Shifting towards the circular economy: Some policies for Viet Nam

39 SHIFTING TOWARDS THE CIRCULAR ECONOMY: SOME POLICIES FOR VIETNAM Dr, Lecturer, To Hien Tha tohientha@gmail.com Le Quy Don Technical University PhD, Student, Nguyen Huu Hoang nhoangmta@gmail.com Szent István University, Faculty of Economics and Social Sciences, Gödöllő Master, Nguyen Huynh Đang Khoa Khoanguyen@gmail.com Hong Duc Hospital, HCM City PhD, Student, Cao Trung Ha Hacao@gmail.com Le Quy Don Technical University Abstract The main aim of this article is to analyse the necessity of transiting the Vietnamese economy towards to the circular economy. This paper will focus on analyzing the basic concepts of linear economy and its problems, the circular economy and the necessity of transiting the Vietnamese economy towards to the circular economy. Expected result: Confirming scientifically the necessity of shifting the Vietnamese economy towards the circular economy and recommending some policies to support this transiting process. 1. Introduction The global ecological environment is facing up to the unsustainable socio-economic development and lacking in attention to the management of natural resources and ecosystems. Natural resources are becoming increasingly exhausted, and environmental pollution is getting worse. Many countries have changed their development strategies to wards a clean economy-a circular economy for sustainable development to resolve these challenges. Vietnam is not an exception. As a developing country, Vietnam's economy is maintaining its traditional linear economy, meaning that the growth is still based on broad-based development factors, slowly moving to growth in depth. The production process still consumes a lot of raw materials, energy and discharges a massive amount of waste. The exploitation and utilization of natural resources are not suitable and economical enough which lead to the fact that the environment and ecosystem of many areas are severely polluted. According to the Vietnamese Ministry of Natural Resources and Environment, raw material costs and average disposal levels of Vietnamese enterprises are much higher than the average level of the regional and all over the world. Besides that, everyday the urban areas in Vietnam discharge nearly 32,000 tons of household waste, while this figure in rural 40 areas is 12,000 tons(QDND, 2016). It is forecasted that by 2025, the amount of rubbish in Vietnam will be about 100 million tons per year, including the household, industrial, and medical waste. The status of garbage untreated before being discharged into the environment has become an urgent issue in the environmental protection of Vietnamese government. In the face of the challenges of the natural resources depletion and environmental pollution, the concept of a new economy - the circular economy is receiving the attention and support of many organizations and governments all over the world. This economic model tends to reuse of raw materials, reduce raw material consumption, improve production efficiency and minimize the impact on the environment. This paper will focus on analyzing the basic concepts of linear economy and its problems, the circular economy and the necessity of transiting the Vietnamese economy towards to the circular economy. 2. Method: This paper uses an overall and comprehensive approach to collect and summarize the recent studies and reports which are related to this topic. All the data and figures are obtained based on the secondary data provided by some public organizations like the Vietnamese Ministry of Health and the Ministry of Natural resource and Environment etc. 3. Results: 3.1. Linear economy and its basic problems The linear economy model is an economic model that has been widely applied in the early stages of industrialization in most Western developed countries and is also the current dominant model of developing countries. The characteristic of the linear economy concept is that waste, as a side result of the production process, is discarded directly into the environment (Figure 1). The concept is based on the principle: ―take, make, consume, discard‖ and it assumes boundlessness and easy availability of material resources (Drljača, 2015). That is, take the resources you need, make the goods to be sold and make the profit and consume it and discard of everything you do not need – including a product at the end of its lifecycle. Figure 1. Phases of linear economy model It is undeniable that the linear economy is no longer a tenable model within the limits of our planet. The disadvantages of the linear economy outline the urgency for an alternative model, which can be further interpreted as opportunities for the circular economy. The main problems of a linear economy are found in the lack of solutions for the growing shortage of materials, increased pollution, increased material demand and the growing demand for responsible products. It can be classified into two types of disadvantages of this economic model such as supply risks and the increase of externality. 