The circular economy can benefit New York City by increasing potential revenues through circular solutions, reducing costs through greater resource efficiencies and enhancing productivity by maximizing the embedded value of goods. This is particularly relevant as the city and its businesses recover from the economic fallout of the pandemic, being forced to make resources go further and “do more with less.”
Many studies have shown the wider macro-economic potential of the circular economy, and the levers outlined here can help deliver this.
Extrapolating these numbers on a per capita basis for New York City means the circular economy could deliver benefits of between $11bn and $21bn, assuming a significant transition to the circular economy. A more precise figure would require bespoke research.
The City will continue to promote economic growth policies that tackle income inequality head-on by leveraging private-sector growth and the City’s own investments in technical assistance and workforce development to improve economic opportunity for all.
OneNYC 2050
In addition to driving employment benefits, circular procurement will also support business growth. In 2018 the City of New York procured goods and services worth $19.3bn.83 Applying circular criteria to a fraction of that spend would enable circular businesses to thrive and promote circular supply chains.
Circular procurement involves purchasers of goods seeking to maximize the lifespan of products through repair and reuse, and by repurposing or recycling items once they reach their end-of-life stage.
Circular public procurement is defined as “the process by which [public authorities] purchase works, goods or services that seek to contribute to closed energy and material loops within supply chains, while minimizing, and in the best cases avoiding, negative environmental impacts and waste creation across their whole life-cycle.”84
Using such a definition, circular procurement can deliver significant economic benefits by taking a “life cycle value” approach to procurement rather than a short-term, cost-driven approach. This is because in most cases the life cycle approach reduces operating costs by minimizing the use of energy and raw materials.
While there is not yet enough data to carry out a meta-analysis of the wider economic benefits of circular procurement, we can gauge its potential by using sustainable procurement as a proxy. According to the World Economic Forum, companies applying sustainable procurement practices can increase revenue by up to 20 percent, reduce supply chain costs by between 9 percent and 16 percent and increase brand value by between 15 percent and 30 percent.85
It goes without saying that the transition to the circular economy will require finance. However, accessing this capital is not straightforward because banks may perceive circular economy business models as unconventional, hence of uncertain credit risk, and may therefore be reluctant to engage. This demand for capital has seen the growth of alternative capital providers and innovative forms of financing, including the addition of circularity to use of proceeds criteria for green projects, under the Loan Market Association’s Green Loan Principles. For a more detailed analysis of the potential of finance to drive the circular economy, read more here in the Enabling levers section.
Planning can also play an important role in delivering economic benefits. One way is through the development of eco-industrial parks: communities of businesses located on a common site that seek to achieve enhanced environmental, economic and social performance by working together to manage environmental and resource issues.
According to a study by the United Nations Industrial Development Organization (UNIDO) that looked at 18 eco-industrial parks in seven countries, a total of over $7m of savings was achieved in one year. The sites involved 180 companies that between them identified 1,685 industrial synergy opportunities, delivering almost 1,000 of these. This resulted in a 21,000-metric ton cut in waste and a 60,000-metric ton reduction in greenhouse gas emissions.86
In 2016, Paris introduced a responsible procurement scheme with a strong emphasis
on the circular economy. The responsible public procurement scheme engages the city by creating an indicator to assess the environmental footprint of its purchases and new resource efficiency criteria for future procurement contracts. By 2017 39 percent of the contracts awarded by Paris’s finance and purchasing departments included a circular economy dimension and 61 percent of the contracts included an environmental clause and/or criterion.87
London, Toronto and The Netherlands all also have circular procurement policies in place, while in San Francisco the city government has adopted circular principles in its procurement criteria for carpets installed in municipal buildings and construction projects. These purchasing requirements, set into regulation, include that all future publicly procured carpets are cradle-to-cradle silver certified, use no polyurethane and include 45 percent recycled content.88
The ConstructNYC program provides exclusive opportunities to work on NYCEDC projects for small-to-mid-sized minority/women-owned and otherwise disadvantaged business enterprises. This could be expanded to businesses applying circular economy principles.
Mipo and Onsan Eco-Industrial Parks are part of South Korea’s Eco-Industrial Park
Initiative, which seeks to transform traditional industrial complexes into sustainable eco-industrial parks (EIPs). Firms in Ulsan Mipo and Onsan have invested some $520m in energy-efficiency measures, industrial symbiosis, waste management and other eco-friendly improvements. To date, the investment has yielded savings of $554m.
Spurred by government investment of $14.8m, companies in the parks cut their CO2 emissions in 2015–16 by 665,712 tons, reused 79,357 tons of water and saved 279,761 tons of oil equivalent in energy use. The investment also created 195 new jobs.89
Sixty-five billion tons of raw materials entered the global economic system in 2010, a figure expected to grow to 82bn tons this year.90 This increasing pressure on natural resources is leading to resource scarcity in several areas and presents a genuine risk to future economic growth. Minimizing waste and making the best use of materials available within existing products will help alleviate these pressures. Materials marketplaces, where used raw materials are traded, are one way to secure the long-term availability of these critical reserves.
By transitioning to a circular economy, the World Economic Forum has estimated there could be materials saving of over $1tn, from material reuse, recycling and upcycling.91 The Ellen MacArthur Foundation estimates that circularity in manufacturing could yield net materials cost savings of up to $630bn per year in the EU alone.92
For materials marketplaces to be effective in New York, several factors need to be in place. First, they require a steady supply of goods and materials, which would be facilitated by extending the markets beyond the five boroughs. Then, transparency of origin of the materials traded, possibly facilitated through blockchain. Finally, strong logistics, including reverse logistics, to facilitate access to – and distribution of – materials.
Loop is a partnership led by TerraCycle, the private US recycling business, that involves leading consumer goods brands including PepsiCo and Unilever and logistics partner UPS. It was developed to reduce reliance on single-use packaging by offering a convenient and circular solution to consumers. Through the Loop model, consumers can responsibly consume products in refillable packaging, which is collected, cleaned and reused. This generates consumer loyalty and a more regular revenue stream for the participating brands.
British entrepreneurs Elvis and Kresse have also created a successful luxury brand using only rescued raw materials such as used leather offcuts, coffee sacks, fire hoses and parachute silks, while preventing 300 tons of material from being sent to landfill.
80
LWARB, London’s Circular Economy Route Map (2015)
81
TNO, Opportunities for a Circular Economy in the Netherlands (2013)
82
Ellen MacArthur Foundation, Scotland and the Circular Economy
85
World Economic Forum, Beyond Supply Chains: Empowering responsible value chains (2015)
86
UNIDO, Eco-industrial Parks: Achievements and key insights from the global RECP programme 2012–2018
87
C40, Municipality-led Circular Economy Case Studies (2018)
89
World Bank, UNIDO and GIZ, An International Framework for Eco-industrial Parks (2017)
92
Ellen MacArthur Foundation, Towards the Circular Economy Vols. 1 and 2 (2013)
