Environmental insurance: ensuring our future in South Africa

Written by: Hermann Erdmann | Published:
A REDISA Midrand depot

We are all aware of the importance of insurance and most people have cover to replace material possessions once lost, but it seems no-one has considered an insurance plan for the environment, says Hermann Erdmann, CEO of REDISA (Recycling and Economic Development Initiative of South Africa)

We hear it all the time: the environment is taking strain, pollution is increasing, global warming is a reality and this space ship we call earth will run out of non-renewable resources. So who should take responsibility, compensating for the elevated environmental damage that has been taking place since the start of the industrial revolution?

Environmental protection and scarce resources demand a new way of thinking about how we consume our resources.

Manufacturers are happy to make products and consumers are happy to buy products, but the full monetary cost of a product is not being taken into account because it excludes the cost of remediation. At the end of a product’s life, there is no-one to take responsibility for it and it becomes waste that is dumped.

Consumers are ultimately paying the price and are subsidising manufacturers who are not forced to develop improved processes to manage their products’ end-of-life, and to reduce emissions and reliance on raw materials. We pay the price indirectly through air pollution, environmental degradation, overflowing landfills, and the resulting health impacts.

Looking to the future

What we need is an insurance policy for the environment - one which ensures that those who create the end environmental problem pay to repair it and factor this into their cost of manufacture. The benefit of this approach is that a product’s total cost to society is made visible to manufacturers and consumers alike; manufacturers are incentivised to make more environmentally-friendly, longer-lasting products, built to be recycled, and with recyclable packaging. The lower the environmental impact of a product, the less environmental ‘insurance’ the manufacturer will need to pay in the long term.

This approach is called extended producer responsibility (EPR) and it is not a new concept. What is new, is the way in which it has been brought to life.

South Africa is the only country in the world that has made this a reality with an industry participating 100%, using waste tyres as a proof of concept. Since 2013, the environment has been ‘insured’ against the negative impact of waste tyres.

The Recycling and Economic Development Initiative of South Africa (REDISA) collects a waste management fee from all tyre manufacturers and importers. The fee is spent on cleaning the environment of tyre waste and funding the development of recycling industries, through which small businesses are developed across the supply chain. REDISA also carries out research and development to help tyre manufacturers and importers better their design processes.

For the first time an industry is being held accountable and is taking responsibility for the full environmental impact of its products and, moreover, has a means to mitigate and ultimately eliminate that impact. This approach has been praised by the World Economic Forum in Davos and the European Union as a success – a South African solution to a global environmental concern.

Through its recycling processes, REDISA enables socio-economic transformation by generating jobs, empowering the informal sector and creating sustainable businesses, as well as protecting the environment. This is an insurance policy that manufacturers should be willing to pay to protect our environment.

Solutions through collaboration

Organisations need to work together to analyse the world’s most important socio-economic problems and formulate innovative strategies to deal with these challenges. The focus needs to be on partnerships that do more than ‘just’ work.

As an organisation we have shown the power of collaboration thanks to the legislative framework set out by the Department of Environmental Affairs which made the REDISA Plan possible – and our results speak for themselves. Statistics show that before REDISA existed, South Africa was only dealing with 4% of the total tyres being generated as waste. Within three years REDISA has been able to increase this to 70%. Imagine how much more we could achieve if we worked closely with other organisations.

Through continued collaboration and work with partners in government and business, and with consumers and NGOs, we will be able to build more sustainable, efficient and long-term socio-economic solutions.

Challenges

One of the biggest challenges in the country is educating people about the opportunities that can be found and created in waste, all by creating a circular economy of which extended producer responsibility forms a part.

We have successfully defeated the biggest hurdle faced in encouraging circularity, namely funding. If it were easy to recover and re-use materials profitably, then business would be doing so. We argue that, at a macro level, it is not only a necessity but also profitable once you take into account all the externalities that effectively subsidise a linear economy.

For example, plastic water bottles that become waste have to be collected and managed by ‘someone’, typically local or regional governments. Thus the utility of the plastic bottle is being subsidised by organisations. In addition, uncollected waste becomes an environmental and health hazard, resulting in medical and amenity costs.

The socio-economic benefits

According to the McKinsey report on Managing waste in emerging markets by 2020, REDISA is expected to deliver an aggregated economic benefit of approximately $6 million to South Africa. In addition, when REDISA reaches its planned objectives for collection and treatment, it is estimated that the system will also generate an annual environmental benefit of $22 million. Findings showed that major economic and environmental benefits can be gained from turning ‘waste into worth’.

The results from the report show that, given the massive change in technology, consumer behaviour and business models, the circular economy is both viable and attractive.


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