Opinion article

Linking the 'E' in ESG to your core business

Today, we take from the environment, make new, then dispose. The linear economy has evolved to manage familiar commercial risks and opportunities, with little recognition that we rely on increasingly scarce natural resources and absorption capacity. Arup's Climate and Sustainability Leader for Australasia Joan Ko writes that the most sustainable product is the one that already exists.

This year, Earth Overshoot Day was 28 July. That’s the day the global community consumed all the materials and services that Earth produces in the year. If we all stopped in our tracks on 28 July, we would have achieved sustainability. If we stopped earlier, then slowly we would regenerate our earthly bank balance. But as we all know, we keep going, and therefore draw down our precious resources.

In my sector –  the built environment – committed professionals are innovating with sustainable design, timber materials, zero cement concrete, green roofs and integrated renewables. In other sectors, the equivalent efforts are yielding plant-based, recycled or efficient clothes, food, packaging and equipment.

However, we must remind ourselves: The most sustainable product is the one that already exists. We can say this for any object or service: the most sustainable shoe, machine, bridge or school is very likely the one that already exists.

In Europe, even before the pandemic, 60 per cent of office buildings were underutilised in business hours.1 A cutting-edge sustainable building is not sustainable if it is empty.

I’ve worked with growing municipalities that are chronically short of community facilities. Imagine the materials, emissions and budget that could be saved through sharing what we already have. Those imaginings are the essence of circular economy thinking. The economy is circular when the things we or nature create are used at their highest and best value for as long as possible.

Today, we take from the environment, make new, then dispose. The linear economy has evolved to manage familiar commercial risks and opportunities, with little recognition that we rely on increasingly scarce natural resources and absorption capacity.

Often, when organisations like councils and universities try to share their spaces, the challenges of shared maintenance, health and safety and timetabling are overwhelming. So, they go back to the familiar, safe and inefficient practices of developing and operating underutilised buildings.

We find ourselves locked into the linear economy, and we lock others in. Fundamentally, the circular economy is a business model and design challenge.

Circular business model innovation

The easiest way to radically enhance the ‘E’ in ESG is to have a business model that makes resource efficiency delightful to your stakeholders. There are more and more examples of such disruptive business models and partnerships, typically enabled by data and digital systems.

If a business offers products ‘as a service’, then they are incentivised for holding assets that are durable, repairable, trackable, shareable, adaptable and highly utilised. Familiar examples include mobility, lighting, printing, pallets and carpets.

The growing class of build-to-rent residential development is akin to ‘homes-as-a-service’. My own dream is to move into one of these buildings, and to never again worry about appliance failure, hot water systems or unreliable internet. Perhaps this dream building would have a furniture swap service, so that I can update my kids’ beds without sending the bunkbed to landfill.

There are other business models that reward circular materials use. These include asset sharing (such as holiday homes and construction equipment), virtualisation (music, laser-marked fruit) and nature-based alternatives (mycelium to treat water2).

Circular design drives innovation 

When we approach a design brief, the first step is to truly value the assets and components that already exist. This mindset drives new questions. Can we retrofit the building, upgrade the critical components of a water plant, or use intelligent systems to eke out more use from a rail tunnel?

If we do build new, can we make the asset adaptable so that obsolescence does not occur again? What sensors and systems do we need to design now so that the asset owner has the data to extend the asset’s life in future? Can we choose components that are standard and modular so that they are easy to replace over time?

Are you now imagining a city built of giant Lego?3 You are not far wrong. The European expression for this is ‘city as materials bank’.

The CEDA ESG community has identified the circular economy as a framework that could drive radical innovation in business models and products. If you are wondering how to tackle Scope 3 emissions (emissions that are a consequence of an organisation’s activities, but occur at sources owned or controlled by another entity), embodied carbon, natural capital constraints, waste, water use or any number of ESG issues, then consider looking at the circular economy.

The good news is that you can make the biggest impact without waiting for hydrogen, digital twins or EU-style codes. Let me end with some circular prompts. You can use this for a breadth of decisions, ranging from choosing a new office through to product development.

  1. Do you need it?
  2. If you need it, can it do more than one function?
  3. If you need it, can it be made passive and adaptable?
  4. If you need it, can you switch the materials?

About the authors

Joan Ko

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As Climate and Sustainability Leader for Australasia, Joan is accountable for growing Arup’s strategic capability for the circular economy, decarbonisation, social value and biodiversity. While many services are long-established, others respond to unsolved challenges. Joan focuses on finding solutions that work and then systematises the methods and processes to benefit Arup, its clients and partners across Australasia. Joan embraces digital transformation as the basis for climate and sustainability services, so that Arup and its clients have immediate access to relevant and targeted data for decision making. A member of several governance bodies, Joan considers long-term strategy, risk appetite, stakeholder engagement, and resilience in place. She serves on the Working Heritage and Sustainability Fund Committees, overseeing public entities that are accelerating progress to a low carbon, circular and resilient future for all Victorians.