41 Supply risks In a linear economy, there are uncertainties about material availability because our planet has a limited quantity of materials and this availability depends on several mechanisms. These uncertainties are fueled by an increase in price fluctuations, the critical materials, the interconnection between products and processes. Price volatility The variation in materials prices have increased since 2006 and significantly raised average prices. This not only induces problems for producers and buyers of raw materials, but it also causes increasing risks in the market, making investments in material supply less attractive. This can ensure the long-term increase in raw material prices.(Lee et al., 2012) Critical materials There are some industries making extensive use of critical materials for their production. These are the metal industry, the computer and electronics industry, electrical equipment industry and the automotive and transport industry. Dependending on critical materials will ensure that companies are dependent on fluctuations in material prices, are unable to make predictions, and are less competitive than less material-dependent competitors. (Lacy et al., 2014) Interconnectedness Because of the expansion in trade activities, the interconnectedness of commodities has become increasingly sharper. For example water-scarce countries with a surplus of crude oil, trade oil for food, which results in a link between these products in the market. Besides, the production of many products is dependent on water and fuels. Because of this interdependence, scarcity of one raw material would have a widespread impact on prices and availability of more goods. (MacArthur, 2013b), (Lee et al., 2012). Increasing material demand Because the growth of population and increases in prosperity, the number of consumers with a higher degree of material consumption will increase by three billion in 2030. The consumption of resources has doubled in the period 1980-2020 and will triple in the period up to 2050 when business-as-usual models are followed. (Macarthur, 2013c), (Fischer-Kowalski et al., 2011). Increase of externalities Remaining to follow a linear economy will also induce negative impact such as destruction to ecosystems, the decrease in product lifetime. Degradation of ecosystems Following the linear model of ‗take-make-dispose‘ will create waste. The production processes will generate large streams of material that are not used but burned or left on a garbage dump. This will eventually lead to an excess of unusable material mountains overloading ecosystems. This ensures that the ecosystem is hampered in 42 providing essential ecosystem services (such as providing food, building materials and shelter, and the processing of nutrients). (MacArthur, 2013a) Decreasing lifetime of products In recent years, the life of products reduced grammatically. This is one of the driving forces behind the expanding material consumption in the Western countries. The service life of products is still declining, by process of positive feedback: Consumers want new products more quickly and are using their ―old‖ products for a shorter period. This results in a decreased need for quality products that can be used in the long term, which stimulates consumers to buy new products even faster. (Bakker et al., 2014) 3.2. Circular economy and practical solutions What is circular economy There are some points of view to define the circular economy. Some of the authors have provided resource-oriented definitions and interpretations, emphasizing the need to create closed-loops of material flows and diminish the consumption of original resources and its attendant harmful environmental impacts (Sauvé et al., 2016, Preston, 2012). Similarly, there is a scholar who claims that the circular economy ―refers mainly to physical and material resource aspects of the economy - it focuses on recycling, limiting and re-using the physical inputs to the economy, and using waste as a resource leading to reducing primary resource consumption‖(Zoboli et al., 2014). Another author(Morgan and Mitchell, 2015) goes further and emphasizes the importance in a circular economy of keeping resources in use for as long as possible as well as extracting the maximum value from products and materials through using them for as long as