How GCC governments can set a circular economy in motion

11 February 2019 7 min. read

To set in motion the transition to a circular economy and reap the desired benefits, GCC governments should integrate their efforts in a comprehensive national framework that will ensure all relevant stakeholders contribute toward a holistic solution. Experts from Strategy& Middle East outline the six key pillars of the framework. 

1. National policies and plans

A dedicated and comprehensive circular economy strategy is the first step in the transition toward a circular economy. As part of their strategy, policymakers should define priority initiatives to spearhead the transition, while continuously monitoring their implementation and impact against set targets. At the national level, this includes achieving resource efficiency and increasing the use of renewable energy. At the city level, this involves proper waste management and increased recycling.

China, France, the Netherlands, and Scotland, among other countries, have adopted a comprehensive circular economy strategy. They have thereby affirmed their government’s commitment to achieving circularity at the national level. 

A comprehensive national framework aims to develop a holistic circular solution

2. Institutional framework

A coordinated implementation at both the national and local levels is essential to the successful introduction of a circular economy strategy. Environment ministries have a key role to play in supporting the ministries of economy, industry, and transportation in defining priorities and targets. Local governments, specifically municipal authorities, are critical for the implementation of waste management, municipal procurement, and asset management strategies. 

To ensure proper coordination and alignment between various entities, GCC countries should create a separate body dedicated to the circular economy. Such an operating model exists in the Netherlands, where the Social and Economic Council (SER) advises the government and parliament on key social and economic policies, including circular economy practices. In 2016, the SER assessed whether there was a need to move to a circular economy, and identified barriers to this transition. 

The result was a decision to focus on making reusable materials more commonplace in the Dutch economy through the development of the National Raw Materials Agreement. The SER is financed by the industrial sector and is wholly independent from the government, representing the interests of industrial groups and trade unions.

3. Regulatory framework

Regulations are required to enhance the productivity of materials, and minimize any current practices that encourage value leakage. This framework should provide the right incentives for manufacturers, distributors, consumers, and governments to adopt circular economy principles. When setting regulations, GCC governments should cover the three governing principles of the circular economy.

Examples of regulations include California’s Rigid Plastic Packaging Container Program, which stipulates that recycled resins should make up at least 25 percent of relevant products. The Oregon recycling law of 1991, which set requirements for the recycling of glass and rigid plastic containers and for the government procurement of recycled products, proved effective at increasing such activity. 

A circular economy creates a closed-loop cycle encompassing resource usage, product life, and waste recovery

4. Fiscal framework

Governments should introduce taxes or fiscal incentives to support the transition to a circular economy. Taxes or levies on non-circular practices can help to curb such wasteful behaviours. For example, to reduce the use of certain raw resources, Denmark introduced a Raw Materials Tax which is levied on resources that are commercially extracted or imported. The Raw Materials Tax was introduced in close conjunction with the Waste Tax. In combination, these taxes encouraged manufacturers to adopt recycled materials as a primary source. 

In Taipei, citizens have to pay for official-issue blue bags in order for garbage trucks to pick up their unsorted trash. Alternatively, they can sort their recyclable trash (including organic materials) in any bag and dispose of it for free. Violators of these regulations are fined up to $200. 

At the same time, tax cuts and other incentives can remove barriers to circularity. For example, China eliminated VAT on goods produced from recycled materials. New York introduced tax credits in favour of remanufacturing firms 20 years ago. Remanufacturing has become an important sector in both places. 

5. Private-sector outreach and public awareness

GCC governments need to increase public awareness of the circular economy and its benefits. They can do this through launching mass media campaigns and resource websites, introducing ecolabels (a voluntary method of environmental performance certification and labelling), and incorporating relevant principles in school curricula. The European Commission’s website, for example, includes comprehensive resources on the EU Ecolabel for consumers and businesses, complete with brochures, links to government websites, news, and tool kits.

In addition, the behavioural science approach holds considerable promise for policymakers in their bid to achieve environmental sustainability. This approach is spreading globally, with the 2017 Nobel Prize in Economics being awarded to Richard Thaler, a pioneer of behavioural economics. A study co-authored by Strategy& and WPP, published for the 2018 World Government Summit, highlights how behavioural interventions improve people’s responsiveness to policies without restricting their freedom of choice. 

Governments can also help businesses to confront the main barriers in the transition to a circular economy. They can provide advisory support, disseminating best practices and fostering networks of stakeholders for collaborative projects. The Green Deal in the Netherlands tackles nonfinancial barriers in implementing circular economy opportunities by providing advisory support for selected innovative business initiatives.

6. Public procurement and asset management

As the largest procurers of goods and services, GCC governments and cities should lead the transition to a circular economy and change the way they procure goods and services. They should change the way they manage and provide access to their assets. Following this approach, governments can save public funds by taking into account the entire life cycle of procured products.

For example, governments can impose circular specifications on products, such as the reparability and sustainability of materials. Individual government agencies can arrange for suppliers to handle the recovery and disposal of these products and components. Cities can rethink how they allocate civic assets and spaces to ensure their maximum utilization. For example, they can share machinery or workspaces among different local government departments or with neighbouring municipalities, or make unused public spaces available to residents.

The Seoul metropolitan government, for example, maintains a website where individuals and organizations can book municipal spaces like sports facilities, lecture halls, and meeting rooms. Such wide-reaching initiatives stimulate demand for circular products and services.