Recycling and repairing

Technology and innovation are paving the way for companies in a range of sectors to explore recycling and repairing options that cater to consumer demand. By participating in a circular model, such options help to preserve nature’s resources and reduce levels of waste.

The current linear, take-make-waste economic model extracts more than we need, makes more than is necessary and wastes much of the output. This model destroys our world’s finite natural resources through excessive material extraction for production, and waste on the other end of the product cycle.

The transition to a circular bio-economy involves commercial solutions that leverage eco-design and tap into the consumer demand for sustainably sourced, durable, repairable and recyclable products. Such inherent circularity and extension of use reduces the need for extraction of raw materials, as it enables creating of new goods through reuse, repair, and recycling of products, rather than sending them to landfill or risking them becoming pollution.

Recognising that nature is one of the most vital and productive assets underpinning our economy, our Natural Capital strategy invests in companies that leverage the regenerative power of nature and preserve this vital asset through a leaner form of industry.

The sharing and repair dimension is aligned with the transition to a circular bio-economy in which nature’s resources are renewed, sustainably managed, recovered and reused as much as possible. It is a part of the outcome-orientated economy¹, one of four investment sub-themes and growth opportunities in our strategy.

 

FIG. 1 Four investment themes drive the Natural Capital strategy

Source: LOIM. For illustrative purposes only.

 

Excessive extraction, accumulating waste

Our take-make-waste system involves excessive material extraction at the beginning of the products cycle, and creates vast waste generation and eventual pollution at the end.

Since the 1970s, the pressure exerted on the planet has exceeded its capacity to regenerate. This overshoot is an outcome of the take-make-waste economic model, which depends on the unsustainable extraction of finite natural resources, over-production of goods, and disposal of excessive or unnecessary waste. The impact of the model on nature has intensified with the expanding global population, which is projected to hit 8 billion by 2023.²

We extract 92 billion tonnes of resources each year – equal to more than half the weight of Mt Everest³– to produce goods. But many of them are underused and discarded: 80% of goods are used only once each month, and most eventually become waste. Less than 20% of refuse is recycled each year, with huge quantities sent to landfill.⁴ Plastic is a telling example: of the 8.3 billion tonnes of plastic in the world, 6.3 billion has become waste rather than being recycled back into the value chain.⁵  

 

Textile and electronic waste

Globally, an estimated 92 million tonnes of textile waste is created each year and the equivalent to a waste-truck full of clothes ends up on landfill sites every second. If this trend continues, more than 134 million tonnes of textiles will be discarded each year.⁶

Source: LOIM, Bloomberg “The real environmental impact of the fashion industry.” For illustrative purposes only.

 

Humanity’s track record on electronic waste is not much better. A record 53.6 million tonnes of e-waste was generated worldwide in 2019.8 High consumption rates, short life cycles and limited repair options could result in 74 million tonnes amassed by 2030, nearly doubling the total in just 16 years. Only 17% of e-waste is recycled each year, resulting in the loss of USD 57 billion worth of goods and materials that could be repaired or repurposed⁷.

 

The pressure of landfills

Much of the waste that is not biodegradable or properly recycled occupies landfills. Over time, the chemicals and particles from the waste can leak into the natural environment and significantly damage living organisms. Improperly treated plastic or hazardous waste heavily impacts the survival rates of animals and plants globally.

In addition, clearing areas to create or expand landfill sites destroys existing natural environments, and as landfill piles up, local species are outcompeted by animals attracted to refuse, like rats and crows. While waste that is not sent to landfill often becomes pollution, directly harming terrestrial and aquatic wildlife.

In short, our linear economic model results in excessive materials extraction, overproduction of goods and too much waste. It’s a major driver of depletion of the natural’s resources, and destruction of the ecosystems that are vital to economic stability.

 

Demand for sharing and repair

Amid rising consumer demand for circularity, companies embedding sustainable materials sourcing, repair and recycling into their product design are set to gain market share – while also enabling nature to recover and regenerate.