possible and then recovering and reusing them. In the available literature, there are also several interpretations of the concept that attempt to move beyond the notion of management of material resources and incorporate additional dimensions (Heck, 2006, Su et al., 2013). (Bastein et al., 2013) emphasize the economic dimensions of the circular economy and suggest that this transition ―is an essential condition for a resilient industrial system that facilitates new kinds of economic activity, strengthens competitiveness and generates employment‘‘. According to (Ghisellini et al., 2016), the radical reshaping of all processes across the life cycle of products conducted by innovative actors has the potential to not only achieve material or energy recovery but also to improve the entire living and economic model. One of the most-frequently cited definitions that incorporate elements from various disciplines has been provided by the Ellen MacArthur Foundation which describes the circular economy as ―an industrial system that is restorative or regenerative by intention and design. It replaces the ‗end-of-life‘ concept with restoration, shifts towards the use of renewable energy, eliminate the use of toxic chemicals, which impair reuse, and aims for the elimination of waste through the superior design of materials, products, systems, and, within this, business models‘‘. Under this framework, the circular economy aims to keep both types of these materials at their highest utility and value at all times through careful design, management and technological innovation(MacArthur, 2013a). The overall objective is to ―enable effective flows of materials, energy, labor, and information so that natural and social capital can be rebuilt‘‘ (MacArthur, 2013b). 43 At the EU level, the (EC, 2015) has included a description of the concept in its Communication ―Closing the loop - An EU Action Plan for the circular economy‖. Specifically, the circular economy is described as an economy ―where the value of products, materials, and resources is maintained in the economy for as long as possible, and the generation of waste minimized‘‘. The transition to a more circular economy would make ―an essential contribution to the EU's efforts to develop a sustainable, low carbon, resource efficient and competitive economy‘‘. Based on these schools of thought above, it can be summarised that a circular economy is an economic system where products and services are traded in closed loops or „cycles‟. This economic system is characterized as an economy which is regenerative by design, with the aim at low environmental impact and to maintain as much value as possible of products, parts and materials. This means that the aim should be to create a system that allows for the long life, optimal reuse, refurbishment, remanufacturing and recycling of products and materials. Circular solutions-Five business models driving the circular economy According to the report, Circular Advantage, by the National Zero Waste Council Circular Economy Working Group in 2014(Accenture, 2014), there are currently five types of circular business models (see figure 2) such as Circular Suppliers, Resource Recovery, Product life Extension, Sharing platforms and Products as a Services. These types are identified in its analysis of more than 120 case studies of companies that are generating resource productivity improvements in innovative ways. Figure 2. The five business models of circular economy Source:Accenture, “Circular Advantage: Innovative Business Models and Technologies to Create Value in a World without Limits to Growth,” 2014. Design adjustments of graphs by Elmar Sander and Katharina Olma. 44 3.3. The necessity of transiting towards circular economy in Vietnam During the 20th Century, the notation of closed-loop production was very popular in Vietnam, especially in the agricultural sector. At that time, there was a prevalent farming model named Vườn (Garden) - Ao (Pond) - Chuồng (Cage) which used waste from one activity as input for another one. For instance, organic garbage from growing vegetables, such as damaged vegetables, old leaves, etc., was used as animal food for fish in a pond or for poultry and livestock living in an enclosure (cage). However, in recent years, the production models which are environmentally friendly like the V-A-C have not received attention from most of the enterprises. As a replacement for these models, the use of chemicals (fertilisers, pesticides) and the application of automatic farming machines have not only broken the natural circle of materials but also generated more waste, even toxic waste, often released into the environment (Hoa, 2016). Environmental aspect