturing; and

3) Of the manufacturing sub-sectors, the following are the most significant to London (although in relative terms, their contribution is minor when compared with the service sectors):

a. Food products, beverages and tobacco; b. Other manufacturing and repair; c. Wood and paper products and printing; and d. To a lesser extent, textiles, wearing apparel and leather.

Within the services sector, there are key roles that some prominent sub-sectors may be able to play in respect of facilitating the development of the circular economy.

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: Edu

cation

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: Scien

tific research

and

develo

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: Co

nstru

ction

of b

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ings

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: Retail trad

e, except o

f mo

tor veh

icles and

mo

torcycles

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: Acco

mm

od

ation

46

: Wh

olesale trad

e, except o

f mo

tor ve

hicle

s and

…

53

: Po

stal and

cou

rier activities

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: Social w

ork activities w

itho

ut acco

mm

od

ation

65

: Insu

rance

, rein

suran

ce an

d p

ensio

n fu

nd

ing, exce

pt…

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: Pu

blic ad

min

istration

and

defen

ce; co

mp

ulso

ry social…

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: Water tran

spo

rt

91

: Libraries, arch

ives, m

use

um

s and

oth

er cultu

ral activities

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: Extraction

of cru

de

petro

leu

m an

d n

atural gas

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: Arch

itectural an

d en

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ering activitie

s; tech

nical…

78

: Emp

loym

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: Foo

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d b

everage service activities

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f mem

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isation

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ing, co

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lated…

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: Travel agen

cy, tou

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rmatio

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: Pro

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A.6.0 Waste Data

Waste data remains of relatively low quality in the UK, especially once one strays outside the municipal waste stream. Data in respect of commercial and industrial (C&I) and construction, demolition and excavation (CDE) wastes are poor, and based upon periodic surveys. Recent adjustments to C&I waste data do little to shore up confidence in this regard.79

We have sought to gain some understanding on the likely waste generation situation in London below. This is followed by an attempt to understand the management of the different waste streams.

A.6.1.1 C&I Waste Generation

We took two approaches to generating C&I waste data for London:

1) In the first, we took the 2012 data reported by Defra for the whole of the UK.80 This gives a broad sectoral split. We then multiplied these UK sectoral figures by the proportion of UK waste which is believed to be generated in England (82%), the implied assumption being that the sectoral split is the same for England as for the whole of the UK. We then multiplied these figures by the proportion of waste from each sector in England which were attributed to London under the 2009 C&I waste survey (a regional split is not available for the more recent data estimates).81 This gives a total C&I waste figure of 4.28 million tonnes;

2) In the second approach, we took the same UK sectoral breakdown and totals as in the previous approach. We then derived London specific estimates by apportioning the sectoral waste streams to London in direct proportion to the contribution made by London to sectoral GVA at the UK level. This gives a much higher figure for London’s C&I waste of 6.88 million tonnes.

The two approaches give breakdowns as indicated in Table 7Error! Reference source not found.. Although these indicate wide variation across the two approaches, both approaches indicate that the vast majority of C&I waste in London is likely to be of commercial origin (between 77% and 85%). Indeed, the figures are well-aligned with those from the 2009 survey, which indicated a proportion of 80%.

79

Jacobs (2014) New Methodology to Estimate Waste Generation by the Commercial and Industrial Sector in England, Final Report to Defra, August 2014. 80

Defra (2015) Digest of Waste and Resource Statistics – 2015 Edition, January 2015. 81

Jacobs (2011) Defra - Commercial and Industrial Waste Survey 2009, Final Report to Defra, May 2011.

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Table 7 - Estimates of C&I Waste, by Sector, 2012/13

Split based on

2009 C&I survey

Split based on London

contribution to sectoral GVA

Manufacture of food products, beverages and tobacco 225,056 279,148

Manufacture of textiles, apparel, leather 24,397 53,132

Manufacture of wood and wood products 111,177 206,735

Electricity, gas, steam supply 65,153 681,053

Water, sewage and remediation 19,356 145,926

Manufacture of coke and petroleum products, chemicals, pharmaceuticals, rubber and plastic

116,023 122,739

Manufacture of basic metals and metal products 22,004 82,903

Manufacture of computer, electrical equipment, machinery, vehicles 29,861 29,494

Manufacture of furniture, other manufacturing, repair 10,525 12,426

Retail & wholesale 1,181,323 1,721,311

Hotels & catering 417,911 728,115

Public administration & social work 395,020 528,079

Education 192,289 301,567

Transport & storage 302,111 586,315

Other services 1,168,344 1,404,145

Totals 4,280,549 6,883,087

Commercial waste as % C&I Total 85% 77%


The proportion of C&I waste coming from commercial sources in London is shown alongside figures for other regions of the UK in Figure 20Error! Reference source not found.. This indicates how unusually high this proportion is for London as opposed to other regions. According to Table 7Error! Reference source not found., the most significant sub-sectors of manufacturing, in terms of their contribution to waste arisings, are:

1) Manufacture of food products, beverages and tobacco 2) Manufacture of wood and wood products; and 3) Manufacture of coke and petroleum products, chemicals, pharmaceuticals,

rubber and plastic.

Even so, each of these manufacturing sub-sectors generates a much smaller proportion of waste than the sub-sectors of commerce. The figures for the utilities are somewhat anomalous, varying hugely between the two estimates.

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Figure 20: Proportion of C&I Waste which is of Commercial Origin (%, by Region, 2009)

Source: Defra C&I Waste Survey, 2009.

A.6.2 CDE Waste Generation

For CDE waste, again, we used two approaches. Both were based upon the English data for 2012 provided for C&D waste in Table 3.1 of Defra’s UK Statistics on Waste, 2010-2012, and for CDE waste, in Table 5.1 of the same set of spreadsheets. The two figures were derived based, on the one hand, using the contribution of London to UK GVA in construction, and on the other, using the proportion of employment in construction accounted for by London. The split between C&D and E waste in the CDE total is based upon the differences between the figures in the two Tables mentioned above, which concern, respectively, C&D waste and E waste.

The two estimates are shown in Table 8Error! Reference source not found.. They indicate that the lower end estimate is higher than that for C&I waste. This is a major waste stream within London.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

North East Y&H East Midlands West Midlands East London South East South West North West

Co

mm

erci

al W

aste

as

% T

ota

l C&

I Was

te

Region

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Table 8 - Estimates for CDE Waste in London, 2012

Category Quantity based on

Employment Share (tonnes)

Quantity based on GVA Share

(tonnes)

Total Construction, Demolition and Excavation Waste 13,933,782 17,138,921

Of which

Total Construction and Demolition Waste 6,365,012 7,829,133

Total Excavation 7,568,770 9,309,788


A.6.2.1 Local Authority Collected Waste Generation

Local authority collected (LAC) wastes in London includes the collection of household waste, as well as some non-household waste. The variation in the proportion of non-household waste collected (as a percentage of the total) is considerable across the individual boroughs in London, with the City of London showing particularly high proportions in this respect.

Official data from Defra (see Table 9Error! Reference source not found.) indicates that in 2013/14, total LAC wastes were 3.6 million tonnes, of which 0.6 million tonnes were non-household waste. Note that of the non-household wastes, a far lower proportion was being recycled than was the case for household waste.

Table 9: Local Authority Collected Waste in London

2008/09 2009/10 2010/11 2011/12 2012/13 2013/14

Total household 3,122,733 3,034,521 3,028,743 2,982,689 2,954,018 3,011,399

Regular household collection 1,784,446 1,677,994 1,657,157 1,598,031 1,596,420 1,622,789

Other household sources 236,874 251,625 250,117 239,366 207,305 234,417

Civic amenity sites 190,216 140,134 141,545 133,338 147,055 133,283

Household recycling 911,196 964,768 979,924 1,011,955 1,003,237 1,020,910

Total non-household 831,961 787,081 728,871 636,680 605,974 619,654

Non household sources (excl. recycling)

749,068 692,246 633,126 543,795 521,588 530,734

Non household recycling 82,893 94,835 95,745 92,884 84,386 88,921

Total LA collected waste 3,954,694 3,821,603 3,757,614 3,619,369 3,559,991 3,631,053

Source: Defra

To the extent that the non-household waste relates to commercial waste collected by, or on behalf of, local authorities, then there may be some overlap with the figures for commercial and industrial waste highlighted above. The extent of this is not always clear.

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A.6.3 Waste Generation, All Streams

To put the different sources of waste into a wider perspective, Figure 21Error! Reference source not found. shows the two estimates the commercial and industrial (C&I) waste arisings for London broken down by sub-sector, alongside C&D and E waste, as well as local authority collected household waste arisings. This gives some feel for the magnitude of the waste streams generated in London, and some indication of where one might prioritise efforts from the perspective of waste generation. Excavation wastes appear to be the largest individual waste stream, followed by construction and demolition. After this, household waste is the largest stream. Following this are the service sub-sectors, with manufacturing sub-sectors contributing relatively small amounts of waste (of the order 100,000 tonnes for the sub-sectors making the largest contribution).

Figure 21 – London Arisings off C&I, CDE and LAC Waste, 2012/13

Source: Eunomia estimates based on data from Defra and ONS

A.6.3.1 Management of Waste Streams

The waste generation statistics tell only part of the story in respect of prioritising considerations for making London’s economy more circular. Some waste streams are better managed than others, and hence, can be said to be managed in a more circular manner. The data is, however, poor in this regard, especially at regional level (where it is more or less non-existent) for C&I and CDE wastes.

0 2 4 6 8 10

Manufacture of furniture, other manufacturing, repair

Water, sewage and remediation

Manufacture of basic metals and metal products

Manufacture of textiles, apparel, leather

Manufacture of computer, electrical equipment, machinery, vehicles

Electricity, gas, steam supply

Manufacture of wood and wood products

Manufacture of coke and petroleum products, chemicals, pharmaceuticals, rubber and plastic

Education

Manufacture of food products, beverages and tobacco

Transport & storage

Public administration & social work

Hotels & catering

Other services

Retail & wholesale

Household waste

Construction and Demolition

Excavation

Million Tonnes of Arrisings

GVA-based C&I Survey based

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A.6.3.2 Household Waste

Where household waste is concerned, statistics from Waste Data Flow indicate that 34% of London’s household waste is being recycled or composted. The breakdown of recycling by source is as in Table 10Error! Reference source not found.. The majority comes from kerbside recycling, though the two rightmost columns (using figures from Table 9Error! Reference source not found. above) indicate that the recycling rate is far higher for civic amenity sites, at 63%.

Table 10: Sources of Household Waste Recycling in London, 2013/14

Source of Recycling Tonnage Proportion Residual Waste

in Stream Recycling as % Total in Stream

CA Recycling 228,963 21% 133,283 63%

Bring Recycling 35,792 3%

Kerbside Recycling 800,774 75% 1,622,789 33%

Total 1,065,529 100%

Rejects 42,542 4%

Source: Defra data and Waste DataFlow

Using the most recent composition data for England for household waste,82 we show below the components of household waste, indicating the proportions recycled and in residual waste. We have made a crude assumption that the plastics being collected by the local authorities are split, broadly, across categories as follows:

Bottles 60%

Non-bottle rigid packaging 20%

Other rigid plastics 15%

Films 5%

Figure 22Error! Reference source not found. shows the results for London for the year 2013/14. The results are sorted by the quantity of waste remaining in the residual waste.

82

Resource Futures (2013) National Compositional Estimates for Local Authority Collected Waste and Recycling in England, 2010/11, February 2013.

89


Figure 22 – London Household Collected Waste 2012/13

Source: calculated using arisings and recycling data from WasteDataFlow, and composition data for all household waste from Resource Futures (2013) National Compositional Estimates for Local Authority Collected Waste and Recycling in England, 2010/11, February 2013.

Several points are worth making:

1) there are some materials that are being lost to residual treatment in large proportions every year.

