Potential of the circular economy - investing in the future
In January 2024, the globally active organization Circle Economy Foundation published its "Circularity Gap Report 2024". CURENTIS summarizes the most important results for you.
The circular economy, also known as the circular economy, is a concept that has become increasingly important in recent years. Given the pressing challenges of climate change and the need for sustainable development, the circular economy presents itself as a transformative solution that has the potential to generate both environmental and economic benefits. For finance, the circular economy offers not only an opportunity to invest in sustainable business models, but also the chance to actively contribute to reducing emissions and promoting global sustainable development.
What is the circular economy
The circular economy is a model that aims to minimize waste and maximize the reuse of resources by generating a cycle of materials. In contrast to the traditional, linear economy, which is based on the principle of "resource extraction, use, disposal", the circular economy promotes the reuse, repair, renovation and recycling of products and materials.
This makes it part of a resource-efficient, sustainable way of life and economy that promotes the implementation of the United Nations' 2030 Agenda for Sustainable Development and thus respects planetary boundaries. In a circular economy, raw materials are used more efficiently and waste is minimized. In this way, the circular economy strives for an ecologically sustainable, non-toxic and fully recycling economy.
The sustainability of the circular economy
By reducing material consumption and maximizing resource efficiency, the circular economy helps to reduce emissions and minimize environmental impact. According to estimates from the latest Circularity Gap Report 2024, the circular economy has the potential to reduce today's emissions by up to 40%. This would be a significant contribution to combating climate change and achieving global climate targets.
The most important findings of the report, which is based on scientific research, include
- Global material use: Despite the growing popularity of the concept of the circular economy, the use of primary materials has not decreased. In the last five years, around 500 billion tons of materials have been consumed worldwide - almost as much as in the entire 20th century.
- Reduction of emissions: The report predicts that the circular economy has the potential to reduce emissions by 40%. This would be a significant contribution to combating climate change and achieving global climate targets.
- Economic potential: It is foreseeable that economic growth in the circular economy will generate a large number of new jobs worldwide. In addition, the market for repair and reuse is estimated to have a potential of EUR 176.5 billion over the next 15 years, particularly due to the introduction of the EU's right-to-repair legislation in 2025.
- Different strategies for different countries: The report recommends different strategies depending on the income level of the countries. High-income countries should drastically reduce their material consumption, while middle-income countries should stabilize their consumption and low-income countries should increase their consumption to meet the basic needs of their population.
- Political and legal framework conditions: It is recommended to change the "rules of the game" in favor of circular practices. This includes incentivizing sustainable and circular practices by adapting laws and frameworks to promote these practices. In this context, it is recommended to rethink financing instruments and accounting standards to encourage investment in the circular economy and increase the prices of unsustainable products through taxation.
The role of banks in the circular economy
As with many aspects of sustainability, banks can be a major driver in promoting sustainable products and thus supporting the ecological transition.
By providing financing to companies that focus on developing and manufacturing sustainable products through the application of the circular economy principle, banks can contribute to the green transition. This refers to the transition to a modern, resource-efficient and competitive economy as defined by the EU.
Conclusion
Investing in the circular economy not only offers the opportunity to help reduce environmental impact, but also to achieve significant economic benefits. The Circularity Gap Report 2024 emphasizes the urgency of moving from discussions and debates to concrete actions to accelerate the necessary transformation towards a more sustainable, circular economy. However, even without regulatory requirements, financial institutions already have the opportunity to be at the forefront of investing in the future.
Are you ready for change, do you want to be kept up to date and are you looking for professional advice? CURENTIS AG will be happy to advise you on the implementation of your own sustainability strategy, including the introduction and implementation of an ESG review process for your business customers. This enables you to make sustainable lending decisions today.
More at: www.curentis.com/consulting/sustainable-banking
Sources:
https://www.circularity-gap.world/2024
https://reform-support.ec.europa.eu/what-we-do/green-transition_de
