EXECUTIVE SUMMARY

Closing the loop

The benefits of the circular economy for
developing countries and emerging economies

© T EARF U ND 2 016 EXECUT I VE SUM M ARY 1

 Introduction negative environmental impacts, primarily affecting
the people and economies of developing countries. The
This report presents evidence to the effect that emerging two inevitable consequences arising from the failure
economies can leapfrog development stages and of the current linear production model are becoming
implement an economic model that is better both for increasingly obvious: non-renewable resources for
society and for the environment. The circular Cradle the production of goods are quickly becoming scarce,
to Cradle® paradigm1 is a production model aimed at while the damage to the environment is compromising
leveraging steady economic development for the future, ecosystem services such as pure water, clean air, fertile
without causing environmental damage. If implemented soil and biodiversity – very often irreversibly.
correctly, it is capable of promoting the maintenance
of natural ecosystems while at the same time offering On the other hand, the Cradle to Cradle® concept
benefits to the poorest groups in society. on which the circular production system is based can
offer a genuinely viable alternative to the dilemma of
The report illustrates the tremendous window of
‘developing or preserving’, because it is able to promote
opportunity provided for Brazil by the new Solid
improvements in the natural ecosystem and, at the same
Waste National Policy. Policies such as this can help
time, foster human social justice. That is because this
low- and middle-income countries to build on and
economic model is based on the same rules followed by
formalise existing informal circular economic activities,
nature’s production system, which sustains life. Nothing
thereby taking a development path that avoids many
in nature is thrown away – everything that an organism
unsustainable elements of the linear production model.
discharges throughout its life cycle becomes raw material
The various case studies included in this report and nutrients for other beings. This is the foundation
demonstrate the potential of the circular economic model of the circular economy which, seeing the production
to bring numerous social benefits, such as strengthening system from a new ‘positive impact’ perspective,
local economies, empowering the poorest families and becomes a common working framework capable of
building resilience, through stimulating the entrepreneurial guiding creativity and innovation – the most abundant
spirit of businesses based on the solidarity economy. resources humanity possesses.

Although the circular economy concept is not yet very

well known in Brazil, this system has already taken root
in various countries, in innovative businesses and major
Making the emerging economies of
global production chains. developing countries circular
The majority of academic and business case studies
undertaken around the circular economy concept have so
Why circular? far produced analyses focusing on the reality in European
Emerging economies like Brazil frequently encounter countries. For example, studies have shown how Europe
the false dilemma of having to choose between social can benefit in environmental and social terms from the
development or environmental protection, as the principles of the circular economy, generating economic
two appear somewhat incompatible. The dilemma gains of €1.8 trillion by 2030.2
becomes even thornier when a degree of environmental
But what advantages could this concept offer if it were
destruction seems unavoidable if social development is
adopted by the emerging economies of developing
to be achieved.
countries? This is an important question, because the
At global level, the economy is currently following a linear bulk of the world’s population is concentrated in those
model based on ‘extracting, producing and throwing countries, and in the future global environmental and
away’ and, as a result, the planet’s ability to sustain life social outcomes will depend to a large extent on how
is shrinking fast. This represents the greatest threat to countries like Brazil, China and India use their natural
recent advances in social development and has many resources.

1 Cradle to Cradle® is a design concept that was developed in the 1990s by Prof Dr Michael Braungart, William McDonough and the scientists of EPEA Internationale
Umweltforschung in Hamburg. It describes the safe and potentially infinite use of materials in cycles. Cradle to Cradle® is a registered trademark of MBDC. For more
information see www.epea-hamburg.org

2 McKinsey & Company (2015) ‘Europe’s circular-economy opportunity.’ Available at: www.mckinsey.com/business-functions/sustainability-and-resource-productivity/
our-insights/europes-circular-economy-opportunity

2 Closing the loop: The benefits of the circular economy for developing countries and emerging economies
This study therefore aims to investigate the relevance of n what benefits the circular economy already offers in
the circular economic system for emerging economies – comparison with a linear economy in the Brazilian
and the poorest people in those countries – on the basis context, for instance in existing examples of informal
of recent experience in Brazil. It is particularly pertinent
circular supply chains
now because Brazil is introducing a new Solid Waste
National Policy, which is triggering a series of innovations n what economic, social and environmental benefits are
in the social, technological, economic, political, legal and linked to developing more circular supply chains in Brazil
environmental fields.
n what role the government can potentially play in
The analyses carried out during this work sought to helping existing production chains to adopt the circular
discover: production model.