Paper is a stream of material which attracts reasonable values in the market place, and for which collection services, albeit of varying quality, already exist. The recycling rate for this material is estimated at 61%. There is room for considerable improvement to recycle more of this material;

A surprising quantity of metals appears to be being lost to residual waste. Estimates indicate that only 41% of metals are being recycled with significant losses still taking place. This might be related to the way in which metal packaging arises in the waste stream (with considerable quantities being consumed ‘on the go’), but also, to the capture of metals through existing recycling schemes (both HWRCs, and kerbside collections, where traditionally, households have been less good at recycling food cans than those containing beverages);

There is a large quantity of plastic film which the above estimates suggest are not being recycled. The extent to which this material is suitable for recycling is not clear, and much depends on the extent to which it is contaminated, or clean;

0 100,000 200,000 300,000 400,000 500,000 600,000

Food waste

Garden waste

Paper

Plastic Film

Sanitary

Glass

Textiles

Other organic

Misc combustible

PTTs

Metals

Furniture

Other dense plastic (non-packaging)

WEEE

Wood

Fines

Other wastes

Card

Misc non-combustible

Plastic Bottles

Hazardous

Mattresses

Soil

Tonnes Collected

Residual Recycling

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Although glass collections are widespread in London, the capture rate is still only 60%. This suggests scope for higher captures through improved collection services;

The capture of textiles is low, at 10% or so. Although not all textiles may be suitable for recycling or reuse, the capture is extremely low according to the estimate made; the opportunity for further increases appears to be significant, although it may be that better quality textiles are already being reused via other channels;

Under our assumptions, the capture of PTTs and other (non-packaging) dense plastics is marginally higher than 10%. Although end use markets for these materials are more difficult to access for these materials, the opportunity exists, nonetheless, to enhance recycling of these materials, especially over the medium term. In respect pf these plastics, there is a pressing need to match the nature of the collection services with the existing sorting and reprocessing infrastructure;

The recycling of furniture is low relative to the size of the opportunity. Reuse and preparation for reuse have much to offer in this respect, and with current performance suggesting only 4% is recycled, the room for improvement appears considerable. It should be noted that these figures might not always account for reuse, so they may understate current performance somewhat. Notwithstanding this point, the room for improvement appears significant;

More than 50,000 tonnes of WEEE remain in residual waste according to our estimates. Similar comments as for furniture may be applicable in respect of the recording of reuse, but nonetheless, with a recycling rate of only 24%, the scope for enhanced capture of this material is significant;

Both card and plastic bottles represent materials which attract reasonable values in the secondary materials market, of which some are still lost to the residual waste stream. Some card in the waste stream is likely to be contaminated, and not available for recycling, and the current level of recycling estimated here is relatively high (at 79%). This is based, however, on a figure for card in the waste stream which appears low (at less than 5%), so in reality, we expect the capture to be lower, and the quantity in residual waste to be higher. In respect of bottles, these figures are influenced by our own estimates as to the proportion of recycled plastics that are bottles. We estimate current captures to be around 60%, with scope for further gains, though as with cans, some bottles will be consumed ‘on the go’, with losses, therefore, to street sweepings and litter collections;

Food waste accounts for 17% of the total waste stream, however very little food – an estimated 14% - is being recycled in London, and less than half is going to Anaerobic Digestion (AD). This suggests considerable potential for improved management of this waste stream. The London Assembly’s Environment Committee recently made a series of recommendations regarding this issue. In addition, a surprising amount of garden waste – more than half – is still not recycled. These two materials, although they attract low value, are the two largest contributors to London’s residual waste stream. They present an obvious

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target for improved management, though the attraction of better management cannot be said to lie in their value;83

Plastics are also a large part of the overall waste stream and one which is also not reaching its full recycling potential. The non-homogenous nature of the types of plastics used in the household may be a barrier to this. From a circular economy point of view, plastics are a valuable resource which is devalued significantly if used purely as to generate electricity from incineration.

2) The majority of the material streams discussed above are such that over 50,000 tonnes of material are left in residual waste. This is of the order of the total amount of waste being generated by most manufacturing sub-sectors in London, where it seems reasonable to assume that some material will be recycled. As such, some of these specific materials appear to warrant continued attention in respect of driving the economy in a more circular manner.

In short, there remains considerable room for improvement. In the discussion above, we have focused mainly on the effectiveness of systems in capturing materials for recycling. It goes without saying that the potential for waste prevention, and as part of that, reuse (and preparation for reuse), should not be overlooked. From the circular economy perspective, producers could play a role in improving prospects for reuse, preparation for reuse and recycling, whilst prevention could be assisted by light-weighting and judicious choice of materials and packaging.

A.6.3.3 C&I Waste

In respect of C&I waste, the figures regarding management of wastes are not especially good. Indeed, the changes between the results of a 2011 study referring to the year 2009, and a more recent update, give little confidence in this data.84 Figures reported to Eurostat under the Waste Statistics Regulation have been used here. The data reported concern:

1) The breakdown of waste types generated by each sector, with wastes that remain ‘mixed’ reported under

a. Household & similar wastes; and b. Mixed & undifferentiated materials; and

1) The breakdown of how different waste types are treated.

As such, there is no breakdown as to how waste from different sectors are treated.

83

One could be forgiven for imagining, on the basis of some reports which have argued for improved management of food waste through a circular economy perspective, that the financial case is a compelling one. In the household stream, the financial argument remains much more finely balanced than these studies have suggested. 84

Jacobs (2011) Defra - Commercial and Industrial Waste Survey 2009, Final Report to Defra, May 2011; Jacobs (2014) New Methodology to Estimate Waste Generation by the Commercial and Industrial Sector in England, Final Report to Defra, August 2014.

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So as to derive an estimate of how waste from each sector is treated, the sectoral waste generation statistics were multiplied by the average treatment shares for each of those waste types for England as a whole in 2012 (the C&I data are for the financial year 2012/13).85 The results are shown in Table 11Error! Reference source not found.. This suggests that for the manufacturing sectors of interest in London, only in the case of the manufacture of food products, beverages and tobacco is a significant proportion of material sent to landfill and incineration (31%). In the case of services, on the other hand, the proportion being sent to landfill and incineration is higher still at 37%, and in absolute terms, far greater (by a factor of approximately 20).

Table 11: Estimated Treatment of Waste by Sector for Key Waste Generating Sectors in London

Energy

recovery Inciner-

ation

Recovery other than

energy recovery -

Except backfilling

Recovery other than

energy recovery - Backfilling

Deposit onto or into

land (landfill)

Land treatment

and release into water

bodies

Services (except wholesale of waste and scrap)

118,239 640,978 2,574,597 72,994 1,046,959 9,499

3% 14% 58% 2% 23% 0%

Manufacture of food products, beverages and tobacco products

9,570 38,231 160,054 302 40,139 3,806

4% 15% 63% 0% 16% 2%

Manufacture of textiles, wearing apparel, leather and related products

358 465 36,683 18 1,214 27

1% 1% 95% 0% 3% 0%

Manufacture of wood and of products of wood and cork, except furniture, manufacture of articles of straw and plaiting materials

18,603 1,619 128,383 5,667 4,191 493

12% 1% 81% 4% 3% 0%

Total 146,770 681,293 2,899,717 78,981 1,092,503 13,824

3% 14% 59% 2% 22% 0%

Source: Defra

This further highlights the fact that the opportunity for more circular management of materials is likely to be greatest in the commercial sector: not only are waste arisings much higher, but proportionately more waste is being sent to landfill and incineration.

It would, of course, be interesting to understand the breakdown of the C&I waste still leaking to landfill and incineration, but for the majority share (from services), the nature

85

The data used were taken from Table 5.9 (published in March 2014) in Defra’s UK Statistics on Waste 2010-12. They refer to the year 2012. The data are reported to Eurostat every other year.

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of the breakdown from the waste statistics regulation data is not at all helpful as the vast majority of this is classified as ‘household and similar wastes’ according to data submitted to Eurostat.

A.6.3.4 CDE Waste

Where CDE wastes are concerned, the same approach (using the WSR data) gives the outcomes shown in Table 12Error! Reference source not found.. This suggests a recovery rate of only 63%, although this rises to 76% if one includes ‘land treatment’ (which for the CDE wastes, relates primarily to dredging spoils).

Table 12: Estimated Treatment of CDE Waste in London

Energy recovery

Incineration

Recovery other than energy recovery -

Except backfilling

Recovery other than

energy recovery - Backfilling

Deposit onto or

into land (landfill)

Land treatment

and release into water

bodies

Construction 0 659 7,430,334 2,300,338 3,845,752 1,959,270

0% 0% 48% 15% 25% 13%

Defra data for C&D waste only give a much higher rate of recovery than is suggested in data submitted to Eurostat for CDE waste (see Table 13Error! Reference source not found.). Given that the more valuable materials are likely to be in the C&D stream as opposed to the E stream, then the relatively high reported recovery rate for C&D waste might suggest diminishing scope for additional recovery of materials with higher values. That having been said, the composition of the C&D wastes suggests that relatively high rates of recovery can be met by focusing only on inert materials, such as hard core materials and soils, which may constitute the majority of the C&D stream. Metals and wood will generally be recovered at a high rate. The remaining materials are likely to be packaging, and plastics from window profiles, guttering and cladding, as well as flat glass, and roofing materials. These may be of higher value, and the potential for their recovery might still be significant: it is simply not possible to be certain in the absence of better quality data.

Table 13: Recovery Rates for C&D waste in UK and England, 2010-2012

UK England

Generation Recovery Recovery

rate Generation Recovery

Recovery rate

000 tonnes 000 tonnes % 000 tonnes 000 tonnes %

2010 45,419 39,129 86.2% 39,832 35,480 89.1%

2011 47,067 40,622 86.3% 41,152 36,754 89.3%

2012 44,786 38,759 86.5% 38,938 34,714 89.2%

Source: Defra (2015) Digest of Waste and Resource Statistics – 2015 Edition, January 2015

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A.6.3.5 Summary, Waste Data

The above analysis regarding waste materials tends to support the analysis in respect of the economic data:

1) The service sectors appear to be worthy of much closer analysis given the quantity of wastes still being consigned to landfill and incineration. A clear picture of the quantity and composition of the materials still being sent for landfill and incineration cannot be gained due to the absence of quality waste composition data for sub-sectors of the service industry;

2) Although the CDE sector generates a large amount of waste, official data suggests that at the level of England as a whole, recovery rates for C&D waste are high. The potential for further value extraction is again unclear given the lack of good information relating to the capture of value from specific sub-streams of the C&D waste stream;

3) In respect of the manufacturing sectors, the data reported under the Waste Statistics Regulation appear to indicate limited scope for further value extraction from the manufacturing sub-sectors which are responsible for most waste generation. On the other hand, the potential for improved management of the waste from the food manufacturing sector may still be reasonably high; and

4) There remains considerable scope for improvement in respect of household waste management. Relatively large quantities of materials of value remain in the residual waste stream.

The above comments focus mainly on opportunities for increased recycling. Evidently, there are likely to be opportunities for waste prevention, and for reuse / repair of products becoming waste. We expect there to be large quantities of relevant material in this respect from the commercial and household sectors, notably in respect of WEEE and furniture, but also, in respect of paint, carpet (in the commercial sector) and other materials.

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A.7.0 What is the Opportunity?

Interest in the circular economy has, in recent years, been stimulated by a number of reports which have suggested that there are considerable economic, or business benefits to be derived from driving the economy in a more circular manner. Amongst the reports of interest are those which:

1) Focus on the magnitude of the business opportunity presented by moving to a more circular economy;86

2) Focus on specific ‘circles’ of the circular economy, such as remanufacturing;87 and 3) Those that focus on the opportunities for resource efficiency.88

It might be argued that the last of these do not, strictly speaking, belong within a discussion of the Circular Economy. Rather, to the extent that they are concerned with more efficient use of resources in generating productive output, the ‘circularity’ of the flow of resources might not be affected by a measure which ‘simply’ seeks to produce more with less.

