Communist Review - In Vietnam, the linear model of economic growth is no longer suited for the needs of today's societies that are facing exhausting natural resources and environmental degradation.  A circular economy to promote sustainable development and preserve the environment emerged as an urgent need and an inevitable trend during the development process of societies. The 13th Party Congress oriented sustainable economic growth to balance economic and environmental benefits. In the new context, the successful implementation of circular economy approaches is vital and becomes the top priority in national development strategies.

Circular Economy in Vietnam

With the current population explosion when 66% of the world population is projected to live in urban areas(1), cities will face greater challenges in terms of economy, society, and environment. Moreover, in recent years, resource overexploitation, rapid industrialization, urbanization, and energy-intensive lifestyles increasing greenhouse gas emissions have been causing damage to the natural system and population. Therefore, moving towards a circular economy is inevitable to achieve more sustainable and inclusive development. A circular economy helps, on the one hand, promote economic growth by extending the product life cycles, minimizing waste, limiting environmental pollution, restoring natural resources, and on the other hand reducing greenhouse gas emissions and using resources more efficiently. This is the reason why the circular economy model is paid special attention and implemented widely in different fields all over the world(2).

According to the Ellen MacArthur Foundation, a circular economy is a systemic approach that is restorative and regenerative by design. A circular economy is an economic system that is built based on business models in a closed circle. In which, the concept of end-of-life is replaced by reducing, reusing, recycling, and recovering materials during the process of production, distribution and. Therefore, the circular economy can be developed at all scales - for small businesses (manufacturers, companies, consumers), medium businesses (eco-industrial parks), and big areas (city, region, country, and globally). The aim of a circular economy is sustainable development, creating environmental quality, economic prosperity, and social justice for current and future generations(3).

In Vietnam, some circular economy practices have been established since the 1980s, such as the garden - pond - shed (VAC) model. This is a sustainable Agri-based bio-economy model in which the components of the system are closely related to each other. Despite being incomplete and used mostly at a small scale by households or cooperatives, this model shows initial economic benefits from resources recycled and environmental damage caused by waste from livestock farms.

In recent years, many initiatives of sustainable corporate governance and promotion of the circular economy to respond to climate change, and strengthen the public-private partnership have been proposed and gradually implemented. There are some prominent programs, such as the waste collection and recycling program of professional enterprises and large enterprises; zero waste to the land, and eco-industrial parks in some big cities. Some specific results from the circular economy model have been achieved by large enterprises, such as Heineken Vietnam, and Unilever Vietnam, or by small and medium enterprises with projects such as the pangasius supply chain or the project of the United Nations Industrial Development Organization (UNIDO) on Eco-Industrial Parks established in six industrial parks of Ninh Binh provinces, Da Nang city, and Can Tho city. All these economic initiatives and models are laying the first foundation for the transition from a linear to a circular economy in Vietnam. However, the successful transition of the whole Vietnamese economy requires a close connection between Government, businesses, industrial parks, and the community. Consequently, the transition to a new circular economy will bring great benefits to the whole society, solve global challenges related to environmental pollution, climate change, and enhance the competitiveness of the economy domestically and internationally, minimize the exploitation of natural resources, get the most out of resources, and at the same time create jobs and investment opportunities, reduce production costs, and move up the value chain.

To achieve goals from 2021 to 2030, with a vision to 2050 set forth by the Resolution of the 13th National Congress which is sustainable economic growth and balance of economic and environmental benefits, the concretization and successful implementation of a circular economy is vital and should be a top priority in national development policy. Currently, many countries have succeeded in developing a circular economy model and reaped benefits. So, Vietnam has the advantage to learn from the experiences of pioneer countries and draw lessons suited to its situation. Developing a circular economy presents both opportunities and challenges to Vietnam.

