Investment in Circular Economy in India Creates Benefits for All

A circular economy development path in India could create annual value of rupee 14 lakh crore (US-Dollar 218 billion) in 2030 and rupee 40 lakh crore (US-Dollar 624 billion) in 2050 compared with the current development scenario. By adopting circular economy approaches, businesses could achieve material cost savings and increase their profits by lowering virgin water consumption, greenhouse gas emissions, transportation kilometers travelled and synthetic fertilizer and pesticide use. These are the key announcements of a new report on “Rethinking Growth for a Long-Term Prosperity“ released by the Ellen MacArthur Foundation.

The study identifies circular economy opportunities in three focus areas: cities and construction, mobility and vehicle manufacturing as well as food and agriculture. These areas cover the largest industrial sectors in terms of employment (agriculture and construction) and growth expectations (construction and vehicle manufacturing). The analysis investigated two development scenarios in 2030 and 2050 – the current development path and a circular development path. Both scenarios take into account projected increases in population, urbanization, and social shifts. The circular economy has to follow three principles. The first is to preserve and enhance natural capital by controlling finite stocks and balancing renewable resource flows to face for example pressing challenges like droughts, waterborne diseases, water contamination and soil degradation. The second is to optimize resource yields by circulating products, components, and materials at their highest utility at all times including amongst others materials consumption, nutrients loss and wasting of products and materials. The third principle stipulates to foster system effectiveness by revealing and designing out negative externalities of economic activities including land degradation, pollution of air, water and noise, release of toxic substan­ces and GHG emissions.

Buildings as material banks   

India must build 700 to 900 million square meters of new commercial and residential space every year. That opens opportunities to design buildings for material, water and energy efficiency. The study votes for an industrialized production, modularization, and standardization of components that can cut the time, cost, and materials consumption of construction and enable rapid building of affordable housing. For the construction sector the selection of regionally appropriate, renewable, non-toxic materials and retaining construction materials at their highest value is proposed. These technologies also support the use of buildings as material banks – identifying materials for reuse after building use ends and capturing value by keeping materials in tighter loops. The building design could include water-efficient fittings, rainwater capture, greywater cycling systems and wastewater solutions from the start and could be coupled with renewable energy resources.

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Concerning the treatment of solid waste in Indian cities, the review suggests the informal sector to provide a starting point for developing effective reverse logistics to help create material flows addressing social challenges. But the informal sector workers typically collect non-organic waste at high-value, but leave low-value materials and organic matters largely discarded and untreated: Informal recycling activities are reported to handle a total of 4.7 million tons of plastics per year, while only 0.2 million tons are collected and recycled via public waste collection systems. So for non-organic waste, systemic initiatives can provide inspiration. The New Plastics Economy Initiative for instance is collaborating along value chains to close loops on plastic packaging.

According to the study, effective collaboration among suppliers, manufacturers, retailers, users, governments, and the informal sector could improve the management of nutrient and material stocks and flows. Overall, following a circular economy development path would generate annual benefits of rupee 4.9 lakh crore (76 billion US-Dollar) in 2050, compared with the current development path. Resource use in the construction of new buildings would also fall, with 37 percent less virgin, non-renewable materials needed, 24 percent less water consumed, and 18 percent less inner city land used in the circular scenario compared with the current development scenario.

Vehicles designed for reuse, remanufacture and recycling

The proposals for a circular economy development in India for this sector include the use of electric vehicles, car-sharing schemes, autonomous driving and smartphone apps offering route and transport options by taking into account traffic and weather conditions. Transport planning would diversify transportation modes and develop a multimodal system optimized by new technologies. Another focus lies on a high vehicle durability established by designing cars that can easily be maintained, repaired and kept in longer use. Designing vehicles for reuse, remanufacture and recycling closes loops of components and material. Vehicle manufacturers would develop new business models and revenue streams to profit from designing long-lasting, upgradable, and efficient vehicles. Manufacturers could collaborate with those currently handling repair and recycling, such as the informal sector, and would design vehicles for longer use and easier remanufacturing and recycling. Coupled with circular business models, such as a car as a service and not only as product, are estimated as even maximizing value capture for businesses. The scheme creates the necessary reverse logistics networks and gives manufacturers a reliable and economical supply of raw materials. Following a circular economy development path for mobility and vehicle manufacturing could generate annual benefits of  rupee 31 lakh crore (482 billion US-Dollar) in 2050, compared to the current development path. Following the circular path would also reduce negative environmental impact, with 68 percent less GHG emissions from transportation and vehicle manufacturing and 82 percent less consumption of virgin materials. Per capita spend on mobility would decrease 50 percent.

71 percent less used fertilizers

Summed up, the study says that applying circular economy principles to the development of the Indian food system could create annual benefits of rupee 3.9 lakh crore (61 billion US-Dollar) in 2050. Digitally enabled machinery- and knowledge-sharing solutions as well as digitized food supply chains transmitting accurate market information could reduce GHG emissions, water usage and environmental degradation and furthermore play a vital role in securing the long-term food supply. Quantified, the benefits consist in 31 percent less GHG emissions from agriculture, 71 percent less use of synthetic fertilizers and pesticides, and almost halved water consumption for irrigation. The spend on food would be 19 percent lowered per capita.

Cash-out cost apparently lower

Investigating the benefits of a circular economy development path in the construction sector, the review balances a reduced consumption of virgin, non-renewable materials by 25 percent in 2030 and 38 percent in 2050 compared with the current scenario. This could be possible by relying more on renewable material and the recycling of construction and demolition waste, rather than bricks, steel, and concrete made from virgin, non-renewable input. Applying circular economy principles in the mobility sector would similarly cut energy consumption in transport – 33 percent in 2030 and 66 percent in 2050 – and reduce the use of virgin materials in vehicle production. Energy consumption would likewise be lowered 24 percent lower in 2030 and 41 percent lower in 2050.

As mentioned before, the cash-out cost in the three focus areas would be rupee 14 lakh crore (218 billion US-Dollar, 11 percent of India’s GDP) lower in 2030 and rupee 40 lakh crore (624 billion US-Dollar, 30 percent of India’s GDP) lower in 2050, compared with the current scenario. This would decrease the cost for households: The expenditure per capita to meet the same level of mobility would be lowered 24 percent in 2030 and 50 percent in 2050.

In summary, the study shows that the circular economy offers attractive opportunities for both businesses and financial institutions: “Companies could moreover scale back investments in linear business models to avoid risks of exposure to greater market volatility and stranded assets“, although the value of investment requires detailed analysis. As recently reported, an investment of 320 billion Euro in a circular economy in Europe would be necessary, but achievable with modest policy and industry action. “The opportunities for India outlined in this report require similar analysis to determine the right investments to make and the political and industrial action required to benefit from them“, the review reasons.

The full report Ellen MacArthur Foundation, Circular Economy in India: Rethinking growth for long-term prosperity, 2016, can be downloaded under

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