Circular Economy

From a linear to a circular economy

Resources on Earth are limited. This sentence is fundamental to understand the importance of circular economy nowadays, especially if we read the data that analysts extrapolate from a world where the linear economy is still by far the most popular production model. For instance, a new global circularity metric (2018) has revealed that over 90% of the raw materials used globally are not cycled back into the economy. Again, we are currently utilizing an amount of resources that are equal to 1.5 Planets, and by 2050 we would need 3 planets if we don’t change our production and consumption habits. If we add a growing population that is expected to be almost 10 billion by 2050, it is clear that a change must be done. These alarming statistics were the focal point of the first Circularity Gap Report, which measures yearly the gap between what we use and what we cycle. Being able to track and target performance via the Global Circularity Metric will help us engage in uniform goal-setting and guide future action in the most meaningful way. For a long time, our economy has been ‘linear’. This means that raw materials are used to make a product, and after its use any waste (e.g. packaging) is thrown away. Today’s Take-Make-Waste economic model presents a series of negative consequences, ranging from social inequality, to depletion of natural resources, environmental pollution and climate change. To ensure that in the future there are enough raw materials for food, shelter, heating and other necessities, our economy must become circular. This means preventing waste by making products and materials more efficiently, reusing and recycling them. If new raw materials are needed, they must be obtained sustainably so that the natural and human environment is not damaged.

Differences between linear and circular economy

A circular economy differs fundamentally from a linear economy. The main differences are found in the step plan, the perspective on what sustainability is, and the quality of reuse practices.

Step plan

A linear economy works according to the ‘take-make-dispose’ step plan. Resources are extracted, products are produced and are used until they are discarded and disposed as waste. Value is created by maximizing the number of products produced and sold. A circular economy works according to the 3R approach of “Reduce, Reuse & Recycle”. Material extraction is reduced where possible by using less material, products are made of reused parts and materials, and after discarding a product, materials and parts are recycled. In a circular economy value is created by focusing on value retention. By keeping a material streams as pure as possible during the complete value chain, the value of this material is retained. Pure materials streams can be used multiple times to provide a certain functionality or service, while only making one investment.

Sustainability

In a linear economy, sustainability is improved by focusing on eco-efficiency. This entails maximizing the economic gain which can be realized with a minimized environmental impact. This negative impact per economic profit gained is minimized in order to postpone the moment at which our system is overloaded. In a circular economy, sustainability is improved by enhancing the eco-effectivity of the system. This means that next to minimizing the negative impact of the system, the focus is put on maximizing the positive impact of the system by radical innovations and system change.

Quality of reuse practices

In a circular economy reuse is intended to be as high grade as possible. This ensures that the value of the material is retained or enhanced. For example: concrete can be grinded in to grains that are used to create a similar wall as before, or even a stronger constructive element. Within a linear economy, reuse is mainly seen in downcycling practices: a product is used for a low-grade purpose which reduces the value of the material and complicates the reuse possibilities of the material in a third life. For example: concrete is shredded and used as road filament.

How is circular economy implemented by companies?

There are mainly 5 business models that can be developed in order to achieve objectives of drastic reduction of waste: Circular Supplies: suppliers must be carefully chosen in order to get the energy and the raw materials necessary for the realisation of the products with smaller impact on the environment. The aim can be achieved with renewable, recyclable or biodegradable inputs, in substitution of the linear ones. For instance, renewable energy, biochemicals and bioplastic. This model is particularly relevant for companies dealing with scarce commodities or inputs that have large environmental impact. Recover and Recycle: this approach is comparable to the cradle to cradle design since the focus is on recovering and reusing outputs to maximise economic value. In fact, at the end of the normal life cycle of the product, the waste is re-processed into new resources to create something more valuable, in this case it is called upcycling. Product life extension: The product life extension affects the lifecycle of products and assets, to ensure they remain economically useful for a longer period of time. The materials that would be wasted are maintained or improved, in order to postpone the moment of disposal and reduce the number of product destined to the landfill. Sharing Platforms: A sharing platform model promotes collaboration between users or organizations in order to maximise the utilization of a good that otherwise would be underutilized. By doing so, the number of products needed would be lower, causing less waste, and less impact from production. Product as a Service: this model represents a valuable alternative to the conventional buy-to-own approach. Products are utilized by many users through a pay-per-use contract. This means that a single product, owned by the same individual, can be used much more efficiently. The company focuses then on the volume of utilization and performance instead of the volume of production.

Circular economy today

The practical applications of circular economy to the economic system and industrial processes have gained momentum since the late 1970s; in 2012, however, the report “Towards the Circular Economy: Economic and business rationale for an accelerated transition” for the first time considered the business opportunity for firms coming from the transition to a circular model. The report was commissioned by the Ellen MacArthur Foundation and McKinsey & Company that delivered the analytics, fact base, and provided the overall project management. Towards the Circular economy identifies the path to follow in making the transition to a circular economy. Skills in circular design and production are considered necessary, as well as an adequate circular business model. The European environmental research and innovation policy, based on the Europe 2020 strategy for a sustainable economy, aims at supporting the transition to a circular economy in Europe, defining a transformative plan to green the economy and the society. Further guidance to organizations implementing circular economy strategies is offered by the British Standards Institution (BSI); it developed the “BS 8001:2017 Framework for implementing the principles of the circular economy in organizations” guide.

The benefits of a circular economy

As stated by the World Economic Forum, a circular economy is a trillion-dollar opportunity with huge potential for economic growth and job creation. A transition to a circular economy, in fact, would not only reduce CO2 emissions by 48% by 2030. It represents a potential solution to questions that Europe’s economies are facing, dealing with issues like slow growth and unemployment. It is estimated that in the UK alone the circular economy would create 205,000 new jobs. Also, GDP in Europe would grow by 11% by 2030. By recovering value from items that would otherwise go to waste, the circular economy improves resource productivity and competitiveness. As a result, an increasing number of big companies and startups have understood the opportunity given by a circular economy and are experimenting with new circular business models. For example, Timberland and tire manufacturer and distributor Omni United have collaborated on a project of tires meant to be recycled into footwear outsoles once they can’t be used on the roads anymore.

Conclusion

Some of the most interesting circular opportunities require resources, technology and especially time to be pursued. The transition to a circular economy is a huge change in society and of course it’s not easy to predict when it will happen. The process requires small steps that might not have short term benefits, but without any doubt they will have positive long-term effects not only on society but also on companies. The right moment to begin is now, many companies have already understood the importance of it and are in the correct way. It is crucial that everyone follows this path before it’s too late. The aim is to implement a model that ensures enough value for everyone and forever.

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