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Building sustainable circular economy and MSMEs in ASEAN
There are common cultural practices in ASEAN that align with circular economy principles, such as using banana leaves to wrap up food or passing down old belongings to the younger generation.
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An artist shows a sculpture made from recycled
newspaper at Original Paper Craft, a small business in
Jakarta, on May 19, 2024. The government said that small and micro enterprises accounted for 61
percent of the country’s gross domestic product.
(Antara/Asprilla Dwi Adha)
I
n the last few years, the circular economy has gained traction in Indonesia and across the ASEAN region as a viable solution to achieve a sustainable and prosperous future. In Indonesia, the government is aware of the future threat of environmental challenges as the country is undergoing rapid industrialization with an increasing rate of resource depletion.
Similarly, ASEAN member states are increasingly putting more importance on the circular economy transition. In 2021, the ASEAN Secretariat launched the framework for circular economy for the ASEAN economic communities as a blueprint for member states to formulate their journey to a circular economy transition.
In pursuing the circular economy transition, micro, small and medium enterprises (MSMEs) can be prioritized, as most ASEAN member countries’ economies are driven by this segment.
It is critical to align MSMEs’ business practices with circular economy principles, in particular MSMEs that operate within industrial or manufacturing sectors where massive waste and emissions are generated. The implementation of a circular economy in small and medium industrial development may transform the way the industry grows at the same time reducing massive waste and emissions.
At the firm level, there are some benefits of circular economy implementation that directly affect businesses’ bottom lines. A circular economy may bring down costs by enabling resource efficiency. An open-loop or linear usage of materials makes the manufacturing process dependent on new non-renewable material inputs.
These inputs are sometimes imported, scarce, or highly fluctuate in price. A circular economy enables industries to utilize secondary material stock – recovered from used products or waste – within the closed-loop system, instead of buying new virgin materials. This closed-loop system allows the same resources to be used over and over, increasing the rate of material utilization and reducing the risk of resource dependency.
This shift may also enable small and medium industries to find new revenue streams. For example, Indonesia’s agriculture industry generates a huge amount of industrial agriculture waste, such as palm fruit bunches, sawdust or husks. These by-products can be sold to other industries that may use them as alternative inputs, such as for mediums of mushroom cultivation or to be processed as natural fertilizers, therefore, creating new revenue streams for the agriculture companies.
