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The Circular Economy: Another ‘Industrial Revolution’?

The Circular Economy: Another ‘Industrial Revolution’?

The big boys who meet at the annual World Economic Forum at Davos aren’t really into warm fuzzy ideas. For them, money talks and bullshit walks. So the fact that they started talking about the circular economy at their meeting in January this year was a pretty good indicator that the idea has become mainstream – meaning that it pays. There is talk of it being worth a trillion dollars per annum (1.4% of global GDP) and it is the subject of next month’s Green Week – ‘the biggest annual conference on European environment policy’. So what is this circular economy that they are talking so effusively about?

The circular economy is best understood by considering what it isn’t. It isn’t the linear ‘take-make-dispose’ economy that we have become accustomed to where stuff is taken from the earth made into something and then discarded. According to the circular economy’s leading proponent, the Ellen MacArther Foundation:

It replaces the ‘end-of-life’ concept with restoration, shifts towards the use of renewable energy, eliminates the use of toxic chemicals, which impair reuse, and aims for the elimination of waste through the superior design of materials, products, systems, and, within this, business models. (See their full reports here)

So it’s a little bit about reuse, a bit about recycling and a lot about the business model. In fact this last characteristic is perhaps the most important element – certainly as far as consumer goods are concerned. The shift towards a circular economy will see consumers involved in ‘collaborative consumption’ and increasingly buying access to services rather than ownership over goods. So you might buy ‘light hours’ rather than bulbs, or hire a washing machine in perpetuity from someone like the Dutch startup Turntoo who have hitched their wagon to the circular economy. And imagine simply updating the software on your phone rather than trashing it and ‘upgrading’. It is not particularly radical.

Such a model of consumption promotes product stewardship – giving producers the incentive to manufacture robust, long lasting products – whereas the current linear model incentivizes the building of obsolescence into goods. So the circular economy fundamentally challenges the linear status quo that relies on products being cheap enough that consumers are happy to discard them when broken. But there is nothing particularly new here either.

My recently deceased neighbor, born during the Great War, grew up milking cows barefoot on frosty mornings wearing clothes made by her mother from reused flour sacs – “We were poor. My old mum never wasted a thing”. So the Davos club, in coveting their trillion dollar circular economy, is merely injecting a bit of good ole frugality into twenty first century capitalism.

And the La San Marco espresso machine that graces this page (and my kitchen bench) is an exemplar of the circular economy. Four years ago a friend dug it out of his shed and gave it to me, insisting that it was a better means of caffeine delivery than my little travelling Italian stove top. He had purchased it for a couple of dollars from the ‘recycling’ shop that has a contract to collect reusables from the rubbish dump. When I disemboweled it recently to conduct some running repairs I learnt that it had been manufactured in 1993 (and its quality had been assured by Guido). It is still going strong, yet was only narrowly saved from its grave by the circular economy. Importantly its robust build – the designer and Guido clearly forgot about obsolescence – meant that it was possible for it to remain in circulation.

Circulation is vital because the earth is finite and the ‘eco-system services’ that it offers are under a great deal of stress. The new frugality of the Davos club is part of a growing recognition of the importance of resource efficiency both as an economic and environmental concept. We will explore this other side of the circular economy – resource efficiency – in more depth in the coming weeks.

3 comments

  • Hi Dave, thanks for your marvellous articles published in the last couple of months. I have read and enjoyed every single one of them and I totally agree with most points you state.
    If you allow me to add some comments on today’s article, it’s the first time that there are some fundamental thoughts I feel the need to express 🙂

    There is a homo oeconomicus in all of us
    It is not necessarily a bad thing to “make money”. Actually, I would even go so far as to state that the motivation to yield an economic advantage is more intrinsic to humans than anything else.
    We should question the way we make business rather than questioning making business as a whole. What I find most interesting is how to combine the economic perspective with respecting ethical values and environmental limits. And that’s exactly what the circular economy deals with.
    As I wrote in the introduction to my article “26 Life-Cycle-Based Business Strategies that Matter”:

    We’ve all heard of the sharing economy. We’re all aware of the need for double decoupling. We all know that our resource consumption needs to drop drastically. But still, nothing is less disputed than our enjoyment of more money, be it a raise, a growing business or an increasing GDP. Isn’t that contradictory?

