The growing adoption of national circular economy strategies and road maps and the ratification of international commitments pertaining to climate change set the stage for the adoption of circularity within global value chains (GVCs). Such measures can influence and alter the configuration, processes and business dealings throughout the entire supply chain.
Similarly, trends pointing to an increase in consumer empowerment, reflected in demands for greater transparency and access to information regarding sustainability practices, resource origin, repairability, among others, act as incentives to foster circularity throughout the entire value chain. Also, an urgent need exists for companies to adopt more sustainable production processes to comply with increasing sustainability regulations, contribute to climate change mitigation efforts and satisfy environmentally conscious clients. In this sense, circularity plays a key role mitigating climate change by fostering more sustainable production and consumption processes.1 In this article, we use the example of the forestry-cellulose-paper value chain in Latin America to showcase the role of circularity in GVCs, not only seen from its greening impact but also from its economic contribution.
Traditional value chain theory has failed to incorporate circularity to address value added capture. Likewise, upgrading within GVCs is usually linked to the improvement and development of processes, products, and functions without paying much attention to the virtuous back-loop cycles that represent new sources of income and jobs. Back loop cycles relate to firms´ capabilities to redesign business models from scratch as well as to recover, recycle and remanufacture waste streams in the production process and to make a more efficient and circular use of utilities like energy and water (see figure below).
Added-value distribution along the value chain
Circularity in the forestry-cellulose-paper value chain
The Economic Commission for Latin America and the Caribbean (ECLAC) recently published its International Trade Outlook for Latin America and the Caribbean 2021 report, which includes a study on the current state and potential of the circular economy within the forestry-cellulose-paper value chain.2 An analysis of trade data during the 2002-2019 period shows constant growth in value of trade in paper-, cellulose-, cardboard- and wood- related waste.3 Such trade patterns serve to underline the potential substitution of virgin material with recycled or recovered inputs, otherwise considered waste.
On one hand, the adoption of circularity in this sector can lead to both benefits linked to the global demand for circular products through international trade, such as diversifying export baskets, creating economies of scale, and generating new income streams through the commercialization of waste and products derived from waste.4 On the other hand, adopting circular production processes in this sector can lead to a series of important savings regarding resources, energy and water use, resulting in more efficient and sustainable production processes (see next figure).5
Circularity in the forestry-cellulose-paper value chain can occur throughout different stages of the production process. Specifically, this value chain can be divided into the silvicultural and the industrial stage, consisting in the transformation of raw materials into intermediate products, such as pulp, and posteriorly, the elaboration of finished products, like paper and paperboard. The production of both intermediate and finished products can be sourced from both primary and/or secondary inputs.
Incentivizing trade in circular goods, such as paper/cardboard waste and scrap, and finished products using mainly recycled inputs can help foster overall circularity throughout the forestry-cellulose-paper value chain. Globally, during the 2002-2019 period, total exports from the forestry-cellulose-paper value chain doubled while the export of circular goods grew fourfold. Specifically, this has led to an increase in circular goods within this chain from 3 per cent to 6 per cent (see figure below).6
At the global level, the forestry-cellulose-paper sector has increased its degree of circularity7. Several trends related to an increase in demand for sustainable products as well as increasing requirements and standards relating to resource intensive sectors can act as incentives for an increased uptake of circular processes within this sector. However, a set of technical and regulatory barriers require close attention to achieve the full potential of the circular economy in the forestry-cellulose-paper value chain.
Recommendations for moving towards circular value chains
Several key actions at different levels, some of which can be extrapolated to GVCs in general, can contribute to advancing circularity within the forestry-cellulose-paper value chain.
Firstly, international cooperation has a crucial role to play by spotlighting the nexus between the international trade and circular economy agenda with the objective of generating consensus on the importance of sustainable trade by incentivizing and regulating trade in waste and products derived from waste. For example, the European Union's Forestry Strategy, which is part of its Green Deal, aims to improve forest protection by promoting certified deforestation-free supply chains.
Similarly, specific instruments such as international certifications, eco-labels and standards can attest to the circularity of products and processes. Such instruments respond both to increasing demands regarding customer empowerment as well as stricter sustainability.8 In the case of the forestry-cellulose-paper value chain, the Forest Stewardship Council (FSC) and the Programme for the Endorsement of Forest Certification (PEFC) can add-value and distinctiveness relative to non-certified products and enable consumers to know more about the provenance and process of their products9. Similarly, policies such as extended producer responsibility, carbon pricing, subsidies, or incentives for recycling10, as well as green public procurement programmes can also nudge producers to adopt sustainable and circular processes throughout their entire chain of production.11
However, in some cases regulations alluding to definitions of waste and the use of recycled content can act as barriers for the adoption of more circular processes. Therefore, adjusting and updating regulatory measures at the national levels can also facilitate the adoption of circular processes and the uptake of circular products relative to non-circular ones.
Overall, positioning the circular economy more visibly on the international agenda can contribute to driving and accelerating the transition at a global scale. The circular economy can generate environmental benefits and boost competitiveness in GVCs, demonstrating that the so-called “waste” can be transformed into valuable inputs for production. However, it may also occur that the benefits derived from the adoption of the circular model remain concentrated in developed countries at the expense of their developing counterparts12. Such implications should thus be taken into consideration and addressed by development cooperation. This highlights the need for mainstreaming circularity in efforts regarding the creation of public-private partnerships, the transfer of knowledge and technology for capacity-building, and in the elaboration and harmonization of definitions and standards.13
This piece has been adapted from a blog published on the Research Network, Sustainable Global Supply Chains.
Disclaimer: The views expressed in this article are those of the authors based on their experience and on prior research and do not necessarily reflect the views of UNIDO (read more).
Have your say
What is your opinion on the IAP?