How will consumption and society change with the "Circular Economy"?

On November 9 and 10, 2021, Dentsu Inc. Japan Network's Sustainability Promotion Office and Dentsu Inc. TeamSDGs hosted the online seminar "New Collaborations and Business Opportunities for Realizing the Circular Economy."

This webinar introduced future collaboration and business possibilities based on demonstration experiments and case studies jointly implemented by various companies and local governments to realize the circular economy. Web Dentsu Inc. News will present a digest of its content over three installments. This first report covers the keynote session from Day 2, where five speakers—primarily leaders from companies engaged in circular economy initiatives—discussed the theme "Changing Japan with the Circular Economy!"

(From left) Moderator Kaori Iida (NHK News Division, Senior Manager), Akihiko Nagata (Euglena, Representative Director and CEO), Michitaka Sawada (Kao, Chairman of the Board), Sumiyuki Nakadai (Nakadai, Representative Director), Yu Kato (Hachi, Representative Director), Rie Takeshima (Dentsu Inc., Team SDGs Project Leader)

Case Studies from Three Companies Engaged in the Circular Economy

The session began with case studies from Kao, Euglena, and Nakadai—companies leading advanced initiatives toward realizing a circular economy.

Kao generated significant buzz by forming an unusual partnership with rival Lion to promote recycling of plastic refill containers for detergents and other products. A pilot project launched in 2020 at an Ito-Yokado store in Sumida Ward, Tokyo, collected used refill containers via recycling boxes. Within eight months, it successfully collected 5,200 film containers—double the initial target. Beyond reusing collected containers in products, they are also repurposed into recycled blocks. This initiative aims to realize a society where waste becomes a resource, involving local communities and children.

Euglena Co., Ltd. is a biotech venture focused on the infinite potential of the microalgae Euglena (Japanese name: Midorimushi). Euglena microalgae not only grow by absorbing carbon dioxide through photosynthesis but also have a high oil yield per unit area, making them a potential feedstock for biofuels and contributing to reduced environmental impact. The company achieved the world's first successful outdoor mass cultivation of edible Euglena in 2005 and built Japan's first biofuel production demonstration plant. In recent years, it has also initiated research to develop plastics from Euglena components. Its biofuels are already in use domestically in buses, ferries, and aircraft, drawing attention as a pioneering venture accelerating the societal implementation of the circular economy.

Nakadai is an industrial waste processing company based in Maebashi City, Gunma Prefecture. While Japan's overall waste recycling rate hovers around 53%, the company boasts an impressive 99% recycling rate. This is achieved by staff who thoroughly understand waste structures and materials, carefully breaking down and sorting them. Recently, through collaboration with Book Off, they have launched shops proposing new uses for waste. They also hold workshops for children, aiming to create a society that transforms waste into resources.

This time, alongside the leaders of these three companies, we gathered five individuals: Mr. Kato, CEO of Harchi, which operates a digital media platform specializing in the circular economy; and Mr. Takeshima, Project Leader of Dentsu Inc. Team SDGs. Together, they discussed challenges and ideas for realizing the circular economy.

Japan's Low Circular Economy Penetration: What is its Potential?

Realizing the circular economy requires not only corporate action but also shifts in consumer awareness and cooperation. According to the "Sustainable Lifestyle Awareness Survey 2021" conducted by Dentsu Inc. and DENTSU SOKEN INC. (survey overview at the end), only 21.2% of respondents in Japan had heard the term "circular economy," and just 8.4% understood its meaning (compared to 26.4%/64.4% in China and 20.2%/20.0% in the US).

Mr. Takeshima prefaced his remarks by stating, "Environmental rules and regulations, including the SDGs, are often decided primarily in Europe and the US, so there is inevitably an element of Japan playing catch-up." However, he added, "On the other hand, while awareness is lower in Japan compared to other countries, survey results also show that many people resonate with the concept of the circular economy and want to incorporate it into their lives going forward. The groundwork for consumer acceptance is likely present."

On the other hand, Mr. Kato remarked, "I felt the figures were higher than my personal perception. Including those who have heard of the circular economy, it's about 30% of the total population. If we simply convert that to population terms, it's about 40 million people, right? For example, the Netherlands, often cited as a leader in the circular economy, has a population of about 17 million. So, we can positively interpret this as Japan already having a market of 40 million people." He also highlighted the sheer size of the market itself. "I believe the concept of 'circulation' itself aligns well with the culture and mindset Japan has cultivated since ancient times, so there is still significant potential for growth going forward," he expressed with optimism.

The costs associated with circularity can be viewed as an investment in the future

The discussion then turned to how much consumers are willing to pay for circular economy initiatives. Dentsu Inc.'s 2021 "Second Survey on Carbon Neutrality Among Consumers" found that over 60% of respondents stated they could bear an additional cost of ¥501 or more. Commenting on this result, Mr. Takeshima explained, "Those in their teens and twenties, often called SDGs natives, tend to be more accepting of higher amounts, like 1,000 to 3,000 yen." On the other hand, he noted that overall, a higher percentage of older age groups were accepting, stating, "I believe one major factor is likely that they have more opportunities to encounter topics about the environment and the circular economy through mass media."

