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The rise of circularity

How the GCC is transforming from the inside for the outside

Rise of circularity

As the world attempts to address causes of climate change before it’s too late, the concept of circularity – the decoupling of economic activity from consumption through the creation of closed-loop cycles in which waste is minimised or eliminated and resources are reused – is gathering momentum.

As one of the biggest consumers of the planet’s resources and a significant emitter, the Energy, Utilities and Resources (EUR) sector should be at the forefront of the debate, exploring ways in which the industry can transform from the inside for the outside.

A planet, and region, in crisis

Since the 1970s human activity and the linear ‘take-make-dispose’ industrial model have pushed the earth close to the point of no return. In the past 30 years alone we have used up a third of the earth’s resources and at our current rate of consumption, by 2030 we will need not just one earth, but two to meet our demand for resources.1

The EUR sector is a significant consumer of the planet’s resources and is responsible for a significant proportion of greenhouse gas (GHG) emissions. The chemicals & petrochemicals and iron & steel industries account for 3.6% and 7.2% of global GHG emissions respectively, while fugitive emissions of methane in the Oil and Gas sector account for a further 3.9%.2

We are already seeing the consequences of our actions through climate change, depletion of the ozone layer and rising sea levels. This puts countries in the region at direct risk through higher temperatures, declining rainfall and other effects of climate change.

 

Circularity as a solution

It’s clear that something has to change, and quickly. There is a growing consensus worldwide that the answer lies in circularity.

The good news is that even companies with business models that are inherently linear, such as those in the EUR sector, can introduce elements of circularity into their operations.

circularity as a solution

The benefits of a circular economy in the GCC

Beyond the urgent and obvious benefits of circularity in addressing the pressing environmental challenges we all face, a circular economy offers a number of opportunities for businesses and GCC economies.

1. Greater efficiency, lower costs, maximum value

Circularity provides a useful lens through which to consider strategic options, making sure that resources are used with care and, wherever possible, treated as assets that have cradle-to-grave value. The end result is a more resilient, competitive business.

2. Brand reputation

As awareness of the risks of climate change grows, so has the focus on sustainability and ESG. EUR shareholders, investors and international bodies are putting pressure on companies to demonstrate their ESG credentials and bring them closer in line with the goals of the Paris Agreement on Climate Change.

3. Localisation and job creation

Circular business models encourage business-to-business trade of process by-products, opening the door to a new ecosystem of service providers, and creating jobs and localisation opportunities. On a national level, circularity can reduce reliance on imports and reinforce localisation policies.

4. Attracting foreign direct investment (FDI)

Interest in green investment is a growing trend worldwide.3 FDI managers are already developing assessment criteria and methodologies that rank countries and companies against sustainability maturity and advancement. A commitment to circularity, on a company and country level, is rapidly becoming an essential criteria for attracting foreign investment.

Circularity in the EUR sector

Companies across the EUR sector have moved closer to a circular economy approach in recent years.

Oil and Gas companies around the world are introducing elements of circularity into their operations and pioneering technologies that contribute to decarbonisation in the sector. These solutions range from carbon capture and utilisation and storage, to negative emissions technologies, such as bioenergy with carbon capture and storage, and direct air carbon capture and storage. The GCC has been the base for many of these initiatives.

The sector can further reduce the waste produced across its value chain, primarily gas and water, by designing interoperable systems between its upstream, midstream and downstream systems that promote the concept of industrial symbiosis. Emissions can also be reduced significantly through the reduction of methane venting, fugitives and flaring in addition to applying advanced technology to control and delay gas and water influx in oil wells.

Read the case studies

the-rise-of-circularity oil and gas

Water scarcity and decarbonisation are the main drivers towards the circular economy in the Power and Utilities sector.

Water utilities have long managed the triple threat of scarcity, rising energy prices and nutrient loading through a combination of demand management, resource diversification, operational optimisation and nutrient recovery.

GCC countries rely primarily on desalination plants for their drinking water. Water desalination is an energy intensive process and one of its by-products is brine, an environmental hazard that can potentially harm marine ecosystems. As reliance on desalination increases, GCC countries will need to find ways to reduce cost, minimise reliance on fossil fuels to power the plants and address the environmental challenges.

Desalination plants in the GCC are already making big efficiency gains through integration with power plants. Moving towards circularity will see a bigger share of renewable sources being used to power desalination plants and encourage ways to reuse brine in other industrial processes. The drive towards decarbonisation has also resulted in a rapid increase in new technology across the value chain, for example clean tech, green tech and digitisation.

