“Circularity is our way forward. It's not painless, though.”

Circularity ticks all the boxes when we're talking about keeping materials in flow longer. Reducing our massive burn rate of natural resources is only possible by becoming more circular. We then have fewer emissions, fewer effluents, which is toxicity and pollution; we also have less extraction, essentially less nature destruction. So it really is a breakthrough as it can help us address climate, nature and pollution challenges all at once. Circularity is our way forward. It's not painless, though.

We don't need to demonise growth. Instead, we need to ask: what do we want to grow? And what do we want growing less? Maybe less coal fired power plants versus growth in fields with a future – like in renewable energy, public transportation or e-mobility. And then there is the question of how we measure gross domestic product (GDP)? There are parts of the economy that add value and parts that extract value.

When you're growing value, you're growing in capacities, in human health, in well-being. All these things are very positive. But at the same time, we need to bring the climate back under control because it's going to impose so many costs on everyone, and especially those who can least afford to shelter themselves from the costs.

We need to ask: what do we want to grow?

Growth is typically strongly correlated with raw material consumption. According to the International Resource Panel, back in 1970 the global consumption of raw materials was at around 27 billion metric tons – sand, iron ore, petroleum, manganese, everything you can imagine. In 2020, fifty years later, this number had grown to around 100 billion tons. And these 100 billion tons of raw materials have a big footprint. Climate footprint, nature footprint, pollution footprint. And with an economy of around 100 trillion dollars, that means that producing a thousand dollars of GDP requires around one ton of raw materials. Or about one kilo of raw materials for every dollar of GDP – not very circular or efficient.

Most of it is indeed lost or burned or leached. Very little circles back. That is what a linear economy is. It's a very inefficient way of creating value because basically it's like a burner. We're burning through our ecosystems.

We're burning through our ecosystems.

It’s not about restrictions – it’s about fairness. It's not about asking people to stop taking vacations; it’s about having a vacation but taking other people and their freedoms and liberties into account. We like buying things, we like having personal freedom, we like our liberties, but we must realise that we're reaching a point where our liberties, our freedoms and our consumer habits are hitting boundaries and impacting on others. That’s where you get backlash.

Just have a look at the sheer numbers: average global CO₂ emissions are currently at around eight tons per capita. That's about the European average. Some countries are around 20, 30, 40 tons per capita, though. And there are others – in Africa and India for instance – that have less than three tons per capita. If everyone is to live sustainably by 2030, this figure needs to be 2.8 tons per capita. To achieve this and to nevertheless be able to increase our liberties and freedoms in a way that doesn't put other people's choices under strain, we need to re-think and re-invent. Particularly for those countries that are straining to meet basic needs at current levels of emissions.

I think it's going to require massive levels of innovation, which offers a huge market opportunity; we need to find ways of creating wellbeing that are fair and that allow human freedom to flourish. Freedom of choice, but not at the expense of limiting other people's freedoms. So, it's not so much forbidding people to do certain things or telling them they should feel bad about doing other things; it's more about finding innovative ways to create abundance within the limits of our Earth. 

I don't think technology alone will solve everything and technology won’t address fairness by itself, either. It’s about getting technology to help humans prosper sustainably but it needs to be transparent and comply with principles of good governance. Of responsibility.

Take plastic. We make it – 400 million tons of plastic every year, by the way – we use it and then we throw it away. But it only looks like it's cheap. The damage as a result of plastic pollution is estimated at around 300 to 600 billion US dollars a year. That's about 1,000 US dollars of externalities for every ton of plastic. And none of that is priced in; those costs are externalised to the future. 

And they include significant damages to human health. Plastics break down into microparticles and then into nanoparticles, which disrupt our reproductive system and cognitive development. Plastic is found in breast milk and in high-altitude mountain lakes and at the bottom of the ocean. Dolphins are choking on it, whales have it in their belly. That's disgusting.