Mr. Sawada noted that since his company clearly communicated how its detergent reduces laundry energy consumption, more people have chosen that product, leading him to feel "consumers' ethical awareness is growing."

Mr. Kato reiterated the benefits of transitioning to a circular economy: "I also notice more people around me choosing environmentally friendly products, even if they cost a bit more. While traditional linear economic models might still seem more rational for companies now, regulations like carbon pricing are undoubtedly advancing. Long-term, the rationality of the circular economy will be secured."

Nakadai agreed with Kato, stating, "Circularity naturally incurs costs, but whether you view these as mere expenses or as investments changes their significance greatly. For instance, considering that the younger generation, highly conscious of sustainability, will be the main target market in ten years, every cost can be transformed into an investment in the future."

Meanwhile, Nagata proposed promoting the term "fair value—a price that doesn't exploit anyone" instead of "price pass-through." He shared his perspective: "I believe everyone must first accept the fact that behind low prices in Japan lies some form of exploitation, such as environmental impact or child labor."

Mr. Sawada added, "Even for everyday consumer goods like detergent or disposable diapers, products of the same quality as in Japan often sell for more than double the price in Europe and the US. In such cases, even if you add 5 to 10 yen to the price to cover costs like recycling or regeneration, the overall price increase is still less than in Japan. With consumer awareness changing now, I believe it's time to reexamine this gap with overseas markets."

In response to these views, Mr. Takeshima replied, "I believe this is precisely the point that concerns businesses the most. We will continuously monitor how consumer awareness is changing, both domestically and internationally, and work together with everyone to consider how we can change our awareness and actions."

Five Proposals for Changing Japanese Society

At the conclusion of the keynote speeches, each speaker summarized what they believe is most urgently needed to change Japan in a single phrase.

● Mr. Sawada's Proposal: "Serious Commitment and Persistence / Collaboration and Cooperation"
The circular economy requires balancing environmental and economic value, so it cannot be achieved with half-hearted commitment. It is crucial to tackle it with genuine dedication and to persist without giving up. And what supports this "genuine commitment and persistence" is "collaboration and cooperation." We feel this through working together with rival companies; by collaborating, supporting each other, and genuinely persisting, we believe we can change society.

●Nagata's Proposal: "Corporate Choice"
When we talk about corporate choice, people often think of consumers selecting goods or services. However, I believe the most significant corporate choice currently available to individuals already active throughout Japan is changing jobs. In the coming era, the risk of working for a company that doesn't sincerely engage with sustainability is high. The more talented the individual, the more likely they are to correctly pursue the circular economy and sustainability. I believe a company's fundamental value lies in its people. Therefore, I think that as talent gathers at companies committed to the circular economy, it will ultimately change consumers' actions too.

● Nakadai's Proposal: "Enjoy Consumption!"
We receive waste daily, and every time I see items discarded in unfortunate ways, I wonder if we're choosing products without considering their fate after use. If we understood how much CO2 our choices could reduce, how much waste we could avoid, and how much we could change society, consumption would become more enjoyable. I believe it's crucial not just to endure and avoid waste, but to choose and buy products that bring us joy.

● Mr. Kato's Proposal: "The Edo Period"
Looking back at Japan's history, we've actually maintained a circular lifestyle since ancient times, including the Edo period. For example, kimonos, which use a single piece of cloth without waste, are the very essence of circular design now gaining attention in the global fashion industry. By learning from these Edo-period principles and implementing them in society using modern technology, I believe we can create a uniquely Japanese circular economy.

● Mr. Takeshima's Proposal: "Building a Forgiving Society"
Since the SDGs and circular economy represent a medium-to-long-term and challenging journey, both businesses and individuals will inevitably need to experiment and learn from mistakes. Rather than rejecting failure, I hope we can foster an atmosphere where society moves forward positively. This involves mutual acceptance of mistakes with kindness and respect, mutual understanding, and sharing the original grand vision and purpose.

Next time, we'll report on the Day 1 keynote titled "The Full Picture of the Circular Economy and the Global Frontiers." We'll share the direction companies should aim for when engaging with the circular economy.
 

[Survey Overview]
Title: "Sustainable Lifestyle Awareness Survey 2021"
Survey Method: Internet survey
Conducted by: Dentsu Inc., DENTSU SOKEN INC.
Survey Period: July 8–20, 2021
Countries Surveyed: 12 countries (Japan, Germany, UK, USA, China, India, Indonesia, Malaysia, Philippines, Singapore, Thailand, Vietnam)
Sample Size: 4,800 people
Target Criteria: 500 men and women aged 18–69; 300 men and women aged 18–44 in 6 ASEAN countries
Japan: 500, Germany: 500, UK: 500, USA: 500, China: 500, India: 500,
Indonesia: 300, Malaysia: 300, Philippines: 300, Singapore: 300,
Thailand: 300 people, Vietnam: 300 people
 

Details here