Getting on Par with Europe’s Circular Economy

The United States food industry is on the clock. By 2050, less than three decades from now, the European Union will become climate neutral. At least, that’s the plan. If U.S. businesses are going to compete, they have to forge a greener path.

The aim of climate neutrality is completely offsetting the footprint of a product. The Intergovernmental Panel on Climate Change, a multi-national authority of science experts housed in Switzerland, explained that such “a carbon offset is a reduction in emissions of carbon dioxide or other greenhouse gases made in order to compensate for an emission made elsewhere.” Simply put, what goes in, has to be recycled. Thus, a climate neutral product emits no pollution and everything that goes into production reaps some sort of benefit.

The United Nations initiative Climate Neutral Now calls for urgent action from businesses and governments to realize the main goal of the Paris Agreement, to limit global warming to well below 2 degrees Celsius. President Joe Biden also announced his administration’s attention to the matter in one of his first Executive Orders.

Realistically, the EU planning to be climate neutral by 2050 leaves U.S. businesses very little time to compete. Unless the pressures from within the market go far beyond existing schemes of corporate social responsibility, the greening of the EU’s economy will leave resource-intensive production in the U.S. in the dark.

According to the European Commission (EC), a whopping 94% of Europeans prioritize their food’s environmental impact. One of the many pieces of supporting evidence is the “Farm to Fork Strategy,” in which the EC, the EU’s executive branch, “recognizes the inextricable links between healthy people, healthy societies and a healthy planet.”

The circularity of food, production and the environment is at the center of the climate neutrality conversation. If current food waste trends continue until 2050, the “global demand for resources will almost triple to 130 billion tons annually, which would overuse the Earth’s capacity by more than 400%,” according to JP Morgan. In addition, the many aspects of the U.N.’s Sustainable Development Goals give hold to the need to achieve carbon neutrality because, according to the U.N., “70% of the Earth’s population’s livelihoods depend directly on a healthy planet.” Thus, exploiting resources is poor planning. Maximizing resources to achieve climate neutrality, in contrast, is smart planning. Smart planning, in turn, translates into economic efficiencies and financial advantages. Investing in sustainable strategies that help offset environmental footprints of products is prudent for future bottom lines. For instance, “[a]chieving the 2 degrees Celsius Paris Agreement target could save $54.1 trillion for a global expenditure of $22.1 trillion,” according to the U.N. In a circular economy, this money could be reinvested to achieve better and more sustainable goals.

A healthy economy rests on healthy competition. With the new strategies in the EU, “healthy” is undergoing an overhaul that includes environmental integrity and public health.

Further, the COVID-19 pandemic has underlined the importance of a robust and resilient food system that functions in all circumstances. It has also made us acutely aware of the interrelations between our health, ecosystems, supply chains, consumption patterns and planetary boundaries. And it is possible for companies to make the pivot. Emanuel Faber, CEO of Danone, told McKinsey & Co. in 2016 that embracing the circular economic model for the dairy producer is “turning something that is a challenge today into something that will have value tomorrow.” Danone is working on redesigning their “products to optimize material use and eliminate waste.” Some of the strategies involve consumers and optimize formal Extended Producer Responsibility (EPR) and Deposit Return Scheme (DRS) systems, which are on par to meet the EU’s expected 2025 target of 90% collection for beverage bottles. By the end of 2022, Danone’s polyethylene terephthalate (PET) bottles will be bio-plastic.

Biden’s new executive order on making climate change a priority is a first step. But once the Circular Economy Action Plan passes into EU law, unsustainably produced products from the U.S. may not be fit for the EU market.

The EU’s proactive action plan might bring an economic upswing and increase efficiencies for many sectors, including food. While the EU is aware of this, the new administration in the U.S. may have an uphill battle making the necessary level of resource efficiency the new norm.