Most people agree that plastics are causing a huge problem and that we are in real need of governance. Member states of the UN are currently in the middle of negotiating what will hopefully result in an internationally binding legal instrument that will govern not just what we do about plastic entering in the ocean but also how plastic – and their chemical components – are mass produced.

Just part of it, and not an easy one, because it's like carbon tax. When you move to full cost pricing, that's definitely a way to get the market competing on a level playing ground. It's good for sustainability, you reflect the full cost of the resource, but it’s a tough one politically. 

As long as we have prices that don't signal scarcity or real cost, we're always going to have these distortions in the economy. We're so used to cheap plastic. We're used to cheap oil. We're used to cheap food. But science tells us that fossil fuel is not cheap; plastics are not cheap. And a lot of the food that we produce that looks very cheap has a lot of externalities as well.

Full cost pricing is good for sustainability, you reflect the full cost of the resource, but it’s a tough one politically.

I think that's where the conversation needs to move, particularly with the financing institutions, the multilateral development banks and also the private banks that form the UNEP Finance Initiative as well. A lot of the voluntary work that's being done here is really interesting. The Principles for Responsible Banking, the Net-Zero Banking Alliance, for example.

Take PFAS, a very toxic type of chemicals – the so-called “Forever Chemicals”. Rather than applying a flat tax across every single type of plastic, you can use legislation to eliminate those parts that are most damaging. You see, there are a whole range of tools for us to use and it’s these tools that are being put on the negotiating table as part of the plastics treaty.

One example is fossil-based energy. The energy transition is a worldwide topic, not only in Germany. There are energy transition partnerships, with Indonesia and South Africa, for example, and there is a lot of support for countries to move away from that energy source.

A second example is minerals. There's incredible demand now for cobalt, magnesium, lithium – for minerals that will power the renewable transition because it's all about energy storage.

A third example is responsible mining. How do you deal with mine tailings, for example, when all the valuable materials have been mined. How do you increase circularity in minerals? The answer is recycling battery materials rather than mining for new ones. All of these ideas are at the frontier of innovation and are really fascinating.

There's a very interesting trend called Extended Producer Responsibility. It says to the manufacturer: “you're producing an item and you're responsible for it, which also means you're responsible for the supply chain and also where that item ends up”. It's placing the responsibility on the producer rather than on the consumer. And so you take the guilt aspect away from the user. Now a cell phone manufacturer needs to produce a product that they stand behind. And as a consumer, you would say, “I'm not buying a cell phone from this manufacturer. I'm buying a communication service”. Then they have an incentive to create a device that lasts as long as possible, and where they recover all the elements in that device. You buy a service rather than a product. That's a shift.

There's a very interesting trend called Extended Producer Responsibility. That's a shift.

Yes, because it changes the dynamic around resource use, around resource efficiency, around incentives for durability of the product and ultimately it can change the footprint, even for electric cars. Manufacturing an Electric Vehicle actually uses 12 times the amount of resources than a combustion engine because of the minerals needed for the battery. So if everyone has their own EV, you're not really doing anything for the environment. But if ten, 20 people can share one EV, that footprint shrinks.

You innovate when you feel the pressure and you also see the opportunity! I'm sure there's a generation of entrepreneurs that will find those breakthroughs that enhance circularity and are good for the planet. Starting with product design through to zero waste.

Mostly in the five industries with the largest footprints: energy, buildings and construc­tion, food systems, mobility and industry. Together, these sectors make up around 80 percent of our climate, nature and pollution footprint. Food, by the way, makes up almost a third of that.

As these sectors are also very capital intensive, you need financial investments, and you need frameworks that enable investors to feel secure that they are making a good bet over the next 30 years. And by the way, these are investments that are also job-creating – thus ensuring a more widespread sharing of benefits.

Long-term investors are a really important agent of change. Take the Church of England Pension Fund: there was a mine tailings failure in Brazil, where the tailings dam collapsed, killing 300 people. The Church of England then decided against investing in mining companies that don’t apply high tailing standards. Investors that take this responsibility have a great impact. The Church of England, with UNEP and other partners, has formed an independent Global Tailings Management Institute (GTMI) aimed at driving mining industry safety standards.

