Six circular economy case studies from Brazil
Welcome to the second article accompanying the publication of case studies collected from particular regions and thematic groups. This cluster of cases aims to illustrate how the circular economy is being applied in various sectors throughout Brazil.
Propelled by the commodities ‘super-cycle’ at the start of the 21st century, Brazil enjoyed the illusion of prosperity for almost a decade. From 2000 – 2012, the country was one of the world’s fastest growing economies, reaping huge profits from vast reserves of raw materials (soya, cane sugar, iron ore, oil, timber) coupled with cheap labour and production costs.
The country’s stellar economic growth owed much to China and India’s emergence as economic powerhouses creating a voracious hunger for resources, due to their need to feed a growing middle class as well as a rapidly expanding urban and industrial infrastructure. This boom prompted a rise in Brazil’s domestic growth, which seemingly lifted millions out of poverty.
The re-primarisation of the Brazilian economy
However, this prosperity was not resilient and so did not last. The country’s over-reliance on short-term profits from extractive industries, combined with a lack of investment in the development of modern industrial skills and facilities, deepened its dependence on foreign markets. The situation meant that Brazil was particularly vulnerable to fluctuations in the fortunes of other countries’ economies, specifically to commodity prices. It also reversed the progress that had previously been made in moving the country to a manufacturing based economy that creates more value out of its raw materials and generates more skilled jobs. By surfing the ‘boom years’ of the early 2000s, Brazil became, once again, a mainly commodity-based economy, with a 20th-century linear hangover and a costly innovation gap.
Brazil is rich with natural resources and possesses a unique set of human and physical characteristics. As the country confronts the need to recalibrate its economy, pioneering companies are showing that introducing more circular thinking into the economy could lead to less wasteful and more effective use of natural and human resources. In doing so, Brazil could decouple its economic growth from unpredictable fluctuations in global commodity demand, thereby laying the foundation for more resilient and equitable prosperity.
Different context, different story
The circular economy concept, not widely known about a decade ago, has gained impressive momentum in recent years. So far, the majority of research and activities related to the promotion of this new economic model has been in the context of high-income European countries that rely quite heavily on commodity imports. The socio-economic context of Brazil is completely different. Average income levels are lower, infrastructure systems are not as advanced, and it is a major exporter of raw materials. This last characteristic is important as many of the drivers for a circular economy, in a European context, are connected to resource and price risks.
The potential for adopting the circular economy in Brazil was set out by the Ellen MacArthur Foundation in an introductory research paper published earlier this year. The paper identified specific drivers and opportunities to implement circular economy at scale in Brazil. Key characteristics highlighted by the research were the significant abundance of natural resources, the emergence of disruptive innovation in the bio-cycle, the large and dynamic informal economy, and the substantial size of the market – both in terms of territory and population. The paper concluded that a shift towards more circular business models could unlock significant opportunities for innovation and value creation across the country.
Six circular economy examples from Brazil
A number of Brazilian companies have already started to appreciate this great opportunity and are rethinking the way they design, operate, and offer services and products. By making changes to designs and business models, these companies realise that they can increase revenues as well as gaining a competitive advantage in the market.
Combining material science and business model innovation, CBPAK is making the most of cassava – a long starchy root which is one of Brazil’s food staples that already serves many applications in the Brazilian food industry. The company is using a non-edible type of cassava starch to make single-use food containers that replace problematic plastics. The value proposition for the customer includes disposal of the containers after use, enabled through partnerships with local composting companies, who collect the used containers, converting them into soil enhancers that can be used to regenerate farmland.
In Brazil, like in many other emerging countries, informal employment encompasses an important part of the working population. For reasons of economic necessity, a big part of the informal sector (e.g. waste scavengers) already act in a ‘circular’ way, hence making an important contribution to a beneficial cycling of materials in the economy. However, many informal workers struggle with lack of social protection and poor infrastructure, resulting in health hazards and material leakage. Some companies have learnt to operate effectively in such a scenario. For instance, Rede Asta has created an online platform to support a network of artisans, to recover materials from corporate and urban waste. The artisans transform this material into bespoke gift products that are then sold back to corporates and other customers. Rede Asta’s platform helps to increase income but also to improve connectivity and resource sharing within the artisan network.
The Amazon rainforest covers over half of Brazil. The forest contains unrivalled biodiversity, one-fifth of the planet’s freshwater, and is crucial for regulating global climate. The Amazon territory also shelters indigenous human communities with invaluable traditional knowledge who are able to manage natural resources in the most beneficial way. Working directly with these community groups Natura applies their bio-intelligence in ways that both create value as well as regenerate the rainforest. By sourcing materials from biodiversity assets – defined as the many valuable natural assets offered by the rainforest ‘biome’ – the cosmetics company has importantly demonstrated a threefold benefit through harvesting fruits, compared to the typically linear extraction of timber. This provides a powerful economic incentive to preserve the rainforest, proving that it can be more profitable to conserve trees for their fruit and seed harvest and thus strengthening the case against deforestation.
Exploring beyond its core business, ArcelorMittal has grasped the potential of Brazil’s uncommonly fast regenerative ability. The world’s largest steel producer has been growing certified forests of eucalyptus on previously degraded land as feedstock for ‘vegetal’ charcoal replacing the need for highly polluting mineral coal which has allowed them to produce ‘carbon neutral steel’. ArcelorMittal has also had a lot of success generating new revenue streams through the sale of by-products from its smelting furnaces. These materials can be used to replace virgin materials in the construction and other industries.
With over half of their 200 million inhabitants considered middle class, defined as a household income greater than BRL 3200/month, Brazil represents a large consumer market. It, therefore, makes sense to capture the value of the many consumer goods sold and distributed, even those that are damaged. However, Brazil covers a very large area, with challenging terrain, and implementing reverse logistics schemes can sometimes be extremely difficult.
In the electrical and electronic sector, eStoks provides a good example of how these challenges can be turned into a business opportunity. It has been estimated that 5% of products on the market are returned by consumers because of minor flaws. The value of these products categorised as ‘pre-consumer waste’, amounts to a potential BRL 7.7 billion (GBP 1.9) in unrealised revenue. Most of the country’s manufacturing plants are based in the south and southeast regions which is also the main consumer market; this is far away from another important consumption hotspot in the northeast. Understanding this, eStoks established reverse logistics and repair centres in this region to optimise logistics and transform pre-consumer waste into saleable products.
The recently launched apparel brand AHLMA is attempting to change mindsets and introduce behavioural change in one of the world’s most linear sectors – the fashion industry. AHLMA’s circular approach covers the whole lifecycle of their garments from material procurement all the way through to customer experience. This includes sourcing 80% of raw materials from the industry’s leftover fabric, open source design, lean inventory, reusable shipping boxes, instructions for extending product life, non-toxic cleaning and repair lab for maintenance and remodelling. Through their actions, the Rio-based company is challenging all the fashion industry’s stakeholders to rethink the way they operate in the market.-
These six cases are just a sample of the many businesses in Brazil who are pioneering a more system-thinking and regenerative approach to their operations. The Ellen MacArthur Foundation is always on the lookout for more projects, companies and initiatives who are doing the same. In mid-November, some of the country’s leading circular economy practitioners will gather in the country’s capital- Brasilia to share success stories, collaborate and challenge existing linear structures, exploring, in particular, how the right enabling conditions such as policy, finance and education can encourage more effective, long-term economic growth.
If you think that your organisation has a compelling circular economy story to share or if you would like to get more involved in the circular economy movement in Brazil, then please get in touch.