Episode 7: The Circular economy transition in Asia Pacific

Full transcript

Ivy: Hello! I'm Ivy Kuo, PwC Asia Pacific Sustainability leader, and you're listening to PwC's ESG (Environmental, Social and Governance) podcast, Defining Asia Pacific’s Future. The podcast for bite-size updates on the latest sustainability trends, from climate change to social and labour rights due diligence. 

We bring together ESG practitioners to discuss and solve today and tomorrow's sustainability challenges, reflecting PwC's strategy of building trust and delivering sustained outcomes.

Joining us today is Melissa MacEwen, who leads on the circular economy for PwC’s Asia Pacific Sustainability team and our Global Sustainability Impact Centre. Today she will be sharing our latest Thought Leadership titled ‘Reinventing Asia Pacific: Embracing a circular economy for a resilient tomorrow.’

Welcome Melissa! Before we start on the Thought Leadership, could you start by giving some context on why circular economy and why now? 

Melissa: Sure Ivy, it’s great to be here. Well as you know, Asia Pacific is at the epicentre of the climate risk, biodiversity degradation and pollution crisis. To pick up on just one of these,  we’re drowning in waste and this is predicted to grow by 71% by 2050.¹

The circular economy - which focusses on extending the lifespan of resources and valuing waste - is an approach to tackle these challenges while also generating economic benefits.

Ivy: Wow, drowning in waste, that doesn’t sound good. Can you share more about the stakeholders involved to drive this change? 

Melissa: Yes, so regulations from Europe, like Corporate Sustainability Reporting Directive – also known as CSRD, which is in force now, and the Eco Design for Sustainable Products Regulation which will apply from 2026 to certain goods placed on the European market, are driving change on this front. 

Here in Asia Pacific, national governments are also introducing a range of policies, plastic taxes, extended producer responsibility policies, where businesses must recover their product or packaging waste at end of life, and new national circular economy roadmaps.  

On the business side, more and more examples now exist of new revenue streams as well as cost savings from implementing circularity.

Ivy: So why did you feel it was important to focus on Asia Pacific when creating this thought leadership on circular economy?  

Melissa: Well, regulatory change, as well as changing demands from large international buyers and investors, will drastically affect manufacturing standards in Asia Pacific as well as create risks and opportunities for a range of upstream and downstream sectors. 

While some large headline figures on the benefits of circularity exist globally, Asia Pacific is a unique region with a very different socioeconomic and environmental landscape. 

It’s understandable that 63% of Asia Pacific CEOs lack confidence in their company's long-term viability in this context², and we wanted to give more clarity on what the circular transition means for the region so that businesses and the public sector can plan for the future. 

Ivy: That makes a lot of sense. I know you did some original modelling of a circular economy transition on Gross Domestic Product (GDP) , jobs and emissions. Can you share with the audience a summary of the outcomes?

Melissa: I would love to, we found that if a circular economy were fully applied in the region today³, over a one-year period, it would:

• Boost GDP by nearly US$340 billion  

• Reduce emissions by 7.2% - and that’s not taking into account renewable energy - and create 15 million new jobs, taking into account part of the informal sector 

• We also found that over a third of the region’s economy could be highly impacted by a transition to circularity, including winners and losers at sector level - which will require careful transition planning.  

Ivy: So where are the opportunities for businesses in Asia Pacific?

Melissa: Well, there is recycling, as well as repair, refurbishment, and remanufacturing. Additionally, leasing represents viable circular business models that can generate new forms of revenue for businesses while boosting resource resilience and benefitting the planet.  

Under a circular economy scenario⁴, we found a 13-fold increase in GDP for the maintenance and repair sector and a 5-fold increase in GDP for the recycling sector, representing a US$1.3 trillion opportunity. Furthermore, we found a 21% increase in GDP for the construction sector, driven by infrastructure expansion to support these activities. And this opportunity does not have to sit in the material recovery sectors alone.

Ivy: Can you share with us examples of businesses that are capturing some of this opportunity?

Melissa: Definitely, in the thought leadership you’ll be able to find a few great best practises. For instance, we are already seeing examples of manufacturing sector businesses integrating resource recovery and processing, like one of the world’s largest Electric Vehicle (EV)  battery manufacturers, which also recycles EV batteries now. They’ve managed to recover nearly 100% of valuable nickel, cobalt and manganese and over 90% of lithium from their products in 2023 and they are expanding their material recovery facilities, with plans to invest upwards of US$7.8 billion  in two new recycling projects⁵.  

Ivy: It sounds like a significant opportunity. Are there any challenges businesses might face during this transition?

Melissa: Yes, without careful transition planning to incorporate circular business models into incumbent sectors, manufacturing and extractives sectors may face decline. Some of the challenges they would face include access to recycled materials, which will be prioritised in the circular economy and will be important to retain export access to more regulated markets. Another  challenge is access to scarce resources, as is the finance required to build the infrastructure we need to recover and reprocess materials and components. 

Ivy: How can businesses in Asia Pacific manage this transition effectively with the challenges you just mentioned?

Melissa: Well, it can absolutely be managed with a step-by-step approach. Starting with ensuring compliance with new regulations, businesses can then consider value recovery, value at risk, and value creation. 

Ivy: Melissa, can you break this down for us a little bit more?

Melissa: Of course. So for value recovery, assessing the value of waste and the cost of waste management  can lead to opportunities to reuse or sell waste and byproducts, or minimise waste upstream to reduce waste management costs. In the Philippines, one of the world’s largest agribusinesses has partnered with a social enterprise and they are turning banana waste fibre into over US$50 million  in fashion products.

Assessing value at risk is the next step. D oes the business deal with scarce resources, or resources which are coming under more scrutiny for instance? Is the business model generating too many environmental impacts? By understanding this, businesses can make necessary changes to ensure their longevity. 

Businesses can then look at value creation. Is there a circular product line or business model that they could implement or invest in to generate an entirely new revenue stream and capture a market opportunity? Look at the automotive sector for instance, one of the world’s major car manufacturers is now also a new European leader in automotive parts refurbishment, aiming to achieve 50% business growth in 2030⁶. The European replacement parts market is projected to reach EUR€8.2 billion  in the same period, so the expansion into this new business model aligns with a burgeoning industry⁷.

Ivy: Thank you, Melissa, for sharing these insights and the case studies. Could you give us some of the key takeaways from the discussion just now?

Melissa: Yes, so there are three things we want you to remember from today:

1. Number 1, there is a big socio-economic opportunity here: A full transition to a circular economy (over a year) could boost GDP by US$340 billion and create 15 million new jobs in the region. 

2. Number 2, there is a significant environmental benefit: By extending the life of resources, we can reduce emissions by 7.2% over just one year, highlighting the importance of circularity in achieving net-zero goals.

3. Number 3, we need to be strategic about this: Businesses and the public sector must carefully plan the transition to circular models and avoid silos. The public sector should support by continuing to develop standards, unlocking financing and supporting workforce reskilling. Within business, supply chain and procurement leads   need to come together with sustainability, R&D and CFO and executive leadership to plan now and implement the changes required to ensure value is not lost and establish a competitive differentiation for the future. 

Ivy: Thank you, Melissa. For those interested in learning more, where can they find the thought leadership for additional information?  

Melissa: To learn more about the results of our study, and PwC’s framework for sustainable business reinvention with circularity, just search for our report ‘Reinventing Asia Pacific: Embracing a circular economy for a resilient tomorrow’ on our website, where you can also find our details to reach out and have a conversation. 

Ivy: Thank you, Melissa, and thank you all for tuning in. Stay tuned for more episodes in our Asia Pacific Sustainability Podcast Series.

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