Circular economy key to sustainable development

Resource depletion is a significant problem globally. While individuals have an important role to play in increasing sustainable practices, a more impactful change needs to come from corporations, wrote David Riddle, acting CEO of Tan Hiep Phat Beverage Group (THP).

Many large companies are actively transitioning from a traditional linear economy to a sustainable circular economy to protect the environment. It is critical that we see more of this, in addition to maintaining a laser focus on how we can use fewer resources to create the products that we all need.

One brand which stands out in my mind, that has taken the right approach to minimizing unnecessary inputs from the beginning, is Clinique, owned by Estee Lauder Companies, a family company founded in the U.S. in 1946, that became a publicly traded company back in 1995, and which today is a truly global organization with amultitude of iconic brands.

One of the creators of Clinique was the legendary Vogue editor, Carol Phillips, who always had the philosophy that “less is more”.

She was instrumental in the creation of Clinique, which was one of the most successful, yet minimalist brands created, and Carol would not allow a single piece of additional packaging unless there was aspecific consumer reason to do so.

I believe adopting this simple approach today would significantly advance our efforts in preserving the incredible global resources we all share, and would at the same time make achieving a circular economy much more attainable.

From my perspective, the success of a circular economy hinges on minimizing the inputs into products and the production process which will then reduce the huge amounts of outputs we need to recycle.

A popular circular economy definition is a model of production and consumption, which involves sharing, leasing, reusing, repairing, refurbishing, and recycling existing materials and products as long as possible. To this definition I believe we need to add a model of production which reduces the necessary inputs to achieve the product that the consumer requires, and certainly that would include the minimization of packaging.

Without doubt the circular economy has numerous benefits for businesses, as well as for society as a whole, I see some of these benefits as follows:

- Easing demand for raw materials which as we all know can be incredibly expensive, and which will become increasingly expensive as we have fewer of them.

- Increasing business efficiency: redefining processes and sparking creativity to generate economic opportunities for companies in innovation, design and recycling.

- Competitive advantages: business partners are increasingly implementing stringent requirements and will partner with companies who can fulfill them.

- Consumer demand: demands from consumers as they become more aware of environmental needs will create pressure and incentives for businesses to change. Those that deliver on the consumer’s expectations for the delivering on circular economy will produce positive awareness and receive increased demand.

- Positive social impact: a circular economy helps to reduce costs in managing and protecting the environment, creates new markets and jobs, and improves the overall health of society.

To implement the circular economy the European Committee (EC) has called for the participation of all related stakeholders, from government agencies and businesses to consumers, to commit to this economic model. According to one major study, a circular economy can result in benefits worth approximately €600 billion every year, create 580,000 new jobs, and significantly reduce greenhouse gases.

Multi-national companies (MNCs) are starting to see the benefits of applying the circular economy within their businesses. Leading companies in Vietnam that operate domestically and globally can learn lessons from these international corporations.

I have outlined below examples of companies who are actively reducing and reusing resources in the development of a circular economy, and from which, at THP, we believe we can learn valuable lessons.

The experience of implementing a circular economy at a few MNCs around the world

Boots

Boots is a British pharmacy, health, and beauty retailer with stores across the UK, Europe, and parts of Southeast Asia. In 2020, Boots launched a partnership with MYGroup, a recycling and waste management service, that encourages customers to deposit used products in Boots stores, that cannot easily be recycled at home.

This has saved over one million items from going to landfill since the scheme started, translating to 19 tons of product packaging.

The ‘Recycle at Boots’ scheme is currently live in 700 stores across the UK and allows the chain’s customers to throw their used beauty, health and wellness product packaging into specially designed recycling bins supplied and collected by MYGroup, which is also partnering with other large UK retailers such as The Body Shop on its ‘Return, Recycle, Repeat’ campaign.

One of the keys to success is that Boots offer their customers afinancial incentive to bring the products into the store for recycling. They do this through their hugely popular Boots Advantage Card program, which offers customers points that can be redeemed for products. UK recycling body OPRL says ‘Recycle at Boots’ is now the most accessible beauty, health & wellness recycling scheme of its kind in the UK.

Waitrose

The John Lewis Partnership is the parent company of two of the UK’s largest brands, John Lewis and Waitrose - a brand of British supermarkets founded in 1904. In 2020, the John Lewis Partnership launched its circularity and waste commitments, including:

- All John Lewis product categories will have a ‘buy back’ or ‘takeback’ solution by 2025.

