What is the link between productivity, circular economy and the SDGs?

Published on 22 May 2017

Patrick Schröder

Research Fellow

Asia’s development over the last decades has been characterised by rapid economic growth, fast-paced development, urbanisation,and rising household incomes. Increases in productivity have been one of the main factors underpinning these trends, lifting hundreds of millions of people out of poverty. Since 2000, Asia’s productivity has been outperforming most other countries, contributing between 10-40% of national GDP growth in Asian countries.

The Asian Productivity Organization (APO) (“Making Tomorrow Better Than Today”) is probably one of the intergovernmental organisations that is less known among the Western development community. With its headquarters based in Japan, established on 11 May 1961 as a regional intergovernmental organization, the APO’s mission is to contribute to sustainable socio-economic development through the promotion of productivity. The organisation has been an important player and made substantial contributions to the success of socio-economic development in Asia over the last decades.

Vietnam getting serious about climate and SDGs

I must admit I hadn’t had any direct dealings with the APO before I was invited to join their 2017 International Environmental and Economic Forum, a conference on the topic of “Action for the Future and Moving Toward a Virtuous Circle for Sustainable Development”. Hosted by APO’s local partner,the Vietnam National Productivity Institute, in Ho Chi Minh City from 11-13 May, the event brought together a wide range of experts, policymakers,businesses and development professionals from across Asia to discuss green transformations and sustainable industrialisation.

The conference was held in parallel with the 11th Eco-products International Fair (EPIF) 2017 at the Saigon Exhibition &Convention Center, where Japanese and Korean private sector firms displayed a staggering array of cutting-edge environmental technologies, ranging from water purification equipment, composting toilets, energy data management and visualisation software, biodegradable plastics, eco-paints, solar and LED lighting products, to name a few. That not being enough, during the same week, the Inter Parliamentary Union and the National Assembly of Vietnam held a high-level political forum entitled “Responding to climate change – Actions of legislators to achieve the Sustainable Development Goals”. I’m more convinced than ever that Vietnam and other Asian countries are taking the issues of climate change, sustainable development and green transformations very seriously.

But how does this relate to productivity?

In this context of sustainable development and global environmental change, promoting productivity is a key issue. Productivity gains have been vital to economic development, as they mean that more is being accomplished with less. Conventional productivity gains are achieved by raising labour productivity (making people work harder) or through technology upgrades (using machines to replace workers altogether).

For green transformations which aim to decouple the direct connection between human wellbeing, resource use and environmental degradation, the issue of improving resource productivity becomes increasingly important. Resource productivity is the quantity of a good or service that is obtained through the expenditure of a unit of resource. This can be expressed in monetary terms as the monetary yield per unit resource (e.g. $ per kg).

Japan – setting the example for resource efficiency

For most Asian countries there is huge potential to improve productivity by using resources more efficiently. According to the United Nations Environment Programme, Japan uses only 0.3 kg of materials per 1 dollar of its GDP, compared to 6 kg in China, 4 kg in India and 9 kg in Vietnam – these are low hanging fruit for sustainability efforts and huge business opportunities for (Japanese) companies with efficient technologies!

One reason Japan has achieved so much in terms of resource productivity, is the country’s early adoption of circular economy principles such as the 3Rs (reduce, reuse, recycle) and cradle-to-cradle design. Also the EU is taking similar steps towards resource productivity through increasing circularity of the economy. Europe could grow resource productivity through circular economy practices by up to 3 percent annually, which would generate a primary-resource benefit of as much as €0.6 trillion per year by 2030. For Asian economies the circular economy potential for resource productivity is possibly even higher; I would estimate it to be in the order of 4-6 percent per year.

Circular economy in developing countries – a “toolbox” for achieving the SDGs

The role of the circular economy in developing country economies is not yet well explored. So I was asked by the APO to present the findings and recommendations of the “Virtuous Circle” report, which I co-authored last year with Richard Gower from Tearfund. Our main messages were that the circular economy in developing countries can increase productivity and economic growth, improving the quality and quantity of employment, and save lives, by reducing environmental impacts such as water and air pollution.

One of the interesting insights gained is that the circular economy requires a systems thinking approach. This approach, in many cases, does not require expensive technology fixes, which might be out of reach for low- and middle-income countries. Furthermore, the circular economy can be used as a “toolbox” to address challenges and targets set under the SDGs, which can be applied by governments, development practitioners, businesses or NGOs. In the circular economy toolbox are a number of specific practices to address pressing problems such as municipal or industrial waste, air pollution, lack of sanitation, low energy efficiency or water contamination.

In addition to the various case studies we collected for the report, I presented ten priority SDG targets for the circular economy (see list below). My point here is that, without applying circular economy practices in these sectors, it will be very hard or even impossible to achieve these specific targets.

10 Priority SDG targets for the circular economy

2.4 By 2030, ensure sustainable food production systems and implement resilient agricultural practices that increase productivity and production

3.9 By 2030, substantially reduce the number of deaths and illnesses from hazardous chemicals and air, water and soil pollution and contamination

6.3 By 2030, improve water quality by reducing pollution, eliminating dumping and minimizing release of hazardous chemicals and materials, halving the proportion of untreated wastewater and substantially increasing recycling and safe reuse globally

7.3 By 2030, double the global rate of improvement in energy efficiency

8.4 Improve progressively, through 2030, global resource efficiency in consumption and production and endeavour to decouple economic growth from environmental degradation, in accordance with the 10-year framework of programmes on SCP, with developed countries taking the lead

9.2 Promote inclusive and sustainable industrialization and, by 2030, significantly raise industry’s share of employment and gross domestic product, in line with national circumstances, and double its share in least developed countries

11.6 By 2030, reduce the adverse per capita environmental impact of cities, including by paying special attention to air quality and municipal and other waste management

12.2 By 2030, achieve the sustainable management and efficient use of natural resource

12.5 By 2030, substantially reduce waste generation through prevention, reduction, recycling and reuse

14.1 By 2025, prevent and significantly reduce marine pollution of all kinds, in particular from land-based activities, including marine debris and nutrient pollution

Source: United Nations

Many of the SDG targets above explicitly aim for higher productivity and more efficient use of resources. Take, for example, target 8.4 “Improve progressively, through 2030, global resource efficiency in consumption and production and endeavour to decouple economic growth from environmental degradation, in accordance with the 10-year framework of programmes on SCP, with developed countries taking the lead.” Circular economy “tools” such as the 3Rs, repair, remanufacturing and industrial symbiosis will be key solutions.

Circular economy practices are not only relevant to industry and manufacturing. Take SDG target 2.4 “By 2030 ensure sustainable food production systems and implement resilient agricultural practices that increase productivity and production, that help maintain ecosystems, that strengthen capacity for adaptation to climate change, extreme weather, drought, flooding and other disasters, and that progressively improve land and soil quality.” Circular economy approaches have much to offer to regenerative agricultural practices of restoring soils and using biological waste as fertiliser.

We will be discussing these issues in more detail here at IDS during our upcoming conference “Sustainable lifestyles, livelihoods and the circular economy” from 27-29 June 2017. The registration for the event is still open.

The views expressed in this opinion piece are those of the author/s and do not necessarily reflect the views or policies of IDS.

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