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COVID-19 induced travel restrictions are not enough to mitigate crises like climate change. Could a circular economy be the answer?

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Research by the Department of Management’s Dr Fred Yamoah and colleagues points to a new way to rebuild the global economy in the wake of the coronavirus pandemic.

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There is no doubt that COVID-19 is first and foremost a human tragedy, resulting in a massive health crisis and huge economic loss.

While the impact on life as we know it has been unthinkable, a side effect of the way of life forced upon us by the pandemic is an unprecedented reduction in global carbon dioxide emissions, which are projected to decline by 8%. If achieved, this will be the most substantial reduction ever recorded, six times larger than the milestone reached during the 2009 financial crisis.

However, these changes should not be misconstrued as a climate triumph. They are not due to the right decisions from governments, but to a temporary status of lockdown that will not linger on forever; economies will need to rebuild, so we can expect a surge in emissions in the future. Indeed, the relatively modest reduction in emissions prompted by the COVID-19 pandemic has proven that zero-emissions cannot be attained based on reduced travel alone; structural changes in the economy will be needed to meet this target.

The case for a circular economy

Before coronavirus prompted this dramatic shift in our way of life, it seemed that the world had been waking up to the need for change to protect our environment. The linear model of our industrial economy – taking resources, making products from them and disposing of the product at the end of its life – jeopardizes the limits of our planet’s resource supply. Girling (2011) found that around 90% of the raw materials used in manufacturing become waste before the final product leaves the production plant, while 80% of products manufactured are disposed of within the first six months of their life. Similarly, Hoornweg and Bhada-Tata (2012) reported that around 1.3 billion tonnes of solid waste is generated by cities across the globe, which may grow to 2.2. billion tonnes by 2025.

Against this backdrop, the search for an industrial economic model that satisfies the multiple roles of decoupling economic growth from resource consumption, waste management and wealth creation, has heightened interests in concepts about circular economy.

What is circular economy?

Circular economy emphasises environmentally conscious manufacturing and product recovery, the avoidance of unintended ecological degradation and a shift in focus to a ‘cradle-to-cradle’ life cycle for products.

In our current situation, there has never been a better time to consider how the principles of circular economy could be translated into reality when the global economy begins to recover. Strategies to combat climate change could include:

  • material recirculation (more high-value recycling, less primary material production)
  • product material efficiency (improved production process, reuse of components and designing products with fewer materials)
  • circular business models (higher utilisation and longer lifetime of products through design for durability and disassembly, utilisation of long-lasting materials, improved maintenance and remanufacturing).

Building back better

A circular economy could also act as a vehicle for crafting more resilient economies. The pandemic has forced a rethink of the way our global economy operates, revealing the inability of the dominant economic model to respond to unplanned shocks and crises. The lockdown and border restrictions have reduced employment and heightened the risk of food insecurity for millions.

To prevent a repeat of the events of 2020, it is necessary to devise long-term risk-mitigation and sustainable fiscal thinking, moving away from the current focus on profits and disproportionate economic growth. Circular economy concerns optimised cycles: products are designed for longevity and optimised for a cycle of reuse that renders them easier to handle and transform. Future innovations under this model would focus on the general well-being of the populace, alongside boosting the market and competitiveness.

This economic model would also support the achievement of social inclusion objectives, for example by redistributing surplus food from the consumer goods supply chain to the local community.

The benefits of a circular economy are therefore obvious in that it strives for three wins in terms of social, environmental and economic impact. The pandemic has instigated a focus on the importance of local manufacturing for a resilient economy; fostered behavioural change in consumers; triggered the need for diversification and circularity of supply chains and evinced the power of public policy for tackling urgent socio-economic crises.

Governments are recognising the need for national-level circular economy policies in many aspects, such as:

  • reducing over-reliance on other manufacturing countries for essential goods
  • intensive research into bio-based materials for the development of biodegradable products
  • legal frameworks for local, regional and national authorities to promote green logistics and waste management regulations which incentivise local production and manufacturing
  • development of compact smart cities for effective mobility.

Post COVID-19 investments needed to accelerate towards more resilient, low carbon and circular economies should be integrated into the stimulus packages for economic recovery being promised by governments, since the shortcomings in the dominant linear economic model are now recognised and the gaps to be closed are known. The question is no longer should we build back better, but how.

This blog was adapted from T. Ibn-Mohammed, K.B. Mustapha, J. Godsell, Z. Adamu, K.A. Babatunde, D.D. Akintade, A. Acquaye, H. Fujii, M.M. Ndiaye, F.A. Yamoah, S.C.L. Koh, ‘A critical analysis of the impacts of COVID-19 on the global economy and ecosystems and opportunities for circular economy strategies’ in Resources, Conservation and Recycling, 164. Available at: https://doi.org/10.1016/j.resconrec.2020.105169

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If there is social capital, good Mayors are re-elected

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Are the public more likely to re-elect a mayor who invests in long-term development? Yes, if there is social capital. The Department of Management’s Dr Luca Andriani shares the results of his latest research in collaboration with colleagues Alberto Batinti and Andrea Filippetti.