Waste generated by industrial activities and urbanisation is one of the most serious environmental issues in Vietnam. Vietnam has been called as one of the top ten countries in the world with the worst air pollution since 2012(EPI, 2012). On 6 October 2016, Hanoi - Vietnam‘s capital - was ranked the second worst city in the world regarding urban air pollution (Saigoneer, 2016). According to the Report on the state of the national environment in Vietnam in 2016, every year, Vietnam "uses" more than 100,000 tons of plant protection chemicals; generates over 23 million tons of household waste. Besides that, more than 7 million tons of industrial solid waste and over 630,000 tons of hazardous wastes are released each year, while there is a little amount of waste and wastewater treated before disposing to the environment. Notably, there are 615 industrial zones, of which only about 5% have concentrated wastewater treatment systems. There are more than 500,000 manufacturing establishments; over 5,000 mining enterprises and about 4,500 craft villages, many of them using old technology which causes the pollution for the environment. Every day, more than 13,500 medical centres generate about 47 tons of hazardous waste and 125,000 m 3 of medical wastewater. Besides that, Vietnam currently has 787 municipalities releasing 3,000,000 m 3 of wastewater per day, but most of them have not been processed, and nearly 43 million motorcycles and over 2 million cars are operating. There are 458 landfill sites, of which 337 landfills do not ensure the hygienic standard and more than 100 small-scale domestic waste incinerators, which are in danger of generating dioxin, furan (OpendataVietnam). The conversion of forest land, mineral exploitation, hydropower construction, and exploitation of biodiversity resources have led to the narrowing area of natural ecosystems, the fragmentation of habitats and the decline of biodiversity. Human health aspect As a consequence, the number of people who are suffering from cancer, acute and chronic respiratory diseases and allergic reactions in some big cities of Vietnam is rising. According to a study in 2013 of the Hanoi-based Central Lung Hospital, 95% of patients 45 experience chronic obstructive pulmonary disease because of living in a polluted environment. Another 2013 study by the Vietnam Ministry of Health noted that of every 100,000 people, 4,100 or 4.1% have lung diseases; 3,800 contract inflammation of the throat and tonsils; and 3,100 have bronchitis, all of these diseases have certain relation to the environment pollutions. The most worrisome problem is that people of working age are those most often affected by air pollution (Vietnamnet, 2013). Understanding of Vietnamese SME’s about circular economy In June 2016 the Centre for Creativity and Sustainability Study and Consultancy (CCS), a spin-off of the EU-funded SWITCH-Asia project ―Sustainable Product Innovation,‖ researched with 152 Vietnamese SMEs operating in a variety of sectors. 78.8% of surveyed enterprises said that they do not have any idea about the concept of circular economy. Only 13.3% of the surveyed company had some knowledge related to the circular economy like sustainable production and consumption, cleaner production, cradle to cradle and resource efficiency. The practice of Vietnamese SMEs towards applying these concepts in business is still insufficient. According to another report produced in 2014 by the Vietnam Environment Administration, only 0.1% (around 200 out of 200 000) of the company all over Vietnam have been applying cleaner production technology in their factories (VEA, 2014). Based on these facts, the demand for transiting Vietnamese economy towards a circular economy is more urgent than ever. 4. Discussion and Conclusion The circular economy model has been widely applied in many European countries and other developed countries in the world today. The benefit that this economic model can contribute to each county not only in economic sector but also in advancing the quality of the environment and protecting the diversity of the ecosystem.Based on the analyzes of the current state of the environment in Vietnam by the effects of traditional linear economic models above, it can be argued that the need to shift towards linear models is essential for Vietnam. In recent years, the Vietnamese Government also has been aware of the negative impacts of the linear economic model on the ecosystem, and on human health, so there have been many policies and measures applied to protect the environment and develop socio-economy. However, to date, the principles of the circular economy are relatively new in Vietnam, and the government-level activities