The link between circular economy & sustainability- a case with H&M

This morning, I introduced the case we will be working on this autumn on my course at the Norwegian School of Economics (NHH): managing business towards a circular economy and sustainability. The case is in partnership with H&M who is also a partner of the Ellen MacArthur circular economy initiative.

As I’ve written about before, I was not an early adopter of the circular economy. I do, however, teach circular economy as a trend in the sustainability area both at Örebro University and NHH. The more I reflect on the concept, the more of a convert I’ve become. So I thought I’d share some of my aha-moments about the circular economy and sustainability with you here.

First of all, what do we mean with sustainability? The established definition is from the UN Brundtland report (1987):

Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs

As Kuhlman & Farrington (2010) (one of our key references in the NHH course) writes, this sustainability definition addresses the tension between mankind’s aspiration towards a better life on the one hand and the limitations imposed by nature on the other hand. This tension between social welfare and natural resources is more often than not ignored in the business debate on sustainability. We often pretend it does not exist. And of course, there are many win-win situations where environmental or social measures also bring down costs and/or increase income.  There are definitely low hanging fruit, efforts that are win-win or at least come at no cost.

However, there are cases where tension between social well-fare and environmental sustainability undoubtedly exists. The pharmaceutical industry is a prime example. The industry argues that it provides tremendous social benefit by saving lives (or at least reducing suffering) but the environmental pollution, especially chemical and water pollution, is high, both at production  and consumption sites. Why do such tensions between social well-fare and natural resources occur?

Operating in a closed system

Some of you might have heard about the Planetary Boundaries. Professor Johan Rockström and co-authors defined nine environmental boundaries we should stay within to ensure a stable living environment (see picture, borrowed from the 2015 article). What this figure tells businesses is that we are operating in a closed system. If we mismanage certain environmental resources, such as biodiversity and chemical pollution, we cannot compensate for these in other ways. If we cross these, there is no functional living environment we can operate within.

 

Why a linear business model does not work in a closed system

Now the problem with a linear business model (which most businesses have and what we often teach students) is that it treats input to businesses (and its outputs) according to the value chain- the business uses certain input and through a number of processes produces some outputs. These inputs, resources, the business uses appear to just exist. The environment is there for us to use and not affected by our use. Likewise, outputs and externalities from our production  just go somewhere. However, as the 1990 chapter on circular economy by Pearce and Turner states, eventually the waste we produce will affect the availability of new resources. And the accumulated waste affects our well-being too. The fact that business operates in a closed system has to be taken into account. Certainly for global businesses.

Now from the planetary boundaries perspective, the best would of course be to minimize consumption and for us to produce less in order to spare the environment and stay within the boundaries. This is in line with the minimalism and anti-consumerism movement. If we consume less, we do not need to produce so much. We can share, mend and repurpose etc. This is admirable and has a place, especially in societies with overconsumption. It is my approach to my own wardrobe situation. However, at this point in the debate, someone will throw in the argument that we cannot deny developing countries the same social benefits we have allowed ourselves. If we have been flying for decades, why shouldn’t they be able to?

Kate Raworth, with a background at Oxfam, illustrated this pedagogically in her ‘Doughnut Economics‘. It is a fact that there are large groups of people that are not getting their basic needs met. And to achieve progress on this point will in many cases require use of natural resources. Here, the tension between the social development and the availability of natural resources the Brundtland report sought to address is very clear.

Consequently, Raworth put those basic social needs into Rockström’s figure, in the middle, to illustrate that we want to maximize the social well-fare of people while at the same time staying within the planetary boundaries. We want to operate, she argues, within the green ‘doughnut’ formation in the figure.

Sustainability is getting the maximum social value while staying within the planetary boundaries

Working along the lines of minimizing and restricting consumption can, at least in some cases, thus deny us social value. Similarly, what many sustainability-minded businesses do is to try to minimize the waste and externalities from production. To reduce the ‘shadow’ of business, make them ‘tread lightly’ on the environment. There are many impressive initiatives with zero waste factories and water reduction regimes. These are all good, no doubt about it. We need these kinds of initiatives. However, the circular economy further adds that ‘waste’ should not simply be removed but could also become a resource for us to use. It’s a fact that we need some amount of production and that it uses resources and that there will be some amount of waste. What can we do with the remaining waste? How can we turn it into resources?

As this post is long enough, I will simply have to write about the challenges with making waste into circular resources in a follow up post. Still, I hope you see, like I do, why there is a case for circular business in a sustainable society. And I’m so excited about our case with H&M and what the students will come up with.

A second year of no-shopping?

At the end of a year of no clothes shopping,  I concluded on this blog that I would not be able to continue another year. Despite ending the year with ca 540 items in my wardrobe, I saw ‘needs’ that meant that I would have to resume shopping this year.

