I have always been fascinated by the regenerative capacity of nature, especially the human body. Couched in the paradigm of biology, the Encyclopaedia Britannica says:
“Regeneration, as one aspect of the general process of growth, is a primary attribute of all living systems. Without it there could be no life, for the very maintenance of an organism depends upon the incessant turnover by which all tissues and organs constantly renew themselves”.
Regeneration, however, is not limited to the realm of biology. One way of looking at the totality of all life on our beautiful world is that it is one vibrant organism that continuously regenerates, where the supposedly old and broken-down gives birth to something fresh and inspiring, where what we conceive of as wastes form the building blocks of new life, in a continuous sacred flow of formation and dissolution. Invariably this points to the idea of impermanence – that uncomfortable reality that all things pass, change form and give rise to the new.
Perhaps this is where the dominant economic system on the planet is out of step with the totality of life resulting in a linearity that simply takes-makes-uses-discards. It mirrors the strong desire to maintain a particular status quo, to grow indefinitely, to hold on for dear life (literally) highlighting the insecurity and fear associated with a sense of loss, having invested all identity into material forms and the psychological conditioning required to maintain that chosen identity.
This ‘scarcity paradigm’ lies at the heart of our psychological and economic structures and is most strongly visible in our scarcity-based money system as explained by author Charles Eisenstein in his book Sacred Economics. This paradigm also results in endless consumption in a bid to fill the systemic ‘not-enoughness’ it enshrines and more tragically, to mask or numb the feelings of a spiritual emptiness.
If what we create in the world is a sum-total reflection of our inner states, our paradigms, our feelings and our thinking then trying to fix the outer without addressing the inner is going about it backwards. Laying the foundation of a regenerative economy starts with a fundamental shift in paradigm. The Capital Institute outlines eight (8) principles of a regenerative economy based on a single core idea – that:
“The universal patterns and principles the cosmos uses to build stable, healthy, and sustainable systems throughout the real world can and must be used as a model for economic-system design”.
The eight principles are shown below:
In 2015, the Cambridge Institute for Sustainability Leadership (CISL) published the report Rewiring the Economy: Ten tasks, ten years, a 10-year plan to lay the foundations for a sustainable global economy. In the report, CISL identified the three most influential actors in economies – business (the engine), government (the steering) and finance (the fuel). These three actors working in concert can lay the foundation, not just of a sustainable economy, but a regenerative one. In this light, this article looks through the lens of these three actors – business, government and finance – and what kind of foundation can be laid by them, particularly in the context of the industrial economy i.e. the activities that combine factors of production to make manufactured goods for markets. Since my current work is related to the remanufacturing industry, the article provides some commentary on it.
Established in 1972, the Business Roundtable is an association of chief executive officers (CEO) of American companies. On August 19, 2019 it released a new Statement on the Purpose of a Corporation signed by 181 CEOs. This statement explicitly recognizes that business shares a commitment to all its stakeholders – customers, employees, suppliers, communities and shareholders – that each of these stakeholders is essential, and that the signatories are committed to delivering value to all of them. An analysis published in the Harvard Business Review says that this:
“…represents a very public rebuke of the Milton Friedman worldview that guides business decisions behind closed doors. Friedman, the renowned University of Chicago economics professor, penned a famous 1970 New York Times essay, “The Social Responsibility Of Business Is to Increase Its Profits,” that helped launch a half century of “shareholder capitalism.” In this worldview, the business of business is business, and the sole focus of the CEO is to maximize the profits of that business. The new statement by the Business Roundtable explicitly counters this view.”
This statement provides a momentary snapshot in time, and perhaps a crystallization (for now) of a stakeholder-centric worldview that has been emerging for quite some time in the business community. While the statement does not go as far as the eight principles of a regenerative economy do, there is certainly alignment between the two. The tremendous traction and visibility that circular economy adoption has been getting globally is a testament to this movement, captured in Principle 7: Robust Circulatory Flow.
Published in 2019, Business Models for a Circular Economy: Opportunities and Challenges from a Policy Perspective published by the Organisation for Economic Cooperation and Development (OECD) highlights five broad circular business models with key characteristics:
- Circular supply: Replace traditional material inputs with renewable, bio-based, recovered ones
- Resource recovery: Produce secondary raw materials from waste
- Product life extension: Extend product lives
- Sharing: Increase utilisation of existing products and assets
- Product service system: Provision of services rather than products. Product ownership remains with supplier
These are not exclusive models but can exist in concert with each other. Combined with Industry 4.0 the effect can be powerful. Remote monitoring of system performance and predictive analytics can forecast lifespan, efficiency and possible failures resulting in timely interventions before inconvenient or catastrophic outcomes. An overlooked aspect of localized circular economies is the immense job creation potential they have as well as a certain degree of supply chain resiliency, potentially providing some insulation against instances that involve extreme weather events or pandemics. Dozens of case studies of circular businesses can be found on the website of the Ellen MacArthur Foundation.
