The Circular Economy: Embracing Extended Producer Responsibility (EPR)
The transition to a sustainable future requires a fundamental shift in our economic systems. This episode dives into the concept of the circular economy and what changes are needed for its success. We explore how the circular economy aims to move away from the traditional linear model of "take-make-dispose" by focusing on reuse and regeneration. A key element in achieving this is extended producer responsibility (EPR), a policy approach that makes producers responsible for the end-of-life management of their products. This episode discusses how EPR drives better recycling practices and contributes to a more sustainable and circular system.
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The Circular Economy: Embracing Extended Producer Responsibility (EPR)
Understanding The Circular Economy
Welcome to the show, where we confront the discomfort that comes with personal, professional, and societal change. I'm going to talk a little bit about what the circular economy is and what needs to change in order for it to succeed. Let's start with what the circular economy. Most of the economy is linear. What do you mean by that?
Generally, you extract something out of the earth. You make it into something, and you sell it back, or you sell it to someone, and then they throw it away. Except for the service industry, but even in the service industry, you may only use it one time. It's linear. It doesn't come back and become the same thing again. The circular economy is just trying to take something and then reuse it. Now, what does that really mean?
Ellen MacArthur Foundation is one of the leading nonprofits researching the circular economy and how do we really bring it to life. There, they say the definition of the circular economy is a system where materials never become waste and nature is regenerated. They take it a step further to say the circular economy tackles climate change and other global challenges like biodiversity, loss, waste, and pollution by decoupling economic activity from the consumption of finite resources.
This is a really critical aspect of the circular economy, is that we don't want to rely on these finite resources. In fact, reuse these resources that we rely on over and over again as much as possible. The reality is nothing is perfectly circular. There's almost always some value loss when you go and use something and then try to reuse it.
Composting: The Value In Creating Dirt
Now, maybe composting could be considered fully circular. Composting is my favorite aspect of an example of the circular economy, which means basically you're taking your food waste or even garden waste. You're putting it into a pile. You're letting nature and microbes and earthworms turn that material back into dirt that can then be reused. I'm sure there's some value lost in that because there's heat that happens to drive it. I'm sure it's not fully perfectly circular.
However, it's pretty close. I also have this personal belief that if municipalities or cities and states could figure out how to extract that value from composting. Not only would we save an obscene amount of carbon emissions out of our landfills, I think it would cut out garden. They buy all this mulch and all these things for just to keep everything beautiful on a government property.
I feel like you could cut that budget line item out if you could figure out how to bring this composting back into the cycle, so back to this value aspect. There is value in creating dirt. You may not believe it, but it is. It's valuable. People use that. People buy composting every year, every spring. Anyway, I digress. I'll get off my love of composting soap buckets.
How Recycling Is Failing Us In Many Ways
When people are talking about the circular economy, they're often referring to recycling. Recycling really tries to be that poster child for the circular economy, but it's failing us in many ways. I have a favorite recycling report. Not everybody does, but there's one that's done by EUNOMIA called The 50 States of Recycling. The latest one is from 2023.
I love this report because it breaks down state-by-state recycling rates across various materials. You can really see who's the best at recycling, where are the breakdowns. It really paints this picture of how localized recycling really is. You can see there's this range. The lowest recycling rate is 4%, and the highest is 65%. There's this huge range across all the states.
They're all like everybody's generally dealing with the same materials. The other thing that's interesting is that I did a little bit of digging into what's going into our landfills. Now, this was about a year ago. A little later data, but a lot of the data is old anyway, because not a of people like to count trash. Anyway, basically, if you look at all the material that's being thrown into a landfill, on average, if you look at the EPA, almost 40% of that, 45-ish, give or take, and it's very rough and everything, but a lot of it, around 40%, could be recycled given the current landscape of technology related to recycling. It's not being recycled.
A lot of that is due to the infrastructure related to recycling across these various states. A lot of it is tied to incentives for the material and the opportunity for a responsible end market. There's a large amount of material and waste showing up in your landfill. I will say that the number also includes the amount of material that could be composted. Together, there's a lot of opportunity.
Reuse: The Good And The Ugly
Now, if we recycled everything that we could and composted everything that we could, would it solve all our problems? Absolutely not. There is never a silver bullet for solving any climate-related challenge. There is a lot of low-hanging fruit in this recycling space and composting space. What are some other examples of the circular economy? The one that's been the hardest nut to crack is reuse.
Consumers are looking for a way to make an easy, sustainable choice that is cost effective.
It's been around a long time, like back in the 30s. People didn't have any money, so they would reuse things all the time. It's got a little bit of a stigma attached to it. Reuse is a valid and exciting opportunity for the circular economy. One example I'd like to bring up is that in Quebec, where my brother lives, so this is why I know about this.
They have beer bottles that are all the same and standardized across the industry. I think it's the whole province, the whole province of Quebec, and he lives in Montreal. Nonetheless, they have standardized beer bottles. All of the brands sell their beer in these bottles, and because of that, they all use the same bottles. There's no differentiation based on the shape of the bottle.
