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By Linnet Solway, Director of the Technology Transfer and Circular Economy Area of ​​Eurochile.

In Chile, Micro, Small and Medium Enterprises (SMEs) represent more than 98% of the business network. This is also the reality in Europe and in most countries of the world. With this, it seems reasonable to me to declare that SMEs make up the backbone of local, national and global economies.

On the other hand, the Circular Economy (CE) – this paradigm shift that means rethinking products, processes and business models to eliminate the concept of waste and maintain the value of materials for as long as possible – is gaining followers worldwide, within all levels of society. To date, the conversation has mainly brought together international organizations, national governments and large companies, but, little by little, SMEs are showing more interest and greater understanding regarding the benefits that CE can bring to their businesses: cost savings of materials, creating a competitive advantage and opening paths for new markets.

This awareness has been occurring for a few years in European SMEs (according to a study by Bassia and Dias (2019), 73.2% of the SMEs surveyed (out of a sample of 10,000 European SMEs) started or were in the process undertaking at least one EC activity in the last three years, and increasingly in Chilean SMEs. However, the implementation of advanced CE strategies within SMEs is slow, mainly due to their more limited organizational, technological and financial capacities, less access to (pre) financing for circular solutions (Rizos et al., 2016) and a lack of qualified human capital (Cantú Garza et al., 2021). In Chile, a survey of companies (not limited to SMEs) -in the framework of the construction of the national CE Roadmap- on the barriers to the implementation of CE in the business sector, shows that the greatest barrier identified is cultural and, secondly, a market barrier.

To overcome these barriers, a series of measures are being implemented, accompanying or even advancing regulatory changes. In the European Union, together with the instruments available through the Research and Innovation Framework Programs, the previous Horizon 2020 and the current Horizon Europe, the European Commission has been developing since 2017 a programme entitled “Promoting the circular economy among SMEs in Europe” which seeks to promote and support the adoption of CE in SMEs in Europe. In Chile, CORFO has introduced a variety of instruments with a focus on CE, allowing SMEs to develop and / or implement new or improved circular processes, products or services. Eurochile has also been contributing, together with European and Chilean partners, in closing information gaps, developing contacts and access to financing for SMEs, through a variety of initiatives such as conferences, brokerage events, support in project execution, and the creation of a Circular Economy Working Group.

However, in my opinion, there is a lack of a key actor that can drive this transition in an important way, acting directly on the market: I am referring to large companies. To really accelerate the process of CE adoption by SMEs, one of the main drivers is the demand for more circular products and services. While we, as citizens, can influence supply to some extent, large companies, by placing themselves in a leading position in the supply and value chains of each industry, can impact entire business ecosystems.

To take advantage of this opportunity, we need large companies to become aware of the driving role they can play, which goes beyond the implementation of CE strategies in their internal processes. The transition to a CE must be carried out in a collaborative and inclusive way, and for this it is critical that actors with the ability to guide the market work together with their network of collaborators and suppliers, to identify the needs of all stakeholders in this transition and co-build a common strategy towards CE.

What can SMEs offer? Those with an environmental and innovation culture, having greater flexibility than large companies, can respond quickly to the market to offer new solutions, products and services. In this sense, the CE offers a new scenario where pioneering SMEs, who assume an informed risk regarding the adoption and implementation of circularity strategies, have the opportunity to achieve leadership and profits in the medium and long term. In this process, they will have to break down a series of obstacles that in turn will open the way for other SMEs that want to follow in their footsteps.

Finally, SMEs can not only benefit from implementing CE  within their operations and business models, reducing their costs by implementing more efficient processes, but they also have the potential to participate, and even lead the transition to a CE at the local level and national.

It only remains to ask what is missing for large companies to assume that leadership, and how can we help them in that process?

In recent weeks, Eurochile has had an important presence in forums related to the advancement of the circular economy and its future development of the country, through presentations made by its director of the Technology Transfer and Circular Economy Area, Linnet Solway. In them, not only the work carried out by the Foundation to advance this trend in the country was addressed, but also its role as a “bridge” to promote technology transfer, knowledge and commercial linkages in this matter between Chile and Europe, a continent that today leads its implementation at a global level.

The first of these was the International Environment and Sustainability Forum and Fair (FIMAS), organized by the Association of Companies and Professionals for the Environment (AEPA Chile), held on May 27 and focused on progress for a development model based on the circular economy.

