Focus on circular economy for job creation and climate change goals

Representative image

Nilaya Varma & Ajeya Bandyopadhyay

The Global Recycling Day, which falls on March 18, has a crucial significance for a country like India, which has to achieve massive economic growth by balancing the dual objectives of job creation and its international commitment to the Paris Climate Goals and SDGs (sustainable development goals).

In such a scenario a transition is imminent, a kind of paradigm shift that is focused on fostering economic growth, through circular economy, banking on the so called 6R principles of 'reduce-recover-reuse-recycle-redesign-remanufacture'.

India's rapid economic growth, has created a larger consumer base with a growing demand for materials.  As India embarks on even higher trajectories of growth, its resource requirements is set to increase. Estimates suggest that annual material consumption in India will likely triple by 2030, compared to 4.83 billion MT in 2009. Enhanced material recycling could help India decouple its growth story from primary resource and material consumption.

If one thinks of long term growth a circular economy path to development is something we should consider as it could bring India economic benefits of around Rs 40 lakh crore in 2050 compared to the so called business-as-usual development path – a benefit equivalent to 30 per cent of India's current GDP.

Labour intensive

Take job creation for instance. The more labour intensive recycling value chain can generate six to eight times more jobs than by incineration or land filling of wastes –Examples of this can be cited from the United States scrap industry which generated over 150,000 direct jobs and 323,000 indirect jobs in 2015 (ISRI); and China where recycling industry created 1.5 million direct jobs and about 10 million indirect jobs.

In India, the metal recycling sector presently employs almost 1.75 million people, contributing 2% of the GDP. Studies reveal that material recycling in all probability can create six times more jobs in 2030. This calls for designating recycling as a ‘strategic sector’ under the Make in India programme in view of the sector’s huge environmental footprint, tremendous job creation potential and, its prospects of adopting high-end process and technologies.

However, recycling rates in India are languishing for a variety of factors, making the country the third largest importer of various types of scrap material.

Although presently there is an over-supply of scrap metal in South-East Asia, imposition of import duty on metal scraps is a deterrent for recyclers to import. In recent years, there has been a rising cost of imports from Free Trade Agreement (FTA) countries too since suppliers increase their product pricing in order to keep parity with the duty added price of scrap from non-FTA countries.

To mitigate such risks, there is an inherent need to ensure a steady supply of domestic scrap conforming to appropriate quality standards. Government should also look at incentivising R&D and innovation in the sector since the unavailability of indigenous technologies and domestic suppliers leave no option for the players but to rely on high-cost import of machineries.

Tech-enabled

Similarly, a focus on 'emerging technologies' would be absolutely critical to radically transform the recycling industry in the future and make it globally competitive. For example, blockchain records transactional data throughout the recycling supply chain thereby helping ensure traceability of material flow from collectors to recyclers.

Such technologies combined with artificial intelligence could fundamentally change the way in which materials and natural resources are accounted for, valued and traded, incentivising individuals, companies and governments to unlock financial value from the so-called waste materials.

Policy push

Considering the tremendous potential for reuse and recycling of products in India, there is a need for a more comprehensive national policy aiming at formalisation of the ecosystem and 'ease of doing business' for recyclers.

The policy may target at removing barriers for the input factors, establishing an electronic market-place for trading of scraps and recycled products, promoting public procurement of recycled material, harmonising the standards for scraps (ISRI and BIS standards) and establishing accredited testing labs and certification procedure. Following successful examples in China, government should look at setting up dedicated material recycling zones (MRZ), connected with large industrial areas and cities through reverse-logistics network.

Of late, the global community has started to recognize the long-term impact a circular economy could have towards climate change mitigation. Unfortunately, in India, as in many other developing countries, there has been little emphasis on 'circular economy' as an important pillar of NDC (Nationally Determined Contributions) for achieving low-carbon growth with social equity and inclusiveness.  The reduce-reuse-recycle of wastes significantly reduces energy consumption in the commodity value chain.

For example, 17 trees, 2.5 barrels of oil, 4100 kWh of electricity, 4 cum of landfill and 31780 litres of water can be conserved by recycling 1 tonne of paper alone. In the same manner, recycling an aluminum can or producing a glass container eliminates 95% and 70% of energy required for producing a similar container from virgin material. To embed the topic in our national climate change narrative, there should be deeper empirical research on GHG impacts of potential circular economy actions across various sectors.

Policy, institution and technology are necessary but are not sufficient conditions by themselves to create a break-through in material recycling. As global examples and best-practices show, a 'circular economy' should be a core and embedded theme of the government’s key missions and programmes.

A fourth pillar is to bring in a behavioural change where every citizen naturally and intuitively segregates waste at the source.  For this, the government and businesses alike should learn from successful zero waste systems implemented elsewhere in the world, mostly in EU, China, South Korea, where almost all construction and demolition wastes, paper, plastic, glass, metals etc., are typically recycled.

In India’s case, making it an integral part of Swachha Bharat, Smart City Mission, Make-in-India Mission etc., will be a crucial step to mainstream the circular economy and accelerate its adoption in all walks of life.

(Nilaya Varma is Partner and Leader – Markets Enablement, KPMG in India; Ajeya Bandyopadhyay is Partner – Infrastructure, Government and Healthcare (IGH), KPMG in India)