Environmental insurance: ensuring our future

Hermann Erdmann, CEO of the Recycling and Economic Development Initiative of South Africa (REDISA), explains that environmental protection and scarce resources demand a new way of thinking about how we consume our resources

We are all aware of the importance of insurance and most people have cover to replace material possessions once lost, but it seems no one has considered an insurance plan for the environment.

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. Who should take the responsibility of compensating for the elevated environmental damage that has been taking place since the start of the industrial revolution?

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 are ultimately inadvertently paying the price, and are subsidising manufacturers that are not forced to develop better processes to manage their products’ end-of-life, and to reduce emissions and reliance on raw materials.

We all pay the price indirectly through air pollution, environmental degradation, landfills filling up and the 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 both manufacturers and consumers; manufacturers are incentivised to make more environmentally friendly, longer-lasting products, which are built to be recycled, and have recyclable packaging. The lower the environmental impact of a product, the less environmental “insurance” the manufacturer will need to pay in the long term.

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 percent participation from the tyre industry. Since 2013, the environment has been “insured” against the negative impact of waste tyres.

REDISA collects a waste management fee from all manufacturers and importers of tyres. It 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 research and development to help tyre manufacturers and importers improve 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. It also has a means to mitigate and eliminate that impact. This approach has been praised as a success by the World Economic Forum in Davos and the European Union. It is 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, while protecting the environment. This is an insurance policy that manufacturers should be willing to pay to protect our environment.