There, Linnet Solway spoke about the process of preparing the new Roadmap for the Circular Economy, a process led by the Ministry of the Environment and where Eurochile guided the construction work and drafting of the proposal and final document coordinating the dialogue between multiple actors.

Solway explained to the attendees how the governance of the committee was formed and the participation of different stakeholders, a process that had more than 130 participants, more than 100 meetings and workshops, the support of 10 international advisers and the development of 11 thematic tables to address specific aspects of the Roadmap, which was finally submitted to a public consultation process that received more than 500 comments for the final document, which will be made official in the coming days.

All this process concluded in a vision that proposes -as a central key- that “by the year 2040 the circular economy should drive Chile towards a sustainable, fair and participatory development that puts the welfare of the people in the center. This, through four lines of action -circular territories, circular innovation, circular regulation and circular culture- each of them with specific objectives and goals for 2030 and 2040”, explained Linnet Solway.

Subsequently, in a second international seminar held on June 8 by the Swedish Embassy in Chile, called “Sweden Sustainability Forum: Insights and practical experience from leading sustainability”, Linnet Solway spoke about the advances of the circular economy in Europe, mainly within the framework of the Green Deal launched by the European Commission (EC) at COP25 to address the climatic, economic and social challenges they are facing today.

She stated that within the framework of this strategy the second circular economy action plan of the European Union (EU) was presented, which updates the previous plan focused mainly on waste management and the end of the production chain, to focus in initiatives that affect the entire chain of the life cycle of the products; among them, empowering consumers to have better information, giving greater importance to eco -design and eliminating planned obsolescence.

Regarding the progress for its implementation, Solway explained that the European Commission “is working on a large number of initiatives, the most specific that comes into force now on July 3 is a legislation on single-use plastics that prohibits certain products, quite similar to the new law that was approved in Chile, and a labeling requirement to provide more information to consumers”. To this- she added- other initiatives will be included such as the delivery of more information by companies to consumers, better traceability in the life cycle of products to avoid greenwashing, the revision of the criteria on eco-design and the incorporation of new products to regulation, including building materials, textiles and furniture.

In parallel, she said, the European Commission is working on two initiatives that, although they are not part of this action plan, are instrumental for the EU to meet its climate objectives. The first one is the unification of a label on the environmental footprint of products; there are currently more than 200 environmental labels in the EU and 80 regarding carbon emissions.

The second initiative is the definition of an EU taxonomy for sustainable activities, which in essence is the creation of a list of economic activities that are considered as environmentally sustainable, and that allows to give information security to both companies and investors and citizenship. “This taxonomy seeks to unify the understanding of what a sustainable economic activity is and inform in the same way (…) This will guide investments in the EU, which can be guided thanks to this taxonomy,” she explained.

Within the framework of the activities of the Eurochile Circular Economy Working Group, in recent days a specialised workshop was held called “Implementation of the EPR Law, from Europe to Chile”, dictated by the international expert Marco Segovia, an environmental engineer who is part of the Circular Change organization of Slovenia and with extensive experience in the implementation of Extended Product Responsibility and circular economy systems.

The workshop, lasting almost two hours, was attended by all the companies that are part of the Working Group and was presented by Ladeja Godina, founder and executive director of Circular Change, and president of the coordination group of the European Circular Economy Stakeholder Platform (ECESP). In addition, Godina was one of the main international advisers for the Eurochile team in the preparation of the Roadmap for the Circular Economy.

During his presentation, Marco Segovia, revealed some key aspects for the implementation of the EPR Law that today is beginning to be installed in Chile, among them the need to consider that it is a system that is not static, but dynamic, which must be able to adapt to the changes and complexities that arise in its development.

“If you plan as a static system you are not building it for success, because it is going to fail, it is not going to work well. It must always be accompanied by periodic planning and re-planning, monitoring and traceability, which can help us improve the system that we have as a basis regarding what is happening within it, but also outside it”, he affirmed.

Among the obvious reasons for the implementation of the EPR are the reduction of the environmental impact of waste, and also a social impact in this matter. But there are others that are deeper and are not being mentioned so much, he stated: “Implementing the EPR and the circular economy helps us to give a holistic approach to the value chain, it helps us to understand it better, to optimize resources, and create opportunities and new business models, which allow us to create new markets”.

How management systems work in Europe

To illustrate this, he explained how some of the EPR systems in Europe are working today, where there is a wide diversity of modes of operation between different systems, priority products and countries. In the case of Germany for packaging, for example, the cost structure covers the entire chain. They are in charge of management, financing and rates, establish agreements and contracts with waste managers and municipalities, and periodically have to communicate data to a state agency. Like Chile, this system is based on sanctions to regulate the system, which can be up to 200 thousand euros if they do not fulfill their function.

