Oireachtas Joint and Select Committees

Thursday, 21 October 2021

Joint Oireachtas Committee on Climate Action

General Scheme of the Circular Economy Bill 2021: Discussion (Resumed)

Dr. Geraldine Brennan:

The point the Senator makes about financial disincentives is a really important one. Again, in terms of the dialogue we have had this morning, it is fair to say on behalf of CIRCULÉIRE's members that they do not expect government to pay them to do this. There are drivers, as I said, like resource-price volatility and like the resilience they have seen through Covid with supply chain shocks. The price of logistics to import goods to Ireland has gone through the roof. One company told us the price per container has increased from in the order of €2,000 to €10,000. Multiple things are happening which make utilisation of locally or regionally produced goods - maybe not locally produced in Ireland but at least in Europe - much more viable and an option to consider financially than if those drivers had not been there.

The Senator is right about the legal obligation on companies to maximise profit. As part of the broader shift towards corporate governance, there is a recognition of corporate citizenship. I am more speaking from my own experience in saying there is an awareness for those companies. If we look at front runners in Europe and around the globe, they know that in order to retain staff, have good relations and do innovative things, it is not all purely about short-term profit. There is a really good quote from a management guru whose name escapes. Basically, it is that profit is like air; it is something we need to live but not the reason for living. Enlightened organisations have at a senior level the understanding that they cannot afford not to make profit as they would otherwise go out of business but making profit is not all of what they are doing. The circular economy represents an opportunity to look at themselves differently and to look at their supply chains and products and innovate. That is another driver to why they will do this. Some companies are doing this without government investment but, again, it is very different depending on their starting point, what they have and who they have in the organisations. There are all these different contingencies as to why some companies just do it and others do not. I emphasise that this is the start of a transition and it is about a cultural and mind-shift change.

On the Senator's point about reuse of machinery and obsolescence for companies, when it comes to the capex-intensiveness of certain machinery, manufacturers are in a different headspace. They understand the concept of keeping machines in use for as long as possible because of the nature of the investment. This resonates with them. If their machinery goes down, they cannot effectively produce. Therefore, they have an incentive in the way their production lines work to try to keep these things functioning as best as possible. From the perspective of the actual operations and production sites, this concept is not foreign.

The circular economy is intuitive for most people but actually implementing it is the problem. It is not that they do not understand. Keeping things in use makes sense. As I heard when listening back to recordings of previous meetings, everyone says this is not a new idea. Everyone gets that. If everyone knows intuitively that we should do this, why do people not just do it? The reason is that there are barriers in place, for example, certain material prices mean it is very difficult to substitute. The cost of virgin new materials is still very cheap which means that if a company does the right thing, that will affect the cost of its fundamental products and supply chain. Whether the end customer is willing to pay more is debatable. Some customers are. In business-to-business arrangements, we are seeing science-based targets. COP26 is coming up. That whole debate means companies want suppliers that are not necessarily giving them the cheapest component but something that allows them to say they are addressing their scope 3 emissions. I apologise if that response was a little fragmented.