Results
Circular supply chains offer clear environmental benefits. Various features of circular economic
activities help to minimise use of fossil fuel and reduce both the extraction of virgin raw material and
sources of pollution. They can improve the carbon balance sheet and also foster responsible use of water
and soil. For example, circular economic activities involving the repair, reuse/redistribution, refurbishing/
remanufacturing and recycling of products help to reverse the impacts of goods production. In the same
way, circular supply chains reduce the negative effects on environmental and human health (and their
associated costs) – for instance, by eliminating the need for dumps and landfill. Apart from this, landfilling
organic waste creates a large volume of greenhouse gas emissions and many health problems. Finally,
to create genuinely beneficial circular supply chains, specific regulations need to be laid down, especially
to control the toxic substances used in the components of products to be recovered or recycled. In brief,
the circular economic paradigm has the potential to decouple economic growth from the intensive use of
natural resources and provides evidence that circular chains can move the future in a positive direction.

CASE STUDY 1
Procomposto: The opportunity of organic waste
Procomposto is a ‘start-up’ offering reverse logistics services to major generators of urban organic waste.
Unlike the situation in most European cities, more than half of all urban waste generated in Brazil is
organic. Of the 94,000 tonne volume generated every day, less than 1 per cent is currently treated
biologically or composted, the rest being disposed of in landfill or dumps. Procomposto’s processing
system prevents organic waste from going to landfill and emitting methane (CH4), a very damaging
greenhouse gas. Instead, the carbon can be put back into the soil through the application of organic
fertiliser produced in sustainable agricultural processes. The company’s business model is suitable for
the great majority of small and medium-sized cities (fewer than 50,000 inhabitants) in Brazil. If the
technology were scaled up to cover 25 per cent of the urban waste produced in Brazil, Procomposto’s
model could create more than 10,000 jobs and help to reduce CO2 emissions by the equivalent of
approximately 100,000 tonnes per day.3

3 Based on Brown S, Kruger C, Subler S (2008) ‘Greenhouse gas balance for composting operations’, Journal of Environmental Quality, v 37, pp 1396–1410

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 There are clear opportunities to involve groups at the bottom of the economic pyramid in circular
supply chains, thereby improving these people’s incomes and working conditions. This relates to
the activities of not only waste pickers and recyclers, but also artisans, family farmers and vulnerable
communities. These individuals can more easily benefit when they are organised into a legally recognised
structure such as an association or cooperative, because this means they can sign contracts with private
businesses and the public sector. In Brazil, support for the formalisation of these workers’ activities has
come from a series of initiatives.

CASE STUDY 2
AJRVI: The circular economy for the poorest
In Brazil, pickers of recyclable waste represent a significant proportion of the poorest population of
urban areas. By organising themselves into recycling cooperatives, these individuals can leave the
informal sector behind, enjoy better working conditions and increase their income, while working to
increase recycling rates for waste that would otherwise be dumped in landfills or the environment.
One example is the Associação Jaraguaense de Recicladores do Vale do Itapocú (AJRVI), an association
founded in 2012 by a small group of waste pickers who wanted to improve their work opportunities.
Three years later, AJRVI is providing work for around 100 people – 20 families – with the potential to
generate average monthly income of R$ 5,000 per family. Apart from the material received from the
local rubbish collection system, half of the takings come from marketing recyclable waste purchased
from other waste picker groups in the region.

PeopleImages/iStock

Recycling cooperatives enable waste pickers to improve their working conditions and increase their income.

