The current industrial model is based on a linear economy. We take resources from the earth to make products, which we use, and, when we no longer want them, throw them away. Take-make-waste. But the current system is no longer working for businesses, people or the environment because our way of doing things is reaching its natural limits.
So what is an alternative?
In a circular economy, economic activity builds and rebuilds overall system health. The concept recognises the importance of the economy needing to work effectively at all scales – for large and small businesses, for organisations and individuals, globally and locally.
Transitioning to a circular economy does not only amount to adjustments aimed at reducing the negative impacts of the linear economy. Rather, it represents a systemic shift that builds long-term resilience, generates business and economic opportunities, and provides environmental and societal benefits.
A circular economy is based on three principles:
- Design out waste and pollution
A circular economy reveals and designs out the negative impacts of economic activity that cause damage to human health and natural systems.
- Keep products and materials in use
A circular economy favours activities that preserve value in the form of energy, labour, and materials.
- Regenerate natural systems
A circular economy avoids the use of non-renewable resources and preserves or enhances renewable ones.
Biological and technical Material Flows
The Ellen MacArthur Foundation has tried to capture the essence of the circular economy in the diagram above, which is somewhat understandably nicknamed the ‘butterfly diagram’.
Biological materials – represented in green cycles on the left side of the diagram – are those materials that can safely re-enter the natural world, once they have gone through one or more use cycles, where they will biodegrade over time, returning the embedded nutrients to the environment.
Technical materials – represented in blue on the right side of the diagram- cannot re-enter the environment. These materials, such as metals, plastics, and synthetic chemicals, must continuously cycle through the system so that their value can be captured and recaptured.
Consumers versus users
Do we consume products or use them?
One particular subtlety of the diagram is the distinction between consumers and users. In a circular economy, biological materials are the only ones that can be thought of as consumable, while technical materials are used. It makes no sense to say that we consume our washing machines and cars in the same way that we consume food.
Further on this raises questions about the necessity of owning products in the way that we traditionally do. It is the access to the service a product provides that is important, rather than the product itself. Understanding this shift in mindset lays the groundwork for shifting our economy from linear to circular.
The economic benefits
Economic growth – would be achieved through increased revenues from emerging circular activities and lower cost of production through the more productive utilization of inputs.
Material cost savings – Detailed product-level modelling, indicates material cost savings for technical products of more than 500 billion EUR in the EU, as well as material cost savings for consumer goods of almost 600 billion EUR globally.
Job creation potential – New jobs will be created across industrial sectors within small and medium enterprises, through increased innovation and entrepreneurship, and a new service-based economy.
Innovation – Replacing linear products and systems with circular ones creates a lot of creative opportunities, benefitting higher rates of development, improved materials and energy efficiency and more.
Environmental and system-wide benefits
Carbon dioxide emissions – in Europe could be halved in Europe by 2030 relative to today’s levels across mobility, food systems and the built environment.
Primary material consumption – could be reduced by 32% by 2030.
Land productivity and soil health – would be increased by returning biological material into the soil while making chemical fertilizer unnecessary.
The opportunity for companies
Profit opportunities – Manufacture cost of technical devices could be reduced and leasing models for advanced technical products could profit both customers and manufacturers.
Reduced volatility and greater security of supply – are created by less need for raw materials and more flexible supply chains.
New demand for business services – such as collection and reverse logistics, product remarketing for longer use of products, or component remanufacturing and product refurbishment.
Improved customer interaction and loyalty – New business models, that engage customers help to establish better interaction with customers giving companies the possibility to improve their products by getting closer insight into usage patterns.
The opportunity for individuals
Increased disposable income – by reduced costs of products and services and less unproductive time
Greater utility – Designing products to be long lasting and efficient creates a greater utility for customers
Reduced obsolescence – when products break they will be repaired or substituted rather than becoming obsolete
Health – Health will be improved by fewer pesticides, antimicrobial resistance, air pollution, water contamination and foodborne diseases.
System change is needed
There is no simple fix and no stones can be left unturned in the pursuit of system change. We cannot change just one element of the existing system and expect the change we need. Systems change is difficult to achieve and great ideas often don’t come to fruition because of failures in managing the complexities involved. What we should do, though, is learn to understand how complex systems – like an economy – operate, because understanding is the first step towards creating better solutions.
The origins of the concept
The idea of feedback, of cycles in real-world systems, is ancient and has echoes in various schools of philosophy. It enjoyed a revival in industrialised countries after World War II when the advent of computer-based studies of non-linear systems revealed the unpredictable nature of the world we live in. With current advances, digital technology has the power to support the transition to a circular economy by radically increasing virtualisation, de-materialisation, transparency, and feedback-driven intelligence.
Our economy is currently locked into a system that favours the linear model of production and consumption. However, this is reaching its limits due to problems like climate change. We must take advantage of our current situation of economic and technological development, and social factors emphasizing the need for a system change in order to accelerate the transition to a circular economy. Circularity has moved beyond the proof of concept; the challenge we face now is to mainstream the circular economy and bring it to scale.
By Till – Petit Pas Team
The Ellen MacArthur Foundation develops and promotes the idea of a circular economy. They work with and inspire, business, academia, policymakers, and institutions to mobilise systems solutions at scale, globally.
Check out their website to learn all you want to know about the circular economy: