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Circularity needs to be an ‘opportunity, not a green squeeze’

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Published: 18 June 2021

The pandemic has rewired the way people think about their power as consumers. It has also supercharged ambitions for circular value chains and sustainable investment and trade in general.

This is what Impact Investor took home from discussions during last week’s European Development Days (EDD) session exploring new business models for a green and circular recovery.

Pamela Coke-Hamilton, executive director of the International Trade Centre (ITC), said the world is witnessing a “spike” in circular economy initiatives at policy level, led by Europe’s Circular Economy Action Plan and Green Deal together with the new consumer agenda empowering Europeans to be more active in the green transition.

But she stressed that initiatives in advanced economies can’t be created without considering producers in developing countries who have to comply with new standards on, for example, traceability and transparency.

Circularity needs to be an “opportunity, not a burden or green squeeze” that pushes developing world enterprises to the margins, she said.

Need for more international policy coherence

Parts of the green-growth ecosystem are thus going to need some attention. Greater coherence between local, regional and international policies and actions (fiscal, innovation, IP, tax et cetera) is a start.

And for this, governments need to further engage with different stakeholders such as financiers, incubators, accelerators and institutions capable of helping all regions benefit equally from green-growth opportunities.

Coke-Hamilton mentioned the importance of seed funding and impact investment instruments and the fact that many developing countries may lack essential green-tech skills.

Her organisation’s upcoming ‘SME competitive outlook 2021’ will highlight how climate resilience and good environmental management can help smaller businesses, in particular, deal with shocks like Covid.

How serious are we about a green post-Covid recovery?

To date, the $US336bn already spent by OECD countries on so-called ‘environmentally positive’ measures only represents about 17% of total Covid recovery investment.

“This means that 83% of this funding either does not consider environmental dimensions or, worse, reverses progress on some of them,” notes the OECD.

“If we are serious about transitioning towards a low-carbon economy, we are going to have to do better than this.”

Harmonising green standards is a priority

For its part, the EU is keen to ‘walk the talk’ with its new recovery and resilience facility, which offers €672.5bn in loans and grants to support reforms and investments, 37% for climate-related concerns and 20% for digital transition.

Right now some 18% is considered green, according to the European Commission’s Marjeta Jager, so there is work to do.

Better knowledge and a stronger policy framework that includes harmonised ‘green’ standards (ITC believes 400 currently exist worldwide) are considered a stepping stone.

Jager also wants to involve the private sector more in the switch to circular models and to mobilise different kinds of investment to achieve a “fair and just transition that leaves no one behind.”

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