It is not possible, on the basis of the many reports reviewed, to identify the potential net benefit to London of a scenario in which the economy is more circular than it is today. We have made some attempts to provide some insight into the potential benefits in some areas. However, much more work, and rather better data, would be required to understand the full implications that a circular economy may have.

86

Ellen MacArthur Foundation (2013) Towards the Circular Economy Vol.1: Economic and Business Rationale for an Accelerated Transition, January 2013, www.ellenmacarthurfoundation.org/business/reports/ce2012; Ellen MacArthur Foundation (2013) Towards the Circular Economy Vol.2: Opportunities for the Consumer Goods Sector, June 2013, www.ellenmacarthurfoundation.org/business/reports/ce2013; Ellen MacArthur Foundation (2014) Towards the Circular Economy Vol.3: Accelerating the Scale-Up Across Global Supply Chains, January 2014, www.ellenmacarthurfoundation.org/business/reports/ce2014; Green Alliance (2013) Resource Resilient UK, Report for The Circular Economy Task Force, July 2013, www.green-alliance.org.uk/page_816.php. 87

All-Party Parliamentary Sustainable Resource Group, and All-Party Parliamentary Manufacturing Group (2014) Triple Win: The Economic, Social and Environmental Case for Remanufacturing, December 2014, www.policyconnect.org.uk/apsrg/research/report-triple-win-social-economic-and-environmental-case-remanufacturing; Lavery Pennell, 2degrees, and Institute for Manufacturing, University of Cambridge (2013) The Next Manufacturing Revolution: Non-Labour Resource Productivity and its Potential for UK Manufacturing, Report for Next Manufacturing Revolution, July 2013, www.nextmanufacturingrevolution.org/nmr-report-download/. 88

Oakdene Hollins (2011) The Further Benefits of Business Resource Efficiency, research Report Completed for Defra; AMEC Environment & Infrastructure and Bio Intelligence Service (2014) The Opportunities to Business of Improving Resource Efficiency, Final Report to the European Commission, February 2013.

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It should be borne in mind that the circular economy brings opportunities into view, but that few of these will be entirely costless to generate. Chatham House’s comments regarding the potential costs are worth citing:

in the short term, there will inevitably be significant up-front investment costs and risks for businesses – e.g. retooling machines, relocating whole factories, building new distribution and logistics arrangements, and retraining staff. Attempting to transform a company’s core business model is a risky task in itself and a strong business case will be needed. Clear, strong and predictable policy frameworks will be crucial to encourage investment and experimentation.

The merit of the commitment to develop a route map is that it should send clear signals to those looking to make new investments that the tide is with them, not against them. At the same time, it needs to be recognised that the vagaries of commodity markets are not amenable to influence by such a route map.

A.7.1 Materials in Household Waste

Based upon the residual waste composition of household waste, it is possible to make an estimate of the value of some of the materials still in residual waste. However, there are serious limitations to this type of analysis, as indicated above:

a) The ‘value’ changes over time depending upon commodity prices; b) The relevant indicator of ‘value’ to use depends, to a large extent, on where one

sits in the supply chain: a sorting plant might be sending off mixed plastics, or mixed glass, for further sorting. Progressive stages of sorting might enhance the value of the materials being handled, but not at zero cost;

c) The fact that a positive value for the material exists does not imply that the overall cost of capturing that value is zero (and the above point indicates that value of a stream of materials can be enhanced, but not at zero cost); and

d) The extent to which the material can be captured in a given form will be less than 100%.

In the analysis in Table 14 below, we have set out assumptions in respect of maximum capture rates and unit values from the perspective of the authority, using conservative estimates of value. These indicate a potential additional value available of around £24 million - £39 million per annum.

Table 14: Value of Materials that Could be Captured from Household Residual Waste

Material

Current Recycling

Rate (%, est.)

Proposed Potential Recycling Rate (%)

Potential Additional

Quantity for Capture (tonnes)

Unit Value (£/tonne, LA perspective)

Low High

Paper 61% 90% 123,799 40 80

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Plastic Film 11% 25% 16,180 30 50

Glass 60% 90% 61,919 -5 20

Textiles 10% 60% 44,947 200 300

PTTs 14% 50% 28,562 45 60

Metals 41% 75% 38,801 80 130

Furniture 4% 75% 43,917 30 40

Other dense plastic (non-packaging)

12% 50% 24,729 45 60

WEEE 24% 80% 41,341 28 40

Card 79% 85% 9,297 55 90

Plastic Bottles 61% 85% 12,804 70 100

TOTAL WEIGHT (tonnes) AND VALUE (£ millions)

446,297 £23.50 £39,20

The discussion above has focused mainly on the effectiveness of systems in capturing materials for recycling. It goes without saying that the potential for waste prevention, and as part of that, reuse (and preparation for reuse), should not be overlooked. From the circular economy perspective, producers could play a role in improving prospects for reuse, preparation for reuse and recycling, whilst prevention could be assisted by lightweighting and judicious choice of materials and packaging.

Of the materials making up the household waste stream, textiles, furniture and WEEE will be eminently suitable for reuse. The current and potential capture rates for these materials are shown in Table 15.

If one assumes that 25% of the additional textiles captured are suitable for reuse, then using the average of figures from a WRAP report for reuse for export, and reuse in the UK, the additional value generated would be £19 million, albeit this might require some additional preparation not accounted for in this. If the reusable fraction was increased to 50%, the increase in value would be £37 million, more than the total from recycling of all the materials considered above (albeit conservatively estimated).89

89

See Oakdene Hollins (2013) Textiles Flow and Market Development Opportunities in the UK, Final Report to WRAP, September 2012 (updated 2013), http://www.wrap.org.uk/system/files/private/Textile%20Flows%20and%20Market%20Development%20Opportunities%20Updated%20June%202013v2.pdf . Note that a separate report suggests UK re-use prices for clothing are ‘typically £26/kg, premier grade clothing £40/kg and vintage £90/kg’, so that the study uses a figure of £35/kg (see Ricardo AEA and Cambridge Econometrics (2013) Economic Impacts of Resource Efficient Business Models, Final Report to WRAP, March 2013).



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Table 15 - Tonnages of Materials Suitable for Reuse that Could be Captured from Household Residual Waste

Material Current Recycling

Rate (%, est.) Proposed Potential Recycling Rate (%)

Potential Additional Quantity for Capture

(tonnes)

Textiles 10% 60% 44,947

Furniture 4% 75% 43,917

WEEE 24% 80% 41,341

Regarding furniture, if one assumes a (probably conservative) value of £500 per tonne for reuse, then if one assumes that 25% of the additional furniture captured is suitable for reuse, then the additional value generated would be £5 million. If the reusable fraction was increased to 50%, the increase in value would be £10 million.

In respect of WEEE, assuming reuse values as in a report for the LGA,90 then if one assumes that 25% of the additional WEEE captured is suitable for reuse, then the additional value generated would be £29 million. If the reusable fraction was increased to 50%, the increase in value would be £58 million.

In total, therefore, these three streams alone indicate that shifting to reuse would increase the overall opportunity from £24 - £39 million to £77 - £92 million at 25% reuse rates, with this rising to £130-£145 million at 50% reuse rates.

It should be recognised that achieving this additional value might not be completely costless. Even taking into account the avoided costs of disposal, there may be additional costs incurred in capturing some components of this value.

A.7.2 Other Waste Streams

In respect of commercial residual waste, any estimation is fraught with difficulty given that the composition of the sub-sectoral (or sectoral) streams is poorly known for the main sector, the service sector. However, it seems reasonable to assume that the potential for value extraction is likely to be high (albeit that the costs of extracting that value might not always be lower than the benefits from doing so). In London, the prominent role of the financial services sector might, for example, mean that the amount of electrical and electronic equipment is relatively high, given the sector’s critical dependence on the rapid flow of information. There would appear to be a real opportunity to extract further value through reuse, repair and remanufacturing

Similarly, where CDE waste is concerned, the composition of the unrecovered material is not well known, so that the magnitude of the opportunity, in terms of the value of unrecycled material, is not well known.

90

LGA (2014) Routes to Reuse: Maximising Value from Reused Materials, March 2014, London: LGA.

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However, it may be that the more valuable materials are not as well recycled as those lower value materials – soil, stones and crushed concrete, and wood – which constitute a large proportion of the waste stream. A possible scenario is shown in Table 16, based on composition estimates from recent work undertaken for Natural Resources Wales,91 and using our own rough estimates of the recovery rates by material. These deliver the recovery rate of 76% suggested in Defra data discussed above.

91

Natural Resources Wales (u.d.) Survey of Construction & Demolition Waste Generated in Wales 2012, https://www.naturalresourceswales.gov.uk/media/1988/survey-of-construction-an-demolition-waste-wales-2012.pdf

https://www.naturalresourceswales.gov.uk/media/1988/survey-of-construction-an-demolition-waste-wales-2012.pdf

https://www.naturalresourceswales.gov.uk/media/1988/survey-of-construction-an-demolition-waste-wales-2012.pdf

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Table 16 - Scenario for Management of CDE Waste in London

Quantity in Total

Stream

Estimated Recovery

Rate

Remaining in Residual Waste

Soil and Stones 7,146,722 85% 1,072,008

Aggregate 5,748,450 85% 862,268

Mixed 1,553,635 15% 1,320,590

Wood 466,091 75% 116,523

Metals 155,364 85% 23,305

Plastic 155,364 30% 108,754

Insulation and Gypsum 155,364 30% 108,754

Other 77,682 15% 66,029

Paper and Card 77,682 50% 38,841

Totals 15,536,352 11,819,280 3,717,072

Recovery Rate 76%

This indicates that there could still be considerable quantities of metals (mainly copper, aluminium, some lead), and plastics (typically, PVC, but also, other polymers used in, for example, roofing) remaining in the residual waste stream.

No estimates have been made, however, of the value of the materials in the CDE and C&I streams other than those for WEEE (for all streams) made below. We repeat the points made earlier: the value of the materials in the waste stream is not an indication of the size of the economic opportunity. This requires knowledge of the costs of extracting that value, and this depends on how any (marginal) increases in capture of material are made.

A.7.3 WEEE in London

We have attempted to make some estimate of the value of discarded EEE in London. In the UK, there are, according to WRAP, around 1.4 million tonnes of EEE discarded annually. Of this, 7% is sent for reuse, 55% is sent for open loop recycling, leaving 38% in residual waste.

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Based on WRAP figures, and assuming that management practices in London are as in the rest of the UK, then we estimate that 245kt of EEE is discarded in London, and that, in line with WRAP figures: 92

1) The value of the materials in the stream is just under £200 million; 2) The value of the materials still being sent to landfill or incineration is around £75

million per annum; 3) The value of the metals within the total amount of discarded WEEE is just under

£39 million; 4) An estimated £24 million of the value in the metals is already captured through

open loop recycling, and reuse; 5) of the £14 million or so of lost value in the form of metals, £7 million is in

materials sent to landfill, whilst the other £7 million or so is lost in recycling processes which tend to focus on steel, copper and aluminium recovery rather than other metals.

A.7.4 Summary

Understanding the magnitude of the opportunity that the circular economy presents is not a trivial task. The task is made all the more difficult due to the absence of data which indicates how materials are currently being managed in some key waste streams.

Notwithstanding this fact, it is clear that there are opportunities in respect of ‘value to be gained’. In the household waste stream alone, plausible improvements in recycling could realise an additional £24 million of revenue, with this rising to £65 million if 25% of the additional WEEE, furniture and textiles that are captured can be sold for reuse, rising to over £100 million if the reusable fraction increases to 50%.

It should be considered, however, that not all of the value that might be present can be extracted at zero cost, and that some apparent opportunities might incur costs that are higher than the value of the benefits. Moves to a circular economy can, however, facilitate a reduction in costs relative to the benefits through improved design, and through better logistics.