4 Closing the loop: The benefits of the circular economy for developing countries and emerging economies
CASE STUDY 3
Nat.Genius: Industrial innovation
Nat.Genius is a business unit of Embraco – a multinational in the manufacturing sector. It focuses
on the reverse logistics of electronic waste, engaging in research and development to find efficient
solutions for the reuse and recycling of components and materials. The Nat.Genius programme has
already remanufactured more than 3 million compressors and recycled 6,200 tonnes of materials.
The company expects that reverse logistics for the industry will create many more better-quality jobs
than the current system of disposal in landfill. In addition, it believes that there are mutual benefits
to be gained from establishing links between industries and recycling cooperatives, especially for the
implementation of door-to-door collection systems for discarded products.

Nat.Genius

The remanufacturing process at Nat.Genius – extracting value from electronic waste.

Circular supply chains help to boost productivity and job creation. There have already been various
cases of private companies establishing their own reverse logistics systems not only to comply with the
new Solid Waste National Policy law, but also because they see the potential efficiency and productivity
gains (in comparison with the cost of virgin raw materials, for instance). Profit margins are often small,
but there are reasons to believe that the economic benefits could increase as more experience is gained,
infrastructure expands in the sector and economies of scale are achieved. Various new businesses are
being set up in Brazil as part of circular production systems, with the potential to create a significant
number of new jobs and even new economic sectors.

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 The government has an important role to play in creating a climate conducive to the establishment
of socially effective circular supply chains. Firstly, it needs to provide the right level of economic
incentives, ensuring that the environmental externalities of linear supply chains are factored into
companies’ costs (for example, by charging for the environmental costs of landfills or making
manufacturers responsible for end-of-life products) and, in addition, ensuring that circular supply chains
and the related products receive tax breaks or are at least taxed equally. Secondly, the government
should facilitate cooperation between all stakeholders in each supply chain. Finally, it needs to ensure
that circular supply chains are established in a way that includes or benefits the poorest groups in
society. Nevertheless, the capacity to fulfil a large part of this role is very often limited. Responsibility for
implementation tends to fall to municipalities and there is an urgent need to support these institutions
at local level.

CASE STUDY 4
Diaconia: A circular economy in rural areas
Diaconia is a pioneer NGO in the field of agro-ecological technologies, and presently promotes
circular production systems in rural areas for more than 4,000 people involved in family farming.
The NGO has adapted and rolled out anaerobic digestion technology for the use of poor rural families
in drought-stricken areas of the semi-arid Brazilian north-east. In place of wood, the families can
use the biogas produced to cook for free. The process can also produce nutrient-rich fertilisers to
increase agro-ecological production and, at the same time, potentially reduce the related greenhouse
gas emissions.

Eleanor Bentall/Tearfund

Biodigestors turn waste into natural gas to use for cooking, benefiting Alvizio’s family and many others in
north-east Brazil.

6 Closing the loop: The benefits of the circular economy for developing countries and emerging economies
 There is a real possibility that countries like Brazil could overcome the problems of the current
production system and move directly to a new economic model more beneficial for both people
and the environment. While many developed countries have virtually eliminated the repair, reuse and
recycle sectors of their economies, emerging economies and developing countries have economically
vibrant activities in these and other circular sectors, although these activities largely reside in the informal
economy. Consequently, countries with emerging economies could apply a different approach and
move towards structuring circular chains on the basis of current economic initiatives. With the creation
of a favourable climate, existing informal circular systems could be helped to achieve formalisation
and expansion of their activities, as described in the report’s case studies. In the treatment of organic
waste, for example, significant environmental advantages and job creation potential can be seen when
environmental and health factors are added together in a circular production approach built around
composting or anaerobic digestion. Developing countries could therefore base their entire organic waste
and effluent treatment infrastructure directly on these alternative circular approaches.