Read the case studies

the-rise-of-circularity power utility

The Metals and Mining industry is particularly well suited to the concepts of a circular economy. Metals have natural longevity, are infinitely recyclable and their high value acts as an incentive to reuse and recycle as far as possible.

The Middle East is one of the fastest growing aluminium markets in the world. The region is also a large exporter of scrap. Metal producers in the GCC nations have a significant opportunity to become more circular. Solutions centre around shifting towards renewable energy sources including green hydrogen to power electric arc furnaces, recovering process by-products which include slags, process gases (coke oven, blast furnace and basic oxygen furnace gases), tar and benzene, and increasing the uptake of recycled metal as feedstock.

While good progress has been achieved by leading metal producers in the region, the metal sector can still benefit from more cross-industrial partnerships. Such partnerships could see more opportunities for the capture of CO2, including using it as raw material to produce outputs such as ammonia and methanol.

Read the case studies

the-rise-of-circularity metals mining

The next steps

While efforts taken by GCC nations and EUR companies to date have been mainly steered by a sustainability agenda, they do contain elements of circularity. There is much work to be done if true circularity is to be achieved.

Moving towards circularity will require a level of partnership and collaboration from government regulators and legislators, industry sector leaders and consumers that has not been seen before. Action is needed at GCC level because of the complexity of value chains, the systemic and multi-disciplinary nature of the technologies and their high development costs, and the cross-sectoral nature of the problems to be addressed.

Our recommendations

The GCC has clear advantages as we transition to a circular economy: It has the leadership and financing capability needed to support investment, EUR companies in the region are already pioneering sustainability innovation, and greenfield developments such as Neom offer the opportunity for a radical blueprint approach. Furthermore, many of the EUR companies in the region are publicly owned. This gives the GCC nations more sovereignty and ability to pass through recommendations that lead to real transformation.

  1. Develop regulatory frameworks based on circularity principles to steer regulation and policy

  2. Incentivise investments in circular economy related/green companies through tax or fiscal incentives

  3. Invest in infrastructure that will enable effective renewable energy integration, waste management and backward logistics

  4. Create independent circularity councils to advise industries and advance the development of standards and specifications

  5. Increase cross country collaboration to explore optimisation possibilities such as jointly developing desalination plants in favourable locations

  6. Increase public awareness of the circular economy and its benefits

EUR companies

For companies, transitioning to a circular economy will require a mindset change towards long term thinking and a wider approach to value. Function and product-based sustainability will need to be replaced with a more holistic approach, with organisations thinking (and measuring) across their entire value chain and considering all stages of the product life cycle. As circularity becomes the new normal, businesses that radically innovate to create new business models will be the winners.

  1. Understand your circular opportunities

  2. Be clear about your strategy and vision

  3. Plan your circular transformation journey

  4. Develop circular collaborations and frameworks

  5. Measure, review and communicate your progress

  6. Move before your competitors, customers and regulators do

The rise of circularity

Success is no longer measured by finances alone, but how businesses adapt to the changing world, taking bold steps forward to tackle the biggest challenges of today and capture the opportunities of tomorrow. By taking the above steps and putting the circular economy at the heart of business strategy, the industry can make the operational, cultural and financial changes needed to deliver sustainable business advantage and long term value: transforming from the inside for the outside.


The rise of circularity: How the GCC is transforming from the inside for the outside

1. Number of planet Earths we need, The World Counts, accessed 9 August 2021, https://www.theworldcounts.com/challenges/planet-earth/state-of-the-planet/overuse-of-resources-on-earth/story
2. Emissions by sector, Our World in Data, accessed 9 August 2021, https://ourworldindata.org/emissions-by-sector#energy-electricity-heat-and-transport-73-2
3. How the World’s Largest Asset Managers Are Finally Taking ESG Seriously, Institutional Investor, 1 March 2021, https://www.institutionalinvestor.com/article/b1qs5j405m2qtf/How-the-World-s-Largest-Asset-Managers-Are-Finally-Taking-ESG-Seriously

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Neil O'Keeffe

Middle East Energy, Utilities & Resources Leader, PwC Middle East

Tel: +971 56 676 3097

Rabih Nassar

Partner, Oil & Gas, PwC Middle East

Abdullah Tamer

Partner, Power & Utilities Lead, PwC Middle East

Tel: +971 50 900 7833

Jon Blackburn

Partner, Power & Utilities, PwC Middle East

Tel: +971 54 793 3935

Dr. Bashar El-Jawhari

Partner and Leader of Industry 4.0, Procurement and Supply Chain, PwC Middle East

Andrew Thurley

Director, Sustainability and Economics, PwC Middle East

Tel: +971 4 304 3100

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