Are we intelligent enough?

Janez Potocnik is a Slovenian politician who served as EU Commissioner for Science and Research (2005-2009) and the Environment (2010-2014). Former Slovenia’s Minister for European Affairs, he is currently Co-Chair of the International Resource Panel (IRP) at the United Nations Environment Program. Widely recognised as one of the key figures and originators of the circular economy concept, he received several awards for his work, among which the United Nations Champions of the Earth Award.

Hi Janez, it’s a honour to host you for a circular conversation. In one of your speeches, you start by arguing that change is unavoidable for a variety of reasons: economic, social and environmental ones. In the aftermath of a very disappointing and inconclusive COP 25 in Madrid, repetita iuvant. Why are we in a situation where change is unavoidable?

The whole story about change being unavoidable is based not only on economic and environmental reasoning, but also on demographics. In one year, we will have a global additional population equal to Germany, and in 4 years equal to the United States. This increase is taking place in least developed parts of the world, where individuals have exactly the same right as we do to live a life with a high level of wellbeing. This implies that, in the future, the pressure on planetary resources will be enormous. 

There are also clear social reasons behind. Few people hold the same wealth as the poorest half of the world, with 1% of the population being richer than the 99%. Currently, 800 million people are hungry and 2 billion people suffer from micro-nutrients deficiency; and yet, we throw away 1/3 of the food that we produce. More than 50% of the cities that will exist in a bit more than 2 decades have not yet been built. In 3 years China has used 1/3 more cement for building its cities than United States during the whole century. 

And this leads us to the environmental reasons, I guess…

The environmental reasons span from climate change and biodiversity loss, to ecosystems that are degrading as as consequence of being used unsustainably, and fisheries being beyond or at biological limits. 7 million people yearly are dying prematurely due to air pollution, 1 million of plastic bottles are bought every minute, of which only 9% is recycled, 12% is incinerated and 79% landfilled. We are the first generation to die more likely as a result of our lifestyle choices than due to infectious diseases. 

If you look at all these data, and take into account that we are basically the first generation on this planet living in a socio-ecological system of planetary scope—making us truly interconnected and interdependent—that’s enough to understand that our collective responsibility has increased enormously. 

These numbers say a lot. What is the role of economic factors in this story?

The current conditions are pretty difficult and I claim that the reasons for that are predominantly in the economic system which we have evolved. Trying to simplify, this goes back to what the Club of Rome described as the shift from the empty world dominated by nature to the full world dominated by humans. While labour and infrastructure were the limiting factors of human wellbeing in the empty world, natural resources and environmental sinks are the limiting factors in the full world.

It’s important that whenever we talk about the impact—climate change, biodiversity loss, pollution, and many of the things I’ve mentioned before—we go back to the fundamental drivers and pressures. Then you always go to the economic story, because economics is about human activity. That’s where resources come into play, as a bridge between the state and the impact.

Therefore, if we go back to the economic story, what do we see?

That we have created a model where financial capital is terribly overvalued, labour capital is undervalued and natural capital is—in many cases—not valued at all. Of course, it’s a lot about the price signals that we are sending on the market, and the creation of externalities because we do not value some parts of our economy. We should not be surprised if economic, social and environmental imbalance is the name of the game. 

“We have created a model where financial capital is terribly overvalued, labour capital is undervalued and natural capital is—in many cases—not valued at all”

If we look into that, it’s a no-brainer that change can’t happen in the economic system as it exists today. You can also see that in the many demonstrations we are receiving from the young generations. We need a fundamental change. This points to the decoupling story, which is something the International Resource Panel is very much behind. We believe that growth in the future is only possible if you measure it differently, and if you are able to decouple it from resource use and environmental impact. 

If that is not done, we’ll simply continue working in the direction that is destroying our basics for living on the planet.  Change is unavoidable; that’s the conclusion.

These appear to be very strong arguments supporting the conclusion that change is unavoidable. But—if the picture is so clear—why is change not happening faster?

I see, fundamentally, three major reasons. 

The first one is that our political systems, public institutions and financial institutions are all organised around a short-term logic and short-term behaviour. If you look today at the business sector, they are confronting a major challenge because—as they start to think long-term—they also need to survive the short-term where the transition is happening.

