Environmental insurance: ensuring our future

Hermann Erdmann, CEO, REDISA

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, 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 pay the price

Consumers are ultimately inadvertently paying the price, and are subsidising manufacturers who are not forced to develop better 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, landfills filling up and resulting health impacts.

What we need is an insurance policy for the environment, one which ensures that those who create the end environmental problem, pay for the fixing of it and factor the cost 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.

Extended producer responsibility

This approach is called extended producer responsibility 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 100% of an industry participating, using the tyre industry 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, and spends the fee on cleaning the environment of tyre waste, funding the development of recycling industries, through which small businesses are developed across the supply chain, and carrying out R&D 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.