in supporting businesses to move towards a circular economy only stop at specialized conferences. So the Government need to build an action plan for the circular economy with the specific objectives to orient the economy towards sustainable development. Besides that, to take advantage efficiently the circular economy concept and learn from the pioneering enterprises, the Vietnamese firms should consider the whole value chain to find possibilities for innovating their business models. Capacity building, an increase in productivity and especially the promotion towards factory workers and stakeholders along the value chain (upstream to downstream) are also necessary for 46 companies to apply a circular economy approach successfully in the longer term. Finally, a strong commitment to these long-term sustainable strategies is essential to ensure the development of circular economy business models and to convince investors to invest in new circular economy ideas. 5. References 1. ACCENTURE (2014), https://www.accenture.com/t20150523T053139__w__/us- en/_acnmedia/Accenture/ConversionAssets/DotCom/Documents/Global/PDF/Strategy_6/A ccenture-Circular-Advantage-Innovative-Business-Models-Technologies-Value- Growth.pdf. 2. BAKKER, C., DEN HOLLANDER, M., VAN HINTE, E. & ZIJLSTRA, Y. (2014), Products that last. Product Design for Circular Business Models. 3. BASTEIN, T., ROELOFS, E., RIETVELD, E. & HOOGENDOORN, A. (2013). Opportunities for a Circular Economy in the Netherlands. TNO, Report commissioned by the Netherlands Ministry of Infrastructure and Environment. 4. DRLJAČA, M (2015). Tranzicija linearne u kružnu ekonomiju (Koncept učinkovitog upravljanja otpadom). III. International Conference" Quality System Condition for Successful Business and Competitiveness. 5. EC 2015). content/EN/TXT/?uri=CELEX:52015DC0614 6. EPI (2012), EPI Report - Environmental Performance Index - World economic forum. 7. FISCHER-KOWALSKI, M., SWILLING, M., VON WEIZSACKER, E. U., REN, Y., MORIGUCHI, Y., CRANE, W., KRAUSMANN, F. K., EISENMENGER, N., GILJUM, S. & HENNICKE, P. 2011. Decoupling: natural resource use and environmental impacts from economic growth, United Nations Environment Programme. 8. GHISELLINI, P., CIALANI, C. & ULGIATI, S. (2016). A review on circular economy: the expected transition to a balanced interplay of environmental and economic systems. Journal of Cleaner Production, 114, 11-32. 9. HECK, P. (2006). Circular economy-related international practices and policy trends. Consulting Report for the World Bank Project on Policies for Promotion of a Circular Economy in China The World Bank Beijing, 30. 10. HOA, D. T. (2016). Benefits of a circular economy in increasing economic values and corporate competitiveness in Vietnam. Switch Asia, Winter 2016/2017. 11. LACY, P., KEEBLE, J. & MCNAMARA, R. (2014). Circular Advantage: Innovative Business Models and Technologies to Create Value without Limits to Growth. En ligne sur le site web d‘Accenture accenture. com/SiteCollectionDocuments/PDF/Accenture-Circular-Advantage-Innovative-Business- Models-Technologies-Value-Growth. pdf (Consulté le 10/02/2015). 12. LEE, B., PRESTON, F., KOOROSHY, J., BAILEY, R. & LAHN, G. (2012). Resources futures, Citeseer. 13. MACARTHUR, E. (2013a), Towards the circular economy. J. Ind. Ecol, 23-44. 47 14. MACARTHUR, E. (2013b). Towards the Circular Economy, Economic and Business Rationale for an Accelerated Transition. Ellen MacArthur Foundation: Cowes, UK. 15. MACARTHUR, E. (2013c.) Towards the circular economy: Opportunities for the consumer goods sector. Ellen MacArthur Foundation. 16. MORGAN, J. & MITCHELL, P. (2015). Employment and the circular economy: Job creation in a more resource efficient Britain, Green Alliance. 17. PRESTON, F. (2012). A Global Redesign?: Shaping the Circular Economy, Chatham House London. 18. QDND (2016). giup-phat-trien-ben-vung-485952. 19. SAIGONEER (2016). https://saigoneer.com/saigon-health/8196-hanoi-s-air- quality-ranked-second-worst-in-the-world-yesterday. 20. SAUVÉ, S., BERNARD, S. & SLOAN, P. (2016). Environmental sciences, sustainable development and circular economy: Alternative concepts for trans-disciplinary research. Environmental Development, 17, 48-56. 21. SU, B., HESHMATI, A., GENG, Y. & YU, X. (2013). A review of the circular economy in China: moving from rhetoric to implementation. Journal of Cleaner Production, 42, 215-227. VEA 2014. 22. VIETNAMNET (2013). pollution-cause-of-chronic-diseases-in-big-cities-in-vietnam.html. 23. ZOBOLI, R., MICELI, V., PALEARI, S., MAZZANTI, M., MARIN, G., NICOLLI, F., MONTINI, A. & SPECK, S. (2014). Resource-efficient green economy and EU policies. Resource-efficient green economy and EU policies, 1-107.