The second reason is that our economy is based on consumerism and quantity-driven growth, which is measured in GDP (Gross Domestic Product) terms. I firmly believe that this is altogether wrong. We need to couple the incentives we are sending into the market with the regulation we are creating. Currently, the incentives are sending businesses in one direction—basically rewarding them with higher profits if they destroy nature—while regulation is saying ‘stop, stop, stop…you went too far and there is a basic public interest that we need to defend’. In this way, a conflict arises, which is resolved partially through new innovation but partially through lobbying, creating a kind of compromise that is not good for anybody.

So, alignment between market incentives and regulation is necessary to avoid this compromise. What about the third reason preventing change to happen faster?

The third reason is that the transition is simply not organised in an inclusive and just way. No transition can be effective if it is not done in such a way. We see today—even in highly developed countries like France—that people see economic differences being too big and wealth not being distributed in a proper way. We see the awakening of the young generations on the streets, complaining because they don’t see a real future in front of them. If the transition is not set to be just, fair and inclusive, then it will never happen.

If you want to make the transition, you need to support it with public funds, instead of using them for stupid things like fossil-fuels subsidies or procurement that is not stimulating more sustainable economic development. In this context, the circular economy is the most efficient tool we have to deliver decoupling in practice and to transform our economies and societies towards something that will be more SDGs (Sustainable Development Goals) compliant.

Coming to the relationship between market and public authorities, you talk about a necessary partnership. In one of your talks, I heard you use an interesting metaphor where ‘businesses are the football players, the market is the playing field, public authorities are the referee, and regulations are the rules of the game’. In this context, you stress how it is in the interest of the best players to have clear rules and a good referee because in this way the real values can come out. How should this collaborative partnership look like with the goal of  steering the transition in a desired direction?

The first thing to keep in mind is that public authorities are paid with public money, which means that they have to protect the public interest. Private companies are there to make profits in a competitive environment. This means that putting too much pressure on the self-regulation of the companies will simply not work, because that’s not their role. We shouldn’t be too demanding because companies simply accommodate the signals given from the market.

Sometimes we talk about a kind of obsession of deregulation. I spoke with many companies that are definitely not against more regulation. They are against unpredictability, unfairness, free-riders and anything that creates an unlevelled playing field. Good regulation is not only needed, it’s essential. But I am not saying that some of the regulations don’t need to be reviewed or modernised and put into the perspective of the latest developments.

“Good regulation is not only needed, it’s essential”

In order to create a collaborative partnership among all the different actors involved, we need to understand the interests of everybody, put ourselves in the shoes of others and help each other to understand the situation from a holistic point of view. This will increase the possibility that such partnership is created because we would allow people to create, feel and live the ownership of the transition we need to walk through. 

When you talk about the policies necessary for the transition, you focus on the importance of having an integration of policies across the economic, social and environmental spheres. Why is it so important? And how can this integration happen in practice?

I will give you one example through which you’ll understand why integration is important. 

Around 15 years ago, when I was member of the first Barroso Commission, I thought we had made one of the bravest and most impactful decisions, putting together climate and energy policies. Both directorates were working together on the same documents and this led to a serious shift in energy policies. It was extremely successful because it enabled finding a solution fitting both logics, which was necessary to make the change possible. And, today, we are seeing major changes in the energy sector.

But, if you look into the climate policies, what do you notice? Imagine for a second that you would have abundant and cheap renewable energy, but still the same model of consumption and production in mobility, housing and the food sector. Do you think the climate change issue would be solved? I think everybody understands that that is not exactly the case. We still need to decouple economic growth from land and water use and materials consumption, and take into consideration nature-based solutions. Many of those things are not addressed by people working together in energy and climate. 

What’s the way forward, then?

Today it might be important to decouple climate and energy again, and to couple all the sectors that have a huge influence on climate change, from agriculture to industry and transports. It is important that you not only involve the energy-related policies. They might have been a revolution 10-15 years ago, but today are becoming a kind of obstacle to other solutions that are also necessary. We need to broaden the debate about climate. It is not enough to have energy and climate people, we need to broaden it to other sectors and debates, where there are solutions lying that would give us much more convincing and credible answers to climate change policies. 