- John Lewis will continue to develop sustainable rental and resaleoptions for customers.

- The company will halve food waste in Waitrose’s supply chains by 2030 in addition to its existing 2030 operational target.

- The company aims to help reduce customers’ household food waste by 50% by 2030.

Since 2017, Waitrose has been donating surplus food from shops to UK NGO, FareShare, which redistributes it to those in need working with charities across the UK who turn surplus food intomeals. Waitrose also sends surplus food from its distribution centers and from its entire supply chain to FareShare. In 2021, Waitrose donated 1,841 tons of surplus food, equivalent to more than 4.3 million meals, to over 3,000 charities working with FareShare.

To mark COP26 in November 2021, Waitrose launched its biggest-ever food-waste awareness campaign. Across online channels, social media, radio and printed press, it provided inspiration to help reduce food waste. Waitrose estimates the campaign benefitted over 10 million people.

In 2021, Waitrose made further progress on the removal of single-use plastic and the recyclability and reduction of packaging acrossits own-brand product range. This included:

• Stopping the sale of magazines which give away single-use plastic toys.

• Reducing single-use plastics across own-brand Easter eggs andconfectionery by 44%

• Reducing made-to-order sandwich platter packaging by 65%, including introducing a recyclable cardboard base

• Reducing packaging across paper-based bathroom and kitchen products, saving 130 tons of board per year.

• Launching, in collaboration with suppliers Berry Gardens and Sharpak, a new Air-Light punnet, made from 80% recycled material, for Waitrose British strawberries, saving 17 tons of plastic over summer 2021.

Waitrose has brought forward its own pledge, that all own-brand packaging will be reusable or made from recyclable or home-compostable materials by two years to this year, 2023, and to date 86% of Waitrose’s own-brand packaging meets this goal.

At the same time, in September 2021, Waitrose removed 10 pence bags from 287 core stores and its food home-delivery service. This is estimated to save up to 40 million bags from being produced annually. The company also launched a range of reusable 50p bags in case a customer forgets to bring their own, and Waitrose continues to explore how it can better encourage customers to transition to reusable carrier bags.

McDonalds’

As of 2021, approximately 82.7% of McDonalds’ primary packaging materials, and 96.8% of primary fiber packaging came from recycled or certified sources, aiming for 100% certified, recycled or renewable materials by the end of 2025.

In addition, the company aims to drastically reduce plastic in Happy Meal toys and transition to more sustainable materials by the end of 2025. Since 2018, McDonalds has reduced virgin fossil fuel-based plastic in Happy Meal toys by 24.4% globally and continues towork on sourcing materials used in Happy Meal toys from renewable, recycled or certified sources.

As a multi-national corporation, the business aims to implement global and local solutions across the business to expand the reduction, recycling, recovery or reuse of guest packaging and help create demand for recycled materials.

Localizing its approach in each market, McDonald’s has developed a range of reusable tableware to be used at its fast-food restaurants in France. A similar pilot has also been rolled out in Germany, Taiwan, and the US. McDonald’s Japan runs a program with the Japanese Ministry of the Environment to collect plastic Happy Meal toys and convert them into restaurant serving trays. To date, the program has collected over 7.5 million plastic toys and turned them into trays.

In markets that have a developed waste infrastructure that is widely accessible and robust, McDonald’s offers customers the opportunity to recycle packaging in restaurants. In areas where recycling infrastructure varies, the company drives advocacy andinvests in partnerships to help advance the development of recyclingsystems. Some examples of this include:

• Reducing the volume of waste from customer packaging in-store.

• Facilitating the recycling of customer packaging in restaurants where possible.

• Partnering with waste management companies, suppliers and other brands to remove barriers around recycling, reuse or composting.

• Working with suppliers to optimize packaging for recycling.

• Using on-packaging labeling to make recycling easier for customers.

• Increasing recycled content in packaging and restaurant designand operation materials to drive demand for recycling.

• Utilizing transport logistics to collect and back-haul recyclables when they deliver supplies to the company's restaurants - helping to recycle materials from restaurants in remote areas and reduce trucks on the road.

