3. Governance challenges to the circular transition
This chapter describes the main challenges that Glasgow, United Kingdom, is facing in the transition from a linear to a circular economy. The main governance gaps relate to the lack of a systemic approach to the circular transition and the need to reinforce the role and leadership of the city council. Other obstacles include the weak co-ordination across municipal departments, the difficulties to involve large companies in the circular transition, the lack of a dedicated budget for the circular economy and the lack of implementation of green public procurement (GPP), among others.
Building on the OECD framework Mind the Gaps: Bridge the Gaps (Charbit and Michalun, 2009[1]) and the OECD report Water Governance in OECD Countries: A Multi-level Approach (2011[2]), the OECD report on the Circular Economy in Cities and Regions (2020[3]) identified five types of governance gaps cities face when designing and implement a circular economy (Figure 3.1). In particular, 51 surveyed cities and regions highlighted the following gaps:
Funding gaps: According to the OECD Survey on the Circular Economy in Cities and Regions (2020[4]), cities and regions face constraints in terms of insufficient financial resources (73%), financial risks (69%), lack of critical scale for business and investments (59%) and lack of private sector engagement (43%).
Regulatory gaps: Inadequate regulatory framework and incoherent regulation across levels of government represent a challenge for respectively 73% and 55% of the surveyed cities and regions.
Policy gaps: A lack of holistic vision is an obstacle for 67% of surveyed cities and regions. This can be due to poor leadership and co-ordination. Other policy gaps concern the lack of political will (39%).
Awareness gaps: Cultural barriers represent a challenge for 67% of surveyed cities and regions along with lack of awareness (63%) and inadequate information (55%) for policymakers to take decisions, businesses to innovate and residents to embrace sustainable consumption patterns.
Capacity gaps: The lack of human resources is a challenge for 61% of surveyed cities and regions. Technical capacities should not just aim for optimising linear systems but strive towards changing relations across value chains and preventing resource waste.
Note: Results based on a sample of 51 respondents that indicated obstacles as being “Major” and “Important”.
Source: OECD (2020[3]), The Circular Economy in Cities and Regions: Synthesis Report, https://doi.org/10.1787/10ac6ae4-en.
A number of obstacles emerged during the OECD missions (27-30 April and 22-25 June 2020), such as policy, awareness, capacity, funding and regulatory gaps. They are described below (Figure 3.2).
Source: OECD (2020[3]), The Circular Economy in Cities and Regions: Synthesis Report, https://doi.org/10.1787/10ac6ae4-en.
There is no clear leadership within Glasgow City Council to accelerate the transition towards the circular economy, while policies are conceived in silos and lack system thinking. The Neighbourhoods, Regeneration and Sustainability department has been in charge of developing the circular economy route map of the city. However, its leading and co-ordination role across municipal departments is still to be clarified. As it is often the case at the municipal level, co-ordination between municipal departments is challenging, with the risk of missing the opportunities arising from the inclusion of circular economy principles in various planning tools. These opportunities are of a socio-economic nature, as well as environmental ones. There are several plans and strategies that could be connected with the circular economy, enhancing co-ordination across municipal departments:
Glasgow’s City Development Plan, developed by the Spatial Planning Department in 2017, explores amongst others, Glasgow’s vision for land use, the reuse of existing buildings, the capture and reuse of energy, the ParkPower project and the urban food and community gardens. The development plan contains policies about construction processes and how the city aims to embed sustainability (Glasgow City Council, 2017[5]).
The city’s Waste Policy for 2020 to 2030, developed by the Neighbourhoods, Regeneration and Sustainability Department’s Waste Unit, aims at minimising waste sent to landfill, applying the European Union (EU) waste hierarchy. The Resource and Recycling Strategy 2020-30 aims to move from waste to resource management, including circular economy principles in procurement.
The Liveable Neighbourhoods Toolkit, launched in 2021 by the Neighbourhoods, Regeneration and Sustainability Department, consists of creating a template for an ideal neighbourhood to be applied in the 56 neighbourhoods in Glasgow, UK (Glasgow City Council, 2021[6]). The department is also in charge of developing a new local transport strategy and a city centre transformation plan at the same time.
The Climate Emergency Implementation Plan (CEIP), launched in 2021, sets the basis for the achievement of the objective to become a carbon neutral city by 2030. The Plan prioritises key areas such as transport, natural environment and biodiversity and energy, and also highlights the relevance of social justice in the implementation of the planned 59 actions by 2030 (Glasgow City Council, 2021[7]).
Glasgow’s Economic Strategy 2016-23, launched in 2016 by Glasgow City Council, in partnership with the Glasgow Chamber of Commerce and Glasgow Economic Leadership, identifies ten key areas for the economic development in the city. Some of these themes address skills, health, education and employment opportunities and support for key sectors of the city (e.g. tourism and events, digital technology, creative industries, etc.).
