Interview with keynote-speaker Niklas Nierhoff on Circular Economy and the cooperation between state and private sector
by Adeline Choo
With a fresh new team put together, GreenBuzz Bern revitalises itself to continue promoting global sustainability. Focusing on Sustainable Finance and Sustainable Regulation, the goal is to help innovation in business and industry.
Join us on 22 Oct 2020 for our launch event, with high profile speakers discussing Circular Economy transition, future regulatory changes and economic impacts. In the run-up to this event, we caught up with keynote-speaker Niklas Nierhoff, Scientific Officer, Economics Section, Federal Office for the Environment FOEN.
Dear Mr. Nierhoff, we like to start by asking what CE means for the FOEN, from a regulatory point of view?
Despite efficiency gains, Switzerland is currently far from achieving the sustainable use of resources. As a result of the rising global consumption of resources, climate stability and ecosystems are at the limits of their resilience worldwide. Switzerland is contributing to this with its high consumption of resources per capita. A circular economy can help to change this.
Approaches to a circular economy have existed since the 1980s: Switzerland is well positioned in the separate collection of packaging and recycling, and high-quality secondary raw materials are produced from this waste.
However, today’s understanding of a circular economy goes further. It is about (re)using products, materials and resources for as long as possible and preserving their value. But keeping products and materials in circulation is not the only goal. Half of global greenhouse gas emissions are associated with materials management activities. Hence, the goal should be to reduce the consumption of materials and energy, and thus reduce greenhouse gas emissions as well as other environmental impacts.
Strategies such as sharing, reusing, repairing and reprocessing usually require less energy and resource input than recycling processes, and are therefore very interesting from an environmental perspective. Right from the design phase, products must be designed to last for a long time, to be easy to reuse later, and to allow individual components to be replaced on a modular basis. This applies to products as diverse as smartphones and buildings. However, there are also measures that do not improve the life cycle assessment, or even have a negative impact on the environment because for example too much energy, chemicals or water is consumed during the process. This should be avoided.
What is the status of Swiss legislation on CE?
Important principles of the circular economy such as the sustainability, precautionary and polluter-pays principles are anchored in the Environmental Protection Act. The Waste Ordinance gives high priority to the avoidance, reduction and targeted recycling of waste. The priority is to prevent waste being generated in the first place. The circular economy goes beyond waste management and affects all sectoral policies.
Food accounts for around 30% of the total environmental impact of consumption, so circular economy approaches can be very effective here. One example is the avoidance of food waste. An action plan is currently being developed.
The revised Public Procurement Act, which comes into force in 2021, offers a great opportunity. With 41 billion Swiss francs, public procurement accounts for approximately 6% of gross domestic product. Through the sustainable orientation of demand, influence can be exerted on the supply side. In the future, federal and cantonal legislation will be harmonised, so that the same requirements can be used for the ecological performance of products and services.
The issues of a circular economy and resource efficiency are also being addressed by parliament, which has submitted various procedural requests on these topics in recent years. The parliamentary initiative “Strengthening the Swiss Circular Economy” by the Environment, Spatial Planning and Energy Committees (ESPEC) contains proposals for amendments to the Environmental Protection Act. The framework conditions for the recycling of waste receive a great deal of attention. However, the principle of resource conservation, taking impacts abroad into account, is also being discussed, as well as a platform.
Prompted by another procedural request – the Vonlanthen postulate on the opportunities for a circular economy – the Federal Office for the Environment has had the possible measures analysed. Three are currently being examined in more detail: the extension of the defects liability period, including a repair option (increased liability on the part of the seller in the event of defects); register solutions for securing property (relevant for service-based business models, such as lighting rather than lamps); and product declaration (informing consumers about repair options, for example, so they can assume their responsibility). Developments at EU level are highly relevant for Switzerland, particularly with regard to product declarations.
Furthermore, in June 2020, the Federal Council instructed the Federal Office for the Environment to submit supplementary proposals for measures to conserve resources and promote recycling by the end of 2022.
What would be the economic advantages for companies who introduce a CE strategy?
The research literature shows positive ecological and economic effects overall, including gross domestic product and employment. In concrete terms, production costs can be reduced by cutting material costs. In Switzerland, for example, this is demonstrated by the success of Reffnet.ch, a network that advises companies on resource efficiency. The advantages for companies are also reflected in their strategic positioning: by improving their position in the sales, credit, insurance and labour markets, and by reducing procurement and reputational risks.
What are the obstacles and challenges of CE for companies & how can they be overcome?
One obstacle that applies to all sectors and companies is the fact that primary raw materials are often cheaper than secondary raw materials. This is usually because prices often do not reflect negative social and ecological effects. The prices of primary raw materials and linear business models would become relatively more expensive if those costs that are currently borne by the public were factored in. The competitiveness of the circular economy would increase.
Due to this, and because of the high initial investment required, there is often no incentive from a business point of view to switch to circular business models. Added to this is the complexity of transformation processes as well as habits and well-established processes. Also, in many Swiss sectors, energy and raw material prices account for only a relatively small proportion of total costs compared to wages. As a result, the potential for savings is often relatively small in relation to the risk involved in transforming well-functioning production processes.
A further characteristic of the circular economy is the need for cooperation within and between value chains. The necessity of collaboration increases search and transaction costs compared to the linear business model. Moreover, product innovations in the sustainability sector are often more complex than traditional innovations as they usually lead to major technical and organisational restructuring within companies, which generally results in higher development costs.
In addition to these challenges, demand remains relatively modest. A change in consumer behaviour towards sustainable products and services is underway, but only slowly. Public procurement plays an important role here. However, consumers must also do their bit and influence supply through their purchasing decisions.
Furthermore, existing regulations can hinder the transition to a circular economy. In response to another procedural request, the Noser postulate, the FOEN is currently investigating regulatory and other obstacles to a circular economy and resource efficiency. The report will be published in 2021. Existing analyses show, however, that regulatory hurdles are often a matter of weighing up protected goods or legal objectives, e.g. pollutant content vs. recycling content.
Companies can address these obstacles in many ways. There are also various networks that enable an exchange of experiences with industry members, business partners, suppliers and research. In addition, companies can use the consulting network Reffnet.ch to obtain analyses and solutions or, with the support of environmental technology funding, drive forward innovations.
In the medium term, costs will decrease in many cases as a result of additional innovations, experience and economies of scale. To achieve a critical mass of supply and demand for the circular economy as soon as possible, cooperation between the state and the private sector, as well as ambitious targets and targeted funding, play an important role. In order to combine our forces, we need a common vision for the Swiss circular economy.
To help us lead good and healthy lives within the limits of our planet, this vision has to aim to regain climate stability and healthy ecosystems.
About Niklas Nierhoff
Niklas Nierhoff is a trained economist and has been working at the Federal Office for the Environment for about four years. He manages, among other things, the development of circular economy and resource conservation measures. These will be proposed to the Federal Council at the end of 2022. This project builds upon the green economy report published in June this year.