Regarding opportunities, the holistic engagement of the entire Vietnamese political system in solving national problems and Vietnam's commitment to the world community in achieving the Millennium Development Goals and Sustainable development goals are an opportunity for promoting a circular economy in Vietnam. Vietnam has been moving towards the Fourth Industrial Revolution, the research and promotion of technological innovation to move from the real world to the digital world will be a great chance for a circular economy that can bring higher growth efficiency than the previous growth model. The transition to a circular economy helps to meet the objectives set by Decision No. 622/QD-TTg, dated May 10, 2017, of the Prime Minister on “the promulgation of the National Action Plan for the implementation of the 2030 Sustainable Development Agenda” and the Document of the 13th National Party Congress. This action plan demonstrates the efforts and commitment of the Vietnam Government to implement its Sustainable Development Goals (SDGs). A circular economy can respond to resource scarcity, protect the environment, respond to climate change and bring economic benefits, helping the country to meet many requirements of the sustainable development goals. These advantages create a great motivation to build this economic model that promotes the development of supporting industries and the use of advanced technologies in recycling and reuse of waste and creates more job opportunities in new fields.

Regarding challenges, at present, the policy framework for building a circular economy has not been clearly formulated. Vietnam has already established some circular economic models and eco-industrial parks. However, Vietnam still lacks a legal framework in terms of a circular economy. In the coming time, it is necessary to have conclusions and improve institutions suitable for this economic model. In addition, economic activities have so far been mainly based on a linear economic approach, the transition to a circular economy needs a clear roadmap and innovative thinking in the production and supply chain to support the transition to a circular economy.  The appropriate level of awareness about the circular economy needs to be maintained from input materials, design, consumption, implementation, reuse, recycling, and disposal for each industry, each field, and from leaders, and managers to each business and individual. In addition, the infrastructure and planning of industrial parks in the direction of a circular economy and their connectivity are still limited. There exists many disconnected programming that uses resources inefficiently due to the linear approach. Moreover, recycling technology, supporting industries, and resources for moving towards a circular economy are not up to par. A circular economy needs to be associated with scientific innovation, access to advanced technology, and safety for human health and the natural system. In terms of human resources, building a circular economy requires competent technical experts who have experience in solving problems in the end-to-end production process and connecting businesses.

Orientation for sustainable economic growth for a circular economy in Vietnam

To achieve sustainable development in harmony with environmental protection, Vietnam needs to continue to give particular priority to improving the quality of human resources, institutions, and policies, raising public awareness in applying circular economy in day-to-day life, using digital technology, waste treatment, and recycling technology, improving the infrastructure of industrial parks and ecological agriculture. The main following solutions should be given due consideration:

First and foremost, strongly renew the mind.

Renewing the mind about the importance of a circular economy plays a pivotal role in paving the way and creating space for sustainable development in the era of globalization and international integration. The 13th Party Congress advocates renewed minds to meet the requirements of socio-economic development. In the face of urgent real-life problems of population pressure, encroachment and destruction of the ecosystem, exhaustive exploitation of resources, and especially waste, renewing thinking about circular economy is needed not only among Government or businesses but also among the whole community. For example, the change in consumers' mindset towards “green” consumption 3R (reduce - reuse - recycle) will promote the development of a “green” economy, creating a premise for businesses to shift to “green” production and creating a spillover effect for sustainable development across the country. It is essential to raise awareness not only of individuals but also of businesses (from micro to large enterprises) about their responsibility for waste disposal and the value of waste when applying appropriate technology to turn waste into energy or new materials in the circular business model. For instance, we can classify household waste (including organic waste, plastic waste, and other garbage), among which, organic waste is an important source of raw materials for the production of electricity from biogas and organic fertilizers; Well-classified plastic waste can be recycled into different items to reduce long-term environmental damages, etc. Or regarding e-waste, businesses need to take measures to deal with consumers in order to collect and recycle properly electronic products that can bring great economic benefits from this waste (precious and rare metals found in electronic components) and preserve green and clean environment.  Besides, it is necessary to renew the mind in building a legal corridor for a circular economy by which businesses are obliged but also encouraged and supported to build a circular economy. For example, high taxes on fossil fuels enabled enterprises to develop bioenergy and renewable energy, such as solar power on a large scale within a short time when they were supported by Government. Supporting policies will encourage businesses to develop bio-energy production, contributing to gradually reducing dependence on oil.

Second, science & technology-based sustainable development.

The circular economy development strategy allows the achievement of sustainable development goals in all three criteria (economic, environmental and social). For example, it helps reduce raw material usage, waste and gas emissions, and waste management costs, and opens up new markets, and new job opportunities. Unlike a linear economy - where development needs increased exploitation and consumption of resources, energy, water, and raw materials - a circular economy is designed with the intention that maximum use is extracted from resources and minimum waste is generated for disposal as long as possible. Therefore, technology offers means and knowledge to policy-making at different levels within public agencies and businesses.

