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Introduction

Global warming has been a big issue facing the contemporary world and measures such as a circular economy have been suggested to reduce the impact of waste on the environment. To incentivize companies to adopt this new system, big companies have taken it upon themselves to implement these measures. One such company is the multinational bank, JPMorgan Chase. JPMorgan has been at the forefront of implementing sustainability measures into its business operations with the hope of incentivizing other companies and their clients into adopting sustainable business operations. This essay will analyze how JPMorgan Chase has approached the topic of the circular economy. JPMorgan Chase as one of the biggest banks in the world has to implement a circular economy in their business operations to combat the global demand of resources and incentivize other companies to take the sustainable business model.

What is a Circular Economy according to JPMorgan Chase?

The term circular economy was coined as the opposite of the linear economy. JPMorgan Chase believes that a linear economy is an unsustainable economic model. A linear economy is where a company, industry, or organization acquires raw materials, processes them to make its products, and gets rid of waste (Alexandris et al., 2018). The problem with this economic model is that it removes resources and replaces them with waste. Hence it is seen as a take-make-waste way of doing business. This is where the circular economy model was discovered to be the alternative guideline for business operations. The circular economy model was coined to eliminate the take-make-waste method of doing things.

Sustainability involves using resources found on the planet in the most efficient and non-harmful way. This is what the circular economy aims to achieve. JPMorgan Chase defines a circular economy as a production model that focuses on the creation of a closed circle that loops materials and resources inside the organization (Mac, 2018). This means that resources will only be acquired from the environment once and going forward the company will aim to recycle and reuse the resources. The circle is also meant to be as tight as possible as this means that the circular economy is more efficient. The circular economy in JPMorgan Chase focuses on reducing labor and energy costs, as these are the two commodities that are mostly consumed by the company. The circular economy main’s objective is to increase the savings of the company as the model would not be feasible if it did not cut on operation costs at the company (Alexandris et al., 2018). JPMorgan Chase defines a circular economy as the creation of a tight loop that aims to reuse and recycle resources used.

Why JPMorgan Chase Uses Circular Economy

The circular economy is more advantageous than the linear economy model and also has advantages to society. Many of the advantages that circular economy gives are better for the environment. This is because the circular economy was coined to have a less negative impact on the environment. The circular economy model also has operational advantages that include cost efficiency and higher percentage utilization of resources used (Alexandris et al., 2018). The last advantage that is acquired from implementing the circular method is its impact on society. A look at these advantages will show why JPMorgan has chosen to implement the circular economy method in its day-to-day business operations.

Global warming has been a major climate issue in contemporary society. The topic has been discussed widely in various international meetings and it is so controversial that some people do not believe that the phenomenon is real. The major culprit for global warming has been carbon emission by major industrial players in the world (Fedotkina et al., 2019). Operations that result in carbon emission are an example of the linear economy model often implemented by industries. Therefore, the first expectation of the circular economy model is that it would cut carbon emissions in an organization. JPMorgan has found out that this is true as the circular economy model’s analogy of recycling resources means that processes that emit carbon such as burning are not supported (Mac, 2018). Recycling also reduces the waste products that come from an organization and this cuts on the impact of waste products on the environment. Sustainability in modern society is mainly focused on reducing the impact of waste from industries on the environment and the circular economy excels at achieving this. The impact of the circular economy model on global warming is one reason that JPMorgan Chase is implementing the model.

Cost efficiency is one of the main goals of any profitable business organization. To implement the circular economy model, its cost efficiency should be proportional to the risk it would require to implement the model (Alexandris et al., 2018). The circular model has proved to have high-cost efficiency compared to other alternative economic models as it recycles and reuses more materials. It is costlier to set in place a circular economy rather than a linear economy. However, the cost for the start-up of a circular economy is much lower than the cost over time for maintaining a linear economy (Alexandris et al., 2018). The advantages presented by the circular economy due to its model focusing on reusing and recycling make it so that it is way more core efficient than the linear economy model. The circular model also focuses on maximizing the efficiency of using physical spaces. Actions like leasing help an organization earn more money by renting out any space that is free in the building. This also reduces the cost of using other resources such as water and electricity (Bonciu, 2020). Materials recycled from the circular economy can also be sold or stored for future use. It can be concluded that the circular economy model has bigger advantages than the linear economy model and this is why JPMorgan Chase has chosen to implement this model in its business operations.

Additionally, the circular economy focuses on maximizing efficient use of all resources and this includes human resources. The linear economy often involves workers working under suboptimal conditions due to various hazardous materials needed to run the model. Examples include mining various resources, burning of coal, petroleum drilling among other hazardous jobs (Bonciu, 2020). A circular economy does away with the use of such non-renewable energy and this means that such hazardous jobs are no longer required. This improves the working environment of the millions of workers who work in these hazardous environments. This would be an argument against the circular economy model as it would be assumed that the model is removing job opportunities but the opposite couldn’t be truer. The circular economy model improves the competitiveness of any organization that implements it (Alvarez et al., 2021). This means that organizations can hire more employees to aim to maintain their competitiveness. The employees have their quality of life also increased as they will be no hazardous jobs that involve risking their life. The potential of job creation is high with the circular economy model and this combined with the way the model improves the human resources in the organization is a reason why JPMorgan Chase chose to implement the more sustainable model.

