10 things you need to know about the circular economy
A working circular economy could be a practical solution to the planet’s emerging resource problems. Here’s 10 facts you should know.
- Why do we need one?
The circular economy is touted as a practical solution to the planet’s emerging resource crunch. Reserves of key resources such as rare earth metals and minerals are diminishing, while exploration and material extraction costs are rising. The current ‘take-make-dispose’ linear economy approach results in massive waste – per Richard Girling’s book Rubbish! published in 2005, 90% of the raw materials used in manufacturing become waste before the product leaves the factory while 80% of products made get thrown away within the first six months of their life. This, coupled with growing tensions around geopolitics and supply risk, are contributing to volatile commodity prices. A circular economy could help stabilise some of these issues by decoupling economic growth from resource consumption.
- It is more than just recycling
While substituting secondary materials for primary materials can offer a part solution, recycling offers limited appeal as its processes are energy-intensive and generally downgrade materials, leading to continuing high demand for virgin materials. The circular economy goes beyond recycling as it is based around a restorative industrial system geared towards designing out waste. This graphic from the Ellen MacArthur Foundation shows how recycling is an ‘outer circle’ of the circular economy, requiring more energy input than the ‘inner circles’ of repair, reuse and remanufacture. The goal is not just to design for better end-of-life recovery, but to minimise energy use.
- Celebrities are shouting about it
The notion of a circular economy was first touted in the 1970s by environmental academics John T Lyle and Walter Stahel, but only caught on when former sailor Dame Ellen MacArthur set up the Ellen MacArthur Foundation in 2010 to champion the concept. Since then, the foundation has been hugely influential in making it resonate among world leaders, global corporations and academic institutions. Several celebrities have since lent their endorsement to the circular economy and its related cradle-to-cradle principles. Brad Pitt is a member of the Cradle to Cradle Product Innovation’s founding circle while fellow actors Arnold Schwarzenegger, Meryl Streep, Susan Sarandon and Will.i.am are all vocal supporters.
- The economics stack up
The business case for a circular economy is compelling. Analysis by McKinsey estimates shifting towards circularity could add $1 trillion to the global economy by 2025 and create 100,000 new jobs within the next five years. Under the Waste & Resources Action Programme’s Circular Economy 2020 Vision, the European Union (EU) could benefit from an improved trade balance of £90 billion and the creation of 160,000 jobs. Manufacturers are most likely to reap the benefits quickest given their reliance on raw materials – McKinsey argues that a subset of the EU manufacturing sector could realise net materials cost savings worth up to $630 billion per annum by 2025.
- Business leadership
Ground-level innovation in this field is being driven by large corporations who are piloting business models based on leasing, product performance, remanufacture, and extended lifecycle thinking. These companies have the power to effect change quickest, given their geographical reach through global supply chains, and their efforts are likely to accelerate with the emergence of a business-led platform for collaboration, the Circular Economy 100. While the circular economy also relies on the involvement of SMEs, take-up in this sector remains limited. A recent survey of nearly 300 small businesses across England, France and Belgium found almost 50% had not heard of the concept.
- Government intervention
Scaling up a circular economy on an international level will likely require government support. A co-ordinated approach by world leaders to introduce positive legislative drivers such as waste prevention targets and incentives around eco-design to promote products that are easier to reuse, remanufacture and disassemble would be welcomed by many. Some countries are already starting to act – China has set up CACE, a government-backed association to encourage circular growth while Scotland has issued its own circular economy blueprint. In a highly significant move the European Commission’s circular economy framework, released next month, is expected to introduce higher recycling targets and a landfill ban on recyclable materials across all 28 EU member states.
- It will change how we consume
Our relationship with the products and services we purchase could be radicalised under a circular economy. What if we didn’t buy the goods we use, but instead favoured access and performance over ownership? The ‘pay per use’ contractual agreements associated with smartphones for example could be extended to standard goods such as washing machines, clothes and DIY equipment. Philips, Kingfisher Group and Mud Jeans are already piloting product-as-service models, which would see us become users rather than consumers. Such a shift would not only allow companies to retain product ownership for easier repair, reuse and remanufacture, but might result in producer responsibility obligations being extended to users as part of the purchase agreement.
- New skills, please
Making the transition to a circular economy will be complex as it requires systems-level redesign and a pressing need for new skills, not just within the STEM (Science, Technology, Engineering, Maths) subjects, but across the creative disciplines of design, advertising and digital. At a higher level, systems thinking and modelling is likely to come to the fore to help build the right frameworks and guide behaviour change. On a more practical level, educational outreach work with universities and secondary schools is being undertaken by various organisations such as the Ellen MacArthur Foundation and Circular Economy Australia.
- Expect disruption
One of the prime enablers will be disruptive innovation – where breakthrough technology and design will spark new circular models of commerce, displacing existing markets and creating new ones. Businesses leading on this agenda are realising that they will either have to disrupt their own models from within, or risk being disrupted. Questions are also being raised over intellectual property, disclosure agreements and competition laws as companies collaborate to brainstorm and co-create. First mover advantage can be costly, and the level of perceived risk may prove a stumbling block.
- The UK is 19% circular
Weight-based material flow analysis conducted in 2010 by Waste & Resources Action Programme (WRAP) estimated that one-fifth of the UK economy is already operating in a circular fashion. The 19% relates to weight of domestic material input (600 million tonnes) entering the economy compared with the amount of material (115 million tonnes) recycled. Future projections by WRAP predict this figure could rise to nearly 27% by 2020, if 137 million tonnes of material were recycled from a lesser direct material input of 510 million tonnes.
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