Estee Lauder Companies

Estee Lauder Companies (ELC) is one of the world’s leading manufacturers of skin care, makeup, fragrance, and hair careproducts. As a family founded company, sustainability has been central to how the business and its brands operate. In April 2023, ELC appointed its first ever Chief Sustainability Officer to continue to lead the company’s sustainability initiatives with specific targets onenergy, emissions, packaging, and ingredient traceability.

Packaging has been an area of focus for the business, with the company setting goals in four areas:

• By 2025, 75-100% of packaging will be recyclable, refillable, reusable, recycled or recoverable.

• By 2025, increase the amount of post-consumer recycled (PCR) material in packaging to 25% or more.

• Ambition to use responsibly sourced paper products whenever possible with a goal to have 100% forest-based fiber cartons FSC certified by 2025.

• By 2030, reduce the amount of virgin petroleum content in plastic packaging to 50% or less.

The company has also made strides to limit its waste and waterusage. ELC has achieved zero industrial waste-to-landfill for 100%of its global manufacturing, distribution, and innovation sites. If waste cannot be reused or recycled, it is converted to energy by licensed power plants or by co-processing at cement kilns.

Regarding water, ELC uses water as an ingredient to make products, for cleaning and cooling manufacturing equipment, and to perform testing, analysis and developing new products. To maximize water-savings, the company has implemented water requirement standards at all its facilities, including low flow fixtures and water use reduction guidelines. In 2020, the water softening system at ELC’s Blaine Minnesota facility was upgraded, which is expected to result in a reduction of more than 600,000 gallons of water used per year.

Hiltons Hotels & Resorts

The Hilton brand is one of the most recognizable travel and hotel brands globally. The company has over 5,500 hotels in over 90 countries and territories around the world. In 2018, it was the first global hospitality company to set science-based targets to reduce green house gas emissions, which were validated by the Science Based Targets Initiative (SBTi). Hilton also seeks to decrease its environmental footprint through its Watts, Water and Waste program.

• Watts is focused on energy efficiency, seeking to reduce utility costsand greenhouse gas emissions. The objectives are to cut managed portfolio emissions intensity by 75% by 2030, cut franchised portfolio emissions intensity by 56% by 2030 and drive toward a net-zero future.

• Water aims to cut water use intensity by 50% by 2030.

• Waste is about prevention, recycling and food upcycling and donation with the goal to cut landfill waste intensity by 50% by 2030.

In response to global trends showing 86% of travelers want to travel more sustainably, Hilton now offers on-site electric vehicle chargers for guests in over 110 hotels across Asia-Pacific as of December 2022. For example, the newly installed charging stations at Hilton Zhoushan have already reduced vehicle emissions by 60 tons.

Food waste reduction is also a significant part of Hilton’s efforts - Conrad Centennial Singapore, for instance, reduces food waste by using often-discarded “ugly vegetables”, as well as plant-based meat and egg substitutes, in its menus.

Hilton has also partnered with Winnow to leverage AI technology to help chefs accurately pinpoint food waste streams to cut costs and tailor purchasing decisions in select hotels across Asia-Pacific. To date, seven properties in Japan have implemented this technology.

Ermenegildo Zegna Group

Ermenegildo Zegna Group is an Italian luxury fashion house thatdesigns, manufactures and distributes menswear, womenswear, andchildren’s wear. Since 1910, the group’s founder believed that the beauty of the natural environment is indispensable to the company’s long-term success.

Long before sustainability was commonly known or practiced, Ermenegildo Zegna set out to create an ecosystem dedicated to environmental protection. Oasi Zegna is an extensive reforestation project in the barren mountainside surrounding Zegna’s mill in the Biella Alps of Piedmont, Northern Italy. Now a giant nature reserve,more than 500,000 trees have been planted at Oasi Zegna covering 100km2 - an area 30 times the size of Central Park in New York.

In 2022, the Group unveiled its new ESG strategy with three commitments:

1. Made in Italy, transparency! This goal commits to having themajority of the company’s value chain in Italy and to improving the traceability of its raw materials and manufacturing processes.

2. Weaving the fabric of tomorrow. This commitment is about creating a legacy of sustainability for the communities where the brand operates.

3. Oasi, home of our values. This addresses environmental concerns, particularly emissions reduction and cleaner, more circular, production processes.

Advantages for Vietnamese corporations in applying the circular economy

Vietnam is taking rapid steps to achieve greater global economic integration, especially in terms of participation in bilateral, multi-lateraland new generation free trade agreements.

