The gold standard

29th July 2015


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Author

Victoria Walsh

Wrap CEO Liz Goodwin calls on businesses to be more resource-efficient or risk disappearing

We always strive for gold, whether it is a gold star at school or a gold medal in sports. Countless films have documented our love affair with this precious metal: from the story of Robin Hood in which King John obsessively counts his gold coins to the tales of Indiana Jones, the heroic archaeologist come treasure hunter. Perhaps one of the most distinctive traits of seafarers in the past was their trademark gold hoop earring - a financial guarantor of receiving a formal burial after their passing. In the early part of the 20th century, many major currencies were pegged to the gold standard, with President Richard Nixon taking the US dollar off it as recently as 1971.

More recently, the monetary system has undergone some dramatic changes from gold coins to metal coins, paper notes and plastic cards. What is carried in wallets or purses no longer represents a person's wealth in its entirety. Instead, a figure on a computer screen will provide a better indication. We've moved from a culture of storing in a safe or under lock and key at a goldsmith's to one that is almost devoid of tangible cash. Bitcoin might never become what it could have been, but cloud computing and virtual currency systems are being increasingly integrated into everyday banking.

The common means of trade are changing, and so too are business models. As Tom Goodwin of Havas Media has pointed out, AirBnB is the world's largest accommodation provider, yet it owns no property; and Facebook is the world's largest media owner, yet it produces no content. Then there are some of the other game-changing giants, such as Amazon and eBay, which are not solely responsible for their inventory, or Netflix, which relies on streaming. Businesses that either did not exist or were just in their infancy only 10 years ago now dominate the global market yet have few physical assets to call their own. Failing to spot such changes could damage or even destroy a business.

The new world order

In the past 50 years, GDP has risen nearly fourfold in the UK. We all consume more, have more "stuff", have more varied diets and live longer. But as the population increases and the appetite for consumer goods grows, we are putting enormous pressure on the world's natural resources. We have to find different ways to operate.

In August last year, humanity had already exhausted "nature's budget" for the year, according to Global Footprint Network, but continued to consume the earth's natural resources and drive the planet into greater ecological debt. Our consumption habits must change. This is why we urgently need to accelerate the move towards the societal trends and economies that are less reliant on the earth's capital, and embrace the alternative business models that accommodate this.

In 1984, Madonna sang about living in a material world but now there is no guarantee of how much longer we can continue this way. And just as Madonna has had to reinvent herself over the years to keep up with change and set trends, so too have successful businesses. Now businesses have the chance to rethink, redefine and reinvent their approaches in ways that they can progress while minimising their impact on the environment. The reality is that we are heading full speed into a world that lacks the materials needed to continue as we have done.

The fact is that making stuff is becoming more challenging and has a detrimental impact on the environment. One pair of leather boots can take up to 14 tonnes of water and 50m3 of land to produce, according to Friends of the Earth. At the same time, the price of natural resources has been increasing more than wage growth - twice as much over the past 10 years.

But let's return to gold - what has become of it now? The material that was once the dominant global trading commodity and the primary symbol of wealth is now often buried in landfill sites along with other precious metals that are embedded into everyday electrical goods. In fact, 65 tonnes of precious metals, including gold and silver, are lost every year in the UK. To help visualise what this looks like, it is about the equivalent in weight to five London double-decker buses. As a society, we have become so accustomed to making, using and throwing away that we do not consider the value in old products and what can be recovered.

Moving forward

But change is important. Historically, businesses have tended to act like a rear view mirror. They examine their performance, drawing from the past. This is reflected in sales figures, case studies and competitor comparisons. We need to be more forward-facing, looking ahead, and we need to be driving in the direction of our intended destination. It's one that needs to be more sustainable and resource-efficient.

A circular economy is an alternative to the traditional "make, use, dispose" linear model. It keeps resources in use for as long as possible, extracts the maximum value from them while they are used, then recovers and regenerates products and materials at the end of life. This journey preserves the earth's natural capital and reduces CO2 emissions.

The switch to a circular economy can be difficult. However, Wrap is working to map out the journey, provide direction, and bring together the knowledge and tools to ensure the route is navigable and avoids risks. Fortunately, we know that now is the time to start the journey.

We can succeed, as the Courtauld Commitment demonstrates. This voluntary agreement to improve resource efficiency in the UK grocery sector brought together large and small retailers to find ways to reduce waste. In the first phase, from 2005 to 2010, 1.2 million tonnes of packaging and food waste was prevented. This in turn, saved 3.3 million tonnes of CO2 equivalent, which is equal to an aeroplane flying around the world half a million times. In phase two, from 2010 to 2012, a further 1.7 million tonnes were saved. It also resulted in businesses collectively saving £3.1 billion.

It is a tried-and-tested solution that works, so Wrap has been applying the same approach to other areas of industry, such as textiles and, more recently, electricals. It has been working with more than 50 businesses, including Samsung, Panasonic and Argos, to help give their business models a "health check" and work out options that are less resource-reliant through its esap programme (electrical sustainability action plan).

Wrap has identified the themes that aim to deliver collaborative action to improve business efficiency and sustainability of products throughout their lifecycles. This includes extending product durability, looking at ways products can be repaired and gaining greater value from reuse and recycling. By adopting this approach, we can prevent some of those materials, such as gold, ending up as landfill.

The current linear approach is part of our unsustainable fast-turnover culture. But the alternative is an appealing proposition. Innovation thinktank The Club of Rome published a report in April - The circular economy and the benefits for society - looking at the effects of a more circular economy in Sweden. It focused on three scenarios: deploying renewables, energy efficiency and resource-efficiency measures. It found that, if all three strategies were pursued at the same time, by 2030 CO2 emissions could be reduced by up to 70% and more than 100,000 jobs created. With current population trends, creating jobs and helping society in a way that preserves the environment can only be a winning solution. Similar reports for Spain and the Netherlands will follow.

As the naturalist Sir David Attenborough observed, when he began his career in 1950 there were just over 2.5 billion people in the world - now there are seven billion. By 2050, there could be nine billion.

Change is happening, the pace is picking up, and we need to find ways to accommodate and adapt in a way to live within the planet's means. As Ban Ki-moon, UN secretary-general, put it: "There is no Plan B for action as there is no Planet B."

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