“In the German strategy what we can see is that there are many competing management systems. And since it is a competitive market, producers can choose which management system to go to based on the market, and how much they should pay you. If one looks at the German case, what has happened since the 90s until now, is that they have known how to adapt and establish a continuous progress of the system. In the 90s the first system was generic in terms of material type, for example, and there was a single management system where the main focus was on separation. This has shifted in 2020 towards a more focus on ecodesign and quantity effectively recycled, with more competing management systems and with specific markets for each value chain. And we can see that now in almost all the countries of Europe, where there is a more information for each type of material”, explained Marco Segovia.

Going in that direction, said the Circular Change expert, the criteria have become severe, with more producers having to join the system, and it has been pointing towards ecodesign and prevention with progressive objectives, such as it also has the EPR in Chile. This has allowed the collection rate to go from 20% to 60% in the 90s -depending on the type of material- to values ​​that today exceed 80% in some cases”

“It is a case to watch closely,” he added, “because it has had progressive results, they have been able to implement the lessons learned in recent years, and the change from one management system to multiple competing systems, plus other additional measures, has allowed reducing the costs of collection and recycling, and also the amount of waste. So, it has also been successful in terms of prevention in the generation of waste”.

The case of Italy is different, where there is currently a centralised management system within which there are specific sub-organizations for each value chain. “What we can learn from this model,” Segovia affirmed, “is that the management system and the association of Italian municipalities signed an agreement that has been reviewed over the years and has allowed a successful dialogue between the public and the private. In this system, producers cannot choose in which system to pay, but for each product they have a specific consortium”.

“The important thing about this system – he added – is that there is good public-private cooperation, and it also includes citizens. And there is a surveillance and control body, where there is a total representation of the system. In this type of system there has also been a lot of progress. Since it was created, the paper product -for example- has gone from 30% recycling to 90%. And there is also a large population coverage, almost 100% (…) One of the things that differentiates this type of system is that there is a lot of participation, from schools, from youth and with great inclusion of citizens, because a lot is invested In communication. This has also helped to obtain a high quality of the recycled material”.

Among the risks presented by this type of centralised systems, he said, is the one that depends on the capacity of operation and management of the municipalities, and that -as in Chile- there are wide geographic and demographic differences in the territory, so that in some areas its implementation is difficult.

REP is just one of the instruments for the circular economy

Does this imply that there is one system better than another? No, Segovia said. The truth is that they are not comparable, because it must be taken into account that in each country the local context is very different economically, socially, environmentally and geographically. For this reason, she said, the most relevant thing is “to personalize and adapt the solutions to the specific case of each country, or each region, and also each value chain. In the case of Chile, for example, it is important to define which indicators to use to determine that the system we are using is the system we actually want”.

However, there are some factors and experiences that serve as considerations when defining the implementation of a system. For example, in the case of a system based on competition between players, it can help reduce monopoly risk, while providing greater market flexibility and driving efficiency and cost improvements. A centralised system, on the other hand, may be better in other cases because economies of scale are developed; it has greater simplicity and supervision, and potentially greater transparency.

There are also other factors – he added – that can affect the implementation and results of the EPR Law, such as user behavior, citizen participation, effective communication, and the impact and cultural evolution, as well as taking into account the cost of the system to the citizen.

Despite the advantages of the implementation of EPR systems in Europe, and the success that they have had first in reducing the impact of waste and today in preventing its generation thanks to tools such as ecodesign, Marco Segovia reminded those attending the workshop that “for the transition to the circular economy we have a group of instruments, and the EPRis only one. For a successful implementation of the circular economy we also need many other measures that help us achieve the objectives we want, and we have seen this in the Roadmap of the Circular Economy of Chile”.

Within the framework of the activities of its Circular Economy Working Group, created as an instance to promote the adoption of this trend in national SMEs, Eurochile Business Foundation held a webinar with Chilean companies and Spanish experts to analyze the progress of this model globally and learn about successful adoption experiences in companies, and open the possibility of new partners to join the group.

Created in 2019 as a platform to link business that seeks to promote cooperation and advance the transition to a circular economy in Chile, today it has eight partner companies representing a wide variety of areas, including smart agriculture, consulting, management waste, EPR and recycling law, start-ups, engineering and design. Today, its work is focused on three major objectives, says Linnet Solway, director of the Area of ​​Technology Transfer and Circular Economy at Eurochile.

