Closing the Loop on the Circular Economy

“Circular Economy” is a relatively new buzz-term in the field of sustainability. What is it? It’s pretty simple: nothing is wasted. In a circular economy, everything produced through economic activity must be transferred and used somewhere else, continuously. Three principles guide this approach: firstly, design out waste and pollution; secondly, keep products and materials in use; and thirdly, regenerate natural systems. Another way to think about a circular economy is one in which ownership is relinquished and goods are rented and leased as they cycle through the system.

Within a circular economy, there are multiple loops or cycles that correspond to varying degrees of efficiency. The inner loop(s) is where design will have a significant role to play in creating direct feedback paths throughout a product’s lifetime. Inner loops include remanufacturing – essentially the restoration of a product so that it is nearly as good as new. Another inner loop is reuse, which includes using goods from a second-hand store. A most efficient inner loop would include maintenance and more intensive use of a product in order to reduce the overall quantity of the item required (think Zipcar). The outer loop, sometimes called the ‘loop of last resort,’ is one that we are already familiar with: recycling. While recycling can preserve the basic materials that a product is made from, it does not preserve other resources that were used to make that item, such as labor.

Current Status

In the context of extreme action that is needed to meet international climate goals, progress on implementing a circular economy is slow. The European Commission has been working towards a circular economy since at least 2014, when it adopted a zero-waste program. Specific goals include recycling 70 percent of municipal waste by 2030. Its last update was in January 2018, which included adding a strategy for plastic and a monitoring framework for the overall strategy. In the United States, the U.S. Chamber of Commerce Foundation has taken a lead in this field, hosting an annual Circular Economy Summit since 2015. While it is commendable that the circular economy has gained momentum in these places over the last five years, its potential role in economic growth and sustainability has been undervalued.

The idea of a circular economy gained greater recognition during the past year’s annual climate negotiations, COP24, in Katowice, Poland. A handful of governments and companies presented their lessons learned for implementing a circular economy in the hope of inspiring others into action. One of the main takeaways from the presentation was that cities are a major place of opportunity. Much like broader sustainability action nowadays, broad-reaching progress often takes place at the grassroots level, such as in cities.

The movement to understand the economy as circular, rather than linear,  is already growing organically as a broader part of innovation. What were previously considered products are now sold as services. Netflix and Lyft eliminate the need to buy DVDs or a car, respectively. Thinking of goods as services instead also removes company incentives to build in ‘planned obsolescence’ so that a consumer will need to purchase more in the future. This shift in mindset allows companies to invest for long-term sustainability.

Inching Ahead

The concept of a circular economy might be simple, but it implies redesigning the entire economy. This transition away from a linear model, where the birth and death of a product are not linked, faces several important barriers. The largest, overarching barrier is cultural: namely, it relates to the way we think about the structure of our economy. There is currently an emphasis on acquiring more and more things, in some countries as a way to demonstrate social status, in others a natural effect of rapid development. Consumer expectations for convenience, including rapid disposal of products, further compound the problem. For example, McKinsey found that from 2000 to 2014, the average consumer bought 60% more clothing but used it for half as long.

As culture slowly catches up to the mentality required for a circular economy, technological progress is also required. Currently, the equipment doesn’t exist and/or is not available at competitive prices to recycle or remanufacture goods. For instance, there are so many different forms of plastic that it takes advanced technology to sort through and process them.

While no entire economy has been redesigned to fit the definition of a circular economy, there are numerous examples of circular ‘ecosystems.’ One such example is Chicago’s The Plant, where 16 food enterprises divert 10,000 tons of food waste each year, while simultaneously decreasing the demand for natural gas within these enterprises. Similarly, the Kalundborg Symbiosis in Denmark consists of nine public and private companies who exchange energy, water, and other materials in an essentially-closed loop.

The leisurely pace at which the circular economy concept is reaching economy-wide scales is a lost opportunity for overall economic growth. In addition to significant emissions reduction potential, estimates of the impact of a circular economy in certain countries, such as India, indicate an additional USD 218 billion in economic value could be added by 2030. Failing to accelerate this game-changing economic transformation would mean leaving billions of dollars on the table, as well as adding otherwise unnecessary emissions to an already tight carbon budget.


Image courtesy of Flickr. Originally published by S&S on March 7, 2019.

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