Economic system encourages waste and slows transition to circular economy – report

A new report says the country’s current financial system is fraught with barriers that are slowing the transition to a circular, low-carbon economy.

The economic system encourages extraction and waste, a new report points out.
Photo: RNZ

The joint report by the Sustainable Business Network and consultancy Grant Thornton said that for years economies had been built around the extraction of resources from the Earth and the profits generated were seen as the measure of success.

He said the current financial paradigm incentivizes a linear, take, make, waste system because it is cheaper than a circular economy, where products and materials are kept out of landfills and given new life again and again. Again.

Michael Worth, head of sustainability and impact at Grant Thornton, said companies won’t move from a linear model until their sustainably produced products can compete at checkout.

“So we have to tilt the playing field the other way.

“Current regulation, taxation and accounting practices do not provide the carrots and sticks needed to support a circular economy, but there are very effective ways to incentivize companies to adopt circular business models.”

The report suggests the first step towards a circular economy required a more pragmatic approach from the government, which had been “slow” in its progress so far.

“The government should exercise its power to impose financial rewards and penalties to accelerate the right attitudes and mindsets needed to nurture and grow a circular economy,” he said.

This could include implementing the recommendations of the Tax Task Force, such as increasing the coverage and rate of waste disposal taxes, promoting the use of congestion pricing or examining other options, such as a tiered tax rate for circular businesses, taxes on the use of “virgin materials” and rebates for businesses that support environmental protection/reclamation.

He also suggested that the government may need to step in to help build “an ecosystem to support circular business models” which rely on the sale and purchase of second-hand materials for disassembly, refurbishment, repair or reprocessing.

The report mentions a manufacturer who said he could sell salvaged materials from his production lines, but that there was no “common infrastructure” to operate at scale and that building this system at starting from scratch would represent a huge investment for a company.

Throughout the report, a prominent theme was that the concept of value needed to be redefined in the context of a circular economy.

The current era has been criticized for measuring economic success by growth in profits, emphasizing ownership rather than sharing, and for treating the repair or reallocation of products as a cost rather than a retention of value.

“We can rewrite what we value and how we value it.

“We can move away from the traditional use of GDP and simple profit, towards a sustainable future where value is attributed to what we leave behind, what we save and what we reuse,” the report says. .