“The first,” she explains, “is to support circularity strategies in Chilean companies through access to knowledge, new technologies and the search for financing.

The second objective is to create and make visible a network of companies for the circular economy that invites them to be part of a circular business value system and create a collaboration network -both with the different actors in its value chain or with other industries- to achieve a truly dynamic ecosystem to implement the circular economy. And finally, to connect Chilean and European companies committed to the circular economy, promoting cooperation and exchange of experiences between both parties”.

In this, Eurochile plays a key role as the only contact point in the country of the Enterprise Europe Network (EEN)- which operates with the approval of the European Commission- and which is the largest support network for all types of companies with international projection and -above all- innovative potential. “It is a network that works mainly through the uploading of profiles to this virtual platform, where counterparts of technological and/or commercial supply or demand are sought”, explains Manuela Caruz, Director of Networks at Eurochile. Since 2020, its main lines of work have been sustainability, digitization and the resilience of companies within the framework of the new objectives set by the European Union for recovery.

“We are three thousand people spread all over the world, with a presence in more than 60 countries. We combine experience in international business with a very deep knowledge of the local company to support them in their internationalization process, as well as promotion of business and technological cooperation in research and development programs. Our main objective is to support SMEs, but universities, business associations, chambers of commerce and technology centers also participate. A very important aspect is to promote business and technological cooperation in research and development programs”, adds Adela Sánchez, director of the European Projects Office at CEOE CEPYME of Cantabria, Spain and project manager of the EEN network.

All this is an additional value to the companies that join the Eurochile Circular Economy Working Group, which among its different activities considers the exchange not only between its partners and national actors, but also with international experts to exchange information on the implementation of the circular economy, as well as access to the different Eurochile business cooperation services”.

“What we seek is to support companies to have well-defined points to move towards a circular economy; that they are connected with the circular ecosystem, that they have knowledge of concepts and strategies related to this trend, and that they finally become companies with a differentiating value offering”, says Linnet Solway.

Circular economy: insight from European experts and companies

The webinar carried out by the Eurochile Circular Economy Working Group, which brought together 45 participants, also featured a presentation by the Spanish Martín Silvan, Legal Counsel of the Department of the Environment of ONTIER, Spain, on theory and practice of the circular economy.

For Silvan, many of the circular economy proposals – such as taking advantage of resources, reducing waste, being efficient – are common practices in any business activity, and almost a requirement to have some success. The difference is that today, a series of methodologies and processes have been established as regular procedures which have broadened the range of possible actions, as well as clear objectives that can also be measured and quantified. “We are going to use all of this for one purpose, which is to make our system sustainable,” he says.

This process, he adds, has strengths and weaknesses. Among the first, that the current economic model continues to be based on the fact that resources are unlimited, so a first step is to overcome this concept. To this are added others such as resistance to change, the appearance of “opportunism” that can give rise to businesses that seem to be circular, but are not; and also the fact of “forcing the concept” as it happened with sustainability, a concept that ended up being used for everything. Abusing the concept of circular economy has the danger of emptying it of content.

“Among the strengths,” Silvan adds, “the first is that today we have no other, so we are forced to do so. In this case, the need will lead us to virtue, which is nothing other than sobriety and efficiency. We have to do it, the limits to growth exist and we have to adjust to that reality, and ignoring reality is not usually a good tactic”.

Added to this is an enormous disruptive strength, which has taken a huge step in terms of R+D+i in which situations that a few years ago were impossible to address from the point of view of circularity, today they are. And this in all phases, from design to recovery, from use to reuse. Another strength is the rise of entrepreneurship that puts new products and new services into circulation, as well as an increase in the efficiency of processes: doing the same, or more, using much fewer resources.

The presentation of Martín Silvan was followed by two Spanish companies, which gave a view of the possibilities of the circular economy in the industry. The first of them was presented by Beatriz Malagon, director of the Mataporquera factory of the Cementos Portland group, regarding the incorporation of the circular economy in its cement and clinker manufacturing process. This has been done mainly through the replacement of fossil fuel in its furnaces with a fuel derived from waste (energy recovery), which has increased both the competitiveness and sustainability of the company, also supporting its energy transition plan and climate neutrality.