Five months into 2018 and it turns out I was wrong. There have not been any urgent needs that I have had to address. Sure, I am running low on nylon stockings (but still I’ve managed 1,5 year using only my stash!). The boots are getting worn but they are still fine with a bit of leather balm. Clearly, I overestimate how much I wear items. In this part of the world, seasons change so fast so clothes/shoes are used only a few times before the weather is too warm/cold and the items get stored away again. The wardrobe gets worn oh so gently.

A friend asked how much time I spend mending. Yes, mending takes time. In fact, I’ve kept track of how much time I’ve spent mending the last four months. As a general pattern, I mend more when I have time to do so and less when I’m too busy. Only natural. What happens when I’m busy is that I get professional help with the mending and I’ve kept track on that too this year. So far it looks like this:

February: 32 min mending, no professional help

March: 15 min mending, professional help SEK 1600 (including mending,  dry cleaning & shoes repair)

April: 10 min mending, professional help SEK 2600 (including dry cleaning & sewing)

May: 1,5 h mending, no professional help

So I don’t spend a lot of time mending, but when I do I get a lot done (17 mends overall). I had five occasions of professional mending/sewing to a totalt cost of SEK2500. Two instances of shoes repair to a total of SEK 500.

From a financial perspective, it makes sense to mend things yourself. It’s fast and cheap. However, in very busy times, it might make sense to get help and save the stress of possibly not having the clothes ready for when you need them. I get help with mending and sewing from my dry cleaner and yes the cost adds up. Above all, less dry cleaning would save both the environment and my wallet. In once instance, I successfully avoided the dry cleaner by washing outerwear in the washing machine, after realising that it was mostly cotton and thus supposedly washable despite the label saying dry cleaning. Shoes repair I’m happy to leave to the professionals at all times.

I’m also happy to report that almost half way through 2018, my wardrobe is  minus 2 items. I went plus 8 when I inherited some clothes, mostly outerwear, from my great-aunt. In addition, since January, I’ve worn out 10 items (mostly basics). Since I don’t expect to suddenly inherit more clothes (fingers crossed!) and if I successfully keep other temptations at bay, I hope the wardrobe content will decrease even more. I am, as we speak, selling a pair of hardly worn Converse All Stars on auction site Tradera. That’s another minus one.

So to sum up, my commitment this year was to adhere to Sara Lazarovic’s ‘Buyerarchy of needs’ but so far I’ve stayed at the bottom, in the category ‘Use what you have’. Which means that I’ve now managed 1,5 years without wardrobe shopping and, since the start, reduced my wardrobe with six items. It’s safe to say that I will never have a minimalist wardrobe. And that’s not the issues here either. I love my clothes. I just need to wear them instead of getting new ones all the time.

2018, the year flying becomes uncool

My prediction for 2018 is that this is the year when flying becomes ‘uncool’. Admitting you’re frequent flyer gold status will become embarrassing.

We already see the early signs. Deputy Science Director at Stockholm Resilience Centre, Henrik Östblom, tweeted happily that he had been downgraded by two air miles programs this year. Swedish sport stars Björn Ferry and Heidi Andersson have stopped flying entirely, despite the fact that they live far up in the Swedish North. Björn Ferry even declined to report from the Olympics because of the required flights.

Why are people making a fuss about flying? In the case of Heidi and Björn, they try to live as climate friendly as possible. After filling in the Swedish Environmental Institute’s ‘climate account‘ they discovered that the absolute biggest impact they had on the climate was transport and particularly flying. So they got an electric car and quit flying. Pretty hard core and quite admirable.

Inspired by these people, I also filled out  the climate account and, as expected, almost all of my climate impact derives from flying. And this is after I already limit my flying to within Europe. This year, I have skipped conferences outside of Europe. Still the footprint from flying is high and much higher than the average person on earth.

Researchers propose that our total carbon footprint should be around 1-2 tonnes per person and year, that’s one return trip to Thailand.

When they compared the impact of car traffic with flying in Stockholm, the flying habit had much larger impact on the climate.

What about climate compensation? It’s not evident that we can compensate fossil fuels, that have accumulated during a very long time with carbon in trees and plants that have much shorter time horizons in the carbon cycle. Thus it’s a practice that has been criticized by researchers. The environmental NGOs disagree on the value of climate compensation, Naturskyddsföreningen is critical to it whereas WWF support the gold standard.

Will we have to quit flying permanently? Maybe not. On the optimistic side, Norwegian airports are starting to offer renewable jet biofuel, for example at Bergen airportThis is very promising, although Swedish airports, unfortunately, are far behind. 

Despite the promise of jet biofuel, the amount of flying and how it’s increasing remains a problem. Our flying habit has exploded the last decades.  Even if we replace all the jet fuel at Swedish airport with renewable ones by 2030, this only compensates for the expected increase in flying i.e. our overall carbon footprint will remain the same as today.  Thus we cannot increase our flying, as we have done the last decades, in the future. And until jet biofuel is the standard, we should simply avoid flying. If we want to save the climate.