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These figures are scaled to the estimate of the London EEE stream based upon figures in WRAP (u.d) Switched on to Value, http://www.wrap.org.uk/sites/files/wrap/Switched%20on%20to%20Value%2012%202014.pdf

http://www.wrap.org.uk/sites/files/wrap/Switched%20on%20to%20Value%2012%202014.pdf

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A.8.0 Stakeholder Engagement

As part of this work, two small workshops were held, the first focused on the nature of prioritisation for action in London, the second, focused on measures that could be considered as part of the Route Map. The workshops are summarised in Appendix A.4.0.

Workshop 1 was followed by a series of interviews. The findings from these interviews are presented in Sections Error! Reference source not found. to Error! Reference source not found.. The interviews were structured around four broad questions;

1) Looking forward to 2050 what vision would you have for the circular economy in your business or sector?

2) What key barriers do you face in moving to a more circular economy? 3) What actions would be required to bring about a transition to a more circular

economy, and who should undertake these? 4) What role could London play in trying to address or mitigate these barriers?

These questions were used as a starting point for discussion around the concept of Circular Economy within their business sector with the ultimate goal of gleaning whether London can play a role in moving circular economy forward for them.

A.8.1 Infrastructure/Construction

Material sustainability principals have been embraced within the construction sector more so than in many other industry. However, the concept of the circular economy suggests a relatively new way of looking at the design of a building. Through the use of product Environmental Product Declarations (EPDs)93 and Building Information Modelling (BIM)94 there are opportunities for developers to gain a more complete picture of their buildings’ environmental footprint. These techniques are not currently ‘the norm’, but a growing number of developers are incorporating them into the design process. Greater progress in respect of the circular economy within the construction industry may take this further, with every building potentially being ‘designed for deconstruction’ (or at least, with that in mind). The emphasis here is on deconstruction rather than the current practice of demolition, and a requirement to manage the waste

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An EPD, is a verified document that reports environmental data of products based on life cycle assessment (LCA) and other relevant information. This allows direct comparison of the environmental performance between similar products e.g. Insulation materials. 94

BIM is a process whereby a building is modelled in 3D to include not just the building envelope itself but its constituent parts and internal fixtures and fittings with the idea that thought is given to how all the interactions affect its environmental performance. Environmental data from EPDs is integral to this.

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that is generated. An increase in modular design and construction will be one of the key ways this will happen. In this way, whole sections of buildings can be removed or swapped as the life of the building leads to its evolution into different purposes, so that there is less need to demolish and start again. These modular sections can be refurbished and reused in other buildings.

Alternatively the modularity aspect could focus more on standardisation of the components that make up a building. Standardisation could apply to steel beams or windows, for example. Modularity would allow a building to be disassembled in a similar fashion to a meccano toy and then built into a whole new building. Such an approach requires a high level of traceability of the constituent parts of the building, for which BIM could play an important role—and also where a leasing model may find traction. Using the steel beam example, the supplier could maintain ownership of the beams within a building; they are leased for a certain number of years and removed to be reused. There may be frameworks in place for the sharing of materials, not just within the building sector but across industries. Disassembled buildings may have their constituent materials assigned to new projects prior to disassembly.

A potential barrier to this form of design is that building regulations are not currently set up to allow this, and therefore, it may be difficult to gain approval for this type of construction, especially if the material content cannot be guaranteed or a warranty cannot be provided. Other barriers arise in highly urbanised areas such as London. The site complexity can stand in the way of a modular approach, and the transportation and logistics in urban areas may also be an issue, especially for disassembly.

On the other hand, there is, perhaps, an opportunity here for London. Whilst building costs in London are similar to those in other areas of the country, house (and other real estate) prices are much higher, so there may be a greater opportunity for buildings to incorporate these principals, whilst remaining commercially viable and profitable for developers.

An example of the circular economy in construction may be found soon in Oslo. The ‘Urban Mountain’95 will demolish an existing building and use 80% of the resulting materials in the new building standing in its place. This is an innovative approach; the building being demolished was not designed for deconstruction and reuse. It is unlikely that this approach would be economic on a large scale, although it could provide a way forward for current commercial building stock.

‘Whole life cost’ is a key area that will also gain focus from the client perspective. This is not just the cost of building, which could increase if more sustainable features are incorporated, but the cost of running it during its lifetime. The client does not always look at the whole cost of ownership as they may not have a long term view and therefore might only look at the up-front capital cost. Early engagement on the subject is

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www.archdaily.com/428959/urban-mountain-team-wins-nordic-built-challenge-in-norway/

http://www.archdaily.com/428959/urban-mountain-team-wins-nordic-built-challenge-in-norway/

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key to helping the client understand that their choices now will affect the cost of running the building for as long as they own it.

Another barrier that was highlighted, and one which is very much the case across sectors, is the lack of good case studies, or examples, that can be drawn upon to inspire new projects. Selling the benefits and the business case for change is best achieved through examples of similar projects. If the industry cannot learn as a whole from each innovative project, then progress is likely to be slower than desired.

This leads on to what London may do to move towards a more circular economy in the construction sector. There is significant opportunity to make sure that whole life costing is used for all public infrastructure projects within London. Public projects are ideal for this approach as short-termism is less of an issue when procuring projects for long term planning. This approach may also glean project examples that London can use to lead the way in green public procurement.

There are also issues surrounding planning regulations which can differ greatly from one borough to the next. The example given by one of the interviewees was the introduction of the ‘Merton Rule’—the requirement of commercial buildings built within Merton to incorporate a minimum of ten per cent on-site energy generation. According to the interviewee, this has had two potential effects; firstly, that other boroughs may have tried to ‘out-green’ each other without necessarily considering the full building life cycle issues; and secondly, potential construction projects may be moved to other boroughs. The lack of harmonised planning throughout London means that is difficult to look at London as a whole with regard to building and infrastructure planning. Similarly it was also argued that sustainable practices and features should be ‘nationalised’ through building regulations rather than being built in at the (local) planning stage. This would set a level playing field across the industry and across London.

A.8.2 Food and Drink

In the discussion in Section 0, it became clear that the food and beverage industry was one of the largest of the sub-sectors within manufacturing, both in respect of GVA and in terms of waste generation. On the other hand, the available data appeared to suggest that the wastes from the sector were being managed quite well. Although the data on which this observation is based are not of especially high quality, the suggestion is that in respect of food and drink, the issues in respect of management of materials may be greater in respect of the food services sector. For the purposes of interviews, we focussed on the food and drink sector from the point of view of the restaurant and hospitality sector, where there are significant hurdles to overcome especially with the issues of food waste.

The hospitality sector is increasingly engaging with sustainability issues, due in large part to a shift in consumer preference, and growing appreciation of the fact that there can be financial savings from alternative approaches. The concept of the circular economy, however, is not one that is widely understood, and the ‘products’ being sold (i.e. food and drink) are not perceived as lending themselves readily to a circular approach. There

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may be an opportunity, therefore, in seeking to ensure that the products that are sold in food service establishments are more circular in nature, for example, making efficient use of nutrients from wastes, and ensuring efficient use of water.

There are a number of innovators that have found niche ways of turning food waste into a valuable product. Examples include waste coffee grounds being pelletised and used in biomass boilers, synthesised into biodiesel, or being used as fertiliser for growing mushrooms. With an estimated 200,000 tonnes of coffee related waste generated every year in London alone, this is a waste stream for which an innovative approach was welcomed.

Opportunities such as these can only be realised when food waste is segregated and collected. Scotland has taken the lead with in food waste segregation in the UK by requiring that all food-related businesses must segregate their food (an approach taken in a range of other European countries). Although this may initially impose additional costs for businesses, especially smaller ones (as businesses pay more to have a separate collection of food waste alongside their residual waste collection) requiring sorting can mean that these additional costs are kept to a minimum, since the density of logistics for food waste collection are improved for commercial waste collectors. The added expense of collecting food waste is one of the key barriers faced and is especially true for smaller, independent restaurants.

This may not always hold true, however, when dynamic effects are factored in: research by the Sustainable Restaurant Association recently found that if food waste is regularly segregated, restaurants could save as much as £5,000 per year, mainly as a result of the act of segregating food waste raising awareness of just how much food is disposed of. Efforts to reduce this waste can lead to savings that far outweigh the cost of separate collection. Access to resources and case studies is critical to support this change in perception. Some case studies of this nature have also been produced by WRAP and the Local Government Association in the past in the context of seeking to encourage local authorities to engage more pro-actively with commercial waste.

Food waste aside, there is also potential for circular economy to impact other areas of the hospitality industry. Examples include renting kitchen equipment, increased use of recycled furniture, and grey water re-use.

London is once again in a unique position with its extremely high concentration of food outlets. Collaborative approaches to recycling have had reasonable success in London’s Business Improvement Districts, and there are possibilities for this to happen on a wider scale. The economies of scale could be leveraged to help London lead the way in this respect.

A.8.3 Retail

The retail sector is another key sector as it is the portal via which most consumers purchase the products they use. It is a very varied sector with different complications arising, depending upon the products that are sold, and the (often varied) channels

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through which retailers interact with their customers. The retail sector is being transformed by the range of channels through which people may purchase items in today’s marketplace, with the rise of on-line purchasing providing the best example of this change. This is already influencing the nature of wastes generated at the household level, as the delivery of purchases to homes is increasing the proportion of cardboard packaging in the waste stream (whilst the consumption of news media on line is reducing the proportion of paper in the household waste stream). The comments below in respect of electrical equipment (see Section Error! Reference source not found.) are also of interest in this regard. For this study, an international retailer and manufacturer of home furnishings, and a high street food and clothing retailer were interviewed. This is clearly not representative of the sector as a whole, but provides some useful insights into some of the issues faced by retailers.

In the home furnishings sector, there are some small initiatives emerging whereby the retailer takes responsibility for furniture after it is no longer needed. Bulky goods recovery and recycling has long been an issue in this area, especially in London, where 40% of householders do not own a car, so have limited ability to access civic amenity sites. Opportunities for managing end of life products have generally taken the form of a collection service for the used product at the same time as delivery of another item of furniture takes place. This enables reuse for serviceable items, or dismantling of items for recycling of valuable components. The retailer concerned has created a ‘hub’ of local charities around each store to facilitate this approach, although there is still a cost to the consumer for each collection made.

There is little evidence of components being reused in new products, even though the modularity of many modern furniture designs, and the fact that many are based on self-assembly, may lend itself to this practice. The use of less robust, lightweight finishes to save cost and produce a modern, clean look is a significant barrier to reuse of component parts. The low cost nature of much of this furniture also means that it is less valuable as a resource to capture when it is no-longer wanted. Similarly, the low cost is also seen as a barrier to a leasing model, although no products have yet been designed with this concept in mind. The value of secondary materials should ideally stimulate the market. However, uncertainty in the markets, and the current low prices of much of the new furniture on offer insufficient financial incentives for such a model.

Smaller products have lent themselves more easily to circular models, although participation by consumers is still limited where these opportunities are presented. Reverse vending machines, offering vouchers for deposited florescent tubes, have been trialled, but this has had a low uptake. Incentivisation is believed to be key to the success of such schemes, although approaches to education and communication are also thought to be important. Inconsistency in approach to recycling across different areas of the country was also cited as a barrier for stores to provide information to customers to allow them to recycle more effectively.

The high street retailer believed that many of the barriers that exist are economic rather than technical at present, the cost of materials and logistics being the key issues. There are few examples of circular economy models aimed at retailers at present. Retailers

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stock a wide range of products, so that the oft-discussed approaches of take-back, with a view to products being reused or remanufactured, might be difficult to apply if a wide range of materials were being targeted for take back. The issue of aggregation of valuable materials (and products) is one of key importance for retailers, who do not have the logistical capability to become conduits for take-back of the wide range of the products that they sell.

A.8.4 Textiles

The textiles industry is identified here primarily because of the significant environmental benefits of recycling and reusing them when compared with many of the other materials in household waste streams.96 The analysis in Section 3.1.1 also indicates that textiles and apparel may be an important sub-sector of manufacturing in London, at least in respect of the proportion of the UK’s textiles-related GVA which is accounted for by London. Although data from Defra suggests that the types of waste produced by the textiles industry are managed relatively well, the data does not appear to be of high quality.