The second case was presented by Elena Santamaría, head Integrated Management Systems, Quality and Environment department of the SIECSA Group of Cantabria. In one of its subsidiaries, a construction company, they are incorporating the circular economy from two main lines. The first is the recovery of iron and steel aggregates from a steel factory in Cantabria to incorporate them into construction, and the second is the management of construction and demolition waste. To do this, they have a mobile recovery plant that moves around to recover the waste generated on site, and reuse it there.

This has allowed that, of the aggregates used on site in 2020 by the company, 32% correspond to reused material and 44% to recycled material, leaving only 24% corresponding to quarry aggregates, or natural aggregates.

Finally, the virtual meeting concluded with a speed dating, a networking activity that allowed participants to meet in smaller groups to generate contacts with other companies and talk about their experience in this transition towards the circular economy.

By Marilú Mansilla, Eurochile Technical Assistant of Projects.

The Tourism industry is one of the most affected by the Covid-19 pandemic that the world is experiencing today. Indeed, the confinement measures necessary to control the virus have produced a deep crisis in an industry that, by definition of the World Tourism Organization (UNWTO), is a social, cultural and economic phenomenon related to the movement of people to places that are outside its usual place of residence, for personal or business reasons. Globally, tourism activity fell by 75.1% in 2020 and although it rebounded in early 2021, it continues to suffer from the outbreaks of the pandemic.

However, this health crisis should not blind us to the climate crisis that we continue to experience, and which we must also take responsibility for. In this area, there are challenges that must be addressed by all actors: tourists, hosts and the tourism industry. The industry covers the entire business designed to meet tourist demand and varies strongly depending on the destination. In the Chilean case, the tourism industry is 75% made up of SMEs.

The impacts of tourism on the environment are significant. Before the pandemic, it was estimated that the industry generated 1.5 kilos of garbage per person per day in the destination, in addition to sewage waste, erosion and degradation of the environment due to tourist activities, deterioration of the habitat of the flora and fauna, among others. These are negative externalities that remain in the destination, and if no one takes charge of correcting or mitigating them, the economic, social and environmental damage will be irreversible.

In this context, the current contraction in the tourism industry offers a great opportunity to rethink the way this activity is being carried out. This is especially seen in some destinations that have historically been more saturated. It is necessary to work for the development of sustainable tourism, and in this matter the Circular Economy emerges as a practical solution.

The circular model can be the basis to approach the recovery and reactivation of this sector. The Circular Economy emerges as a practical solution to the needs of sustainable tourism, especially from the action of companies in this industry, incorporating sustainability criteria and at the same time generating positive effects that make their business models more profitable. In other words, moving from a linear model to a circular offer makes it possible to simultaneously improve the environment, people’s quality of life and the profitability of tourism companies.

According to Chile’s National Plan for Adaptation to Climate Change, SMEs are the ones who will have the greatest difficulty in diversifying and adapting their business to climate change. For this reason, this segment of companies should be the priority target of policies and programmes that promote the incorporation of the Circular Economy in their processes, making them more efficient and also capable of adapting to climate change and the requirements of some consumers (especially foreigners) increasingly aware of their water or carbon footprint.

For this, it is necessary to disseminate and facilitate the development of circular business models, circular value chains; promoting manufacturing models, sustainable manufactures, based on the reduction of consumption; the reuse of components, clean production systems and the use of renewable energies. It is no longer enough for companies to incorporate elements such as waste sorting or energy saving systems if they do not apply real changes in their way of operating. We are not expected to achieve zero impact, but rather to incorporate solutions that deliver a positive impact on the system and thereby generate sustainable and circular tourist destinations.

In this work, Europe is ahead of us. In 2015, the European Commission launched the plan “Closing the loop: an EU action plan for the Circular Economy” formally initiating Europe’s transition to a Circular Economy, thereby promoting sustainable economic growth. Thanks to this, several initiatives have been generated from which we have learned; thanks to Eurochile’s contact with business and technology entities from Europe. In our country, the Foundation has worked hard to promote the Circular Economy in Chile, carrying out initiatives such as a technological diffusion program on Circular Economy, specialised seminars and workshops on this subject, and working with SMEs through the life cycle assessment methodology. In addition, the Foundation is in charge of the process of preparing and writing the document of the Roadmap for Circular Economy in the country led by the Ministry of the Environment.

We know that there is still a lot to work on, we do not yet have a specific Circular Economy roadmap for the tourism sector in the country, and many of these concepts are still unknown to most SMEs. However, we are under the unique possibility of, with the support of entities such as Eurochile and the commitment and effort of companies and public entities of national and regional development, to advance on this route and transform tourism into an increasingly efficient industry, sustainable and circular.