NEWSLETTER by Alessia Falsarone
Building a circular society means considering the significant role of informal economies in the socio-economic development of entire countries. This is particularly important in the Global South, where high levels of inequality and natural biodiversity must be taken into account.
| The Science of Impact
Circular economy (CE) is a concept mostly known in advanced industrial societies, which rely on technologically-powered ecosystems and extensive value chains. It is important to recognize that Global South economies can benefit from new technologies to reduce environmental impacts and encourage social growth. However, there is still much room for improvement in moving away from a resource-intensive and informal economic model to a circular and sustainable system. The high share of informality in developing economies may offer an opportunity to build a circular production and supply model that can be competitive in global markets.
>>click to zoom in | Credit: ILO Department of Statistics
But how do we define the informal economy? According to the International Labour Organization, it refers to all economic activities that are not covered by formal arrangements and exclude illicit activities. This includes workers and organizations operating outside of government regulations, lacking property rights, and having limited access to modern technologies, infrastructure, and financial means. Despite efforts to promote formalization, the informal economy persists, especially in the Global South.
The process of formalization can have many benefits such as providing stable earnings, better working conditions, and access to welfare. Additionally, it can help remove the negative stigma attached to informal work, increasing recognition and respect from society and public authorities. However, its outcomes are context-specific and can affect local labor costs.
The Urban Informal Economy, by Prof. Alison Brown from Cardiff University / Prifysgol Caerdydd, highlights the informal nature of labor and its prevalence in Global South countries, where employment can pose significant health and safety risks, especially for women.
The workshop held by the CE working group of Future Earth last summer offers important insights on the puzzle of formalizing the informal economy, and the dilemma of scaling up production in emerging economies, while employing circularity to offset the need for higher natural resource use, and preserving biodiverse environments.
| Circularity Roadmaps Explained
Putting the CE and models of human development under one framework may support processes of formalization that improve human well-being and address the conservation and sustainable use of natural resources. Patrick Schröder from Chatham House, and Alexandre Lemille and Peter Desmond, the co-founders of the African Circular Economy Network (ACEN), have been long time supporters of this approach.
Yet, with the majority of non-agricultural workers being part of the informal economy, integrating marginalized communities of informal workers could magnify their vulnerabilities further.
An important consideration is that some circularity practices have emerged in grassroots form already, especially as recycling and waste management activities. Take, for example, waste picking by informal collectors in São Paulo, Brazil. In a relatively brief period of time, it has transformed itself into an organized activity led by local waste management cooperatives first (Waste Pickers Organizations), and then into a breeding ground for developers of eco-innovations. In countries such as Argentina or Colombia, waste pickers are already part of a larger social movement involved in transferring knowledge for the increase of materials recovery and diversion into the circular economy, building more awareness in the community about socio-environmental dimensions of separate waste collection, addressing social inclusion and creating incentives in the form of remuneration for their services.
The recently published work of Jutta Gutberlet on emerging grassroots social innovations in Brazil provides a valuable reference for CE practitioners and policy makers seeking to lift formalization challenges and grow more inclusive circularity practices in the country.
| Investing in the Circular Economy
Globally, the informal economy is estimated in the range of US$10 trillion, representing 80% of workforce in emerging economies. Therefore, investing in the CE requires a a focus on human development, which includes addressing the informal economy directly.
〉Are circularity investors including informal labor in their due diligence process?
〉What about the impact of their stewardship efforts in the Global South in promoting formalized labor markets?
Resource recovery, repair, and recycling are mainly carried out by informal laborers in Asia, Africa, and Latin America. Their role is often referred to as an invisible subsidy to local waste collection, recycling, and repair activities – primarily at the cost of their own health and social growth.
>>click to zoom in | Source: Green Economy Coalition and their Green Economy Tracker toolkit
The research paper on Promoting a Just Transition to an Inclusive Circular Economy from the team at Chatham House highlights how the lack of credit and commercial finance options is one of the biggest headwinds for informal organizations seeking to enter the circular economy.
With informal recyclers and waste pickers lacking access to funding for the upgrade of their operational setup, work conditions will likely not improve and resource recovery will remain subpar. According to Chatham House, one possible solution could be the launch of a public-private Global Repairation Fund. The vehicle would disburse the necessary funding for repair, recycling, and remanufacturing initiatives on a global basis, especially informal sector initiatives in the Global South. Beyond labor remuneration, it would also investment in up-skilling and capacity building activities in local markets.
| You don’t want to miss this week
From Glasgow to Melbourne, and Phnom Penh (Cambodia), this week offers new opportunities to connect with fellow circularity practitioners both in person and in hybrid mode.
Discover, grow and leave your mark!
〉May 3rd: 2023 LARAC Scotland Conference (Glasgow, Scotland). As the leading event for organizations looking to partner with Scottish local authority waste and recycling officers, the conference will tackle key issues around running an efficient and effective local authority waste and recycling service and the challenges of the policy changes ahead. The program includes evidence from extended producer responsibility (EPR) with Paul Vanston (Industry Council for Packaging and the Environment), a review of deposit return schemes (DRS) with John Lee (TOMRA Collection UK and Ireland), and a range of case studies such as digital waste tracking technologies with Gary Walker (Scottish Environment Protection Agency).
〉May 4th: SEA Summit 2023 (Melbourne Cricket Ground). Hosted by the Sports Environment Alliance , the annual gathering aims at promoting sustainability and regeneration practices of sports organizations in the Australasia region. Dr Sheila N. Nguyen, co-founder of SEA and Head of Sustainability at FIFA Women’s World Cup, will open the program with a focus on the “Why now”. Matthew Nicholas will represent Tennis Australia in the discussion surrounding the circular economy, along with Sofi Emma Armenakian from the Atlanta Hawks followed by a session on supply chains and sustainable procurement with Norman Vossschulte for the Philadelphia Eagles.
〉May 3th-4th: Introduction of Circular Economy for Policy Makers (Phnom Penh, Cambodia). The ERIA: Economic Research Institute for ASEAN and East Asia is hosting an introductory workshop on circularity principles for public sector officials and policy makers in the region. ERIA have been conducting research activities and making policy recommendations for further economic integration in the East Asia region since its launch in 2008. Amelia Litania is the main contact for this event.
Join us at UChicago Circular Economy and Sustainable Business
On May 4th we will welcome Fabiana Quiroga, Director of Circular Economy for South America at Braskem, to our practitioner series. A corporate lawyer turned sustainability champion, Fabiana’s circularity journey has included establishing the strategy for the new Circular Economy and Plastic Recycling Business, coordinating the implementation of circular economy initiatives in the region and developing new business models, partnerships, and markets. The acquisition of the Wise Recycler company in early 2023 is a recent example of her action-packed mandate as she continues to spread the principles of circularity within the organization.
Off to another impactful week!
| about
Alessia Falsarone is executive in residence, practitioner faculty at the University of Chicago, where she leads the Circular Economy and Sustainable Business program. The article is based on the author’s newsletter A Week of Circularity from the innovation knowledge hub.
| All opinions expressed are those of the author and/or quoted sources. investESG.eu is an independent and neutral platform dedicated to generating debate around ESG investing topics.