Organizations have an impact on their stakeholders and the society neighboring the organization is often one of the major stakeholders of the organization. Therefore, when implementing any production model, an organization will review its impact on society. The circular economy is regarded as the best production and economic model concerning its impact on society. The model has the obvious advantage of having less waste deposited on the environment. This improves the environmental state of the area occupied by the organization and the civilization living next to them (Bonciu, 2020). The circular economy model also improves the life of workers working for any organization by eliminating the existence of dangerous jobs which involve risking lives to acquire non-renewable resources (Alvarez et al., 2021). The impact of the circular model on the human resource of organizations also means that the workers earn more for less risk. This also means that the surrounding area of an organization that has implemented the circular economy model experiences a deflation in the prices of goods and products. Workers also can earn more due to the profitability of the model. All of these phenomena that arise from the implementations of the circular economy model come together to improve the living conditions of the society neighboring the organization (Alvarez et al., 2021). This means that an organization will have good relations with its main stakeholders and this is why JPMorgan Chase has put a lot of focus into implementing the circular economic model into its business operations.

How JPMorgan Implements the Circular Economy Model

The circular economy model emphasizes the reuse and recycling of resources and passing them in a closed-loop to achieve sustainability. JPMorgan Chase has focused on achieving sustainability through various methods. The sustainability goals for JPMorgan Chase are both for the organization and for developing the community. This is what has motivated the multinational bank to implement the circular model in its business operations. A look at how the bank has tried to achieve its sustainable development goal can give insight into how the bank has implemented the circular economy model.

The first aim of the circular economy model is to eliminate the dumping of waste into the environment and reduce one’s carbon footprint. Hence, the first way that JPMorgan chase has implemented the circular economy model is by going green. JPMorgan Chase, being a bank, achieves going green by influencing what resources and energy its client use their investment on. An example is their eligibility criteria for various investment projects on certain projects that fulfill the criteria of going green (Mac, 2018). These criteria include; a client who has implemented a business model that utilizes renewable energy, a client with a business model that uses clean technology for its production, a client whose business model allows for the conservation of water and flood control, a client whose business model is focused on minimizing waste and prevention of pollution, a client whose business model supports the conservation of aquatic and terrestrial ecosystems, a client whose business model supports sustainable transportation means, a client who has his business or whose business model is supported by a green building, and a client whose business model is aimed at reducing the waste of energy and has energy-efficient technologies (Mac, 2018). JPMorgan Chase has ensured that its clients are aware of their sustainable development goals and has provided the same information. This is how the bank has implemented the going green project as a way of adapting the circular economy model.

Also, the circular economy model focuses on the reuse and recycling of resources. Research has shown that the majority of resources are found in countries that have less development such as the oil countries and countries with rare minerals (Alvarez et al., 2021). Developing the economy of these countries will lead to more sustainable use of resources as the countries will stop relying on the sale of such non-renewable energy as their main source of revenue. JPMorgan Chase has implemented measures to achieve this and has dubbed the project the development finance project. The development finance project focuses on the mobilization of funds to advance the sustainable development goals’ project in emerging economies (Alvarez et al., 2021). The countries supported by this initiative must meet certain criteria that include; an emerging economy that is aligned with JPMorgan’s product, exclusion filters, and environmental and social policy, the emerging economy is requiring funds is aiming to promote social and economic development in the country, the emerging economy is eligible to boor a loan from the world bank, and the emerging economy’s sustainable development goals qualify through JPMorgan’s DFI methodology that outlines the steps for development gap and investment contribution (Mac, 2018). The development of emerging economies to make the transit from the dependence of revenue generated from the sale of non-renewable energy sources is one way to achieve the United Nations sustainable development goal and this is a way that JPMorgan has implemented a circular economy model.

Human resources are a major resource for any organization and the circular economy model aims to utilize this resource in the most efficient way possible. JPMorgan Chase has implemented various measures to achieve a closed-loop in the usage of the human resources available to the organization. The measures include the company improving the community around the bank as the community is one of the stakeholders of the bank and as the bank is a multinational bank, it has various philanthropic measures that are aimed at developing the community (Mac, 2018). Some of the areas that JPMorgan has focused on improving to create a tighter loop on human resources included; the financing and lending to small business, the lending to homerun business, the investment of projects that finance affordable housing, and the investment into projects that benefits communities concerning affordable health care (Mac, 2018). The firm is also committed to developing communities in other areas apart from finances such as matters to do with racial equity. These measures fall into the circular economy model. It allows the bank to be in partnership with the community and improve the situation for both parties. In the linear economy model, the bank would have been instead solely focused on improving its profits at the expense of the community and this would have led to a lot of avoidable friction between the two parties. The human resource component is important in any organization and the community is one of the major stakeholders in JPMorgan and as such the bank has applied the circular economy model to improve its relations with the community and improve their condition.