If a mayor is good, she should be re-elected. Prior research tells us that what distinguishes a “good” mayor from a “bad” mayor is the adoption of long-term oriented and transparent municipal fiscal policies. “Good” mayors re-allocate the municipal budget more towards capital investments (rather than current expenditures) and towards property tax, which is more transparent than a surcharge income tax. However, “good” mayors are not always re-elected. In this study, we argue that social capital might be a key reason. In a context with low social capital, municipal long-run fiscal strategy might not be rewarded.

Social capital generally refers to elements of cooperation, reciprocity and mutual trust regulating relations among members of a community. It is generally expressed through the presence of civically engaged citizens preferring leaders and governments that show credible commitments in taking good care of public resources, in acting efficiently and fairly and that adopt long- rather than short-run political economic strategies.

In this study, we look at the Italian context, as this is characterised by a pronounced economic regional disparity between the southern regions recording low economic growth and high unemployment and the more economically advanced northern regions. Italy is also a country with a large disparity of social capital endowment across regions and municipalities for several institutional and historical reasons (Putnam 1993).

Since the late 1990s, Italy has implemented two significant reforms aiming to bring local public institutions closer to the citizens’ needs and preferences: an electoral reform to appoint local governments and mayors and a fiscal reform towards a more federalist system. These changes have been pursued by economically wealthy regions seeking greater autonomy. They were also advocated as remedies to stimulate those administrations in regions that are less developed and efficient.

We test whether the probability of “good” mayors being rewarded, i.e. re-elected, is influenced by the level of social capital endowment existing in the municipality. We investigate this empirically in 6,000 Italian municipalities over the period 2003-2012. We consider the structural dimension of social capital as one referring to the individual’s involvement in associational activities and social networks. This dimension captures citizens’ prosocial behaviour and individuals’ attitude towards planning capacity and forward-looking decision making

Our results show that “good” mayors are more likely to be re-elected in contexts with more social capital. One can speculate that social capital may favour the reallocation of the municipal fiscal budget towards public investment vis-à-vis current expenditures and towards property tax vis-à-vis surcharge income tax, thus enhancing the efficiency and transparency of local public policy.

What does this mean for policy makers?

These results raise important reflections on the implementations of public policies promoting decentralization.

Fiscal federalism theory claims that decentralization improves the ability of local institutions to tailor specific policies aiming to meet citizens’ demands (e.g., DiazSerrano and Rodríguez-Pose, 2015). This gets reflected in the citizens’ satisfaction (e.g. Espasa et al., 2017; Filippetti and Sacchi, 2016). This study qualifies these results, showing that decentralization works relatively well in the presence of high levels of social capital. In social contexts where individuals value forward-looking and transparent fiscal policies, decentralization promotes better public policies and benefits public sector financial performance.

However, this study also advocates that decentralization policies should be coupled with initiatives to improve the capacity of local institutions to stimulate the accumulation of social capital. This could be pursued through two complementary strategies. Firstly, by employing programmes that favour the capacity-building of civic associations, including organizations for environmental, human, democratic rights. Secondly, by enabling these associations to be more involved in local governance. This can be achieved by providing local associations access to formal and informal avenues for participation, engagement and closer monitoring of local public decision-making process.

This blog is based on the following research paper:

Batinti, A. Andriani, L and Filippetti, A (2019) Local Government Fiscal Policy, Social Capital and Electoral Payoff: Evidence across Italian Municipalities. Kyklos 72(4): 503-526

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Ethical consumerism in the time of COVID-19 

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Has climate change fallen off the public agenda due to the coronavirus pandemic? According to Birkbeck’s Dr Pamela Yeow, it’s more relevant than ever. She explains her latest remote research project exploring ethical consumerism.

Paper coffee cups

Amidst the current coronavirus pandemic that’s engulfing our global consciousness, one may wonder if research to do with the United Nations Sustainable Development Goals (UNSDG) is a tad too irrelevant and insignificant.

After all, coffee chains, which had previously encouraged customers to bring in reusable mugs (and in return benefit from a discount), no longer allow such practices to help tackle the spread of the global virus.

However, it has been shown that during this pandemic, issues surrounding climate change and sustainability have continued to be raised. Global records have demonstrated that carbon emissions have reduced as a result of lockdowns worldwide and many reports suggest an increase in birdsong, brighter and clearer skies, cleaner air and less pollution.

So it is clear that research to do with sustainable consumption should be as relevant as ever  and it would be interesting to see, in a live experiment (given that we are living through it as we write), how consumers behave and react to embedding sustainable consumption patterns.

