CREATING JOBS THROUGH THE CIRCULAR ECONOMY

This article was originally published in Actu-Environnement .

By substituting the consumption of natural resources with that of labor, the circular economy not only preserves raw materials but also creates jobs.

To remain competitive, companies must constantly reduce their costs. For a manufacturing company, it is easier, and also faster, to reduce labor costs than materials or energy costs. Reducing the workforce in a factory is easier than reducing the supply of raw materials and faster than reducing energy consumption.

Labor productivity has thus increased much more rapidly than material or energy productivity. For example, labor productivity tripled in the United States between the 1950s and 2000s, while material or energy productivity changed little. In Germany, labor productivity increased 3.5-fold between 1960 and 2000, while material productivity only doubled . ¹ Fiscal policies, which emphasize taxing labor rather than taxing resource use, have also favored increases in labor productivity at the expense of resource productivity.

Productivity gains are therefore mainly achieved at the cost of significant workforce reductions. In France, they lead to the destruction of 43,000 jobs each year ² . Could the circular economy , which, unlike our current economic model, prioritizes the productivity of materials and energy, make it possible to reverse this trend?

In a circular economy, used products and materials are reintroduced into the production, distribution, and use cycle as many times as possible. The circular economy thus inherently improves material productivity. These productivity gains are estimated to save a billion dollars a year overall by 2025 ³ . By preferring to reintroduce used products into the production cycle rather than manufacturing new products, the circular economy also helps reduce energy consumption. Indeed, 75% of the energy needed to manufacture a finished product is used to extract natural resources and transform them into materials, such as iron or cement. Only the remaining 25% is used to transform these materials into finished products ⁴ . By prioritizing material and energy productivity over labor productivity, does the circular economy help preserve or create jobs?

The impact of the circular economy on employment is difficult to estimate, either globally or at the country level. However, an initial estimate can be made by analyzing each of the circular economy’s loops: recycling, remanufacturing, repair, and finally, reuse.

RECYCLING CREATES JOBS, SOME OF WHICH ARE LOCAL

Waste recycling creates jobs ⁵ . It creates 6 times more jobs than waste-to-energy  ⁶  and 25 times more than landfilling ⁷ . However, the job creation potential is different at each stage of the recycling process: collection, dismantling, sorting and material recovery. Waste collection and sorting ⁸  are labor-intensive activities. Moreover, they are sometimes difficult to automate. For example, while technologies are being developed to sort textiles by fiber type, manual sorting based on human judgment remains essential today.

On the other hand, the job creation potential of dismantling is more limited. Dismantling (or deconstruction) has a much higher productivity than construction. For example, for the Renault Group,  dismantling a used vehicle  is eight times more productive than building a new vehicle.

Collection, dismantling, and sorting, carried out near waste sources, are handled by local employees. However, material recovery is not always carried out within a local or regional scope. The often high cost of recycling plants limits their number. For example, there are only three plants in the world capable of properly recycling the precious metals contained in mobile phones. Some of these recycling plants are located outside Europe, in countries with less stringent environmental constraints. Europe thus exports a significant portion of its plastic waste to Asia.

The job creation potential of recycling remains significant. The full implementation of European Union waste legislation (which mainly concerns recycling) would, according to a 2011 estimate, create more than 400,000 jobs by 2020 ⁹ . In the United Kingdom, methanisation, which is a form of recycling of organic materials, would create 35,000 new jobs ¹⁰ .

THE POTENTIAL OF REMANUFACTURING

Remanufacturing is a labor-intensive activity with significant potential for local job creation. The productivity of a reassembly operation is often lower than that of assembling the same product. For example, remanufacturing a Xerox printer requires twice as much work as manufacturing it and requires a more skilled workforce ¹¹ . It is also difficult to automate disassembly by setting up disassembly lines similar to assembly lines. Indeed, the duration and successive operations of disassembly can vary from one product to another. For example, a damaged product is generally more difficult to disassemble than a product in good condition.

Remanufacturing used products requires local or regional employment. The often high cost of transporting used products and the limited cost of remanufacturing plants (which are difficult to automate) encourage locating these plants near consumer regions. For example, Renault, Ricoh, and Canon have remanufacturing facilities in Europe.