Global consumer appetite for products developed from sustainable sources, and which are repairable and recyclable, is growing. Globally, 85% of people have favoured environmentally sustainable products in the past five years⁸ and one-third of consumers are willing to pay a premium for sustainable products⁷. Gen Z is adopting more sustainable behaviour than any other group: 45% stopped purchasing certain brands because of ethical or sustainability concerns.

The price differential can firstly be justified by extended durability of some of the products, where, for example, the design is adjusted for greater repairability or reuse of the parts – eventually reducing the total cost over the life cycle of the product. During the periods of heightened awareness of consumption restraints, consumers equally may benefit from longer life-spans of products, and the ability to benefit from the reuse and recycle cycle built into the value of the product or distribution, such as for example trade of second-hand or discounted items at lower price points.

 

Circularity, growth and the right to repair

In Europe, value pools worth EUR 500 billion in annual revenues could form by 2030 as circularity replaces linearity as a driver of bottom-line growth.⁹ Shifting consumer demand will be the primary cause, redirecting demand from the take-make-waste to circular consumption models: consumer-to-consumer, and consumer-to-business-to-consumer, where the business acts as an intermediary. As a result, the proportion of circular goods trading in the regional economy could rise from 10% today to 25%-35% by 2030.

Regulatory developments will further fuel this momentum. A key component of the EU’s Circular Economy Action Plan is a proposal for eco-design making products more durable and fit for reuse and upgrading. The right to repair is seen as a key step for the EU’s plan to achieve circular economy by 2050 in the framework of the European Green Deal. Ahead of a planned European Commission proposal on the right to repair, Parliament adopted its priorities in April 2022.

France’s 2020 law creates a competitive advantage for companies that have embedded repairability in their product design. The UK’s Right to Repair states that UK manufacturers are legally obliged to make spare parts available to consumers, a move which is expected to extend the lifespan of products by up to 10 years, thereby reducing materials demand and the unnecessary disposal of appliances needing only straightforward simple repairs.

Meanwhile in the US, the Federal Trade Commission (FTC) unanimously voted to enforce the right to repair as policy in 2021, and announced settlements in July 2022 with companies concerning warranty provisions that unlawfully conveyed that their warranties would be voided if a customer used third-party parts or independent repairers.

 

The rise of eco-design and repair

In the electronics industry, eco-design is becoming a differentiator in a competitive market. Improving the energy-efficiency of devices, leveraging green processing, and factoring durability and repairability into product designs are among the approaches used¹⁰. Leading manufacturers are increasingly looking to recycle at scale components and materials – like aluminium, plastic, glass and rare earths – while retaining their properties and quality.¹²

Repairability is also becoming a widespread design feature. For example, there is a smartphone on the market with a modular design that enables repairs and upgrades of components and batteries. It is bound by screws, not glue, allowing for easy disassembly and re-assembly. The phones also use recycled copper and plastic.¹¹

 

Circular services, encompassing product maintenance and repair, form a growth market, too. For consumer electronics, repair turnover is estimated to grow from USD7.98 billion in 2021 to USD8.38 billion in 2022 at a compound annual growth rate of 5.1%.¹² Brands and retailers will offer such services, alongside specialist repairers, and many already enable consumers to perform a range of repair tasks on goods including mobile devices, laptops and appliances like refrigerators, washing machines, ovens and coffee machines.

In the clothing and sportswear industries, product lines made from recycled materials are becoming more common. Shirts, shoes, jackets, bicycle helmets and backpacks are being made from recycled materials like plastic fishing nets or use bio-based substances, like a firm foam derived from algal biomass, which helps clean waterways suffering from agrochemical pollution¹³. As the design of garments changes to enable easier future recyclability, distribution systems are adjusting to integrate resale platforms that extend the lifespan of manufactured clothing. The secondhand apparel market in the US is expected to double in the next five years to USD 77 billion.

Within the sharing and repair part of the Natural Capital’s investment universe, we focus on companies developing or providing goods that require minimal or no extraction of new materials, and embed reuse, repairability and recyclability into product design. They are appealing to rapidly increasing consumer demand supporting the regeneration of nature, creating new profit pools of opportunity. These companies are also increasingly benefiting from the profitability of using alternative sources of inputs, tapping into the material and component sourcing that is so far still under-utilised by the broader economy.