The Challenges Facing JPMorgan’s Implementation of Circular Economy

The circular economy has been seen to have many advantages over the linear economy model and yet the linear economy model is the most used economy model globally. This shows that the implementation of the circular economy is bound to present some challenges. These challenges are more pronounced for financial institutions as although they may aim to achieve sustainability, they don’t necessarily have the biggest carbon footprint compared to other industrial sectors. Therefore, financial institutions have had to weigh the cost ratio of the circular economic model to the more popular linear economic model (Alexandris et al., 2018). That is what JPMorgan Chase considered and decided that the circular economic model was the most cost-effective. A look at the challenges that they face while implementing the circular economy model can give insight into how the bank implements the model.

Additionally, the circular economic model focuses on reusing and recycling waste but not all waste is reusable. Waste products by definition are meant to be products that have no use to anyone and hence it would be logical to conclude that even with recycling and reusing being focused on, eventually, it would reach a point where the waste can no longer be recycled. This means that the circular economic model is not 100% achievable (Alexandris et al., 2018). This presents a problem to financial institutions and more so JPMorgan Chase because if the economic model implemented by the bank cannot be achieved then that is a failure on their part. The way to combat these would be to use a material that can be recycled. However, there have not yet found alternatives to certain materials that are essential to JPMorgan’s daily business operations. Such material as paper, which can only be recycled once, has not yet been found weaker to any alternative. The circular economy model does not also have room for hazardous materials. This means that these materials are completely removed from the cycle and if the replacement for the said materials has not been found yet then the company has to change its business operations to fit new materials (Alexandris et al., 2018). This makes it harder for JPMorgan Chase to advise its clients to adopt the circular economy model. The fact that not all waste can be recycled means that JPMorgan Chase cannot fully implement the circular economy model making it harder to advise other parties to do so.

The United Nations and governments have been in the frontline for advocation of the circular economy model but the regulations imposed may do more to hurt the endeavor than support it. This makes it hard for JPMorgan Chase to incentivize its clients into adopting the circular economy model. An example is clients in the food beverage sector where they are required to put a certain expiration date after which point the food item will no longer meet the standards of quality expected by the government (Ozili, 2021). However, more often than not even a few days after the set expiration date, the food items are still edible. This makes it hard for JPMorgan Chase to convince such a client to adopt a government-regulated economy model that is aimed to reduce waste while the same government has set in place regulations that are actively creating waste.

Furthermore, the cost incurred by implementing the circular economy model is largely on setting up mechanisms and technology for recycling and reusing waste. The reason why the linear economic model is still the most popular economic model despite its unsustainability is because of the lack of a robust waste management infrastructure and recycling technology (Bonciu, 2020). A financial institution like JPMorgan Chase might see this as the circular economy model having a higher risk-to-profit ratio. The fact that the state of the waste infrastructure and recycling technology in developing countries is worse puts a dent in the efforts of JPMorgan in trying to implement the circular economy model. This is because the company aims to achieve this model by funding emerging economies into achieving it too (Fedotkina et al., 2019). The circular economy model may have more advantages that might eventually surpass the cost of setting up new and advanced technology and infrastructure to achieve waste recycling. However, until the fruits of the model are harvested, JPMorgan Chase will be taking a big risk in funding and implementing the circular economic model, both in the organization and in emerging economies.

Conclusion

JPMorgan Chase is a multinational bank that has put great importance on achieving the sustainable development goals set by the United Nations. This has led the bank into implementing the circular economy model. The circular economy model is where resources are reused and recycled in a closed-loop that is aimed to be as tight as possible. It differs from the linear economy model as it does not allow the production of waste. The model has various advantages over the linear economy as it improves society, revenue, and cost-effectiveness. JPMorgan has implemented the model by outlining various sustainable development projects that will focus on increasing the efficiency of utilizing resources. The company has, however, faced challenges during the implementation of the circular economy model. These challenges include poor waste infrastructure and the ineffectiveness of government regulations. JPMorgan Chase understands the importance of sustainable development in contemporary society and is one of the major organizations that has implemented the circular economy model in the world.

Reference List

Alexandris, G., Katos, V., Alexaki, S. and Hatzivasilis, G., 2018. Blockchains as enablers for auditing cooperative circular economy networks. In 2018 IEEE 23rd international workshop on computer-aided modeling and design of communication links and networks (CAMAD) (pp. 1-7). IEEE.

Alvarez-Risco, A., Estrada-Merino, A., Rosen, M.A., Vargas-Herrera, A. and Del-Aguila-Arcentales, S., 2021. Factors for implementation of circular economy in firms in covid-19 pandemic times: The case of Peru. Environments8(9), p.95.

Bonciu, F., 2020. Is Circular Economy Compatible with Capitalism? Romanian Economic and Business Review15(1), pp.16-30.

Fedotkina, O., Gorbashko, E. and Vatolkina, N., 2019. Circular economy in Russia: Drivers and barriers for waste management development. Sustainability11(20), p.5837.

Mac, F., 2018. JP Morgan Citigroup. JPMorgan Chase.

Ozili, P.K., 2021. Circular Economy, Banks, and Other Financial Institutions: What’s In It for Them? Circular Economy and Sustainability, pp.1-12.

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