In the United States, the remanufacturing sector, which employs 180,000 people full-time, is growing by 15% ¹² . In the United Kingdom, remanufacturing could create at least 310,000 new jobs ¹³ .

NON-RELOCATABLE JOBS

Relying on new business models, repair and reuse could create a large number of local jobs. Studies of the impact of repair and reuse on employment are limited. Yet, it is perhaps for these two activities that the potential for job creation is greatest.

Repair and reuse should not be limited to existing businesses such as car repair or vehicle rental. They must include new business models, such as the functional economy or the collaborative economy.

A growing number of companies, from startups to multinationals, are adopting the functional economy. The functional economy is the substitution of selling the use of a good for selling the good itself. Xerox doesn’t sell printers, but print management services. Elis doesn’t sell workwear, but a rental-maintenance service. Philips wants to replace the sale of lighting systems with the sale of a lighting service. Safechem no longer sells perchloroethylene, but rents it. Other companies, such as Apple and Amazon, manage their products through a closed loop: they buy used products from their customers, refurbish them, and then resell them.

New organizations must be put in place to operate these new models in order to ensure the monitoring, maintenance, recovery or even the reconditioning of products. These activities are highly labor-intensive. These models are probably still too new to know their impacts on employment. However, the evaluation of similar models suggests significant potential: in Germany, replacing a single-use bottle management system with a deposit bottle system would allow the creation of 80,000 jobs ¹⁴ .

While the net number of jobs created by the circular economy is difficult to estimate, the initial signs are promising. By substituting the consumption of natural resources for that of labor, each of the circular economy’s loops creates jobs. The “shorter” the loop, the greater the substitution of natural resources for labor, and the greater the creation of local jobs. It may not be a coincidence that the study that founded the circular economy, published in 1977 by the European Commission, focused not on reducing resource consumption but on job creation.

This job creation will undoubtedly be accompanied by the destruction of existing jobs, particularly in the mining and manufacturing sectors. But these destructions will probably have a smaller impact on France, which has already lost many jobs in these sectors. Based on labor-intensive activities, overall, the circular economy should create many more jobs than it destroys. According to the Japanese government, which initiated a transition to the circular economy in the early 2000s, 650,000 jobs were created in the space of seven years ¹⁵ .

By improving the competitiveness of businesses and creating jobs, the circular economy represents a tremendous opportunity that France and Europe cannot afford to miss.

¹  Working for the environment: a growing source of jobs, Michael Renner, Worldwatch Institute, September 2000. 
²  Deindustrialization in France (DG Trésor working documents), Lilas Demmou, June 2010. 
³  Remaking the industrial economy, McKinsey Quarterly, February 2014. 
⁴  The performance economy, Walter R. Stahel, February 2010. 
⁵  Consult the recycling hiring opportunities. 
https://www.emploi-environnement.com/fr/gestion_offre/offre_emploi_recyclage.php4 
⁶  Consult the waste-to-energy job opportunities. 
https://www.emploi-environnement.com/fr/gestion_offre/offre_emploi_valorisation_energetique_incineration.php4 
⁷  Implementing sustainable resource use: a thematic strategy for waste prevention and recycling, European Commission, December 21, 2005. 
⁸  Consult job opportunities in the field of waste collection and sorting. 
https://www.emploi-environnement.com/fr/gestion_offre/offre_emploi_gestion_collecte_tri_des_dechets.php4 
⁹  Implementing EU waste legislation for green growth, European Commission DG ENV, November 29, 2011. 
¹⁰  Anaerobic digestion strategy and action plan, Department of Environment, Food & Rural Affairs. 
¹¹  Green jobs: towards decent work in a sustainable, low-carbon world, United nations environment program, September 2008. 
¹²  Source: Remanufactured goods: an overview of the US and global industries, markets, and trade, United States International Trade Commission, October 2012. 
¹³  The next manufacturing revolution: non-labor resource productivity and its potential for UK manufacturing, Next manufacturing revolution, July 2013. 
¹⁴  Reuse and recycling systems for selected beverage packaging from a sustainability perspective, PwC, 2011. 
¹⁵  Establishing a sound material-cycle society: milestone toward a sound material-cycle society through changes in business and life styles, Ministry of the environment (Government of Japan), 2010.