Long-term investors are a really important agent of change.

Risk is a main driver. Take plastics again: according to a report by the Minderoo-Monaco Commission, the potential liabilities for litigation risk is huge, up to 100 billion US dollars a year. Those are real costs.

So food retailers like Unilever or Danone that use plastics on a daily basis have signed up to the Global Commitment which is led by the Ellen MacArthur Foundation, in collaboration with the UN Environment Programme, and whose aim it is to promote a circular economy for plastics. Food retailers are very exposed to potential consumer backlash – because every Coca-Cola bottle in the in the street is bad for Coca-Cola.

No, actually, I don't. There is this tension: end of the world versus end of the month. People need to pay their bills every month. Even in high income economies where people want to do the right thing and they understand they have big footprints; they're still driven by the reality of having to put food on the table and pay the bills. The real challenge, I think, is to demonstrate that these issues are very real and tangible and that they, too, have an effect on our health and well-being. They are “end of the month” issues.

It’s legitimate to ask “what's in it for me if I go circular?” Imagine you're in a country rich in mineral deposits and you haven't really started exploiting them. Your intention might be to export as many minerals as you can because that model is still profitable. This is one more reason why we need to think about fairness when it comes to circularity, particularly for lower income countries that may be rich in mineral deposits or other assets that they want to monetise.

It is a kind of all-hands-on-deck approach, with initiatives like the Principles of Responsible Banking we already mentioned, a UNEP finance initiative to align finance with principles that enable us to achieve the Sustainable Development Goals and the Paris Climate Agreement. 

It is a kind of all-hands-on-deck approach.

We are also a workplace for science because, in this age of false information and generative models, we need authoritative science to guide us. That's where UNEP comes in. We put a really high value on the credibility and the legitimacy of the science that we bring to the discussion.

What you also need, however, is policy champions to lead the way and update the policy framework of entire industries from inside. It's not about stifling industry or repressing the entrepreneurial spirit; it's about guiding entrepreneurial spirit so that market forces in business, industry and finance are working in a direction that is good for the environment and society.

The question of fairness needs to be addressed intensively. Technology now is concentrating – the top ten market cap are all technology firms – and wealth is becoming concentrated in the hands of fewer and fewer. So fairness is a real issue, because if you can’t transition fairly, I don't think there'll be any transition at all. And for a circular economy to really work, we have to address the fairness question and ask questions like: How does this affect jobs? How does this affect income distribution, rents and royalties from raw materials – let alone an even broader view of wealth?

If you can’t transition fairly, I don't think there'll be any transition at all.

I’m talking about a really big picture that includes stocks that produce physical capital – all the roads, bridges, buildings, all the assets in the whole world – but also stocks of nature, stocks of human capital. If you look over time, you see increasing human capital, social capital (more people are educated and profit from an improved health system), and more produced capital – and decreasing natural capital. 

And what are we doing with our wealth stock? There is some interesting data emerging from UNEP’s 2023 Inclusive Wealth Report. It shows that we're liquidating natural wealth to create produced wealth and human wealth. And as that is happening, private wealth is increasing rapidly in almost every OECD country and public wealth is sinking rapidly, with some countries now having net negative public wealth. In other words, their assets are worth less than their liabilities.

Now what happens to your governance capacity when you have net negative public wealth? And how do you define and manage wealth, even private wealth? And what's the responsibility of private wealth? That’s where the financial services industry can play a key role.

The financial institutions are naturally agile, are very smart and have a big role to play. They need to be proactively engaged. Deutsche Bank and all of its peers and all of its investors, essentially all of its clients. There is a Climate Ambition Summit coming up in the fall by Secretary Guterres, and another COP climate change conference in December.

All of these are moments where you can show leadership: Deutsche Bank, UNEP, the UN, the private sector, the policy champions. So we stay focused on those moments when the window is open to actually create change. And when you stay focused, you can create change.

This interview was conducted by Maike Tippmann. 09/2023