The widely discussed concept of the Circular Economy promises to reward sustainable economic activity. Are we at the brink of implementing a fair economy that is not only economically, but also ecologically and socially profitable?
Of Lines and Circles – Circular Thinking is Natural
The idea of a Circular Economy has its origins in the realisation that we live in a world of finite resources. While this fact appears to be rather self-evident, it seems as though it is seldom taken into account by political and economic decision makers (or by any of us for that matter). The result is a shortsighted and linear, yet globally predominant “take, use, dispose” mindset, which leads to the irrecoverable waste of resources and energy. Once the negative impact this mentality has on our planet is understood, it also becomes clear: adjustment and optimisation within the old, linear economic model is not going to be enough. What we need is a completely new way of thinking.
Throughout the centuries, we have adopted a great number ideas and concepts from nature in order to improve our lives. In looking at how to make our economy work for everyone, we are again best advised to look to nature for assistance: everything natural is part of a cycle of some sort. Nothing that dies stays on the face of the earth as useless waste. Remains either serve as food for other creatures or they decay and give their nutrients back to the soil, thus continuing to be part of a holistic system.
Tying in with this thought, the Circular Economy implies a completely regenerative global trade and supply chain that does not use up any finite resources. The goal is to keep the value of every product, part and ultimately every material as high as possible, so they can be repaired, reprocessed and reused instead of having to go to waste. The circular supply chain produces no waste whatsoever; it works solely with already existing resources which can be reused over and over again. Thus, the primary objective of this new economic model is to minimise the net burden on our natural and social environment. Considering that as of today, we still produce more than 40 million tonnes of electronic waste annually, this would be an immense measure.
How Does the Circular Economy Work?
Circular thinking seems natural and therefore reasonable. But how is this idea supposed be put into practice?
The Circular Economy needs a clear, feasible concept in order to find its way into the hearts and structures of our society, our economy and our political system. A number of these concepts already do exist (most of them emphasising different core areas) but the ‘instruction sheet’ developed by the Ellen MacArthur Foundation goes further to build a good framework for change towards a Circular Economy:
- Regenerate… restore, and ultimately maintain our ecosystem’s health. In the long run this can only be achieved by cultivating the use of renewable energy and material and by returning all biological resources to their native space – the soil.
- Share… and thereby prolong the life span of products. As we have pointed out in our article about the Sharing Economy, concepts like carsharing, or the subleasing of living space (i.e. Airbnb etc.) have already been widely adopted. The Circular Economy needs more of this!
- Optimise… the efficiency and performance of products altogether. This goes beyond improving the product itself in terms of its life span, or design. It rather implies the sustainable, circular shaping of the whole supply chain, a task the cradle-to-cradle principle is concerned with.
- Loop… or in other words: re- and upcycle products, parts and material of all kinds. The construction sector is a wonderful example of how this can lead to a huge reduction in waste, as it reuses materials from old buildings at new construction sites, thus saving these resources from going to waste (a trend called urban mining). ‘From old to new’ is certainly a motto of the Circular Economy.
- Virtualise… the reduction of “stuff” on our planet is a big opportunity brought upon us by the modern, digitalised world. Recent developments in the music industry exemplify this fact very well: Since music is now mostly released, bought and listened to via platforms such as iTunes, Spotify, or Deezer, the whole industry has become vastly dematerialised. CDs and packaging are now becoming obsolete.
- Exchange… old, ecologically inefficient production methods, business models and technologies, and replace them with modern, circular alternatives.
Who Should Carry the Responsibility?
Developing a theoretical model is of course only one part of the equation. At this point the question of responsibility arises: whose obligation is it to put this model into practice? And: do these stakeholders even have an incentive to move out of their comfort zone by dropping their old, linear patterns of behavior? In this regard three groups are becoming crucial:
The fact that the economy and its businesses are a fundamental part of the Circular Economy certainly comes as no surprise. As the model is in a way something new to our society, political players heavily depend on the market’s technical knowledge, while formulating circular policies. They are, in the end, best suited for evaluating the chances and limitations of certain economic policies. Thus, it becomes clear that the market and its businesses have an enormous influence on the success of this idea. The Circular Economy cannot function if the market does not proactively decide to make it function.
Ultimately it is the businesses themselves who decide which sector they want to enter and how they want to produce what kind of products. Now one might wonder why companies and businesses would desire to change their presently comfortable situation in the first place. The answer is rather trivial: the Circular Economy is very profitable! For some reason our society tends to link environmentally sustainable behavior with inefficiency and abstinence. In contrast to that assumption the European Commission estimates that the successful implementation of a Circular Economy within the EU could save around 600 billion EUR by 2030, while creating an additional two million jobs. The Ellen MacArthur Foundation goes even further and predicts net savings of 630 billion EUR by the year 2025. Although there is no perfect consensus regarding the exact numbers, all experts are in agreement regarding one fact: the Circular Economy is an enormous economic chance for businesses.