The way in which this industry works in terms of the management of discarded materials is somewhat different to the management of many other materials in the household waste stream. The secondary textiles markets are firmly built around reuse, either by the third sector in charity shops, or by large-scale bulking businesses that ship wearable clothes to (typically) sub-Saharan Africa and parts of Eastern Europe. Much of the rest of the material is down-cycled into other products, such as insulation or industrial wiping cloths—rags. There is very little, if any, closed loop ‘textile recycling’, and not on an industrial scale. This contrasts with the recycling-orientation of most other markets for end-of-first life management of materials from household waste.

This situation may not last, however, as the reuse markets for less-than-perfect clothing may diminish as the countries that receive the clothing begin to become wealthier and start to desire new clothing. This may result in a transition towards greater reliance on textiles recycling. The main barrier to this transition is that technologies which enable closed loop recycling are in their infancy. There are many pilot projects and collaborations looking into this issue: some of these can only recycle textile products that have been produced in a specific material, and so must be kept within their own closed loop system; others aim to separate the fibres out so they can be re-spun into new clothing using any grade of textiles. The viability of this may depend upon whether these processes can compete on a cost basis with the extraction and processing of virgin material. One interviewee suggested that 360 plants processing 50,000 tonnes a year each would be all that is required, worldwide, to remove the need for virgin fibres of polyester and cotton.

96

Zero Waste Scotland (2013) The Scottish Carbon Metric: Technical Report, October 2013

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If technologies can be developed that can take any quality of fibre and turn it back into new clothing, there would be a fundamental shift in the way textile waste is viewed by the waste industry and the consumer. Even low grade clothing could become a valuable resource rather than ending up as cleaning rags, or in residual waste. This shift might also require collection systems to evolve and improve, making implementation of kerbside collections more important. Grading of textiles may remain an issue as the system evolves (and might become more of an issue with increased kerbside collections) since a wider variety of grades could be collected, but the highest grades, suitable for sale in charity shops, would be better separated out for reuse rather than used for fibre recycling, assuming they are not already being re-sold on reuse sites.

Logistical issues were also highlighted by one interviewee with regard to the current recycling of textiles. Currently, recycling of textiles (or more accurately, down-cycling) into products such as insulation and carpet underlays is an industry which is based primarily within Yorkshire. Because of this, and the large impact on margins that transportation has in the textiles market, it is less desirable for Yorkshire fibre merchants to source and collect textiles from southern England. Indeed it was noted that areas south of the river Thames are not viable areas for these businesses to be sourcing from.

The above discussion indicates that London may need to re-evaluate the way it deals with textiles recycling from a logistics and infrastructure point of view to prepare for the changes that are expected in this market. Careful consideration should be given to how London can best facilitate this change without becoming locked into systems that create issues for circular economy integration.

A.8.5 Electrical and Electronic Equipment

Interviews were conducted with companies providing electrical and electronic equipment on account of the facts that a) much attention has been given to the (supposed) value of the opportunity to drive these in a more circular manner, and b) it is expected that (notwithstanding the low quality of the extant data) the services sector in London is expected, at present, to be the source of a considerable flow of discarded electrical and electronic equipment. In particular, the financial services sector is expected to be a key user of this equipment.

One of the ways electronics companies are seeking to increase the circularity of their products is to increase the recycled content of the plastics they use. They use highly engineered plastics and feel that the collection systems in place, including those which they are required to support under producer responsibility, lead to too much mixing of different plastics. The current situation leads to levels of contamination of plastics which are far too high. They are keen to use recycled ABS (acrylonitrile butadiene styrene, a plastic polymer), but find it difficult to access the quantities they would like.

One of the companies interviewed would like to engage in more ‘product service’ approaches to delivery, including managed print services and IT services. However, uptake by commercial companies remains below what they would like. This may be, in

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part, down to the demanding specifications of the potential customers. They have started to offer some services of this nature to homes.

Another equipment supplier considered that what happened to electrical and electronic equipment at end of first life was ‘a disaster’. This was a theme of the interviews, with the interviewees all lamenting the nature of the collection infrastructure generally available, and viewing the existing producer responsibility regulations as ‘not fit for purpose’. There was, in the view of one company, too much revenue in the hands of compliance schemes acting essentially as middle-men.

Another provider stated that it was adopting a global strategy towards the circular economy and was already selling remanufactured products. They recognise that all the items they sell are valuable and would like to instigate a system whereby those who do bring back products enjoy some benefit from that. Part of their strategy is to move increasingly away from selling products, and towards performance-based relationships. The finance department of the company is closely looking at the business models based around new consumption models.

One company made it clear that it seeks to ensure, though design, that all its products are readily serviceable, and that they can be refurbished and resold. It also seeks to create a market place for trading in parts, and to identify key materials in its products to facilitate recycling. The company expressed concern that materials in its products may become more scarce and more expensive, posing a material security risk.

One company identified national requirements for waste management registration and licensing as an “unhelpful” and “unnecessary” hurdle to material recovery logistics. This is particularly true where the material they may be collecting is being leased to companies. They believe it is important to publish repair manuals and are open to others being engaged in repair, though they would prefer to retain ownership of materials. Seventy per cent of the spare parts they use are second hand parts. They would like more customers to fill in warranty cards so that they can track where their products are. They have 5 large repair facilities across Europe, each of which resembles a manufacturing facility, and each of which is dedicated to dealing with a specific range of products. The location of these facilities is based on a range of considerations (including tax incentives, labour costs and logistics).

One of the companies interviewed indicated that since they were designing products for repair and reuse, the asset recovery industry could, when companies discard material, acquire IT equipment from businesses, and seek to derive maximum value from reuse of equipment and parts, based on the possibilities facilitated by appropriate design. This suggests that equipment manufacturers do not need to control assets themselves in order for value to be derived from them.

In general, it would appear that the barriers to further circularity in the sector are less to do with the ways in which value extraction can occur. One company commented that this was ‘very easy’. They would prefer to deal with materials ‘internally’, and feel that the right approach is to channel products back to original equipment manufacturers. They noted that although collection logistics could be improved, that smarter collection

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systems (based on telematics) might not always work effectively since, in their experience, companies tend to move materials from one location to another without notice, and might not always set out what they claim, and when they say they will.

The industry also sees potential for it to act as an enabler of the circular economy in future. One company noted that ‘the sharing economy’ is largely enabled by technology such as PCs and smartphones, as well as data centres, which effectively enable the development of new markets. In future, they saw the potential for integration of the potential of 3D printing with an economy based more on repair and remanufacturing. Super-fast and low cost accurate 3D printing could enable the local production of spare parts on demand, thereby shortening supply chains, reducing inventories, and diminishing travel distances to deliver parts. The impact on production could be profound, with parts picked up locally on the way home by households, or delivered by cycle couriers in the case of repair facilities.

The financial services sector was highlighted as a potential target for additional activity. It was indicated by one interviewee that the sector consumes a lot of paper, but that organisations were migrating business processes from paper to digital. They were also moving away from in-house servers to hosted servers, indicating the potential to make further changes. The confined geographic location of many major financial services companies was seen by one organisation as making the financial district of London a suitable place in which to pilot new models of logistics and consumption of electrical and electronic equipment. Another company noted that the financial sector was generally not very good in managing its electronic equipment.

It is worth commenting that the interviewees struggled with the notion of considering the circular economy at ‘a London level’, with their strategies in respect of the circular economy being focused at a larger geographical area (UK or global). In respect of the location of manufacturing, none of the companies concerned were manufacturing in London. When asked whether actions in London could influence product design, only one of the interviewees felt this was the case, and then, only if activities which made for a coherent new system were initiated in London. The system nature of change was mentioned in this regard.

A.8.6 Waste Services

Due to London’s role as a major consumer of goods and services, the role of the waste management industry is likely to remain important for the time being. The industry is already beginning to change in relation to the circular economy. One waste services company that is aiming to develop activities around the circular economy was interviewed.

In this company’s view, the transition to a substantially more circular economy, where not just recycled materials are being extracted from the waste stream, is likely to take considerable time, perhaps to beyond 2050. Over that period, it was suggested that the waste industry would remain in the vanguard. The company itself is seeking to derive much more value from waste management, across the range of municipal, industrial and

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commercial clients it serves. The company has become involved in decommissioning large pieces of infrastructure, and this mentality is trickling down to a range of higher value, often smaller, products.

The company takes a bottom up view and sees the need for considerable additional infrastructure. Although it is not yet directly involved in remanufacturing and reuse, it has aspirations to supply materials of the right quality direct to customers, with a view to helping them achieve security of supply. They aspire to do this for materials that were not always the target of careful management in the past. The company still considers that in order for business cases to stack up, that the chicken and egg situation in respect of investment in treatment, and ensuring the available feedstock, will remain an issue.

The company noted that it saw itself becoming, in part, a ‘green product’ company. This requires new expertise, not just in logistics, but also marketing, and health and safety legislation. Their advantage, in this respect, relates to their scale (as a global waste management company).

They noted some barriers: they cannot allow volunteer groups to take WEEE from civic amenity sites as liabilities that may arise from doing can come back to haunt them; they also believe end-of-waste legislation means that justifying doing positive things with waste takes longer than it should. They also noted that planning for anything to do with waste has the potential to give rise to difficulties and controversy.

Potential solutions included streamlining end-of-waste rulings, including giving more resources for this to the Environment Agency. They also suggested that London could help enable the circular economy through procurement. Support for planning applications in respect of suitable new infrastructure would also be helpful, whilst some support for new businesses introducing new products along circular economy lines could be used to support innovation.

A.8.7 Summary

Key messages from the stakeholder interviews with relevance for the development of a route map for London are as follows:

5) Construction a. In principle, it would be desirable if all buildings were designed with

deconstruction in mind. Modular design and construction might facilitate this;

b. In terms of use of materials, materials reuse (through selective demolition) would be desirable where appropriate, whilst there may also be possibilities for leasing materials for use

c. In the context of public procurement, awards regarding structures which are likely to be more permanent should take account of whole life costs; and

d. The sector would benefit from presentation of best practice case studies. 6) Food and Drink

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a. The hospitality sector could make its activities more circular through (inter alia) leasing kitchen equipment, reuse of furniture / cutlery /crockery, and grey water reuse;

b. In order to ensure cost-effective collection systems are delivered, consideration should be given to mechanisms whereby businesses can jointly procure services from a single provider, for example, through Business Improvement Districts;

c. In order to foster take up of separate food waste collections, case studies highlighting the prevention-related savings flowing from food waste separation should be developed;

7) Retail a. For retail, the potential issues associated with take-back of a wide range

of products suggests a need for different forms of store, and for examining the logistics which might be required to serve them;

b. Models for reuse already exist, with stores working with networks of local service providers;

8) Textiles a. For high quality clothing, reuse is clearly the most preferable option; b. There is scope for supporting innovation in closed loop recycling of

textiles; c. This would lead to greater interest in kerbside collection of textiles of a

range of different qualities in future; 9) EEE

a. In order to ensure the quality of specific material streams, greater streaming of collection systems is required;

b. Different companies adopt different approaches to the reuse and repair of products: some maintain materials within their own sphere of influence, others have an understanding with asset recovery companies, ensuring they have access to manuals to facilitate repair;

c. There is further scope for encouraging product/service models in business to business transactions (and probably in household too);

d. The likely levels of consumption in financial services, and the clustering of such activities in specific parts of London, suggests that these areas would be appropriate places for trialling new systems of logistics for take-back and reuse / repair / recycling;

e. The industry’s products can play a role in facilitating the transition to a more circular economy;

10) Waste a. Decision making by planners needs to be more supportive in respect of

waste facilities; and b. The laws governing liabilities to which waste companies are exposed

when they allow third parties to engage in reuse act as a barrier to its further development.