Just imagine merging product life extension, resource recovery and product service system models. Mobility services that utilize remanufactured parts and harvest materials at the end of life of the product. White goods that can be leased directly from OEMs so you are paying for the function (hours or air conditioning or number of wash cycles) while OEMs can remanufacture or harvest components and materials. The possibilities are endless.
According to Delivering the Circular Economy: A Toolkit for Policymakers published by the Ellen MacArthur Foundation:
“There are two broad, complementary policymaking strategies that can help accelerate the circular economy. The first is to focus on fixing market and regulatory failures. The second is to actively stimulate market activity by, for example, setting targets, changing public procurement policy, creating collaboration platforms and providing financial or technical support to businesses.”
The toolkit describes six (6) key policy interventions covering both strategies that governments can apply. These are shown below.
As an example, the policy initiatives implemented by China in relation to remanufacturing over the last two decades have shaped the industrial economy we see today in the nation. In a recent paper published in the Journal of Cleaner Production titled Overview of remanufacturing industry in China: Government policies, enterprise, and public awareness, the authors state that:
“Over the past two decades, [the] Chinese government has enacted a series of fair and sophisticated laws and regulations, thereby making significant contributions in helping and promoting the expansion of [the] remanufacturing industry.”
Notable government actions in China include the Circular Economy Promotion Law, the Regulation on Symbol of Remanufactured Products on Automobile Parts, the Swap the Old for Remanufacturing policy, and the Intelligent Remanufacturing Action Plan.
There is much to learn from this, especially for nations like India that are seeing shifting consumer expectations, and a manufacturing economy in transition. The Indian government is aiming for 25% of GDP contribution coming from the manufacturing sector and 100 million new jobs in the sector by 2022. Several government initiatives have been launched including the well-known Make in India scheme.
In the recent budget announcement for FY 2020-2021, a scheme is expected to be launched to boost electronics manufacturing in the country. But incentivizing growth in the manufacturing sector without considering the structure of the economy will this only add to the waste generated in a linear economy, like the e-waste crisis India is experiencing.
Sustainable public procurement (i.e. procuring and creating demand for, as well as confidence in sustainable products and services), creating or modifying laws that create an enabling environment for a circular economy, consumer education and awareness campaigns, and fiscal incentives are powerful catalysts to steer the economy into regenerative waters.
The world of finance is multifaceted. However, the role of finance here is discussed primarily as a fuel, in alignment with the Cambridge Institute for Sustainability Leadership (CISL) published report on rewiring the economy. This fuel is what gives forward momentum to the principled decisions made by humanity collectively to co-create a more beautiful, just and sustainable world.
This fuel has taken many forms, ranging from green bonds, Environmental, Social and Governance (ESG) investing to actions like the recent announcement by RobecoSAM on the launch of the RobecoSAM Circular Economy Equities strategy. According to RobecoSAM, “[t]he strategy’s investment objective is to achieve long-term capital growth by investing in listed companies that address the opportunities created by the paradigm shift in traditional production and consumption patterns toward a circular economy”.
While it is not a perfect indicator, one way of looking at finance and money in particular, is as a commonly agreed to measure of value. The phrase ‘shareholder value’ is one that is well known. However, what we consider to be of ‘value’ is what matters. Of the eight principles a regenerative economy, viewing wealth holistically, empowered participation and honouring place and community are perhaps the more undervalued elements in the contemporary financial system.
Our collective decisions must expend financial fuel on actions that not only restore ecological, economic and social harmony but also strive to systemically maintain that balance. And these actions must be stakeholder driven. In other words, every party should have a voice at the table as well as skin in the game.
A real-world example of this regenerative model is exemplified by an organization called Soil Capital engaged in regenerative agriculture. According to Soil Capital, “Regenerative farming restores the natural fertility of agroecosystems and captures more carbon than it emits. It produces nutrient-dense food, clean water and abundant biodiversity. It integrates agroecological practices such as conservation agriculture, organic farming, agroforestry, permaculture and holistic livestock management”.
Soil Capital’s services include farm management services, business & government solutions and investment advisory, including co-investment and they partners with farmland owners, corporates, governments, public institutions and investors. Imagine what we can accomplish by applying this thinking to every industry.
Author Charles Eisenstein suggests that:
“The present convergence of crises––in money, energy, education, health, water, soil, climate, politics, the environment, and more––is a birth crisis, expelling us from the old world into a new.”
In this birthing, it is time for us to take a hard look at how we can be midwives to the emergence of an industrial economy that is closed-loop, elegant, honourable and restorative.
To regenerate means to refresh, rejuvenate, renew, restore, revitalize. It implies the intention to maintain a system, an organism, in a state that enables all its parts to flourish and thrive. This can only be done when all the cells of the organism work in concert, when cell turnover and new cell creation are understood to be part of the natural order of things, when there is an implicit understanding of the interconnected nature of all life and when there is clear and constant flow of information.
A deep and felt sense of harmony with all life, an appreciation of beauty in all forms, reverence for our shared humanity and ultimately a change of heart are precursors to conceiving and bringing a regenerative economy to life. The circular economy framework, well-designed long-term policy interventions, wise investment and meaningful partnerships are undoubtedly important elements in this transformational journey.