What Is the Circular Economy and Why Should We Care?

The world’s population is expected to reach nearly 10 billion in 2050, according to the United Nations. Yet, the earth’s resources are not limitless. Basic economic principles tell us that more demand, without a simultaneous increase in supply, results in higher prices. While this economic model of price determination is pretty straightforward, it highlights a pressing problem that humanity faces: the scarcity of resources. Our current economy is largely linear – we collect raw materials (take), turn those materials into products (make), use the products (consume), and discard them as waste when we do not need them anymore (dispose). This take-make-consume-dispose approach however is not sustainable.

The Solution

The circular economy is a systemic approach with the aim to eliminate waste and pollution, keep products and materials in use, and regenerate natural systems, according to the Ellen McArthur Foundation. There are several components to a circular economy that make our economic system more sustainable:

  • Maintain, prolong and share: By making products more durable though design, maintenance and repair, and by making products accessible to other users, the need for creating entirely new products that require resource input can be removed.
  • Reuse and redistribute: Certain materials and products, especially technical ones, can be reused multiple times or redistributed to new users. Sometimes, there may be a need to slightly change or enhance a product or material, but online marketplaces like eBay showcase that this is viable and already being done.
  • Remanufacture and refurbish: Both approaches refer to the restoration of the value of products. When a product is remanufactured, it is dissembled and rebuilt, with certain components being replaced when necessary. This results in an as-new condition of the product with the same warranty as an entirely new product. Refurbishment on the other hand refers to a cosmetic process where a product is repaired as much as possible but usually without dissembling it or replacing components.
  • Recycle: Recycling is an already well-known process where a product is reduced to its basic material level that can be used to manufacture new products. However, recycling is a lower-value process compared to the previously mentioned processes. This is because recycling results in a loss of embedded labour and energy, the costs of remaking products entirely are higher, and recycling inevitably results in material losses.
  • Cascades: The Ellen McArthur Foundation describes the cascades process as “[…] putting used materials and components into different uses and extracting, over time, stored energy and material order”. This is done until the material is ultimately returned to the natural environment as nutrients. An example of this, according to the foundation, is a pair of cotton jeans that first is turned into furniture stuffing, then into insulation material, and ultimately returned to the soil as nutrients after being anaerobically digested.

The circular economy promises many benefits for the environment and the whole economy. For example, increasing revenue from circular activities and more productive utilisation of resources may result in overall economic growth. There is also the possibility of job creation across industrial sectors and SMEs, and through increased innovation and entrepreneurship. The environment may benefit from lower carbon dioxide emissions, a reduction of primary material consumption, higher land productivity and enhanced soil health due to more nutritious fertilisers from natural sources rather than chemical ones.

Also, businesses and individuals can benefit from the circular economy. By lowering the cost of remanufacturing and introducing new revenue streams, companies can increase their profits. Also, by using more recycled inputs, a company can reduce the risk of volatile raw material prices. Moreover, the circular economy demands new business services, such as supply chain logistics to support the reintroduction of end-to-end products into the system, and new sales platforms to facilitate longer product use or higher product utilisation.

The Ellen MacArthur Foundation even suggests that a circular economy could result in a €3000 increased disposable income per EU household by 2030. Also, a circular economy could result in products that are better tailored to customer needs, resulting in more choice and higher perceived quality. Moreover, longer-lasting products would increase the convenience for customers since hassles with repairs and returns could be avoided. By introducing a circular economy in the food value chain, healthcare costs could be lowered that are related to pesticide use. Additionally, lower air pollution, lower water contamination, lower antimicrobial resistance and lower foodborne diseases, achieved by a circular economy in the food sector, could save up to 290,000 lives by 2050 that would otherwise be lost due to outdoor air pollution.

The Future

Currently, only 9% of the world economy is circular, according to the Circularity Gap Report 2019. However, the scarcity of resources makes a transition towards a circular economy all the more pressing, especially with a growing global population and other related issues like climate change. Major global brands (e.g. BlackRock, Google, 3M, Heineken, IKEA, McDonald’s, Apple and Microsoft), universities (e.g. UCL, Arizona State University and TU Delft), cities (e.g. Brussels, Milano and Toronto) and governmental bodies (e.g. the Danish Business Authority, the Scottish Government and the Republic of Slovenia) have already opted to learn, share knowledge and put ideas with regards to the Circular Economy into practice by joining the CE100 Network. The circular economy creates exciting opportunities for companies, organisations, the public sector and entrepreneurs alike, and it is likely that we will see a variety of innovative circular economy initiatives on both local and global scale in the not-so-distant future.

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