“Companies, the protagonists of the change towards a circular economy.” By Lucinio Muñoz, director of the ICO Foundation

“Companies, the protagonists of the change towards a circular economy.” By Lucinio Muñoz, director of the ICO Foundation
“Companies, the protagonists of the change towards a circular economy.” By Lucinio Muñoz, director of the ICO Foundation

The world is experiencing increasing overexploitation of natural resources to meet the needs of the global population, thereby generating greater degradation of nature and depletion of many raw materials, which in turn leads to numerous social, economic and environmental problems in various regions of the world.

The linear economic scheme based mainly on extraction, production, consumption and waste has led the planet to an unsustainable situation, which forces us to consider new productive schemes such as the circular economy, which provides a viable alternative with significant benefits for countries, societies, economies, and therefore, also for companies.

Background on the circular economy

The Circularity Gap Report 2024, by Deloitte and the Circle Economy Foundation, highlights that in the last six years the world’s population consumed more than 500 billion tons of materials, almost as much as was consumed during the entire 20th century.

Despite this, most of the materials used in economic activity are mainly primary, while “circular” or “secondary” materials have gone from 9.1% in 2018 to 7.2% in 2023. Other sources, such as WWF, point out that the ecological footprint of consumption is equivalent to almost two Planet Earths, which warns of the urgent need for systemic change to keep us within sustainable planetary limits.

Many specialized studies warn us of the problems that overexploitation is generating in the world, such as the scarcity of raw materials. Added to this is the demand from consumers, who are asking to transform the extractive and linear economy into a circular model that meets its main objectives, reducing, reusing and recycling, and that goes further in this transformation: moving forward in ensuring that waste is converted into raw material, something in which companies, as protagonists of economic activity, have a key role.

In both Spain and the European context, strategies have been in the works for years to promote this change and accelerate it in economic sectors that, due to their production and consumption practices, are those with the greatest negative impact, such as food production and distribution, the textile industry and construction, among others.

The ICO Group and, specifically, the ICO Foundation, work on the development of sustainable finance and the circular economy, both at the national and European levels, trying to promote financing aimed at achieving these objectives and going beyond the “3Rs” – reduce, reuse and recycle – of the circular economy.

Advances and challenges of economic sectors

The change in model is also promoted by increasingly advanced regulations on recycling, for better waste treatment, biodiversity directives and other environmental policies that open the door for companies to align their processes with the objectives of circularity in responsible production and consumption.

In addition, there are numerous initiatives promoted by companies, social and sectoral entities that focus on reducing the consumption of inputs, their recycling and reuse, as well as other circular practices such as collecting, repairing, recovering, renewing, redesigning, among other actions, with which, not only are we addressing the shortage of raw materials and advancing towards more environmentally sustainable practices, but we are also reducing costs and achieving more efficient production.

However, there are numerous challenges that require public-private collaboration to advance further in this transition and whose treatment can encourage an increasing number of private sector agents to have a more circular activity, mainly SMEs.

In the textile sector, there is still a need to work more with recycled material and to obtain materials with a low impact on the production chain, for example, by consuming less water. This is also an area in which specific financing products can contribute to promoting the production of sustainable fashion and, very importantly, a change in mentality in consumption at a social level with models of clothing reuse. Thus, in Spain there is the challenge of destigmatizing the purchase and use of second-hand clothing and bringing the supply that already exists closer to the demand. For example, there are currently some 300 stores selling second-hand clothing that are managed by social entities, compared to the 11,000 in the United Kingdom.

The construction industry is key due to its consumption of materials, generation of waste and the impact of buildings on energy efficiency. The sector faces challenges such as increased use of secondary raw materials, reduced waste, increased recycling and attention to the environmental impact of buildings.

The food sector uses the largest amounts of water in agriculture and energy in its different phases, so saving both is seen as a necessity. Also, improving packaging, reducing waste and the use of plastics, improving recycling, separating waste, promoting local consumption and promoting collaborative activity.

Other sectors also face challenges to advance circularity, which will require regulatory changes, technological innovation, and the production of their products and services with renewable energy, thereby promoting attractive business models that generate more and better jobs.

As part of this necessary change, the ICO, as a national promotion bank, is committed to ensuring that at least 40% of the new financing it grants in the period 2022-2027 is sustainable. To this end, it is developing – among other actions – joint lines and initiatives with other European national promotion banks aimed at financing projects that promote the circular economy. This work is complemented and enhanced by the activity being carried out by the ICO Foundation to bring SMEs closer to more sustainable and circular processes.

In this field of action, the fourth issue of the Notebook on Sustainable Finance and Circular Economy 1 was recently presented, dedicated to analyzing the Circular Economy from various approaches, showing experiences and good practices of circularity of business, social and institutional agents, and trying to reach many other actors who are not yet immersed in this process.

The real change of model will not materialize until a greater number of companies adopt circular production processes and an awareness of responsible consumption in this line is established in society. Only in this way will we be able to advance in the balance that the planet demands of us, and be able to ensure the well-being of future generations, also ensuring that companies have good results with sustainable production models, so that, as they say in English, they can ‘do well by doing good’.

Lucinio Muñoz is director of the ICO Foundation

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