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A.9.0 Potential Elements of a Route Map for

London

A.9.1 Steps Towards the Circular Economy

Stakeholder engagement and a review of literature reveals that there are a number of policies and actions that have been recommended in respect of fostering a circular economy. However, for many of the proponents of the Circular Economy, the emphasis is on business itself to take action. To the extent that the shift to the circular economy may require businesses to conceive of ‘products’ in different ways (for example, as delivery of the service the ‘erstwhile-product’ was intended to deliver), then it becomes clear that neither governments, nor any other organisation, can impose or legislate for this, and nor would this be desirable.

The Ellen MacArthur Foundation considered the Roadmap to a Circular Economy in two phases with the aim of mainstreaming the concept around 2025.97 The two phases were:

1) Rapid pioneering and broad-based mainstreaming; and 2) The mainstreaming phase

In the words of the Foundation:

Although we see businesses themselves as the primary driver of a shift towards circularity, the public sector may also have a role to play. Specifically, governments can help stimulate fast-track adoption of circular business opportunities by adjusting the enablers to shift the rules of the game.

They breakdown the ‘government/regulatory approach’ into different ‘plays’, these falling into five areas:

1) Organising re-markets (and fighting leakage). This is focused mainly, and appropriately in our view (and with considerable relevance to what London could do) on re-design, and scale up of, collection systems;

2) Rethinking incentives. This is the proposal – and it is a common one in the context of proposals for the circular economy – for a tax shift away from labour and towards resources and pollution. This is not something London can do, and nor is it likely to happen in the short term: the data and information requirements, let alone the requirement (for a broad-based resource tax) for

97

Ellen Macarthur Foundation (2013) Towards the Circular Economy: Economic and Business Rationale for an Accelerated Transition, January 2013, www.ellenmacarthurfoundation.org/business/reports/ce2012

http://www.ellenmacarthurfoundation.org/business/reports/ce2012

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agreement at (at least) a pan-European level, make it a challenge to deliver. It is, however, in our view, essential to shore up the business case for the circular economy: it will not be sufficient to rely on what Foundation reports suggest is an inevitable and inexorable rise in commodity prices to drive this, not least because the volatility which the same authors highlight implies that a key driving mechanism for the circular economy is itself inherently unstable. The fall-out of the recent decline in commodity prices – more than 30% for each of the main commodity groups since the peaks of 201198 – for recycling provides a sobering reminder that commodity price volatility remains, and that the volatility does not imply a one-way upward price movement;

3) Igniting innovation and entrepreneurship, stepping up education. This speaks to the requirement to encourage re-thinking of professions and disciplines in such a way as to foster entrepreneurship, both in the business sense, but also in respect of how procurement officers, including those in the public realm, can apply critical thinking to foster circular approaches. The need for education, or perhaps, re-education, and the re-shaping of skills in design and other disciplines is made clear. This is appropriate in our view, not least to ensure that when ‘goods’ are procured, procurement specifications are such that service models can compete on a level playing field, with assessment of added value being considered part of the levelling of the playing field;

4) Providing a suitable international set of environmental rules. The proposal here is for the establishment of standards and guidelines to foster, and ease, supply chain collaboration. The combination of regulations to eliminate hazardous materials from products, and product labelling to facilitate improved management of products and materials at end-of-first-life, can facilitate recycling or reuse of a wider range of products and materials. In addition, certification programmes to give consumers confidence regarding the quality and safety of circular products may be needed to scale up demand for them. This is something where London does not have an immediately obviously role to play, although any form of standard setting relies upon the experiences gained in practice as to what prevents a more significant shift into the inner circles of the circular economy for given products. As such, to the extent that London can encourage activities that become a laboratory for the circular economy, the lessons learned might be invaluable in shaping standards, and approaches to certification. Furthermore, as is well known, the quality of products which are taken back at the end of first life rests heavily on the approach to collection. There is a symbiotic relationship between these elements: the quality of collection might not improve if sufficient value cannot be extracted from products because of an absence of information: equally, the requirement to label in a specific manner, or provide information of a given type has limited relevance if there is no intention to extract more than the value from bulk recyclables;

98

Based of the World Bank’s commodity price indices, accessed in April 2015.

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5) Leading by example and driving scale up fast. Governments, and local government, are significant consumers of products and services across the United Kingdom. London procures a significant amount of goods and services each year: it ought to be possible, albeit there may be a need for training, for some of the products being purchased to be specified as services. It should be noted, however, that, not least in the current situation in respect of budget constraints, local authorities will be reluctant to pay ‘over the odds’ for what they consume. As such, one might consider the role of green procurement to act in a strategic manner. In many cases, the scaling up of a different form of logistics (as per point 1) will make sense only where there is a demand for the outputs from that amended approach to logistics. In these instances, procurement could play a key role in stimulating the demand side for more circular products.

Clearly, there are, within the above list, a number of potential actions which government, national and local, could take.

For Rabobank, the path to a circular economy is more closely aligned with transition theory.99 They suggest a four stage transformation of the economy, as follows:

Stage 1: Business as usual: in this stage, the CE is not widely supported by businesses, and the main CE activities happen at the margins, prompted by emerging limitations of existing practices and continuing efforts in respect of resource efficiency;

Stage 2: Recycling and alternatives take hold: in the stage, there is broader support from business, and governments support a more systematic transition by setting targets for recycling of specific waste streams;

Stage 3: New markets come up: in this stage, as the authors put it, ‘the norm has shifted’. By-products are used in higher value applications in other industries and there is greater separation of components into raw materials Recycling is the norm and ‘waste is near zero’;

Stage 4: The circular economy emerges: by this stage, new technologies, systems and markets have replaced older ones. Businesses eliminate waste and use all by-products, either in their own supply chain or those of others.

Closer examination reveals this to be of relatively limited value, not least since it would be reasonable to argue that the Netherlands lies somewhere between Stages 2 and 3. In addition, there is little attention given as to how the important transitions from Stages 2 to 4 may actually happen. The focus also seems to be on businesses, and the waste from business: even if businesses eliminate waste (on the terms suggested, i.e. recycling is equivalent to ‘not waste’), that would not imply that waste from households is similarly reduced. In order for that to happen, businesses would need to adopt an expanded view of their supply chain, recognising that the post-consumer waste stream in Stages 1 and 2 is itself a potential source of value.

99

Port of Rotterdam and Rabobank (u.d.) Pathways to a Circular Economy.

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Common to both views of the transition is the view that businesses will take the lead. The role of government (in its various guises) is deemed to be a secondary one. Yet this perspective must also be set against the supposed nature of the drivers: if one assumes that commodity prices will stay at high (and volatile) levels and that resource scarcity will be increasingly problematic, then it might be reasonable to assume that businesses will be keen to manage their businesses differently. If these assumptions do not hold true, however, then businesses are likely to be somewhat more conservative in the extent of the changes they make. In those circumstances, the role of government is potentially very significant in maintaining momentum behind the move to a more circular economy. The question that still arises for governments, however, is which aspects, from a social perspective, of the circular economy should they seek to stimulate, and with what policy instruments.

A.9.2 Policy Review

In order to survey the proposals being made for policy change in respect of the circular economy, as well as the two reports mentioned in the previous section, we reviewed reports by six different authors, chosen because of their strong policy orientation. Key observations are made in the following sub-sections.100 A full listing of policies is given in the Table at the end of this Appendix.

A.9.3 Fiscal Policies

On the basis of our review, all but one of the studies proposes the removal of environmentally harmful subsidies (which often target raw material extraction) and the

100

The reports are: Chatham House (2012) A Global Redesign? Shaping the Circular Economy, March 2012, www.chathamhouse.org/publications/papers/view/182376; Green Alliance (2013) Resource Resilient UK, Report for The Circular Economy Task Force, July 2013, www.green-alliance.org.uk/page_816.php; Green Alliance (2015) Circular Economy Scotland, January 2015, www.green-alliance.org.uk/circular-economy-scotland.php; CIWEM (2013) Less Is More: A Lifecycle Approach to Waste Prevention and Resource Optimisation, March 2013; Policy Studies Institute at the University of Westminster, Institute for Environmental Studies, Ecologic, BIO Intelligence Service, and Institute for European Environmental Policy (2014) Scoping Study to Identify Potential Circular Economy Actions, Priority Sectors, Material Flows and Value Chains, Report for DG Environment, European Commission, August 2014, www.psi.org.uk/site/project_detail/scoping_study_to_identify_potential_circular_economy_actions_priority_secto; TNO Consulting (2013) Opportunities for a Circular Economy in the Netherlands, Report for Netherlands Ministry of Infrastructure and the Environment, October 2013, www.government.nl/documents-and-publications/reports/2013/10/04/opportunities-for-a-circular-economy-in-the-netherlands.html; A Wijkman and K Skanberg (2015) The Circular Economy and Benefits for Society Swedish Case Study Shows Jobs and Climate as Clear Winners, an interim report by the Club of Rome with support from the MAVA Foundation and the Swedish Association of Recycling Industries, April 2015.

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internalisation of the external costs of materials use. The former is eminently sensible and can potentially happen in the relatively short-term, though of course, vested interests are strong. It is a measure widely recommended by international bodies such as the OECD, IMF and European Commission. The latter, on the other hand, is rather more complicated and would require a major body of evidence, and rather more work on the design of the policy than its proponents appear to appreciate, in order to work sensibly. It is a measure which could not reasonably be expected to be in place, in our view, in a period of less than a decade.

A second, very popular, fiscal measure, mentioned in five of the seven studies, is to make changes in the system of VAT to help foster the circular economy. Reduced rates on re-used or refurbished products are proposed, whilst some also propose the removal of VAT from the service activities – maintenance, repairs, refurbishment and product service systems – themselves. A European Commission Working Paper, accompanying the 2010 Green Paper on the future of VAT, acknowledged that there were strong arguments to the effect that integrating environmental aspects into taxation can encourage consumers and producers to switch to more environmentally-favourable products through the effect they exert on price structures. The document states that:

‘The current VAT system does not recognise this phenomenon. Broadening the objectives of VAT by linking it to sustainable consumption would be in line with the recent Commission initiatives aiming at achieving a resource efficient economy which is one of the flagship initiatives of the EU 2020 Strategy. Changing price structure can help to shift demand towards less polluting and more resource- and energy-efficient products. 101

While apparently attractive, there is no clear evidence of impacts relating the use of variable VAT charges for waste prevention. This in part reflects the scarcity of examples of the instrument’s use for this purpose. The matter has been explored in a Dutch study, and (in the context of waste prevention), by a Eunomia study.102

These fiscal measures are of potentially huge significance, but they are outside the competences of London to deliver.