Most of these free trade agreements have commitments on sustainable development, environmental protection, combating climate change and compliance with waste and gas emission standards. This is the platform from which Vietnam can act quickly to transition into the circular economy. In applying circular economic principles, Vietnamese companies can learn from the pragmatic experience of multi-national companies by taking on collaborative opportunities in manufacturing and product development.

Some Vietnamese business have begun taking steps towards implementing circular economies, with initiatives including metal scrap collection models, paper collection models and cleaner manufacturing models in industrial manufacturing on micro, small, and medium scales. At the government level, sustainable development and environmental protection have been focus areas in setting objectives, responsibilities, and actionable solutions for businesses in the past few years. In this way, the circular economy plays an important role in achieving fast and sustainable economic development.

The XIII Party Congress’s resolution established a framework to build a circular, green, and environmentally friendly economy. The 10-year socio-economic development strategy for 2021-2030 emphasizes “encouraging the development of a comprehensive circular economy to be used effectively for manufacturing processes”. To implement the strategy’s goals, the five-year socio-economic development for 2021-2025 emphasized “developing roadmaps, mechanism, policies and laws to form and operate the circular economy”.

The Environmental Protection Law passed by the National Assembly, which officially came into effect in January 2022, is the highest-level legal document which promotes a circular economy as a critical solution to protecting the environment during the process of socio-economic development.

As the government’s remedial policy on environmental protection, it stipulates “to integrate, promote circular economies, green economy in building and implementing strategies, masterplans, programs, schemes, and projects for social economy”. The law also specifically sets out Article 142 on the circular economy and at the same time, specifies regulations related to resource exploitation, waste reduction and raising standard levels of reusage and recycling in environmental protection law.

The government passed Decree 08/2022/ND-CP in January 2022 detailing further environmental protection law articles. In June 2022, the Prime Minister issued Decree No 687/QD-TTg passing the Circular Economy Development Scheme in Vietnam. The specific objective of the scheme is to solidify the goal of greenhouse emission reduction in terms of GDP by at least 15% in 2030 compared to 2014, aiming toward net zero emission in 2050.

At the same time, the scheme will raise awareness, grow corporate investment, domestic and foreign investments in the circular economy, and promote the circular economy to greenify industries. Along with the participation of ministries, industries, and localauthorities, there is growing support from corporate communities and increased awareness, helping Vietnam transition towards acircular economy.

Difficulties, challenges for Vietnamese enterprises when applying circular economic principles

A circular economy is a systemic approach, requiring participation and close collaboration from various entities in the economy. Vietnam still faces several challenges regarding institutionalization, policies, infrastructure, technology, operating mechanisms, and markets, including specifically the following:

- A need to introduce systemic planning and implementation, introduce appropriate laws and production practices, and to foster effective collaboration between businesses and industries.

- An urgent need to consider fully environmental factors in planning processes including assessing strategies, masterplans, projects and programs.

- Vietnam has a relatively comprehensive system of policy tools compared to the rest of the world in transitioning towards a circular economy, especially in environmental protection, such as economic tools,communication and education, and administrative measures. However, gaps remain in the implementation of legal documents and regulations. Many entities and organizations have not yet properly implemented or proactively communicated existing legal provisions and policies.

- Manufacturing and trading entities and individuals still use short-term objectives on profit and have yet to consider long-term, sustainable benefits in the context of expanding global economic integration. The circular economy has yet to create breakthrough momentum to attract resources, especially outside of the government.

- Markets for environmental goods and services, eco-friendly products, recycled products have yet to receive significant attention or support matching global trends. Waste is not yet seen as a resource, which means markets for secondary raw materials and fuels have yet to be established.

- There is greater scope for the definition and development of the government’s role in creating, supporting development, and regulating markets and behaviors of market participants regarding mining objectives, utilizing natural resources economically and effectively, promoting manufacturing and using eco-friendly goods and services.

- Several policy tools are not yet fully coordinated, which means they cannot fully regulate the operational effectiveness of entities inmining and utilizing resources in a transparent, fair, economic, effective and sustainable manner for the economy. Policies can be developed to create financial pressures and incentives that promote technological innovation and raise the social responsibility of companies and consumers to meet circular economic objectives.

