June 4, 2024
Circular is the new linear
Since the onset of the Industrial Revolution, the world has operated under a linear economic model: take, make, and dispose. Today, faced with dwindling natural resources and a climate emergency, many see a circular economy as the future. We share this vision.
6 minutes
The consumption intensity of natural resources has escalated continuously over the past century. According to the IRP (International Resources Panel), in 2015, humanity consumed 90 billion tonnes of resources, a significant increase from the 6 billion tonnes consumed in 1900, representing a fifteenfold increase. And it's not likely to improve: if we continue the pre-coronavirus crisis trend, natural resource extraction could soar to nearly 160 billion tonnes by 2060*.
The circular economy holds the promise of addressing this issue by offering the world’s economies a new paradigm: a sustainable and economically viable framework capable of decoupling growth from natural resource consumption.
What is a circular economy?
A circular economy model diverges from a linear economy model which is characterised by a “take, make, and dispose” approach to goods.
Two significant problems arise from this linear model:
- Firstly, given the finite nature of our world, it is not sustainable to extract raw materials indefinitely. Currently, on average, we are consuming the ecological resources of 1.7 planets annually. If we continue on our current growth trajectory, we will require the resources of 2.3 planets by 2050.
- Secondly, we cannot indefinitely accumulate waste.
The concept of a circular economy aims to minimize the need for raw materials. This involves:
- Avoiding the production of new goods in the first place by:
- Extending the lifespan of existing goods and intensifying their use through sharing.
- Repairing goods that are no longer in good working order. - Ultimately, recycling the components at the end of their life to close the circle.
Recycling is therefore an important, but not the only part of the circular economy. Manufacturers must, from the outset, consider a product’s entire lifecycle (or even multiple lifecycles, since it can be used, refurbished, reused, and then recycled into another product that repeats the same cycle).
Circularity also entails a shift towards prioritizing “service” over “product”. The sharing economy and collaborative models actively support a circular economy by prolonging the lifespan of products, thereby maximizing their utility. Research indicates that one shared car can replace up to 20 privately owned vehicles parked on city streets**.
These practices not only benefit the environment by reducing carbon emissions and pressure on biodiversity, but also protect human health by mitigating the release of pollutants into the air, water, and soil.
In practice, the real economy is already embracing circular practices, partly due to increasing regulations, such as the Extended Producer Responsibility policy approach in Europe.
In addition, circular practices enable companies to:
- be more resilient against shortages of virgin materials and supply chain disruptions
- be less sensitive to price volatility and overall cost increases.
How can AXA contribute to the development of the circular economy?
Although we are not a consumer-goods manufacturer, our position as an insurer and global financial player enables us to significantly contribute to the transition towards a low-carbon and less resource-intensive economy.
As an INSURER, our role is to improve the understanding of the risks associated with emerging circular practices and business models, to drive their insurability, and thereby facilitating their development:
- Recycling: In 2023, in partnership with IKEA and Swiss Re, AXA published "What Goes Around Comes Around", a white paper exploring the challenges and drivers of insurability in the growing recycling industry.
- Buildings: Through its membership, particularly in the Circul’R Club, AXA participates in discussions on the insurability of buildings incorporating reused materials. In this regard, AXA France already offers a guarantee covering the use of reused materials for all its professional insureds and building companies in its contracts.
In addition to driving insurability, when claims occur, we prioritize repairing over replacing and advocate for upgrades to more environmentally friendly and resilient solutions.
- Motor: In several European countries, including France, AXA promotes (i) the repair of damaged parts rather than their replacement, and (ii) if replacement is necessary, the re-use of parts.
- Telephony: In the context of Damage/Theft/Breakdown insurance for smartphones sold through partnerships with Free or Fnac/Darty, for example, AXA France prioritizes replacing damaged devices with refurbished ones. To showcase this initiative, AXA France published a white paper on sustainable telephony which includes a comprehensive study assessing the CO2 emissions savings resulting from the diverse services offered within its mobile phone insurance programs. Using ADEME’s environmental impact assessment, each service was compared to the environmental impact of providing the client with a new phone. The analysis revealed that a repair led to a 91% reduction in environmental impact while replacement with a refurbished product resulted in an 87% reduction, highlighting the benefits of shifting practices and embracing a circular economy model.
As part of its telephony program, AXA France has reduced its environmental impact by 35% (as calculated using ADEME’s environmental impact assessment) in 2022 and by 60% in 2023 compared to 2019. AXA France aims to achieve a 75%*** reduction in the environmental impact of telephony claims management by the end of 2024, through meticulous service offerings management and an increased focus on raising client awareness of the benefits of the circular economy.
As an INVESTOR, since 2016, AXA IM has been investing in a circular economy model through various impact investment funds which carefully select assets based on financial returns and their positive social and environmental impact. For instance, with the AXA Impact Fund Climate and Biodiversity SA SICAV-RAIF, AXA IM directly invests in various companies that integrate the principles of a circular economy, such as reducing, reusing, and recycling, through alternative assets like private equity, venture capital, private debt, and project finance. These companies include Shark Solutions, CleanFiber Inc. and PackBenefit****. In 2022, AXA IM also launched a biodiversity listed equity strategy investing in companies whose activities are effectively preserving life on land, water, and air through providing sustainable alternative products and services and/or through their best-in-class operational practices which are protecting and supporting ecosystem preservation.
As an EXEMPLARY COMPANY, we prioritize internal action within our own operations to promote the concept of circularity. We are working, for example, to minimize our environmental footprint by contributing to waste reduction and sorting for recycling. Through a number of local initiatives already launched within certain AXA entities, we have managed to (i) reduce the amount of unsorted waste generated by the AXA Group to 16 kg/FTE in 2023, representing a decrease of 31% compared to 2022, (ii) reduce the total amount of waste generated by the AXA Group to 4,350 tons in 2023 from 5,070 tons in 2022, representing a decrease of 14% and (iii) increase the recycling rate (sorted waste/total waste) to 55% in 2023, representing a 21% increase compared to 2022.
We also believe in the power of collaborations and continuous learning to drive progress in our climate transition journey:
- AXA is part of the Circul’R Club, a collective of CAC40 companies and startups committed to advancing the circular economy. Within this network, we engage in ongoing dialogues with our partners to better understand their challenges and collectively explore solutions.
- We have also joined the Circul’R Factory Coalition, focused on developing metrics to measure the circularity, environmental impact and social and economic implications of various activities.
- AXA Climate provides specialized training on the circular economy through the Climate School, with the goal of introducing key concepts such as eco-design and industrial ecology.
Supporting the circular economy is a significant opportunity to support a global transition toward a more sustainable economy.
Lars von Sivers Lindmark
Group Global Enterprise Director
Circular economy and recycling are strategic imperatives for AXA's global clients. We are convinced that collaborative multi-stakeholder efforts across industries, exemplified by the collaboration with IKEA, SwissRe and AXA, can accelerate the development needed to solve these global challenges.
Xavier Lalouet
AXA France Head of TPA & Service Provider Management
AXA is dedicated to engaging in environmentally friendly practices by rethinking insurance programs in telephony, fostering the adoption of virtuous behaviours and informing its clients and partners about circular economy solutions. It’s crucial to connect all stakeholders (insurers, service providers, distributors, clients etc.) to pave the way for a healthy environment where all stakeholders endorse circular economy.
Alexander Schmidt
AXA Germany Head of P&C Mid Markets
Recyclers, as a core part of the circular economy are a difficult risk, no doubt about it. The mix of risk prevention and risk transfer is the key, with the right protection measures, these assets are and will remain an insurable risk!*****
