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All about Circular Economy in One Page

Circular Economy

Looking beyond the current take-make-waste extractive industrial model, a circular economy aims to redefine growth, focusing on positive society-wide benefits. It entails gradually decoupling economic activity from the consumption of finite resources and designing waste out of the system. Underpinned by a transition to renewable energy sources, the circular model builds economic, natural, and social capital.

It is based on three principles:

  1. Design out waste and pollution
  2. Keep products and materials in use
  3. Regenerate natural systems

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.

The model distinguishes between technical and biological cycles. Consumption happens only in biological cycles, where food and biologically-based materials (such as cotton or wood) are designed to feedback into the system through processes like composting and anaerobic digestion. These cycles regenerate living systems, such as soil, which provide renewable resources for the economy. Technical cycles recover and restore products, components, and materials through strategies like reuse, repair, remanufacture or (in the last resort) recycling.

The notion of circularity has deep historical and philosophical origins. 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 unambiguously revealed the complex, interrelated, and therefore unpredictable nature of the world we live in – more akin to metabolism than a machine. 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.

The following are the four essential building blocks of a circular economy identified by me.

1. Circular economy design

Companies need to build core competencies in a circular design to facilitate product reuse, recycling and cascading. Circular product (and process) design requires advanced skills, information sets, and working methods. Areas important for economically successful circular design include material selection, standardised components, designed-to-last products, design for easy end-of-life sorting, separation or reuse of products and materials, and design-for-manufacturing criteria that take into account possible useful applications of by-products and wastes.

2. New business models

The shift to a circular economy requires innovative business models that either replace existing ones or seize new opportunities. Companies with significant market share and capabilities along several vertical steps of the linear value chain could play a major role in circular economy innovation and driving circularity into the mainstream by leveraging their scale and vertical integration. While many new models, materials, and products will come from entrepreneurs, these brand and volume leaders can also play a critical role. Profitable circular economy business models and initiatives will inspire other players and will be copied and expanded geographically.

3. Reverse cycles

New and additional skills are needed for cascades and the final return of materials to the soil or back into the industrial production system. This includes delivery chain logistics, sorting, warehousing, risk management, power generation, and even molecular biology and polymer chemistry. With cost-efficient, better-quality collection and treatment systems, and effective segmentation of end-of-life products, the leakage of materials out of the system will decrease, supporting the economics of circular design.

4. Enablers and favourable system conditions

For widespread reuse of materials and higher resource productivity to become commonplace, market mechanisms will need to play a dominant role, supported by policymakers, educational institutions and popular opinion leaders. These enablers include: Collaboration, rethinking incentives, providing a suitable set of international environmental rules, leading by example and driving upscale fast, Access to financing.

The circular economy concept has deep-rooted origins and cannot be traced back to one single date or author. Its practical applications to modern economic systems and industrial processes, however, have gained momentum since the late 1970s, led by a small number of academics, thought-leaders and businesses.

Cradle to Cradle

German chemist and visionary Michael Braungart went on to develop, together with American architect Bill McDonough, the Cradle to Cradle™ concept and certification process. This design philosophy considers all material involved in industrial and commercial processes to be nutrients, of which there are two main categories: technical and biological. The Cradle to Cradle framework focuses on design for effectiveness in terms of products with a positive impact and reducing the negative impacts of commerce through efficiency.

Cradle to Cradle design perceives the safe and productive processes of nature’s ‘biological metabolism’ as a model for developing a ‘technical metabolism’ flow of industrial materials. Product components can be designed for continuous recovery and re-utilisation as biological and technical nutrients within these metabolisms.

Eliminate the concept of waste. “Waste equals food.” Design products and materials with life cycles that are safe for human health and the environment and that can be reused perpetually through biological and technical metabolisms. Create and participate in systems to collect and recover the value of these materials following their use.

Power with renewable energy. “Use current solar income.” Maximize the use of renewable energy.

Respect human & natural systems. “Celebrate diversity.” Manage water use to maximize quality, promote healthy ecosystems and respect local impacts. Guide operations and stakeholder relationships using social responsibility.

Performance economy

Walter Stahel, architect and industrial analyst, sketched in his 1976 research report to the European Commission 'The Potential for Substituting Manpower for Energy', co-authored with Genevieve Reday, the vision of an economy in loops (or circular economy) and its impact on job creation, economic competitiveness, resource savings, and waste prevention. Credited with having coined the expression “Cradle to Cradle” in the late 1970s, Stahel worked at developing a “closed-loop” approach to production processes and created the Product Life Institute in Geneva more than 25 years ago. It pursues four main goals: product-life extension, long-life goods, reconditioning activities, and waste prevention. It also insists on the importance of selling services rather than products, an idea referred to as the ‘functional service economy’, now more widely subsumed into the notion of ‘performance economy’. Stahel argues that the circular economy should be considered a framework: as a generic notion, the circular economy draws on several more specific approaches that gravitate around a set of basic principles.

