Advancing sustainability through a circular economy

A circular economy is structured so that products are created to be reused, repaired, and recycled, reducing waste and optimising the use of resources. Its goal is to establish a closed-loop system in which materials are circulated and reused, instead of being disposed of as waste.

Benefits of a circular economy

The adoption of a circular economy model brings multiple benefits including the reduction of greenhouse gas (GHG) emissions, conservation of biodiversity, and enhancement of resource efficiency. While we target decarbonisation, biodiversity and sustainable buildings as part of our key ‘planet’ themes in the Janus Henderson Sustainable Credit Fund, they are inter-related to our fourth theme of circular economy in the following ways:

• Decarbonisation: By reusing materials and components, a circular economy reduces the demand for energy in manufacturing processes (Scope 1 and 2 emissions) and minimises Scope 3 emissions associated with end-of-life disposal. This is achieved by extending the lifespan of embodied carbon in products.
• Sustainable buildings: Implementing reuse strategies in the construction sector not only decreases embodied carbon during the building phase, but also conserves energy and materials that would otherwise be used in demolition and new construction. Such practices promote the development of green and sustainable buildings.
• Biodiversity: Efficient management and recycling of water and waste alleviate pressure on natural habitats, thereby supporting the restoration and conservation of biodiversity.

Corporate contributions to a circular economy

Various companies across different sectors are actively implementing strategies to support a circular economy. During our company engagement meetings with corporate bond issuers, we seek to better understand what initiatives they have in place to achieve this. Most are focused on waste and water recycling and waste diversions from landfill. Below we discuss what some of the issuers are doing, but it would be fair to say that most companies are making inroads on this circular economy theme where possible:

• Airlines:
  • Qantas: The airline is exploring ways to reduce its environmental impact, such as repurposing materials from decommissioned aircraft for new ones. Additionally, Qantas has committed to incorporating 10% sustainable aviation fuel derived from recycled food scraps, further reducing its carbon emissions in a hard-to-abate sector.
• Airports:
  • Melbourne Airport: Aims to divert 60% of terminal waste from landfill and repurposes materials like soil, water, concrete, and asphalt in its infrastructure projects.
  • Sydney Airport: Encountered challenges with its waste recycling processes when external capabilities faltered, leading to unintentional landfill disposal. The airport is actively seeking solutions and has made progress in water conservation through the installation of water-efficient fixtures and fixing leaks.
  • Brisbane Airport: Committed to achieving zero operational waste to landfill by 2050 (excluding quarantined goods) and has set a target to recycle 50% of its water usage.
• Ports:
  • Port of Brisbane: Strives for zero landfill waste by 2030. The port is enhancing waste segregation practices and improving contractor management to achieve this goal. It also utilises captured rainwater for non-potable uses and construction, aiming for a net-positive water impact.
• Universities:
  • La Trobe University: Utilises sustainable building materials such as cross-laminated timber (CLT), which captures carbon during its growth and requires fewer resources during construction. La Trobe also has numerous waste and water recycling initiatives across its campuses.
  • University of Tasmania: As part of its relocation to the Hobart CBD, the university is prioritising low-carbon construction materials and methods to minimise upfront embodied carbon.
• Retails and Supermarkets:
  • Woolworths: In response to the collapse of REDcycle, Woolworths introduced Soft Plastics Recycling with collection points in 500 stores nationwide. They committed to making all of their own brand packaging reusable, recyclable, or compostable and have removed single-use plastic items from their stores.
  • Coles: Participates in the B-cycle battery recycling scheme, providing nearly 850 battery recycling drop-off points across Australia, diverting hazardous waste from landfills.
  • Nestlé: They are targeting 95% recyclable plastic packaging by 2025. They are also switching to paper and biodegradable materials, making coffee pod recycling easier and reducing single use plastics.
• Industrial and Infrastructure:
  • Wesfarmers: Focuses on enhancing product design for recyclability and end-of-life recovery, including take-back programs. Their subsidiaries, such as Bunnings and Officeworks, support customers to recycle products at end of life, including paint, batteries, toner cartridges and technology.
  • Transurban: Incorporates predetermined embodied emissions targets in their contracts, achieved through the use of recycled materials.
• Real Estate Investment Trusts (REITs):
  • Mirvac: Their sustainability efforts include a zero waste to landfill goal by 2030. A pilot project at the company’s 55 Pitt Street development in Sydney has diverted approximately 900 cubic meters of furniture and fit-out materials from landfill. This initiative not only extended the life of over 1740 items but also underscored the viability of a circular waste model.
  • Vicinity centres: In FY21 Vicinity managed to recycle 51% of their total generated waste.

Conclusion

Despite backlash against the notion of ESG in other markets, here in Australia we have companies aiming to do the right thing for the planet. These corporate contributions to a circular economy not only reflect responsible business practices but also show how innovation and collaboration can lead to positive outcomes. As more organisations embrace these strategies, the cumulative impact on environmental conservation and resource optimisation becomes increasingly profound.

As we engage with companies we will continue to ask direct questions on their circular economy activities. Setting targets is just the beginning. Our active engagement means that we will also monitor the achievement of these and the general trajectory as they progress.