However, they just relabel it and refill it. Now, they have an infrastructure there that can support the beer industry. You just bring your bottles back to the liquor store when you get some new ones, and you take them on. This has been quite successful in an opportunity for reuse. The thing that really makes this unique is that it's an industry-wide solution.
Therefore, not one brand is burdened by the cost of building out this infrastructure. From a consumer standpoint, you have one consumer experience across all brands, which makes it much easier. You can get into the habit and the routine of where to take these beer bottles. Another less structurally dependent example of reuse is just simply resale shops or vintage.
Vintage has become a way to brand these resale items. You can now access this concept of resale through the internet. There's Poshmark, there's Facebook Marketplace. Of course, there's the standard brick-and-mortar Goodwill. Goodwill is really interesting. The concept of Goodwill is already tackling some societal changes that need to happen as far as helping people build skills.
They've always funded this by these Goodwill stores where you can donate, and then they sell your materials. Through that, they've learned that the people almost are using them as a dumpster in many cases, not intentionally, but like, Goodwill will figure it out. Which one has value, and which one doesn't?
I don't think there's malice in there, but that's just kind of what ends up happening. It's this lazy aspect of reuse. They're donating it, and then Goodwill is left with a lot of waste that they have to deal with. Now, they're actively participating in pushing for textile extended producer responsibility. Now, I'll have another podcast episode that dives deep into extended producer responsibility.
Basically, this legislation has been passed for many things, including packaging, including mattresses, batteries, paint. Now, in California, textiles. The idea is to shift the funding mechanism of the end-of-life management for these materials away from municipalities, state, and local governments and onto the producers.
The company makes and sells the product and package. Goodwill is recognizing that the deterioration of the quality of textiles has increased so much over time that they really cannot reuse a lot of the clothes that are given to them. Now they're pushing for, like, “I'm tired of throwing all of this stuff into landfill. Let's figure out a way to turn this into something.”
Recycling And The Problem With Landfills
Which is just another really great example of evolving. Back to what we traditionally think of as recycling and why should we focus here? As I said, there's just a lot of material that's being thrown away into landfills that could be recycled or composting using existing technology. Why isn't it? Why isn't that happening? What needs to change in order to actually start increasing recycling rates?
Realistically, lots needs to change. If it were easy, then it would already be fixed. I did a lot of research on this concept of what's going into landfills. A long time ago in New York City, they created the first waste management team, if you will, and they all wore white. The garbage pickup and they wore white and they sorted everything out of necessity. They had composting available, and they had everything sorted by material so that they could dispose of it properly. This was in the early 1900s.
We changed. We went away from this idea of sorting everything for consumer convenience. Now, there's so much contamination. Everybody's wish is cycling. They don't know what to recycle. It just is causing this like continued, you 4%, 5%, 6% recycling rates in many of these states. Yet we know that this material is valuable. We know that there are companies out there looking to use that material in their packaging because there's a consumer value.
The Role Of Legislation In Driving Circular Economy Success
Consumers are looking for a way to make an easy, sustainable choice that is cost-effective, which is not easy. What needs to change? Realistically, we likely need a few things. Legislation just does not happening organically. We're going to need the government to step in on this topic. In fact, that's been proven to be successful in other countries.
We also need consumer behavior to shift. Generally, we just need to stop calling everybody consumers. I went to a sustainability conference where they were like, “Stop using the word consumer. Call them people.” When we call them consumers, that's all we're thinking about is how we want them to consume more. Finally, we need to rethink economic value.
Back to what Ellen MacArthur Foundation talked about, decoupling this idea of economic value with finite resources. We need to rethink economic value to include environmental and societal impact. Legislation. Europe has passed across all the different countries. There are lots of different versions of this and lots of different success stories.
In general, the European Environmental Association, I believe, they have put out some numbers around recycling rates, and because of the shift in or the implementation of extended producer responsibility over the years, the data just showed that from 2004 to now, there's been a significant increase in the recycling rates.
Now I think it's capped out at like 65% or something, but that's across all of the countries. In Norway and Sweden, where they have very best-in-class EPR, we're looking at 85% to 90% recycling rates. My trip to Sweden was one of the most memorable things I took note of was that we went to the liquor store to buy rosé, which I love.
There was a whole wall of Rosé, which on its own is pretty exciting, but also it was all bag in a box. It'sa bag in a box because they can handle the end of life of the nylon bags inside the box. The box is easy to recycle, but it's the bag inside, the flexible plastic, that's very difficult to recycle. Through EPR, they've been able to build the infrastructure to support this generally hard-to-recycle material.
Therefore, they're able to realize both the carbon footprint benefits of shifting away from glass, because glass is heavy and carbon intensive to move around, and they can recycle the material. Now, here, if you were to shift everything to bag in a box, you would maybe realize some carbon footprint benefits, but everything would end up in the landfill because it's very hard to recycle those nylon bags.
