Putting India on an accelerated path to build a circular economy

Circularity is not a new-age idea to the Indian ecosystem. The country has been known for its frugal innovation around 'doing more with the less'.

Today, India stands at an inflection point in its journey towards economic growth. To balance the adverse effects of rapid urbanisation, industrialisation, growing population, and climate change, it is imperative to imbibe circularity in our economic development.

There is a need to disrupt the linear 'take-make-waste' model and adopt circular economic models which are restorative and regenerative by design, and pay equal attention to people, planet and profits. This would integrate the design-thinking approach for optimising resource efficiency across product lifecycles, enabling businesses to overcome the risk of raw material shortages.

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As a multiplier effect, it would also reduce negative externalities such as waste, pollution and health hazards, while opening up newer business opportunities. According to Ellen MacArthur Foundation's estimates, circular economy adoption in India will bring an annual benefit to a tune of Rs 40 lakh crore ($624 billion) in 2050 and reduce GHG emissions by 44 per cent.  

The recent focus on circular economy in the Union Budget puts India in the right direction. So far, the government has been proactive in formulating policy frameworks for ten focus sectors for circular economy transition.

The Natural Resource Efficiency Policy, Plastic Waste Management Rules, Construction and Demolition Waste Management Rules, Metals Recycling Policy and Extended Producer Responsibility are a few such examples.

Going forward, the policies need to evolve into coherent and systematic action plans to enable circular business models. Here are a few pragmatic perspectives that can enable the actors of change to achieve this.  

As the next step, there is a need to innovate and contextualise realistic circular business models to harness the multipronged benefits of a circular economy. It should go beyond feel-good corporate social responsibility and cut across sectors, industries and value chains to drive sustainability on a mass scale by refashioning linear streams of inputs and outputs while keeping businesses financially viable.  

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Today, one-third of India's 1.2 billion people live in urban areas, generating approximately 62 million tonnes of municipal solid waste (MSW) annually. As per NITI Aayog, this number is expected to grow rapidly to 125 million tonnes per year by 2031.

Optimising material usage through better product design, product lifecycle extension, product as service, sharing platforms and using recycled material through green procurements can disrupt the not-so-sustainable consumption pattern and consumerism.

Brands have already started to design incentivised return policies and buy-back mechanisms. This helps in constructing effective reverse logistics where the waste is put back into the system as a resource, thus giving a new dimension to waste economy.  

Multi-stakeholder collaboration and alliances are instrumental to enable such circular business models. For example, the key to addressing India's solid waste management challenge lies in connecting all kinds of actors along the value chain, including producers/brand owners, municipalities, the informal sector, waste management companies, and recyclers.

Brand owners have tied up with waste management agencies to realise their circularity objectives and are supporting municipalities in plastic waste collection. While low-value plastic waste collected from cities is co-processed as fuel in cement kilns, high-value plastic waste is being recycled.  

The government can offset such pre-competitive collaboration across industries and value chains with partners as mutually invested coordinators of circularity. While this opens up additional avenues of green job creation, businesses have to be considerate about the already existing informal sector in demystifying the complexity of reverse logistics and the recycling landscape.

As per an SBI report, India's informal economy contributes to more than 20% of the country's GDP, placing the country in an advantageous position to swiftly move towards a circular economy.  

Leveraging digital technology for reverse logistics could further reinforce innovation and value creation for circular business models. Technology and digital intelligence can transform the traceability of material flow across value chains and build confidence amongst industry players and users of recycled products. Initiatives such as Startup India, Make in India and Digital India have well-positioned the country to create such indigenous solutions.  

Simultaneously, a circular economy can attract and accelerate sustainability financing. Its closely knitted equations with SDGs and the global ESG agenda give a fresh window to cities and businesses to realign themselves and rebuild their brand value to appeal to a growing class of sustainability-minded stakeholders.

Global investments are backing sustainable businesses, infrastructure, and development. According to Bloomberg intelligence, ESG assets are on track to exceed USD 53 trillion by 2025.

The circular economy is being used as a lens to weigh the short-term returns vis-a-vis the longer-term social and environmental value. Despite being in its infancy, the circular economy is giving businesses and cities that commit to it a chance to gain a first-mover advantage to attract such funds and investments.  
 
The government has already identified a few focus areas and related sectors that need to recognise and revolutionise the material flow and carbon footprint across product life cycles. 

There is a need to closely assess the economic interactions to identify interdependencies in between the value chains of businesses and systems that can be leveraged to induce circularity. I

India's rapidly evolving market and high development potential can be a competitive advantage over mature economies. This ambitious long-term vision of a circular economy, built on the current strengths of the Indian market and congregation of diverse stakeholders could pave the way for a fast-tracked sustainable and resilient prosperity. 
  
(Views are personal. Chauhan is Partner, Raghuram is Director, and Aryan is Senior Associate in ESG - Circular Economy, PwC India.)