“We need to broaden the debate about climate”

I believe this is a typical example of what it means to create a good policy, but at the same time creating a kind of new silo that—even if it’s broader than the initial one—it’s still lacking a holistic approach that goes beyond the things that we were able to think about just a decade ago.

Having introduced resource efficiency and circular economy (CE) concepts in European policy, you are in a privileged position to trace the evolution of the CE discourse in the EU context. Can you provide us with a snapshot of its development?

The circular economy started at the beginning of my mandate with the Resource Efficiency Platform and finally emerged at the end of the mandate in 2014 into the Circular Economy Package, thanks to the involvement and collaboration of many stakeholders developing the circular economy story. The Package was then immediately withdrawn by the next commission and, after the reaction of the stakeholders which had been involved—especially business stakeholders—it was put back on the agenda, with someone claiming that my package was not ambitious enough. Let’s not discuss that, as I am happy enough with the fact that it is back on the agenda and sure that it will be a core element of policy making in the next commission. 

Let me take a broader perspective here. How can we grasp the CE concept in relation to the socio-economic system we have created?

Circular economy and bio-economy are the oldest concepts on Earth, because everything in nature is organised in a circular way. Nothing is without a purpose or is lost, and everything has its meaning. So, the real question is: when will we humans behave as we are part of nature? Or will we keep behaving like some sort of intelligent beings who rule nature?

This goes back to one quote by the most famous Belgian detective, Hercule Poirot, who—when asked why he was always speaking about himself in third person—said ‘I am doing that because I am so intelligent that I need to establish a healthy distance from myself’. That is pretty much the same question to humanity: are we intelligent enough to establish a healthy distance from ourselves and behave as we are part of nature? Can we embrace the fact that this is our only home and we need to treasure and protect it as we are part of the same journey through time?

“Are we intelligent enough to establish a healthy distance from ourselves and behave as we are part of nature?”

That’s the main point when it comes to the circular economy.  It’s essential that we start to understand circularity as something natural, which is not forced upon us, but is rather just a correction of the compass that is sending us in the wrong direction. Ultimately, it’s just setting the course of humanity back to where it needs to go and where it belongs. 

Do you believe that the Circular Economy model can also contribute to solve problems of equity and social justice?

Not automatically, but it should. I absolutely believe that those two things need to be connected. Today I was speaking at the European Economic and Social Committee and was underlining exactly this issue. That’s why, when I was talking before about what is needed for the transition, I included that the transition must be just, fair and inclusive. That’s the social component. Alexandre Lemille is very much a proponent of that kind of logic which I like.

Coming to the topic of leadership, which kind of political leadership do we need at the European and national levels to accelerate the transition? What political narrative can be conducive to change? 

We need to clearly understand that the circular economy story is the only reasonable and logical solution to protect and improve European competitiveness in the long run. Europe is not rich in a lot of natural resources and, according to data from the European Commission, we are importing more than 90% of all the materials used to build our high-tech products. We are import-dependent and—due to scarcity—the price of resources in the long-run will very likely increase, while it will be volatile in the short-run, which means it’s unpredictable and not good for business. 

“The circular economy story is the only reasonable and logical solution to protect and improve European competitiveness in the long run”

If you look to the cost structure of manufacturing, there are basically two major costs: the cost of labour and the cost of materials. According to the German Resource Efficiency Agency, in the period 1990-2010, the percentage of labour costs decreased from 27% to 17%, while the percentage of materials costs increased from 37% to 47%. These data clearly show that for us Europeans, being import-dependent, the circular economy makes business sense. 

We can build a model that can make us more competitive without hampering social equity and without forcing us to further limit the rewards given to labour. At the end of the day, if you want a pure political argument, resources don’t go on the street and protest.  This is why for me circular economy is the most efficient competitiveness policy of the European Union and I sincerely hope that this connection between circular economy and competitiveness will be put more into the centre of the agenda, because it allows to better address a series of interrelated issues—such as distribution of wealth—that are at the core of European values.  