Just before the lockdown in the UK, my colleagues and I were awarded an Eastern Arc grant to run a pilot workshop on understanding sustainable ethical consumerism from the householder’s perspective. In particular, we were keen to address the UNSDG 12.5 which states “By 2030, substantially reduce waste generation through prevention, reduction, recycling and reuse.” 

Previous research that we had conducted concluded that “both individuals and institutions play a significant interaction role in encouraging a sustained behavioural change towards ethical consumerism”. We suggest that embedding behaviour is a gradual process. one with a series of stages and factors that can impede the transformation of attitudes into behaviour.  

This time round, building on that understanding of processes and journeys, we were interested to understand  the householder’s journey toward ethical consumerism and whether there would be any clarity in how they might embed and substantially reduce waste generation through prevention, reduction, recycling and reuse. 

The UNSDG website states that “The current crisis is an opportunity for a profound, systemic shift to a more sustainable economy that works for both people and the planet...COVID-19 can be a catalyst for social change. We must build back better and transition our production and consumption patterns towards more sustainable practices.”

Our research project aims to consider how we might begin to embed these practices by understanding where householders are now. As researchers, we too have had to adapt due to COVID-19: instead of hosting a workshop to answer our questions, we’re asking participants to keep a photo journal of single use plastics in the home to better understand how these items are entering the household and to promote awareness among users of their consumption habits.

This project is still in the early stages, but one thing is clear: more needs to be done to promote sustainability rather than less. We need to continue to understand behaviours and attitudes toward sustainable consumerism so that we can build a better, more sustainable economy and society for us and the future generations.

Dr Pamela Yeow is a Reader in Management at Birkbeck and Course Leader of the Central Saint Martins Birkbeck MBA.

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To trust or not to trust: the role of social media influencers in corporate crisis communications

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Dr Benedetta Crisafulli, Lecturer in Marketing, shares the findings from her latest research in collaboration with Professor Jaywant Singh, Dr La Toya Quamina and Dr Melanie Tao Xue.

Zoe Sugg, social media influencer

As anyone with an Instagram account will know, social media influencers (SMIs) play a prominent role in modern day marketing. Over two thirds of multinational brands plan to increase expenditure on influencer marketing within the next few years, with global spending in the area expected to reach $15 billion by 2022. 

Despite the enthusiasm from marketers to partner with SMIs, scholarly evidence on the efficacy of such a practice remains sparse. Is it always wise for brands to employ SMIs to get their message across? What about the role played by SMIs in corporate crisis communications? Our study entitled ‘To trust or not to trust: The impact of social media influencers on the reputation of corporate brands in crisis’ looks into whether brands would be wise to employ SMIs during times of corporate crisis. 

When crisis hits 

Highly negative events such as corporate crises emphasise the ‘bad’ character of big brands, putting their reputation at stake. Whether it’s a potentially harmful ingredient in our make-up, or using our data for profit, crises shake our trust as consumers and can damage our relationship with a brand. 

In this study, we were particularly interested in how a brand’s ingratiation response to the crisis, whereby customers are reminded of the brand’s past goodwill, works in minimising negative responses, and whether the presence of an influencer improves or rather worsens the brand’s efforts. We asked consumers to evaluate a corporate crisis situation and consequent crisis response from the brand alone, or from the brand and an influencer. 

Social media influencers: hindrance or help? 

There is thus far evidence to suggest that SMIs boost consumer engagement with a brand. However, we find that, like salespeople, SMIs can be seen as acting out of their personal financial motives, and solely in the interests of the brand. This is especially the case in the event of corporate crises.  

Far from passively absorbing the marketing content that surrounds them, consumers are often aware of persuasive attempts from brands and actively resist these. From a very young age, consumers develop what is known as persuasion knowledge. Such knowledge allows them to identify and resist persuasive attempts at manipulating their behaviour. Our findings suggest that consumers overwhelmingly interpret the contribution of an influencer in crisis communications as a persuasive tactic of the brand to try and make consumers believe that the crisis is not as bad it seems. Such an attempt is perceived as manipulative, thus rejected. 

What does this mean for influencer marketing?  

Our study suggests that influencer marketing might not be as effective as claimed by previous research and highlights the need to exercise caution in the use of SMIs during crisis communications. Brands, therefore, need to be particularly wary of involving SMIs in any attempts to bolster reputation in crisis communications.  

The study also suggests practical ways in which companies can think of engaging SMIs to support brands during crises. We find that an effective way for SMIs to support a brand in crisis is by making the genuine, values-driven motives behind the brand-influencer partnership known to consumers. Consumers are more likely to respond positively to messages which are dictated by motives of altruism. 

The citation for this study is Singh, Crisafulli, Quamina & Xue (2020). ‘To trust or not to trust’: The impact of social media influencers on the reputation of corporate brands in crisis. Journal of Business Research (In Press).

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