- Organizational apparatus, human resources, information systems, data and audit mechanisms, implementation and application of circular economy monitoring have yet to be fully formed. Currently many ministries, industries, universities, and institutions participate in this topic but require a lead agency to coordinate the implementation andapplication of the circular economy.

- There needs to be much greater education and awareness amongst manufacturers and consumers of environmental considerations. For example, many companies and consumers do not understand what they should be recycling. Clean and responsible manufacturing and clean and sustainable consumption are still concepts in directive policies and legal provisions which are not widely practiced.

- The financial resources for transitioning to a circular economyare significant, but the mobilization of resources from society has not been entirely effective. Mechanisms and policies in the investment of solid waste treatment have been institutionalized but are still extremely limited due to restricted access to loans. Participation from private and public entities should be encouraged further.

- Physical facilities and technical equipment for environmental management are limited. The collection, treatment and reuse readiness of waste, as well as the use of recycling technology, are not coordinated, meaning most waste ends up in landfill.

What is needed to promote the circular economy and circular business?

Currently, there have been a few circular economies implemented across Vietnamese businesses, bringing certain efficiencies, including our own at Tan Hiep Phat. However, we have a long way to go as a nation to protect andpreserve our resources and to effectively introduce mass scale circulareconomies which can make a significant difference to our future.

We list below several possible ideas for consideration:

- Conduct studies to examine where the circular economy have worked internationally and lessons learnt from those that have not succeeded.

- Educate and raise awareness at a national level of circular economy and why it is necessary. To succeed in our common goals we will need participation from all stakeholders, including government agencies, all companies producing raw materials including metals and mining corporations, processors, manufacturers, distributers, retailers, consumers and waste collectors.

- Create an appropriate legal management system in the development of a circular economy; formulate and develop a policy and legal framework to manage the circular economy according to market needs, shifting to pollution prevention and the efficient use of recyclable materials.

- Encourage companies to apply strict standards of product management, carefully assess and evaluate the quality and quantity required of input materials.

- Introduce clear government guidelines at all levels to promote a circular economy with supporting policies for access to capital, manufacturing locations, expanding opportunities to access the appropriate information technology.

- Introduce industrial parks for recycling.

- The introduction of a government support center for businesses which implement a circular economy in research and manufacturing activities.

- Support the development of science, techniques, technologies and advanced products in recycling materials and new energy from waste, satisfying environmental requirements and cost-saving.

- Create incentivizing mechanisms to apply circular economy principles by providing benefits, tax priorities and other supporting policies.

- Consider over the longer term, the formation of corporations providing service support to manufacturing businesses to apply a circular economy.

- Strictly control waste: Vietnam could use the successful experience of waste management and treatment technology of developed nations such as France and Sweden. From there it will be possible to quickly issuestandards and guidelines for collecting, transporting and reusing waste

- Establish incentives for enterprises which process and use ashand slag.

- Optimize input materials; the control and management of input materials should be considered and implemented throughout manufacturing systems.

- Increase international cooperation and promote the role of the non-state business community in piloting models which are currently new to Vietnam.

- Mobilize the participation of communities in the development of the circular economy.

Conclusion

In conclusion, this is a critical issue for everyone. There is a tremendous opportunity for MNCs to lead the way in Vietnam, and for Tan Hiep Phat and other domestic brands in the country, to learn valuable lessonsfrom the experiences of MNCs from the UK, Europe, and the U.S.

At Tan Hiep Phat we continue to educate the communities and our local stakeholders on the benefits of sustainability and the circular economy to help them understand that all big ideas start with a small step and each of us can make a difference.

There is no doubt that urgent action is needed to avoid the impending disaster we and our children will face if we do not move quickly. Doing nothing is not an option and Tan Hiep Phat is committed to being at the forefront of these initiatives within Vietnam.

David Riddle is British and spent his early career in financial services in London before relocating to Asia in 1976. He has served Tan Hiep Phat (THP) over the last 13 years as deputy chairman, board director and now acting chief executive officer. Riddle has over 50 years of management experience, and has spent 45 years in Asia.

Prior to taking on a full-time role with THP, he ran the Southeast Asian business of a management consulting firm for 25 years, advising clients across the region. While spanning a wide range of industries, his advisory work has focused on the consumer sector. Before his consulting career, Riddle spent 20 years in high-profile leadership roles at retail firms, including as CEO of Ralph Lauren for Australia and New Zealand