How investors can help foster responsible consumption in emerging markets – Professionele

Current global consumption patterns in aggregate are unsustainable and are contributing to climate change, biodiversity loss and pollution.

As populations grow and economies develop, the amount of materials used in the production and consumption of everyday goods and services is rising at rapid rate, and depleting the natural resources we depend on for life on earth.

Emerging markets feel some of the negative effects of consumption most keenly. However, through impacting investing it is possible to invest in companies helping to turn the tide towards a more sustainable future. Here’s how.

What needs to happen?

To build a more sustainable future – one in which economic growth doesn’t depend on environmental degradation – consumption patterns need to change all over the world, across developed and emerging countries.

We need to reduce consumption overall, but also to make the shift from harmful to responsible: we need to harm fewer forests, emit less carbon, use less plastic packaging and reduce waste by recycling.

In an ideal world, we would produce and consume in a circular economy, one that prioritises the efficient use of resources and upcycles waste into new products that get reused over and over again. In this way, nothing is disposed of; it is reused within the economy multiple times.

The importance of the circular economy is formally recognised in the UN’s Sustainable Development Goals (SDGs). These are 17 goals that aim to promote peace, prosperity and the eradication of poverty, all while protecting the planet. 

– For more on what the UN SDGs are about, read our quick guide 

SDG 12 is about ensuring sustainable consumption and production patterns through various measures, including specific policies and international agreements on the management of materials that are toxic to the environment.

Some of the targets associated with SDG 12 include:

  • By 2020, achieve the environmentally sound management of chemicals and all wastes throughout their life cycle
  • By 2030, halve per capita global food waste at the retail and consumer levels and reduce food losses along production and supply chains, including post-harvest losses
  • By 2030, substantially reduce waste generation through prevention, reduction, recycling and reuse

But it is not just policymakers who need to contribute to the achievement of this goal. Impact investors have a key role to play. Impact investing intends to make a measurable positive contribution to society or the environment, as well as generating attractive financial returns.

This can be done by investing in the shares of companies which, as well as financial promise, demonstrate intent to positively impact the people and environments in which they operate.

What are some of the issues facing emerging markets?

Emerging markets are likely to feel the impact of irresponsible consumption most acutely.

Not only do the effects of the overconsumption of our natural resources – such as climate change – disproportionately affect those in developing countries, the infrastructure to deal with waste is often underdeveloped or lacking, resulting in pollution and health hazards.

Plastic pollution is a relatively well-known issue across both the developed and emerging world. According to a 2018 World Bank study, the US was responsible for 13% of global plastic waste. Emerging markets like China (which accounts for 11%) and India (9%) are not far behind, while the Latin American and MENA regions generated 11% and 6%, respectively.

But it’s not just plastic that is the problem – issues caused by other types of waste are less well recognised.

Take electronic waste, which is the fastest growing stream of waste globally given increases in the consumption of electronic equipment and its (generally) rapid obsolescence. India’s e-waste is growing by 30% annually, for example, and recycling rates across the world are alarmingly low. The average across Latin America and the Caribbean is 1.2%, while in sub-Saharan Africa it is 1.6% (2019 data, UN). 

Not only do emerging economies produce their own waste, they also import it from abroad, earning valuable income in the process.

Some developed world countries export their waste overseas because it’s cheaper than dealing with it themselves and reduces their own domestic landfill.

But inadequate disposal and recycling systems mean waste is often illegally dumped or burned, with implications for communities’ health given the toxic fumes that this process can generate.

One report suggests dumped and burned rubbish, especially plastic waste, is responsible for the death of one person every 30 seconds in developing countries, while landslides from rubbish dumps also pose a serious risk to the lives of wastepickers and nearby inhabitants.

Elsewhere, plastic pollution in drainage systems in some countries in Africa has contributed to outbreaks of diseases like cholera.

Meanwhile, health risks such as DNA damage, impaired thyroid and lung functions, respiratory issues and increased risk of developing chronic diseases like cancer later in life have been associated with exposure to toxic e-waste.

Impact investing: driving positive change at the company level

There is clearly much to be done in emerging economies to deal with waste and, as investors, we can play a role in investing for positive impact as well as financial gain.

There are a number of companies that are committed to addressing issues of plastic and electronic waste in the emerging world. We look at two in particular: Brazilian paper and packaging firm Klabin and Chinese second-hand electronic dealer ATRenew. Please note all stock mentions are for illustrative purposes only and not a recommendation to buy/ sell.

Case study: Klabin

What does the company do?

Klabin is the leading Brazilian producer of paper, paperboard and corrugated board packaging product, primarily for the food industry. The company is vertically integrated from forestry through to pulp and finished products, and sells these and excess pulp production domestically and to foreign markets in 89 countries.

How is Klabin having a positive impact?

Not only are Klabin’s end-products alternatives to fossil fuel based products, the raw materials used are all sustainably sourced, whether from its own forests – 100% of which have full FSC* certification and 43% of which are classified as protected – or from third parties that meet FSC standards.

The forests the company manages captured the equivalent of 4.9 million tons of CO2 from the atmosphere (goal: 45 million between 2020 and 2030) and directly contributes to SDG 15.2 to “promote the implementation of sustainable management of all types of forests, halt deforestation, restore degraded forests and substantially increase afforestation and reforestation globally”.

How does Klabin approach sustainability?

Klabin aims to be a global reference for sustainability, sharing best practices throughout its supply chain and raising the bar on industry standards. Some of the highlights of its sustainability performance in 2021 include:

  • Reused 98.1% of industrial waste (goal: zero waste to landfill by 2030)
  • 16% reduction in specific industrial water consumption (goal: 20% reduction by 2030)
  • 5% per ton reduction in scope 1 and 2 greenhouse gas emissions associated with pulp, paperboard and packaging (goal: 25% by 2025, 49% by 2035)
  • 115,800 native tree seedlings to recover degraded areas (goal: 1 million by 2030)
  • 56% of critical suppliers included in the Sustainable Supply Chain Management Program

As a result of Klabin’s holistic view on sustainability, it’s also contributing to other SDGs. For example,  in line with SDG 5 (Gender equality), the company is targeting 30% of leaders to be female by 2030. SDG 6 (Clean water and sanitation) is another goal the company is contributing to with its specific targets on reducing water use.

Other targets such as the reintroduction of two extinct species further increases the environmental impact the company has.

 *The Forest Stewardship Council is considered the gold standard in ethical production  

Case study: ATRenew

What does the company do?

ATRenew stands for ‘All Things Renew’ and its mission is to give a second life to all idle goods. It operates a platform in China to facilitate recycling and trade-in services of pre-owned consumer electronics, distributing the devices to prolong their lifecycle.  

How is ATRenew having a positive impact?

The company has a positive impact through its ability to facilitate the re-commercialisation of electronic products from collection through to resale.

In 2021, over 31.2 million products were transacted through its platform.

Through its commitment to prolong the lifecycle of ever more products, it aims to reduce carbon emissions while fulfilling consumers’ demand for high-quality electronic products.

In 2021, for example, the company estimated a reduction of 464,000 metric tons of carbon emissions through the reuse of pre-owned mobile phones. It also partners with qualified organisations to properly dispose of e-waste, responsibly disposing of 223,000 devices, reducing 35.7 metric tons of e-waste in 2021.

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How does ATRenew approach sustainability?

ATRenew is committed to working and engaging with all stakeholders, from customers through to suppliers, employees, local communities and shareholders.

For example, ATRenew has a number of digital education programmes donating devices and providing educational resources to underprivileged children in China.

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