CASE STUDY 5
Vira-Lata: Partnerships between companies and waste picker cooperatives
The Vira-Lata cooperative was set up in 1998 with the aim of generating income for the community
through the collection, recycling and marketing of waste. The cooperative plays a key role in reverse
logistics for several large multinational industries operating in Brazil. For example, in the steel supply
chain, the cooperative is responsible for collecting discarded vehicle components from the network of
auto-repair shops of the Porto Seguro insurance company and selling the material to Gerdau, a leading
steel company. Another example relates to the glass supply chain: the cooperative collects drinks
bottles from distributors and establishments for the Diageo company and sells the material mainly to
Owens-Illinois, a global producer of glass packaging. Both arrangements produce more efficient reverse
logistics systems and, for both the steel and glass supply chains, the cooperative’s participation makes
reverse logistics economically viable, with better results than if the operation were carried out by the
companies themselves. Furthermore, in enabling the circular flow of recyclable waste between generators
and recyclers, the door-to-door collection and sorting services performed by the cooperative give the
companies better control over the operational risks related to the illegal market – preventing the use of
the glass bottles for counterfeit drinks or the improper reuse of defective car parts.4

Recommendations
The report puts forward a series of recommendations to economy needs to refine some elements of current
help the Brazilian government promote the formation of legislation. For example, there are many wasted
circular supply chains. These recommendations are opportunities in the fields of organic waste and
also relevant for other parties interested in the circular agro-ecology. Unlike other countries, Brazil’s urban
economy, and for emerging economies in other parts of waste comprises 51 per cent of organic matter on
the world. Detailed in the final section of the report, the average, generating high levels of greenhouse gas
recommendations may be summed up as:
emissions in landfills. Technologies for recovering
1 Create a national-level policy framework for organic waste through composting on a large scale
the circular economy are viable, however, and have already been tested.
Building on the excellent start made by the Solid Waste Similarly, agro-ecological production initiatives in
National Policy, the new policy to promote the circular rural areas offer huge potential for local production in

4 Based on Demajorovic J, Caires EF, Gonçalves LN da S, Silva MJ da C (2014) ‘Integrando empresas e cooperativas de catadores em fluxos reversos de residuos solidos pos-
consumo: O caso Vira-Lata’, Cad. EBAPE.BR, v 12, Ed. Especial, pp 513–532

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 the circular model, using simple, decentralised, cheap Final considerations
technologies.
The study demonstrates the potential of supply chains
2 Establish a permanent Brazilian resource in the circular economic model to increase job creation
panel and improve the working conditions and pay of the
Open for multi-stakeholder participation, the panel poorest groups in society. The study also provides
would be a vehicle for identifying and promoting best evidence that circular chains can promote activities
circular economy practice in emerging economies at capable of strengthening local economies, empowering
all levels, bringing together policy-makers, industry and increasing the resilience of resource-poor families
bodies, universities, business leaders and civil society and promoting an entrepreneurial spirit for the solidarity
organisations. economy. Furthermore, the circular economic model
3 Build capacity and raise awareness of the makes it possible for emerging economies to move
circular economy directly to a more beneficial development model,
with much more effective, balanced results for society
Public management capacity at municipal level is
and nature.
a particular cause of concern. There is a risk that
the potential social benefits arising from the proper In conclusion, we can affirm that failing to support
application of the Solid Waste National Policy in circular economic initiatives in emerging economies is a
Brazil will be lost unless an effort is made to increase wasted opportunity to learn how the circular economy
understanding of the social role of circular chains. can offer a solution which, while promoting development
At the same time, if they are to play a part in the and enhancing the natural ecosystem, can effectively
circular supply chains in accordance with the Solid reduce poverty on our planet.
Waste National Policy, waste picker groups need
support to organise themselves into cooperatives and
acquire skills in business and production management.

4 Form international partnerships for the

circular economy
Product design standards in the European Union and
Cover photos (clockwise from left):
other major markets have considerable influence
Biodigestors turn waste into natural gas to use for cooking,
on global manufacturing chains and impact various benefiting Alvizio’s family and many others in north-east Brazil.
aspects of production in Brazil, including reuse, Eleanor Bentall/Tearfund

repair and recycle capability. Similarly, valuable The remanufacturing process at Nat.Genius – extracting value
waste considered as secondary raw material is often from electronic waste.
Nat.Genius
sent beyond national frontiers for processing and is
Seleta women’s group make crafts out of recycled materials,
therefore lost. Cooperation with international partners increasing their incomes while decreasing waste. Recife, Brazil.
is key to breaking into global circular supply chains. Eleanor Bentall/Tearfund

Visit www.tearfund.org/circular to download the full version of this report.

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