Governments as mediators
The elected government is a vital part of the Circular Economy, holding everything together, in a way. Through various laws, incentives, subsidies and programs, it can promote sustainable, thus good economic practices and penalise harmful behavior. While interacting with the economy, the political arena has three basic functions:
- Set financial incentives for businesses to start acting economically sustainable
- Limit waste through direct regulation
- Provide all information and infrastructure needed to enable the circular flow of all resources.
There are a number of reasons why governments should be eager to promote the Circular Economy and adjust their policies accordingly. On the one hand inefficient and thoughtless consumption of finite resources inevitably leads to long-lasting social issues such as water shortages, smog or the recurring failure of energy supply. On the other hand it is simply economically reasonable for governments to impose circular policies: generally a government will always strive to provide a stable internal infrastructure, not least in order to make its country an attractive business location for as many firms as possible. At the end of the day more firms equal more tax revenue. Lastly, by now a vast majority of political players has finally come to realise just how enormous the cost of climate change will be if it is not properly counteracted.
In December 2015 the EU dared to make a first political step towards a Circular Economy by formulating a program called: ‘Closing the loop – An EU action plan for the Circular Economy’. The plan’s main focus lies on the optimisation of value added chains across the board of resources, products and waste of all kinds. The implementation of this program, which is all about the extension of product life cycles, is planned to be heavily subsidised by the EU.
Reactions to this political action have, however, been rather mixed (if not largely negative), due to one simple reason: while the program is a straightforward moral commitment to the Circular Economy, it does not include any constructive and clear figures, rates or regulations. Thus, by releasing this vague plan, the EU has not yet lived up to all the obligations a governing body is supposed to live up to in this context. If you would like to see for yourself and form your own opinion about the plan, you can find the complete and original program here.
Foundations and NGOs play a very big role in the Circular Economy, as they use their know-how to bridge gaps everywhere in society. With the help of their research and knowledge, businesses are able to develop strategies, governments are able to formulate policies, and we consumers are able to understand what the Circular Economy is actually all about. While the Ellen MacArthur Foundation is probably the most prominent of such organisations right now, other players – such as British-based WRAP – are constantly emerging. There is even an annual award program called The Circulars, which is held in order to bring attention to and recognise the work of contributors to the Circular Economy.
Last but certainly not least we consumers are largely responsible for the implementation and success of this paradigm change. It is ultimately up to us to decide for instance, if we are going to resell unneeded white goods (thus prolonging their life span), or if we terminate the value they can create by throwing them away. It is also our burden and responsibility to decide, whether we want to separate and recycle our waste properly or not. While governments and businesses are indeed able to provide us with the necessary framework of infrastructure, laws, regulations and products, it is at the end of the day up to every single individual to embrace and live the Circular Economy.
We ought to get involved, to inform ourselves and to call for the implication of a sophisticated, profound Circular Economy within our society. Fortunately, modern times provide assistance for this admittedly big task: apps such as “JouleBug” or “GoodGuide” grant transparency about the products we buy and remind us of living with a circular mindset.
At last (whether we like it or not) we need to fundamentally reconsider the way we consume in the long run. How many pairs of jeans do I actually need? Is it really necessary to purchase or lease a car every four years? (Some might even ask: is it really necessary to own a car at all?) As they challenge some very basic mechanisms of our culture, those sorts of questions are extremely difficult to answer. At the same time, though, thinking about these questions is absolutely crucial for true change to eventually come about. The extent to which our culture is defined by consumerism might after all be one of the biggest obstacles to overcome on the way to attaining a truly sustainable and healthy world.
An Opportunity That Can Only Be Seized in Unity
The idea of a Circular Economy is far more than a certain way of producing things or a government policy; it is a true cultural paradigm change, which bears huge social, ecological and economic chances. These chances can, however, only be seized if all relevant stakeholders choose to collaborate. Civil society, governments and businesses are all (in one way or another) an indispensable part of the concept, which makes them all equally responsible for its successful implementation. It is time for us to understand that we live in a world of complex and interdisciplinary, global problems. Solving those problems requires collaboration and thinking outside the box.
Although the 2015 EU program can be seen as a failed first attempt, there is hope: Denmark is home to a vast amount of Circular Economy pioneers and has a history of adopting innovative policies that encourage farsighted, sustainable economic behavior. The Circular Economy is evidently not merely an unrealistic, utopian vision after all; this way of thinking can be the key to a future in which mankind does not need to be anxious about resources, environment and social justice so much anymore.
Author: Valentin Greggersen / RESET editorial