Currently, more than 100 billion tonnes of raw materials enter the economy every year, yet only a very small fraction (7.2%) gets recycled and used again.

The resources entering the economy are not used to simply cover our basic needs but are instead fed into a system of over-consumption and over-production fuelled by an expectation of cheap, short-lived, non-reusable products, quickly available on our doorstep. The current system sees no value in the waste it incinerates or sends to landfill.

We spoke with Triodos Bank researcher Matija Kajić about what shifts are needed, the circular economy and the role of the financial sector.

Why is it so important to change people’s approach to resources, materials and waste?

We need to reconsider our practices around resource use, since our growing demand for natural resources is exhausting the planet’s reserves, leading to both resource depletion and damage to people and natural environments.

From Triodos Bank’s perspective, the current economic system is too focused on inefficient production methods that create short-lived, unnecessary products – leading to resource scarcity, pollution and waste. More ambition is needed to transition to an economy in which people and the environment are central, and in which raw materials are used efficiently and prudently.

So we should see waste as valuable?

Society has a very poor approach to pollution and waste management. Most products and materials come to an early end-of-life, usually in a landfill without previous recycling or recovery of materials. This is a waste of the resources and has damaging effects on the surrounding environment and biodiversity.

Our failure to use resources efficiently is making other environmental goals, including our climate targets, increasingly difficult to achieve. For example. natural resource extraction, processing and product-manufacture make up approximately 50% of our total greenhouse gas emissions.

There are three focus areas that we’ve identified to address these concerns: to sustain and restore nature; to extend the life of products; and to prevent waste and downcycling, which means recycling something into a product that is of lower quality and functionality than the original item. This aligns with moving towards a ‘circular’ economy, rather than a ‘linear’ one.

What needs to happen?

Society needs a mindset shift: why do we need all these products? We are so focused on ‘more, more, more’, while this ultimately neither makes us happier nor creates the desired positive impacts in our societies and environment. We need to not only think about how to make a product more sustainable and what kind of energy and materials to best produce it with, but also ask ourselves if the products themselves are even necessary.

This mindset shift is focused on fundamental choices. For example, when a company is looking to build a new office space it should contemplate whether it needs an office space at all. And if it does, it should look into refurbishing an existing building first before considering constructing a new one.   

We need to let go of our never-ending ambition to achieve maximum growth and profit, and instead address consumption and production practices. This is perhaps the most ambitious action of all.

Actions to make products and production methods more sustainable and circular only make sense when happening in parallel to this mindset shift. Only then can we truly reap the benefits of circularity and resource efficiency.

How does this affect where Triodos Bank lends and invests money?

We have identified the sectors which, from a Triodos Bank perspective, have the most negative impact on resource scarcity, waste, pollution and nature degradation. We’ve also identified those sectors that have vast potential for positive impact – these sectors include construction, nature-based solutions, ICT, renewable energy, and manufacturing.

We have financial activities in these sectors – where a transition within a business would entail replacing fossil fuel energy with renewable energy, minimising waste in all parts of the relevant supply chains and becoming more efficient with material. We’d also look to identify companies that are using products for as long as possible by designing them with a view to repair, by refurbishing them and by creating second-hand markets and sharing platforms.

For example, in the construction sector this means focusing on refurbishment rather than new builds, considering surrounding environments and land-use change. It also means using renewable energy both in material production and in construction activities, avoiding CO2-intensive materials; focusing on secondary, reclaimed or renewable materials, requiring product passports, as well as designing for longevity, modularity and repairability.

What is the financial sector’s role in all of this?

The financial sector plays a vital role in driving transitions through loans and investments, with a responsibility to create a positive impact through its financial activities. This involves looking beyond the current economic system by collaborating with clients to rethink business models, encouraging changes in product design and acting as the backbone of different supply chains.

At Triodos Bank, our initial step is to minimise any negative impacts by refusing to fund projects that are unethical or harmful to people and nature. Our minimum standards guide these decisions.

An important topic related to the use of resources is deforestation. We require the companies we invest in to preserve forest areas. Water scarcity is another critical issue, so we insist that companies address their freshwater usage. These are measures that other financial institutions should adopt.

Moreover, we see a significant role for financial institutions as thought leaders, engaging with consumers and influencing societal decision-making around product purchases. Ultimately, we believe that the financial sector is key to tackling the enormous challenge we all face: transitioning away from practices that harm people and ecosystems, towards building a society that enables people to live prosperous lives on a thriving planet.