Let me go back to the topic of GDP growth and its relationship with the circular economy. In almost every policy document, the circular economy is depicted as a  sort of decoupling wizard tool, decoupling economic growth from resources consumption. You before mentioned that growth will continue as long as we redefine growth in a different way. What’s the point you would like to make here?

First of all, it’s better to use the expression wellbeing because growth has become, in a way, contaminated. If you look at the Wealth Inclusive Index, that’s the measurement of wellbeing and not growth in GDP terms. It’s fundamental that we change the way we measure things. We also need to be clear about the difference between well-developed economies and those economies that need growth because people are poor and living in inhumane conditions. 

For me, it’s not a fundamental discourse whether growth can or cannot continue. If measured, named and positioned in a different way than it is today, then we actually need growth. In Europe we can certainly afford the debate, but I personally believe that for Europe the question is about the distribution of wealth, not the growth rates. 

“For Europe the question is about the distribution of wealth, not the growth rates”

Any illustrative example that can help us shift the focus from growth rates to distribution of wealth?

Imagine there is a person earning 100 euro and growing 10%, and a person earning 1000 euro and growing 1%. In both cases you have 10 euro more at the end of the year, but which person would you like to be? If you go to a shop, do you say I am growing 10%, or you say I have 1000 euro in my pocket? The level achieved is clearly the most important thing. 

For poor economies, it is essential that their level is increasing faster than ours. For us, instead, the debate should be around the distribution of wealth and how to make our society more equitable. Of course, also in less developed economies, we see some people that are terribly rich. Differences between states and within states matter a lot, and differences inside national communities are becoming even more the factor for stability because people see and compare each other. I really don’t think that having a kind of fundamental position with growth or not is the most important thing we have to decide at this moment. 

Is that saying that by focusing on growth per se, we run the risk of over simplifying the discussion?

Yes. It’s over-simplistic if you say I am for growth or I am not. It’s not a fair approach and it’s not the right approach; it’s not helping anybody. There are many other things that need to be taken into account. I think it is better to have serious, in-depth discussions that allow us to improve and address the real questions. We have been discussing the measurement issue for decades. The French government wrote it some years ago and it still didn’t evolve because the simplicity of GDP is still prevailing. Do you know how I am trying—in one sentence—to explain people what GDP actually is? You will not reach your goal by walking faster, if you are walking in the wrong direction. 

A final message to conclude our conversation. Nowadays, looking at floods, ecosystems collapsing and extreme climate events, depression is an understandable feeling. But depression is not conducive to action. What attitude do we need right now to be concerned that the problem is severe and urgent, but keep hopeful that we can collaborate together to solve it?

The awareness about the necessity of change has enormously increased in just five years.Now  I would hardly find serious people who would say that the transition to a more sustainable economy—in environmental, social and economic terms—is not needed. But the urgency is not entirely there yet, and that’s why we need to work on the urgency.

I think the message that is coming from the side of the young generations is really important. I don’t see Greta as a symbol of an awakened young generation in the first place, but rather as the symbol of the failure of our generation. In a way, it’s quite shameful that a 16 years old girl has to tell us what to do, while many of us exactly know what is necessary and important to do. 

So, what we need is a true sense of urgency

I believe urgency is the core issue on which we have to concentrate. We have to understand that any transition is a major economic opportunity to change the world into a better place. What is essential and has not been put on the table yet is a kind of intergenerational contract  where we would create a program for the future generations that puts sustainability—social, economic and environmental—at the first place.

We are terribly indebted to the young generations, not only in an environmental sense but also in a social  one, and it is time that we address this problem. We need to send a clear message to the young generations and everybody protesting on the streets: we do care, we do understand and we will try to make things better. 

“We do care, we do understand and we will try to make things better”

We must be hopeful, because without hope we are lost. I also sometimes have doubts on how some problems should and could be addressed, but staying optimistic is essential because if you are optimistic you live better and longer. This transition represents the best chance we have to provide a solution to some of our major problems. 

Thank you Janez. It has been a great pleasure to hear about your views and experiences. Now it’s time to prove that we are intelligent enough to secure a future on and for this planet…urgently!

Conversation between Emanuele Di Francesco & Janez Potocnik

Edited December 2019