101

European Commission (2010) Commission Staff Working Document: Accompanying document to the Green Paper on the future of VAT – Towards a simpler, more robust and efficient VAT system, COM(2010) 695, available at http://ec.europa.eu/taxation_customs/resources/documents/common/consultations/tax/future_vat/sec%282010%291455_en.pdf 102

Institute for Environmental Studies (2008) The Use of Differential VAT Rates to Promote Changes in Consumption and Innovation, Report for the European Commission Directorate-General for Environment, June 2008, http://ec.europa.eu/environment/enveco/taxation/pdf/vat_final.pdf; Eunomia (2011) A Comparative Study on Economic Instruments Promoting Waste Prevention, Final Report to Bruxelles Environnement, 16 December 2011.

http://ec.europa.eu/taxation_customs/resources/documents/common/consultations/tax/future_vat/sec%282010%291455_en.pdf

http://ec.europa.eu/taxation_customs/resources/documents/common/consultations/tax/future_vat/sec%282010%291455_en.pdf

http://ec.europa.eu/environment/enveco/taxation/pdf/vat_final.pdf

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A.9.4 Producer Responsibility

Another common area for policy proposals across the studies is in one or other aspect of producer responsibility. The range of proposals in this regard includes:

7) Recommendations in respect of provision of disassembly instructions and bills of materials. This information enables others to understand how to dismantle products with a view to repair and refurbishment, and what materials are in products (and how to recover them). This is in line with the recommendations of the European Resource Efficiency Platform (EREP) on ‘product passports’. Suggestions range from voluntary actions to mandatory disclosure based on a common methodology;

8) Two studies comment specifically on the need for the specification of collection and disassembly requirements for products containing critical materials, including expanding take back requirements to cover store delivery and internet retailers;

9) Another common request was for the use either of design codes to encourage reuse, for ease of dismantling, or the specification of collection and disassembly requirements, or requirements for products to be designed such that they were suitable for repair or remanufacturing. The level at which these are specified is usually very general, with less thought given as to how easy or difficult it might be to make such specifications in ways that do not hinder innovation;

10) Measures to address issue of intentional obsolescence, such as extended warrantee/guarantee periods, were also mentioned in two studies;

11) It was also suggested that producer responsibility schemes should be adapted to reward users of recycled materials by reducing their obligated tonnage. Little thought appears to have been given as to a) how this would be audited and b) what such an approach might imply for the existing compliance markets;

12) A shift away from recycling targets and towards those set either for reuse and recycling, or to include remanufacturing, was also proposed;

13) The desirability of strict Individual Producer Responsibility was mentioned; 14) Finally, reflecting approaches taken in the French packaging (and vehicle excise)

scheme, mention was made of the use of bonus / malus type arrangements, where specific products / packaging could be levied additional payments, or be given payment reductions, according to whether or not they were repairable, recyclable, amenable to disassembly, etc.

Whilst all of these clearly run in the right direction, many of the proposals have not been elaborated in any detail, and some are likely to be difficult to implement in anything other than a cumbersome manner. In particular, definitions of reusable, remanufacturable, etc. are unlikely to be straightforward to make, and will have to made for specific products.

The relevance of these for London is, we would suggest, partial. London could make use of information from reuse / repair organisations within its own boundaries to understand the ease of repair of some items, and whilst it might not be able to enforce

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standards across industry, it could use this as a basis for influencing procurement decisions.

A.9.5 Public Procurement

Although public procurement has the potential, as indicated in the comments by the Ellen MacArthur Foundation, to shift markets, relatively few of the studies reviewed gave it much prominence. However, some clearly recognised the potential power of this mechanism. Even so, it might be difficult for public sector bodies to justify (if only on cost grounds in some cases), purchasing only ‘resource-efficient and cradle-to-cradle products’, however these are defined. Another phrasing of the requirement was to: ‘require minimum disassemblability and recyclability standards for products, and specify that a minimum proportion of products come from a reused/remanufactured source.’ It would be challenging for one body, acting alone, to set such standards for the full range of goods and services it purchases unless information can be readily obtained through other sources.

One potentially interesting approach – to the extent that it does not already happen – is to ensure that goods and services are procured based on total cost of ownership. Products that have been designed for reuse and ease of disassembly may last longer because they are more easily repaired, and they may have a higher end-of-life value. To the extent that they are able, procurement systems should take these lower lifetime costs into account when choosing between products. This resonates with comments made in the stakeholder interviews.

Clearly, this is an area where London has the capability to act. As such, it should do so. The nature of the approach, however, should be carefully considered with due regard to value for money, not least given the expected further squeeze on public spending which is anticipated. As already noted, this is likely to require also some re-training of procurement professionals.

A.9.6 Support for Innovation

Various authors highlight the role to be played by innovation. The Green Alliance suggests that:103

the 'led by industry for industry' model is likely to encourage shorter time horizons, more incremental innovation and a focus on lower risk near-to-market opportunities. Existing industry is quite rightly embedded in solving today's problems. New technologies and business models for a circular economy are more

103

Green Alliance (2015) Circular Economy Scotland, January 2015, www.green-alliance.org.uk/circular-economy-scotland.php

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likely to arise from a focus on longer-term opportunities rather than existing business pressures.

IPS et al, therefore, recommend: ‘support further R&D and innovation (e.g. through the Horizon 2020 and COSME programmes, leveraging both public and private financing and building on existing efforts such as the European Innovation Partnerships (EIPs)’. Another study pushes for action at a European level to promote product-service models.

Clearly, this is an area where London can play a role. London is one of the leading regions for innovation in the UK, and has world-leading universities as well as design colleges and agencies.

A.9.7 Legal Framework / Regulation

Several studies appeal to the need to change specific regulations. Two areas of interest are in respect of:

1. Company cooperation, and the need to review the potential legal implications, related to competition law, of company-to-company collaborations. Some have proposed that the European Commission should clarify competition law to reinforce exemptions for environmentally beneficial co-ordination; and

2. The need to review definitions of waste. This issue was raised in our stakeholder interviews, there being some frustration at the fact that in the case of product service models, it might not always be clear that a product being taken back for repair / replacement might be classified as waste. One study suggested ‘risk-based enforcement of waste handling regulations to enable possible reverse loops, such as the Tesco TV take back scheme and the use of charity shops as WEEE handlers.’ The issue really becomes one of when products have genuinely been discarded, and there are already circumstances where it might be legitimate to argue that consumers are not so much ‘discarding’ as ‘managing their waste with the expectation that value will be derived from it’.

Other, less frequently cited regulatory changes were:

1. Allowing co-digestion of biodegradable waste in sewage sludge digesters; 2. Legally requiring recovery of phosphorus from wastewater (already mandated in

some countries); 3. Changing DEFRA guidelines for fruit and vegetable specifications used by food

retailers, if necessary getting derogation from EU restrictions 4. Introducing new targets on food waste prevention (as proposed in

(COM(2014)397) 5. Restrictions or selective bans (e.g. on landfilling of plastics or recyclable materials

as proposed in (COM(2014)397) 6. Developing quality standards for secondary materials to facilitate

commoditisation.

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7. Developing collection standards for reusability (implying that those involved in end-of-life collection systems for appliances should be trained to ensure that the way they handle appliances maximises reuse potential).

None of these represents an area where London could obviously take action under its own steam. It could, on the other hand, work with key stakeholders in London to improve collection services with a view to delivering higher quality materials for recycling, and facilitating reuse.

Some other suggested changes, of greater interest to London because of the role London could play, relate to buildings, especially new ones. In this respect, a number of public authorities have set standards which publicly funded projects need to meet. London could play a role in seeking to ensure that new buildings incorporate circularity within their design, either through procurement, or land-use planning, or a combination of the two.

A.9.8 Advisory Services

One of the studies recommended that support should be available to companies to help them improve resource efficiency. Another study suggested that support should be available to companies regarding alternative uses for their by-products.

This is an area where there is scope for London to take action. It could also move beyond conventional models of ‘resource efficiency’ and make the activities more ‘circular economy-relevant’.

A.9.9 Education and Skills

The emphasis on education and skills, within the studies reviewed, was somewhat weak. One study mentioned the need to increase education, especially in schools, on the environmental impacts and resource challenges of consumer culture, whilst another suggested a need for awareness raising campaigns among, for example, consumers regarding ways to reduce food waste, and among producers and local authorities.

Only one study highlighted a need to develop skills and training in the current and future workforce in respect of activities such as refurbishment or remanufacturing. The potential to do this through the European Social Fund was highlighted.

London’s Enterprise Panel has highlighted the need for the dissemination of new skills across the labour force if unemployment is to fall in London. There is a clear opportunity to tie in skills related to the circular economy within this broader framework of activity.

A.9.10 Infrastructure Planning and Investment

On infrastructure planning and investment, one study recommends the development of sector specific road maps using the industrial strategy model for government and

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industry collaboration, piloted through the delivery phase of existing industrial strategies. To some extent, this has already been reflected in the calls from various bodies for a new institutional set up for the management of resources within government.

Otherwise, recommendations have been made for improved collection infrastructure, support for the development of clusters within different parts of the EU, and support for industrial symbiosis and best practice platforms which connect companies and other actors, including municipalities.

Another study proposed systematically exploring the potential to use other EU funding instruments such as LIFE+, European Fisheries Fund, and the CAP, to support the transition to the circular economy, with investments that run counter to the circular economy being outlawed.

In respect of infrastructure, and planning for this, London clearly has a role to play. It can influence both the what, and the how. The Mayor’s Infrastructure Plan makes this clear.

A.9.11 Data

Surprisingly few studies focus on the need for better data. Only one of the studies reviewed highlighted the need to ‘increase knowledge and awareness of raw materials in each value chain.’ Given the absence of quality data in the value chain post consumption, rather more could be done than has been proposed.

London is in a position to understand this better than it does, albeit that it may not have all the tools to require the changes it might ideally ask for.

A.9.12 Summary

It is clear that London does not have the vires to implement all the above policies. On the other hand, if the transition to a Circular Economy is deemed to be sufficiently important, then London may wish to exert what influence it can in support of measures such as these.

In seeking to propose measures which may be appropriate for inclusion in a route map, we have considered the literature, the second workshop and the information gained from interviews to develop a list of policy proposals. In the next Section, we propose a series of measures which are focused principally on those that are in London’s gift to implement. We also suggest measures which London might support (or even lobby for) because they appear to have a strong, if not, pivotal role to play in driving forward a circular economy.

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Fiscal measures

Chatham House

Pricing in the externalities associated with resources and encouragement of minimal resource use, waste and pollution

Incentives for owners to put materials back into circulation - e.g. land-value taxes, value-extracted taxes and 'recovery rewards'

Removal of distorting subsidies on resources, energy and land

CIWEM (2013) - Easy Wins Reducing VAT on second hand or refurbished products (particularly electricals)

CIWEM (2013) - Big Wins

Shifting taxation away from labour to environmental impacts

Redressing environmental taxes to drive sustainable behaviour, especially VAT

Implementing a sufficiently high carbon price

PSI et al Fiscal incentives including taxes, charges and levies at the national or local level (e.g. taxes/charges on aggregates

or construction materials, products (e.g. phosphorous in mineral fertilizers), pollution (e.g. CO2)

TNO

Taxing extracted value instead of added value (a shift from taxing income to taxing materials)

Lowering the rate of VAT on services in the circular economy (maintenance, repairs, refurbishment, various product service systems

Subsidy schemes such as MIA and VAMIL only encourage purchases of environmentally friendly and energy-efficient appliances. It would be useful to explore the potential of these and other subsidy schemes to encourage circular behaviour, such as the shared use of appliances and other ways to reduce the use of raw materials

Review the effectiveness of a broad set of fiscal and financial incentives to promote circular behaviour

Creating contributions meant to extend warranty periods on products

Actively using financial resources from guarantee and disposal funds to further encourage business activity (although it is not up to the government to act on this)

Actively using financial resources from existing fiscal subsidy instruments promoting environmentally benign investments (MIA or VAMIL) for a broader series of investments or activities that would help increase circularity

Club of Rome

To move society towards sustainability – both socially and ecologically - would require a tax shift, lowering taxes on work and increasing taxes on the consumption of non-renewable resources in the form of materials and fossil fuels. Such a tax shift would accelerate the transition to a circular economy, which is low-carbon and resource-efficient in nature.

Parallel to that the system of VAT should be carefully analyzed. Goods produced by secondary materials – where VAT has already been paid once – should be exempted from VAT. Such a reform would promote the use of secondary materials – i.e. reuse and recycling – and help correct a situation where it is often less expensive to use

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virgin materials than recycled ones.

Yet another policy measure to consider would be so-called white certificates for the promotion of investments in energy efficiency. Such certificates could be traded on a market like emission rights or renewable energy certificates

Producer Responsibility

Chatham House

These are already applied in countries including the EU, Japan and South Korea, especially for consumer electronics, electrical equipment and vehicles. The focus should be on rates of remanufacturing and reuse.b

Used in Japan since the 1970s and now proposed for China, the 'top runner' policy sets minimum average energy performance standards for different product categories that tighten over time, encouraging innovation by manufacturers and removing inefficient goods from the market. For a CE, this approach could be broadened across other resources and adapted to ensure that the reuse and remanufacturing of products are incentivized.