There is a lack of citizen awareness of what the circular economy is, its benefits and their role in the transition. Waste separation is poorly performed at the household level, due to a lack of proper incentives to shift behaviours. Moreover, there is no clear understanding of users overall of how the waste management system works and the process after they separate their waste. There is a general reticence towards second-hand products. For example, rental garments are not perceived as clean. Access to repair services is limited and lacks affordability, compared to the process of acquiring new products. Despite the efforts made by the Glasgow Chamber of Commerce and partner institutions (i.e. Zero Waste Scotland and Glasgow City Council) to raise awareness and support the private sector in the transition to the circular economy, it is still not very clear to many companies of different size what the circular economy is and how they can take advantage of the opportunities arising from the circular transition. The chamber of commerce is struggling to involve large corporations in the circular transition. The latter claim that some of their activities are performed within a global value chain, impeding the closure of loops and direct control over operations along the value chain. Finally, despite consumers’ increasing sustainability awareness, SMEs tend to consider that much remains to be done to properly engage consumers and deliver messages in a simple, clear and scalable way. Glasgow would need to move from a business-led approach to a holistic one that would include the entire city.
The city of Glasgow, UK, will need to build and strengthen internal capacities to accelerate the transition. While Zero Waste Scotland is highly technically specialised in waste and resource management and the chamber of commerce has an important network through which to create a community of practice on the circular economy, the city would need to build the technical and human capacities required for the transition, lead by example by incorporating circular economy principles in daily practices and enhance co-ordination across departments. Regarding public procurement, in Glasgow City Council, there is a disconnection between public officials in charge of drafting the tenders and those managing the contracts. In general, there is a strong focus on the tender, with less attention paid to how the contract is performing once it has been awarded. In addition, system skills (capacities to understand, evaluate and enhance) and technical skills (competencies to design, plan and accelerate the transition engaging a variety of stakeholders) are also lacking.
Related to technical capacities within the city council and across sectors is the ability to produce and analyse data. For example, data gaps are particularly evident in the built environment sector, where there is a lack of information about the materials used in the construction sector and the way to make data available for modular repurposing. Data gaps are partly explained because some of the dimensions of the circular economy have not been historically measured.
The lack of funds dedicated to the circular economy and the fragmentation of the municipal budget may have an impact on the feasibility and financial sustainability of circular economy initiatives in Glasgow, UK. Transitioning from a linear to a circular economy requires a significant amount of investment and financial resources. However, while there is funding available from national, regional sources and European institutions, there is no specific budget specifically allocated to circular economy initiatives at the city level. Moreover, the city council is experiencing budget constraints and there is competition for funds between different areas.
Access to funding is a major obstacle, particularly for social enterprises pursuing circular economy principles, as financing tools are not necessarily suited for sustainable business models. The exploration of new business models, such as “product as a service”, can be challenging for some SMEs as they must acquire the asset first and a return on investment is a lengthier process. The transaction cost for SMEs to move from a linear ownership model to a more circular model based on use can require additional funding in the first stages. Social enterprises based in Glasgow, for example, involved in circular economy activities such as repairing and reusing, rely very much on external funding, which is limited in time. As such, these enterprises, which pursue social and environmental functions, call for various streams of income as grant funds are not sustainable sources in the long-term.
There is a lack of adequate financial incentives to promote the adoption of a circular approach in Glasgow, UK. For large companies, budget restrictions are extremely relevant in contractual requirements and commercial agreements, while material specifications have a minor role in the allocation of contracts. Therefore, incentives to use secondary materials are low. Regarding the built environment sector, there are no incentives for constructors to perform a life cycle analysis and extend the use of buildings, as higher taxes are applied to refurbishment activities than to new constructions. As such, the focus is very much on de-risking rather than on opportunities from the value of future assets. Currently, in the UK, refurbishing and redeveloping existing buildings is subject to a reduced VAT tax of 5%, while the building of a new house or flat is exempted from VAT (UK Government, 2019[8]).
Regional and local regulations are not yet fully conducive to circular-related innovations in various sectors, including the built environment and waste. For example, in Scotland, the Circular Economy Bill does not include the building sector. The National Infrastructure Commission (NIC) raised this point in relation to the need of moving beyond energy efficiency when it comes to construction and aiming for low-carbon and renewable resources (NIC, 2019[9]). At the local level, planning policy regulations do not indicate which material to use nor require to provide information on the origin of the materials. Building standards in Scotland mainly focus on energy efficiency. Similarly, at the local level, Glasgow City Council aims at increasing energy efficiency standards in different areas of the council (e.g. spatial planning, development and regeneration services) and within the building stock owned by the city. However, there seems to be a mismatch between building standards at the regional and local levels. One of the main challenges is to make sure that building standards allow achieving planning policy outcomes. Circular economy principles such as the reuse of secondary materials in new buildings or implementing modular off-site construction models are not encouraged by the current regulations.