Maybe not everything because you do have a small percentage of consumers that might take something difficult to recycle to a hard to recycle. A charm center for hard-to-recycle materials. Generally, those are the waste nerds like me. It's not your mainstream population. Extended producer responsibility shifts that funding mechanism onto the producer and changes the incentive structure of packaging.
Changing Consumer Behavior & Perceptions Of Value
That is one way to really drive a change in at least the recycling aspect. Now, the extended producer responsibility bill also in California includes infrastructure investment slated for reuse. Anyway, the point is this shift in legislation can be really powerful in a drive and shift to the circular economy. There's consumer behavior.
If we don't call them consumers and we call them people, so it's human behavior. There needs to be a shift in both the behavior and then the perceived value of a reused product or recycled product. I think we're shifting there. What I mean by that is like vintage, Poshmark, or Facebook marketplace.
There's lots of these websites that are growing, that are increasing in the number of people coming to buy from them. There is a shift that's happening. It's just not mainstream yet. Although I will tell you. My nephew, he's one of the Canadians, my nephew came down to Texas and one of the big things he wanted to do was go to a resale shop with his friends and look for like a Carhartt jacket or like all these different name brand jackets that he was like, “I can find these at a resale shop in Texas. It'll be easier to find.”
He and his friends like almost exclusively wear resold or high-value, like quality material clothing. The shift is definitely happening, but it's just not mainstream yet. There are some barriers to this. I think a little bit of it is convenience, like Amazon or being able to go and get the thing that you need, exactly what you need, exactly the size that you need, at the exact time that you need it.
Stop using the word consumer. Call them people. When we call them consumers, all we're thinking about is how we want them to consume more.
There is this demand and expectation of convenience in this digital age. The trust in the quality. Another perceived barrier is the trust in the quality of the thing that you're going to get. I think Poshmark, as an example, has done a really good job of addressing those issues with tons of pictures. There's a whole section where you can ask questions and get answers.
There's also this coolness factor of it being vintage or a high-quality brand that you cannot find anymore. I can maybe take a lesser-value product that's not perfect because of the character it's providing. That status comes with the character and not necessarily with the fact that it's new. It is a bit of a perception change on reuse.
The Business Case For Sustainability: How B Corps Lead The Way
The economic value for business has to shift. This is not an advertisement for B Corps or benefit corporations. However, I did learn about them many years ago when I was in graduate school, and I was hooked ever since, and they have not yet disappointed. The concept is this like attachment of environmental and societal benefit to the value that your company is providing.
It's like shifting this concept of risk and resilience, like the risk that can happen from a wildfire or some other natural disaster or the fact that your consumers or people that buy your products, maybe they are on hard times or whatever. There are all these interconnectivities to your business that are tied to the environment and society. B Corps confront this and then attach it to the value of their business.
Also, to the value proposition to the people buying their products. You're getting both this intrinsic emotional value of buying something that you feel good about and that business is giving back into the environment of society in a positive way that is ultimately tied to their business. What do I mean by this?
Tom is a great example. Buy one shoe, give one shoe. Now that's how they started. Buy one, give one. The basic concept of a B corporation. They shifted. They found out that them giving away these shoes is actually taking jobs away from people in the communities where they were trying to give these shoes to. They shifted the benefit that they were providing and to better meet the needs of the community they were trying to serve.
Their business is only growing. The quality of shoes has gotten better. I those first shoes, if you ever got them, were not the best quality. People felt really good about buying them. Now, they've become a bit more mainstream in their product offerings because they've grown. They're also growing their positive impact and, therefore, their resilience in the industry.
In fact, this concept is supported by data as well. B Corps have a report that they put out, and they're showing that their top-line growth is on par or better in general than a standard business. They are definitely more resilient against major shifts like COVID-19, and these companies last longer because they're thinking about the whole set of things that are impacted and can interconnected to their business.
I think that that is going to be a key future element of driving the circular economy is recognizing that interconnectivity. The good news is that I think that the future is on its way. The circular economy as a mainstream activity is definitely gaining momentum. I am hopeful for the shift to the circular economy.
Why We Need To Embrace The Circular Economy
I would like to end my episodes with this concept of like, why embrace the change? Why embrace the change to the circular economy? For me, it's really about, this isn't sexy, but it's the low-hanging fruit. There are so many tough challenges related to climate change. There are so many tough things that we as a society need to accomplish in order to hit the 2.5 degrees or less or whatever it is.
There's just a lot of tough things, a lot of innovative things we need to do. The circular economy has already been done. We just walked away from it. Now, we just need to go back to it in a lot of cases. It's cost effective for businesses and for people. To me, why embrace this shift and change to the circular economy is because it's low-hanging fruit and it's cost-effective. We could probably do it very quickly if we just took the time to invest in the infrastructure, which brings us back to why extended producer responsibility is so valuable. Thank you all for being here and going on this journey with us.