The Circular Economy (CE) is rapidly turning from a buzzword into a fully-fledged economic system that promises to reshape the way we use (and re-use) resources in order to make our world sustainable. Not only is that good news for our people and planet; it also opens up opportunities for the corporate sector to offer new products and services.
In Japan, the government is taking the initiative by promoting CE as one of the pillars of its growth strategy. “We think of the circular economy as an economic system that aims to create added value by making maximum use of resources already obtained, while minimizing the input of new resources,” says Shogo Tanaka, Director, Resource Efficiency and Circular Economy Division, GX Policy Group at the Ministry of Economy, Trade and Industry (METI).
The concept of CE was originally proposed by Ellen MacArthur in the UK and began to spread as a policy in the mid-2010s, initially in Europe. In Japan, it began to be discussed as a policy around 2020 and was a departure from the country’s traditional approach, he explains. This sought to solve environmental issues by passing various laws – such as the Waste Management Law for proper disposal of waste, and the Basic Act for Establishing a Sound Material-Cycle Society, which promotes reduced waste generation and resource circulation.
By contrast, CE also addresses resource constraints, such as resource depletion and procurement risks. It represents a broader concept that seeks not only to respond to constraints but also to transform the economic system itself and thereby promote economic growth.
GX Policy Group at METI (title has since changed)
The Circular Economy as a Growth Opportunity
This approach is attracting attention from companies, whose interest in the CE concept is growing year by year, notes Hidetaka Yamashita, Deputy Head of the Environmental and Energy Headquarters at ORIX.
Mr. Yamashita, who oversees the promotion of CE initiatives across the entire ORIX Group, says that while ORIX has been offering waste management services since 1998, since about 2020, customers started to change their focus from just ensuring proper disposal of their waste to reducing the amount of waste itself.
In addition, with growing geopolitical risks, more companies are expressing a desire to reuse materials and components domestically instead of relying on overseas procurement. “In this sense, CE is not merely an extension of environmental measures, but a game-changer and a business opportunity,” Mr. Yamashita argues. And in March 2023, ORIX established a specialized unit for CE promotion and implementation and began offering specific CE services.
That reflected METI’s new “Strategy for a Resource-Independent Economy Aimed at Growth”, which was launched the very same month – and which seeks to turn Japan’s inherent lack of resources into a strength, according to Mr. Tanaka.
Against the background of a globally tight supply-demand balance for non-renewable resources, it is critical for a manufacturing-driven nation like Japan to ensure a stable and reasonably priced supply of these resources. If it can switch from purchasing to recycling them, the economy can retain capital, reduce emissions and create business opportunities by developing domestic supply chains.
The METI strategy therefore aims to promote such domestic “new growth” through CE. The government will update regulations and rules, provide approximately ¥2 trillion ($13.5 billion) in policy support over the next 10 years, and launch a public-private-academic CE partnership. Ultimately, this will put Japanese companies in a strong position to export CE services and solutions to Asia and other developing nations.
Advancing Public-Private Collaboration
ORIX’s Mr. Yamashita welcomes the government’s willingness to listen to voices from across industry and academia. He points to the September 2023 launch of “Circular Partners”, a collaboration between government departments, industry, and academia to realize CE.
Circular Partners are working on setting goals and roadmaps for CE in Japan and have established working groups to apply these roadmaps to individual industries, products, regions and economic zones – as well as building data platforms to underpin all these efforts
Mr. Tanaka is excited by the Circular Partners program and says it is helping to define what CE will look like for Japan in 2030 or 2040 and what must be done to get there. The government wants first movers to benefit and has started to spend some of its budget to support them. In return, companies applying for subsidies will need to be Circular Partners members and disclose quantitative CE targets.
Mr. Yamashita confirms that ORIX supports the goals of the Circular Partners program. Since CE affects the entire supply chain, collaboration with all stakeholders is essential and the Circular Partners program offers a valuable forum to engage and to stay updated on CE policy trends. “The requirement to set and disclose CE targets is also a positive pressure,” he says: “Creating and sharing our goals was valuable in itself.”
Beyond that, Mr. Tanaka points out that the government is aiming to seamlessly connect the stages of design/manufacturing, sales/use, and collection/recycling that make up CE. He thinks of manufacturers as being like the arteries in the human body and recyclers like veins. The two must collaborate organically.
ORIX looks ideally positioned to bridge the two systems. “If those in waste management can become indispensable resource suppliers to manufacturers, that’s a major business shift,” argues Mr. Yamashita. “We believe we can serve as a hub or glue connecting both sides.”
On top of that, ORIX’s Environmental Energy Headquarters also provides renewable energy services, such as solar panels and batteries. These too will eventually need to be recycled rather than disposed of and so become part of the circular economy.