Within the framework of the European Union (EU), several studies to convert waste and carbon dioxide into building materials have been conducted. In Europe and China, a number of eco-industrial parks have been established to turn waste, and gases emitted by their factories into input materials for other factories. In enterprises, using biodegradable, environmentally friendly materials at all stages of production to reduce waste and maintain the high value of the used product is also an approach to the circular business model.

In agriculture, science and technology have made great impacts in promoting agricultural restructuring, improving the quality of growth and performance of the economy. Many technology–based agricultural models such as smart fertilizers, automatic irrigation systems, drones in organic farming, clean agriculture, and application of technological advances in source traceability and weather forecasting have contributed to improving productivity and product quality and minimizing risks for inhabitants. Digital transformation also helps connect people with the market and businesses through linking production - consumption, moving up the value chain, developing e-commerce, and having access to market information,. ..

The circular economy can bring benefits in all stages of the agricultural production process, such as the optimization and conversion of waste by-products into input materials (eg, water circulation in aquaculture, composting of rice straw and shrimp shells as bio-fertilizer,...) or the diversification and combination of farming types to take advantage of the resource of different types of agriculture, such as combined crop-aquaculture models (shrimp - rice, garden - pond - barn, shrimp - forest, ...). In addition, improving post-harvest processing and preservation technology, connecting production-consumption chains, and taking advantage of waste by-products, such as rice straw, livestock waste, etc. will help increase productivity and improve environmental quality.

Third, innovation and digital transformation.

To move from a linear to a circular economy, businesses need to pioneer in “renovating” business models to form a more circular value chain. Research by Gligoric et al(4) on the circular economy shows that the development of digital technologies is contributing to this shift. Along with that, the process of digital transformation among industrial enterprises is occurring simultaneously with the emergence of the circular business model concept. In industrial enterprises, digital technology is considered part of the Fourth Industrial Revolution, also known as Industry 4.0, which is related to the process of industrial transformation, in which the collection and storage of data have turned products into systems that create high value. Digital technologies are classified into three categories based on functions: Data collection, data integration, and data analysis. Data collection technologies include sensors (e.g. radio frequency identification - RFID) and devices that connect products and users to the internet (e.g. internet of things - IoT). Data integration technologies store and format data that enable data analysis technologies to produce and develop information.

The relationship between digital technology and business model innovation in the direction of a circular economy emphasizes how digitalization can help narrow, slow, and close resource flows. Specifically, IoT through improved monitoring, analysis, and control of product data can extend product lifecycles and enable recycling in the supply chain. Along with that, the real-virtual cyber system supports production and maintenance optimization by providing data for real-time decision-making.

Besides supporting resource flow strategies, digital technology also enhances value creation. Specifically, digital technology helps to improve competitiveness based on innovative services; improve financial health through value creation and cost reduction; improve equipment efficiency through machine optimization and new business models (e.g. product-service solutions and pay-per-use models); and improve resource efficiency through optimization. Therefore, the application of circular economy principles in renewing the business model is the main driver of value creation from the technologies of the Fourth Industrial Revolution.

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* Dr. Le Quang Dung, Dr. Nguyen Kieu Lan Phuong

(1) See: Department of Economic and Social Affairs Population Division, United Nations: World Urbanization Prospects: the 2014 Revision (ST/ESA/SER.A/366), New York (USA), 2015, p. 517

(2) See: Ellen MacArthur Foundation: Towards the circular economy - Economic and business rationale for an accelerated transition, Isle of Wight (UK), 2013, p. 99

(3) See: Ellen MacArthur Foundation: Towards the circular economy - Economic and business rationale for an accelerated transition, ibid, p. 99

(4) See: N. Gligoric, S. Krco, L. Hakola, K. Vehmas, S. De, K. Moessner, K. Jansson, I. Polenz, R. Kranenburg: “SmartTags: IoT Product Passport for Circular Economy Based on Printed Sensors and Unique Item-Level Identifiers”, Sensors, Basel, Switzerland, 2019

This article was published in the Communist Review No. 985 (March 2022)