Circular Economy: An alternative development pathway for India

An entrepreneur delves into the tremendous untapped potential of circularising the Indian economy to accelerate growth and job creation. In 2010, India consumed close to one-twelfth of the total raw materials extracted globally. Being one of the fastest growing economies globally, with a growing population anchored around an aspirational middle class and unprecedented levels of urbanisation, India will nearly triple its demand for primary raw materials to 15 billion tonnes by 2030 if it follows the current linear economy model of 'take-make-dispose' of resources. This untenable demand on resources underscores the imperative to build a new economic model - one in which growth is decoupled from resource utilisation and depletion. The Circular Economy model provides a framework to do exactly that, and its rigorous implementation can provide a crucial alternative pathway for India's development. The Ellen MacArthur Foundation's 2016 report identifies three key focus areas for the transition to circular models in India - cities and construction, food and agriculture, and mobility and vehicle manufacturing - with projected annual benefits of $624 billion by 2050. With the economy primed for strong growth in the coming years, the time to make an accelerated and systemic push towards a circular model is now, before we get locked into the current wasteful linear models that developed economies face. For instance, nearly 70 per cent of the building stock in India in 2030 is yet to be built, pointing to a massive opportunity for circularising the built environment ecosystem. In addition to addressing resource availability challenges and reducing negative externalities, circular models - for instance, remanufacturing of automotive parts - are also more labour-intensive than making new parts, offering tremendous potential for creating high-skilled jobs. This is particularly important for an Indian economy that faces increasing pressures to create a greater quantity and quality of jobs. Circular activities also offer scope to increase the competitiveness of export-oriented sectors in the country and can help achieve the climate change target of limiting temperature increase to 2 degrees Celsius. One of the foremost challenges in this transition to what is an appealing alternative economic model in theory, is a lack of comprehensive understanding on what the circular economy really is. Often zealously oversimplified to mean better recycling, the circular economy is actually the antithesis of the current linear 'Take-Make-Dispose' model. It is a model that is aimed at designing out waste, 'closing the loop' of resource flows in our economy, to endlessly regenerate resources and always keep materials at their highest value. Most crucially, it emphasises the need for a systems approach - the need to value interventions in the context of the entire system, to go beyond the idea of doing 'incrementally better' and prevent the unintended consequences that stem from tweaking one component of a system, without consideration for the other components that it will affect. In practice, these principles translate into a shift to renewable energies, smarter material choices and better design (modularity, design for disassembly etc.) to minimise waste, product life extension models including reuse, repair, remanufacturing and refurbishment, product as a service models, and end-of-life resource recovery and recycling. Meaningful measures towards the circular economy are beginning to take shape in India. On the waste management side, while EPR (Extended Producer Responsibility) rules for electronic and plastic waste are already in place, their implementation needs significant strengthening in order to have the anticipated impact. In a major step forward for Resource Efficiency (RE) and Circular Economy (CE) in India, the NITI Aayog, in collaboration with the EU Delegation to India, recently released the Status Paper and Way Forward on Resource Efficiency & Circular Economy. This spells out 30 recommendations for transformation to resource efficiency and circular economy in India, including the formulation of a National Policy on RE/CE, establishment of a Bureau of Resource Efficiency (BRE), and R&D for scalable technologies for RE & CE. Four sector-specific papers on resource efficiency in steel and aluminium, construction and demolition waste, and electrical & electronics sector have also been released. On the industry side, while several examples of circular models in action exist (particularly in the resource recovery phase), these are primarily interventions that make inherent economic sense in the short-term or at an operational level. Truly transformative and systemic changes that extend over the longer-term and require significant collaborations, capital investment, innovation and R&D (such as remanufacturing or redesign of products for economic viability of repair and recycling options) have been slow on the uptake. With industry bodies like FICCI and CII taking the initiative for knowledge sharing and capacity building in the circular economy space since last year, it is expected that industry-led transformation will start taking shape in the coming years. On the innovation front, enterprising start-ups are beginning to play a pivotal role in supporting industry transformation towards circularity. Banyan Nation, a Hyderabad-based start-up, has developed technology to produce near-virgin grade recycled plastic from post-consumer and post-industrial waste, and demonstrated its applications in closed loop recycling of automotive bumpers as well as shampoo bottles. However, rapid scaling of circular innovations like these will require a signal change from the linear ecosystems that they operate in. For instance, industry adoption of closed-loop recycling technologies like Banyan Nation's can be accelerated if there is concerted action towards standardisation of materials in products, as well as design for modularity or easy disassembly. Systems level transition to circular economy models in India is still a long way away. It will require an enabling ecosystem that can create better awareness, nurture disruptive technologies, create robust policy frameworks (including standards and criteria for recognising circular products and services) and innovative funding models. Particularly important considerations for the circular transition in India would be:

• Enabling a shift in perspective of Indian businesses to understand the Circular Economy as a framework for longer-term value creation, innovation and risk-management to mitigate 'Linear Risks'
• Clearly defining the value proposition from applying the circular economy model by conducting sectoral deep-dives that can evaluate alternate material flows and identify the best models of value creation
• Establishing mechanisms for pre-competitive collaboration amongst industry players and between industry and other stakeholders, similar to the global CE100 programme, that can become vehicles for building stakeholder consensus, spurring material innovation, testing and pilot of new business models etc.
• Building a robust innovation ecosystem for CE that is closely linked to industry, and that leverages on India's advanced digital technology capabilities
• Developing capabilities in the financial ecosystem to create funding models that can adapt to emerging circular business models (which will change corporate risks, cash flows and asset ownership equations) as well as provide patient capital to spur circular innovation.