Biomimicry

Janine Benyus, author of Biomimicry: Innovation Inspired by Nature, defines her approach as ‘a new discipline that studies nature’s best ideas and then imitates these designs and processes to solve human problems’. Studying a leaf to invent a better solar cell is an example. She thinks of it as ‘innovation inspired by nature’. Biomimicry relies on three key principles:

Nature as a model: Study nature’s models and emulate these forms, process, systems, and strategies to solve human problems.

Nature as a measure: Use an ecological standard to judge the sustainability of our innovations.

Nature as a mentor: View and value nature not based on what we can extract from the natural world, but what we can learn from it.

Industrial Ecology

“Industrial ecology is the study of material and energy flows through industrial systems”. Focusing on connections between operators within the ‘industrial ecosystem’, this approach aims at creating closed-loop processes in which waste serves as an input, thus eliminating the notion of an undesirable by-product. Industrial ecology adopts a systemic point of view, designing production processes in accordance with local ecological constraints whilst looking at their global impact from the outset, and attempting to shape them so they perform as close to living systems as possible. This framework is sometimes referred to as the ‘science of sustainability’, given its interdisciplinary nature, and its principles can also be applied in the services sector. With an emphasis on natural capital restoration, industrial ecology also focuses on social wellbeing.

Natural Capitalism

“Natural capital" refers to the world’s stocks of natural assets including soil, air, water and all living things. In their book “Natural Capitalism: Creating the Next Industrial Revolution”, Paul Hawken, Amory Lovins and L. Hunter Lovins describe a global economy in which business and environmental interests overlap, recognising the interdependencies that exist between the production and use of human-made capital and flows of natural capital. The following four principles underpin natural capitalism:

Radically increase the productivity of natural resources - Through radical changes to design, production and technology, natural resources can be made to last much longer than they currently do. The resulting savings in cost, capital investment and time will help to implement the other principles.

Shift to biologically inspired production models and materials - Natural capitalism seeks to eliminate the concept of waste by modelling closed-loop production systems on nature’s designs where every output is either returned harmlessly to the ecosystem as a nutrient or becomes an input for another manufacturing process.

Move to a “service-and-flow” business model - Providing value as a continuous flow of services rather than the traditional sale-of-goods model aligns the interests of providers and customers in a way that rewards resource productivity.

Reinvest in natural capital - As human needs expand and pressures on the natural capital mount, the need to restore and regenerate natural resources increases.

Blue Economy

Initiated by former Ecover CEO and Belgian businessman Gunter Pauli, the Blue Economy is an open-source movement bringing together concrete case studies, initially compiled in an eponymous report handed over to the Club of Rome. As the official manifesto states, ‘using the resources available in cascading systems, (…) the waste of one product becomes the input to create a new cash flow’. Based on 21 founding principles, the Blue Economy insists on solutions being determined by their local environment and physical/ecological characteristics, putting the emphasis on gravity as the primary source of energy. The report, which doubles up as the movement’s manifesto, describes ‘100 innovations that can create 100 million jobs within the next 10 years’, and provides many examples of winning South-South collaborative projects— another original feature of this approach intent on promoting its hands-on focus.

Regenerative Design

In the US, John T. Lyle started developing ideas on the regenerative design that could be applied to all systems, i.e., beyond agriculture, for which the concept of regeneration had already been formulated earlier. Arguably, he laid the foundations of the circular economy framework, which notably developed and gained notoriety thanks to McDonough (who had studied with Lyle), Braungart and Stahel. Today, the Lyle Center for Regenerative Studies offers courses on the subject.

Green Economy

The Green Economy, defined by the United Nations Environmental Platform (UNEP), is an economy that results in increased well-being and increased social equality, while at the same time greatly reducing environmental risks and ecological scarcity.

Bio-based Economy

A bio-based economy is an economy that does not run on fossil fuels, but an economy that runs on biomass as a raw material. In a biobased economy, it is about the use of biomass for non-food applications.

The donut economy

The donut economy, developed by Oxford economist Kate Raworth, is a model for measuring the earth’s prosperity, based on the Sustainable Development Goals and the planetary boundaries. Many of the planetary boundaries relate directly to ‘unlocked’ cycles, such as those of greenhouse gases, toxic substances, eutrophication, freshwater, aerosols and oxygen radicals.

More than 100 different definitions of the circular economy are used in scientific literature and professional journals. There are so many different definitions in use because the concept is applied by a diverse group of researchers and professionals (Kirchherr, Reike & Hekkert 2017). A philosopher of science emphasizes a different aspect of the concept than a financial analyst. The diversity of definitions also makes it more difficult to make circularity measurable.

Circularity contributes to a more sustainable world, but not all sustainability initiatives contribute to circularity. Circularity focuses on resource cycles, while sustainability is more broadly related to people, the planet and the economy. Circularity and sustainability stand in a long tradition of related visions, models and theories. 

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