    The answer is hidden somewhere in between 26 examples that show how the right business model increases both financial and resource efficiency at the same time. Decoupling resource use from economic growth, as grandmaster Weizsäcker proclaims in “factor 5”, showing that a 5-fold increase in efficiency is not delusional at all.

    Back to the roots
    For the longest time, mankind has already had a circular economy. Before the first industrial revolution, most products we used were reuseable and repairable, most materials we used were biodegradable, and most energy renewable. Why? Because material and energy were scarce, like your neighbor has experienced. Then our science and our economy went through all the well-known steps of industrialization and innovation that made today’s products so cheap, that made us so rich, and our life style so unsustainable. Thus, today’s challenge is combining both worlds – today’s freedom of choice, today’s comfort, today’s health with yesterday’s modesty, yesterday’s efficiency and yesterday’s consistency with natural cycles.
    And here’s one more publication definitely worth a read, showing “how civilization can reduce its material need without compromising the comfort level we’ve gotten used to (and citizens of emerging economies strive to get used to, too)” using the example of global aluminum and steel consumption: 6 Options to Maintain Current Lifestyles with Far Less Raw Materials: “With Both Eyes Open”.

    Ecodesign, sharing economy, waste prevention
    I am totally looking forward to the next articles when you dive into the world of the circular economy. In the meantime, let me highlight the most important findings I made in two years of blogging on this topic:
    For any kind of circular economy to work, products must not only have a long life time (as you write correctly), but also be designed for easy disassembly to replace parts or to discard/recycle each homogenous material separately. This is achieved by adapting the principles of ecodesign. For embedding ecodesign, there exist numerous political instruments already; however, the only thing these instruments have in common, is their lack of international harmonization. According to one study, ecodesign can save up to 80% of a product’s environmental impact.

    There’ll always be leftovers

    Reduce, Reuse, Recycle – the waste imperative is as clear as it can get. What’s less clear, however, is what we should we do with the remaining stuff. Even the greenest society is, at a certain point, confronted with the unusable leftovers of consumption. (…) What should happen to these? Treatment of the leftovers is a well discussed question and the answer relies on three big alternatives: incineration, dumping and composting. All three have pros and cons, some of which are apparent, others rather surprising.

    Find a detailed LCA-based comparison here.

    …and there also is a modest in all of us…
    Don’t get me wrong, I do sympathize with the modesty proclaimed by post growth and sufficiency approaches. However, as much as it is our duty being a resonsible individual citizen to limit ourselves and to take responsibility for future generations, it is also inherent to companies to make money, as in growing. Hence, im my humble opinion, the key to success lies in “A Balanced Mix of Technologies and Strategies”.

    Looking forward to your next articles! In the meantime, cheers to the espresso machine that empowers your productivity and creativity so staunchly – we should all have a 1993 San Marco…

  • Thanks Moritz – I appreciate your kind words and the thoughtful analysis that builds upon my very rudimentary circular economy sketch. It’s a massive topic whose boundaries are so wide that we could just about call it ‘sustainability’.
    Anyway, the comments you make about the virtues of ‘making money’ ultimately represent an ideological position. You are most welcome to this position. But my remarks about Davos and bullshit talking were not a critique of this ideology – I really don’t think it’s relevant to the subject matter. All that I hoped to do by noting the embrace of the circular economy by the Davos class was to buttress the circular economy’s foundations. If Davos thinks that it will work economically then the hard work of marketing it is done – without recourse to such abstract fields as ethics or science.

  • And a couple more words on the idea of making money – from none other than the great American economist J.K. Galbraith who commenced his classic 1958 work The Affluent Society with the following memorable sentence:

    “Wealth is not without its advantages and the case to the contrary although it has often been made, has never proved widely persuasive.”

    But then his second sentence reads:

    “But, beyond doubt, wealth is the relentless enemy of understanding.”