CIWEM (2013) - Easy Wins Extending producer responsibility directives to recover critical resources

CIWEM (2013) - Big Wins Setting design codes to encourage reuse, for ease of dismantling or the specification of a minimum incorporation

of renewable content (for material efficiency)

PSI et al

Better integrate circular concepts (e.g. eco-design, extended producer responsibility (EPR) related legislation, requirements on packaging and packaging waste, labelling, reporting and accounting, REACH

Measures to address issue of intentional obsolescence (e.g. broad policy objective, extended warrantee/guarantee periods)

Green Alliance (Res Res UK)

Set collection and disassembly requirements for products containing critical materials. This could involve expanding take back requirements to cover store delivery and internet retailers

Make disassembly instructions and bill of materials data available. This information enables others to understand what materials are in products and how to recover them. This would be in line with the recommendations of the European Resource Efficiency Platform (EREP) on ‘product passports’. However, companies that have already started down this route have been those where the physical product is tangential to their primary business model. Examples include Google, which has made its Nexus 7 tablet repairable, and Facebook, which has adopted an open standard for its datacentres. Both companies make money from their software ecosystem, rather than their physical products

Use the collaborative approach trialled in the recent industrial strategies to increase voluntary disclosure of bill of materials and disassembly instructions. Working across a sector or supply chain derisks information disclosure

Require Environmental Product Declarations (EPDs) based on a unified methodology, such as the Product Environmental Footprint (PEF), across the EU, if businesses don’t voluntarily disclose bill of materials data. The prevalence of EPDs in the construction sector shows this is possible, but agreeing a common methodology is time

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consuming, and data collection may be expensive. As such, this should only be used as a backstop.

Adapt producer responsibility schemes to reward users of recycled materials by reducing their obligated tonnage. To increase demand for recycled materials, manufacturers that use such materials should be rewarded with a reduction in the weight of material they are required to prove has been recycled/recovered

Implement strict Individual Producer Responsibility

Require repairability, recyclability, disassemblability via ecodesign or incentives (bonus/ malus).

Set minimum reuse/recycling targets, such as those set through End of Life Vehicles (EoLV) legislation. Minimum reuse/recycling targets achieve the same ends as 'ability' metrics but in a more prescriptive way

Require modularity via ecodesign or incentives (bonus/malus).

Public procurement

Chatham House Obligations on public-sector agencies and government departments to purchase resource-efficient and cradle-to-

cradle products. In many countries this is a powerful lever for creating markets for more sustainable goods and encouraging innovation.

PSI et al Further action to encourage Green Public Procurement (GPP) can also be useful in incentivising more circular

procurement practices among public authorities.


Procure based on total cost of ownership (or pay more for circular products). Products that have been designed for reuse and ease of disassembly often last longer, are more easily repaired and have a higher end-of-life value. Procurement systems should take these lower lifetime costs into account when choosing between products

Set green public procurement rules specifying more circular products. Government buying standards should require minimum disassemblability and recyclability standards for products, and specify that a minimum proportion of products come from a reused/remanufactured source.

Public support for innovation

Chatham House Policy is crucial in setting the framework to encourage private-sector investments in innovation, for example in

new materials or supply-chain resource tracking.

Green Alliance (2015) (CE Scotland) Closed loop recycling, reuse, biorefining and remanufacturing should not need to be subsidised once scaled up

but, where there is competition for feedstock or finance, public policy should be adjusted to enable these technologies to compete

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While a connection to business experience is important for innovation to thrive, the 'led by industry for industry' model is likely to encourage shorter time horizons, more incremental innovation and a focus on lower risk near-to-market opportunities. Existing industry is quite rightly embedded in solving today's problems. New technologies and business models for a circular economy are more likely to arise from a focus on longer-term opportunities rather than existing business pressures

We see Scotland's industrial strategy for a circular economy essentially as an innovation strategy, grounded in a clear view of the country's characteristics and the global challenges that face its businesses. We stress the importance of institutions, and the connectedness needed to foster collaboration down supply chains and across sectors.

PSI et al Support further R&D and innovation (e.g. through the Horizon 2020 and COSME programmes, leveraging both

public and private financing and building on existing efforts such as the European Innovation Partnerships (EIPs),

TNO

Technology development for biorefining, biogas extraction and phosphate recycling;

Design for reuse and recycling;

Developments in the area of tracking and tracing of consumer products;

Promoting systems thinking (in terms of technology and economics); and

The development of appropriate new business models for a circular economy.

Club of Rome

Considerable efforts should be made at the European level to help stimulate the development of new business models – moving from selling stuff to offering high-quality services. Such business models – labelled as a functional service economy or as selling performance, rather than a product – are by far much more resource-efficient, less polluting and labourintensive than today´s linear economy

Addressing legal frameworks

Chatham House Review of the legal implications of company-to-company cooperation - e.g. anti-trust frameworks and data

protection and security.

Information / labelling

CIWEM (2013) - Easy Wins Setting up a cloud computing accreditation scheme

CIWEM (2013) - Big Wins Ensuring that advice and support is available to help SMEs identify and improve their resource efficiency and

sustainable use of raw materials

PSI et al Targeted information and advisory services (e.g. for companies on alternative uses for their by-products)

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Regulations

Chatham House Just as important will be the removal of any unnecessary regulatory obstacles to the use of 'waste',

remanufacturing and new business models.c

CIWEM (2013) - Easy Wins Setting minimum standards for recycled content in concrete and building materials

Co-digesting biodegradable waste in sewage sludge digesters

CIWEM (2013) - Big Wins

Legally requiring wastewater recovery for phosphorus

Changing DEFRA guidelines for fruit and vegetable specifications used by food retailers, if necessary getting derogation from EU restrictions

Mandating an increasing level of Code for Sustainable Homes or BREEAM for new buildings

PSI et al

mandatory product or process requirements (e.g. mandatory phosphorous recovery from sewage sludge

Review definitions of waste

New targets (e.g. on food waste as proposed in (COM(2014)397)

Restrictions or selective bans (e.g. on landfilling of plastics or recyclable materials as proposed in (COM(2014)397)

Club of Rome Resource efficiency targets for materials where scarcity looms or where the overall environmental impact of

resource extraction and use is significant


Require disclosure by companies of high impact risks on water, land, and materials use in company reports to investors.

Push the European Commission to clarify competition law to reinforce exemptions for environmentally beneficial co-ordination. See page 29 for details

Develop quality standards for secondary materials to facilitate commoditisation, such as PAS 141. The lack of an agreed standard for different grades of recycled material reduces reprocessors' willingness to pay higher prices for higher quality material as it has to be taken on trust. There is therefore little incentive to invest in improving the quality of recyclate. The government should work with industry in developing a set of agreed standards for secondary materials following a similar process as was used for the development of the PAS141 standard on reuse

Expand risk-based enforcement of waste handling regulations to enable possible reverse loops, such as the Tesco TV take back scheme and the use of charity shops as WEEE handlers. Waste handling regulations have been developed to prevent irresponsible and environmentally damaging disposal of wastes, but should also facilitate companies trying to use existing logistics systems to get products into reprocessing systems

Use landfill bans as the intervention of last resort for high volume, low value materials, such as textiles, food, and perhaps plastics. Landfill bans need to be accompanied by policies to ensure that materials are recovered, such as a requirement to sort, and be introduced with enough lead time to enable appropriate alternative infrastructure to

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be built

Develop collection standards for reusability. Poor handling of end-of-life products can limit their reuse potential. People involved in end-of-life collection systems for appliances should be trained to ensure that the way they handle appliances maximises reuse potential. As with quality standards above, the government should work with industry to develop guidance on how to manage WEEE collections to maximise reusability

Mandate quality sampling and reporting for recycled materials as part of the Materials Recovery Facility (MRF) Code of Practice. The MRF regulations should require MRF operators to sample the materials they send on to reprocessors and report on contamination rates. The sampling technique needs to be sufficiently robust to reassure reprocessors of quality and should be refined in the light of reprocessor feedback on quality if necessary

Use local authority association collaboration to deliver infrastructure at the right scale. Waste collection and processing is currently based around the geography and scale of the local authorities responsible for delivering the services. The system should instead be organised around the scale best suited to high value recovery. Such an approach is likely to deliver more value to local authorities, but may require higher upfront investment or more uncertainty about costs. Local authority associations, such as the Local Government Association, Local Authority Recycling Advisory Committee and National Association of Waste Disposal Officers, can help to match the processing systems with the characteristics of the materials by brokering collaboration between neighbouring authorities on collections systems and disposal infrastructure. Such collaborations would be helped by an analysis of what infrastructure is best for treating a material at a particular scale.

Education / communication

CIWEM (2013) - Easy Wins Increasing education, especially in schools, on the environmental impacts and resource challenges of consumer

culture

PSI et al Awareness raising campaigns (e.g. among consumers on ways to reduce food waste, producers and local

authorities).

Incentives

CIWEM (2013) - Big Wins Incentivising district heating to use much of the 60% of energy input to power stations that is currently not used

PSI et al PAYT schemes

TNO Ensure that frontrunners and others who stick their necks out receive a permanent and true advantage, for

example through value chain management

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Skills support

PSI et al Develop skills and training in the current workforce (e.g. on refurbishment or remanufacturing, skills of food

chain personnel) as well as in the future workforce (e.g. through young designer awards etc.) e.g. through the European Social Fund

Investment support

PSI et al

Support investments in infrastructure including specific infrastructure (e.g. centralised collection points) and better use of existing infrastructure/services (e.g. postal service for collection) e.g. through EU Structural and Cohesion Funds.

Public investment could also support clustering, industrial symbiosis and best practice platforms , e.g. EU Cohesion Policy funding could be used to set up 'facilitators' at regional/national level across European regions which connect companies and other actors including municipalities.

The potential to use other EU funding instruments such as LIFE+, European Fisheries Fund, and the CAP to support the transition to the circular economy should be systematically explored (e.g. to support cascading use of biological materials) as well as avoid or minimise EU funding of investments that go against the circular economy, e.g. investment in energy recovery from untreated waste.

Green Alliance (Res Res UK) Create sector specific road maps using the industrial strategy model for government and industry collaboration,

piloted through the delivery phase of existing industrial strategies. See page 29 for details

Data

TNO Increase knowledge and awareness of raw materials in each value chain

Club of Rome Everything from business models, product design and changes in the ecodesign directive to the greening of public

procurement and economic incentives

Business led


Work with supply chain to trace materials back to source, and register relevant risks on company risk registers. See page 28 for details. Understanding risks, by using Environmentally Weighted Material Consumption (EMC) for example, helps companies to understand which circular strategies cut their risks most. However, tracing supply chains is resource intensive, which may limit interest

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Collaborate in relation to high profile risks eg Roundtable on Sustainable Palm Oil. Where companies are aware of a material risk but there is currently no lower risk circular source of the material, they can work with suppliers to develop such a source or increase aggregate demand for such a source by agreeing a future procurement commitment with like-minded companies. There is a danger, however, this will only be done by very large, highly motivated single companies or in response to high profile campaigns

Procure based on total cost of ownership (or pay more for circular products). Products that have been designed for reuse and ease of disassembly often last longer, are more easily repaired and have a higher end-of-life value. Procurement systems should take these lower lifetime costs into account when choosing between products

Contract for long term supply and demand of secondary materials.

Own more of the supply chain eg Coca Cola and ECO plastics JV; Viridor remelt plant

Piggyback reverse logistics on existing systems, preserving the ability of products to be reused or repaired

Use standards for reuse and remanufacturing (such as PAS 141). To increase both business and consumer trust and demand for reused/remanufactured goods, companies should use certified processes that ensure their quality

Initiate dialogue to limit the use of materials, eg the Dairy Roadmap. This would be a brokered discussion following the same principles as those set out above on using industrial strategy type processes to increase the recyclability of materials on a sector by sector basis

scoping study for a route map to a circular economy … · dr dominic hogg thomas vergunst simon...

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