A range of stakeholders finds some regulations in relation to waste management unclear, especially in terms of transforming waste into resources. For instance, the Scottish Environment Protection Agency (SEPA) conceives as waste all items collected as such. However, the definition of various types of waste and end of life is preventing the reuse of waste as secondary material in new products. There are some international examples of national governments taking action towards adapting the existing regulatory frameworks to emerging needs related to the circular economy. For example, in the Netherlands, the legal and regulatory framework is being adapted in order to make the country an economy without waste by 2050, as defined by the National Circular Economy Strategy. In Belgium, the government is undertaking audits of all existing legislation and regulations in order to remove any possible normative obstacles to the development of a circular economy (OECD, 2020[3]).
Public procurement does not fully exploit the potential of the circular economy in products and services by and from the municipality. Currently, life cycle analysis (LCA) is not integrated into procurement decisions, though it would help prevent negative environmental impacts. Furthermore, each municipal department negotiates its own procurement arrangements, each with its own different demands and specific supplier lists. As such, processes are fragmented and do not include circular economy principles, even though furniture supplies and suppliers, information and communication technology (ICT) equipment provision and disposal could reflect circular practices, in terms of renting, moving from ownership to services, using second-hand furniture, etc. Key performance indicators (KPIs) are not used to identify how the contract is performing. Examples of different applications of public procurement and ongoing related initiatives are illustrated in Box 3.1.
Cities are increasingly including circular-related requirements in tenders. Some of the objectives of these activities are:
Promote circular economy building developments: The city of Amsterdam, Netherlands, developed a Roadmap Circular Land Tendering (2017[10]) that includes 32 performance-based indicators for circular economy building developments. Paris, France, is developing a deconstruction/demolition framework agreement, which establishes a deconstruction methodology for construction waste management. Construction tender selection criteria could entail: sorting organisation internally onsite; transport of waste to a recycling platform; traceability of the disposal of construction waste; the rate of recovery of construction waste specifying the nature of waste, the sectors and suppliers. The Strategic Plan for Public Procurement from the city of Lisbon, Portugal, is launching building construction contests, public space interventions and increasing the introduction of recycled materials in new constructions.
Encourage the use of circular business models: The city of Ljubljana, Slovenia, aims to foster “product as a service” schemes by renting printers, electric lamps or furniture instead of buying them. The municipality of Bollnäs, Sweden, has applied what the local government calls “functional public procurement” (funktionsupphandlingen) to rent light as a service in municipal pre-schools and schools. The service is provided by a start-up that received support from Umeå’s BIC Factory business incubator.
Incorporate secondary materials, repair and reuse: In Paris, France, in 2018, 43% of the city’s purchases were linked to the circular economy and 14% of them included “circular economy” criteria. Some examples are: price criteria on household appliances assessed in terms of user cost over eight years (water and energy); reuse/recycling process of used equipment (audio-visual, curtains, clothing); recycled kitchen equipment; computer recycling market; modular demountable nurseries; retreated tires and environmentally friendly office supplies (recyclable and/or rechargeable). Copenhagen, Denmark, and Kitakyushu, Japan, are promoting the use of recycled materials and the extension of the “in-use phase” of uniforms and work clothes through procurement. In the city of Ljubljana, Slovenia, the public tender for the selection of suppliers of sanitary paper products included the “zero waste” criterion, whereby sanitary products had to be made of cardboard packaging or cardboard hollow packaging collected in the city.
Adopt specific public procurement provisions to favour the involvement of SMEs and start-ups: Some cities use a modular approach (Antwerp, Belgium), others engage with local suppliers to help them build capacities (Melbourne, Australia) or highly prioritise local job creation (Dunedin, New Zealand).
Source: OECD (2020[3]), The Circular Economy in Cities and Regions: Synthesis Report, https://doi.org/10.1787/10ac6ae4-en.
References
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[7] Glasgow City Council (2021), Climate Emergency Implementation Plan (CEIP), https://www.glasgowconsult.co.uk/Project/861.
[6] Glasgow City Council (2021), Liveable Neighbourhoods Toolkit, http://www.glasgow.gov.uk/CHttpHandler.ashx?id=53409&p=0.
[5] Glasgow City Council (2017), City Development Plan, https://www.glasgow.gov.uk/cdp (accessed on 10 December 2020).
[10] Municipality of Amsterdam (2017), Roadmap Circular Land Tendering, https://amsterdamsmartcity.com/projects/roadmap-circular-land-tendering (accessed on 28 January 2020).
[9] NIC (2019), “New report underlines need to tackle carbon emissions from homes”, National Infrastructure Commission, https://nic.org.uk/news/new-report-underlines-need-to-tackle-carbon-emissions-from-homes/ (accessed on 11 December 2020).
[4] OECD (2020), OECD Survey on Circular Economy in Cities and Regions, OECD, Paris.
[3] OECD (2020), The Circular Economy in Cities and Regions: Synthesis Report, OECD Urban Studies, OECD Publishing, Paris, https://dx.doi.org/10.1787/10ac6ae4-en.
[2] OECD (2011), Water Governance in OECD Countries: A Multi-level Approach, OECD Studies on Water, OECD Publishing, Paris, https://doi.org/10.1787/9789264119284-en.
[8] UK Government (2019), VAT for Builders, https://www.gov.uk/vat-builders (accessed on 9 December 2020).