Circular Economy: An Attractive Option For The Future

A circular economy is an economic system aimed at eliminating waste and the continual use of resources. Circular systems employ reuse, sharing, repair, refurbishment, remanufacturing and recycling to create a closed-loop system, minimising the use of resource inputs and the creation of waste, pollution and carbon emissions. The circular economy aims to keep products, equipment and infrastructure in use for longer, thus improving the productivity of these resources. Waste materials and energy should become input for other processes: either a component or recovered resource for another industrial process or as regenerative resources for nature (e.g., compost).

The circular economy encompasses a very large number of sectors of activity and can be broken down into 7 complementary patterns of production and consumption which, when combined, make sense and reinforce each other (source: Solar Impulse Foundation):

1. Sustainable procurement: development and implementation of a responsible purchasing policy

2. Ecodesign: the process of reducing the environmental impacts of a product or service throughout its life cycle

3. Industrial and territorial ecology: search for eco-industrial synergies at the scale of a business area - the waste of one company can become the resources of another one

4. Economics of functionality: a collaborative economy that favours use over possession and thus tends to sell services related to products rather than the products themselves

5. Responsible consumption: rational consumption and choice of products according to social and ecological criteria

6. Extending the duration of use: through repair, reuse and repurpose

7. Recycling: treatment and recovery of the materials contained in collected waste

The potential benefits of shifting to a circular economy extend beyond the economy and into the natural environment. By designing out waste and pollution, keeping products and materials in use, and regenerating rather than degrading natural systems, the circular economy represents a powerful contribution to achieving global climate targets.

The first advantage of a circular economy is the protection of the environment, reducing waste and the emissions of greenhouse gases (GHG), systematizing recycling, and ending planned obsolescence. The circular economy also allows decreasing the dependence on the importation of resources (raw materials, water, energy). Another huge benefit of the circular economy is that it stimulates innovation and boost economic growth, and could in the long run enhance the competitiveness of national companies. In addition, the circular economy creates jobs and enables people to save money, cutting unemployment and poverty as well as reducing the social impacts of pollution and climate change.

The circular economy could result in a reduction of primary material consumption (i.e., car and construction materials, real estate land, synthetic fertiliser, pesticides, agricultural water use, fuels, and non-renewable electricity) by 32% by 2030.

GHG emissions would be substantially lower in the circular scenario than in the current scenario. In the built environment, using fewer virgin materials, applying more efficient construction techniques, and reducing electricity use in cooling would reduce GHG emissions by 23% in 2030 and 40% in 2050. In the agricultural system, GHG emissions from land and energy use and production of artificial fertiliser would be 21% lower in 2030 and 31% lower in 2050. Overall, Indian GHG emissions would be 436 million tonnes of CO2 equivalent (Mt CO2e) lower in 2030 and 1,042 Mt CO2e lower in 2050. Reduced consumption of virgin, non-renewable materials and energy. The extraction of virgin materials and the production of energy from non-renewable sources like coal and oil have significant negative environmental externalities, like GHG emissions, toxic materials, and other pollutants leaking into local environments.

Three major challenges in achieving the circular economy.

1. Controlling life cycles efficiently

It is no surprise that many products are hard to disassemble or recycle. Product designers are not waste managers and have no strong reasons to incorporate end-of-life considerations into their products. The circular economy, therefore, requires integrating the entire product life cycle from raw material extraction to disposal (or preferably reuse and recycling). This can be done either through intensive collaboration between companies or single ownership of the product chain.

However, such integration has many disadvantages. First, if companies own the entire life cycle of products, they can easily cross-subsidize different activities, leading to inefficient production and high prices. Similarly, strong collaboration can facilitate cartel-like behaviour. Second, if producers manage the waste of their own products, it may be more difficult to benefit from economies of scale in waste management. Finally, the upfront costs of owning or managing the entire life cycle may be too high for newcomers.

2. Making linked industries resilient 

Sometimes the resource loop cannot be closed within one industry. It is possible to turn plastic bottles into eternity, as closed-loop shows, but many industries will see their waste being used as a resource by other industries. Linking up different production chains creates a web of complex interdependencies that can leave the system very vulnerable to disruptions. Similar complexities and collapses are quite common in other systems.

Many proponents of the circular economy set nature as an example. However, nature is not perfect. The huge complexity of ecosystems means that a change in one variable (say loss in biodiversity) can create a cascade of effects ending in the collapse of the entire system. In the same way, a cascade of events led to the crash of the complex and interlinked financial system, which in turn affected many others sectors. The ramifications of a similar crash in for instance manufacturing would be unpleasant at least.

3. Keeping the environment on the agenda

The conversation among all the participants at the Resource Events was clearly mostly about the economics of the circular economy. The trillion pound opportunity in transitioning to the circular economy – as calculated by the Ellen MacArthur Foundation – was cited extensively. However, it would be silly to forget that resource use is strongly connected to environmental and social issues.

Of course, there is great potential for reducing environmental harm in applying the circularity concept and many proponents of circularity see this as an important argument in favour of the concept. But the exact relationship between circularity that maximizes profits and circularity that minimizes environmental benefits is unclear. If governments want to support the circular economy, they should know what policies are needed to achieve both economic growth and reduced environmental impacts.

Circularity clearly is an attractive option for the future. However, the actual implementation of circularity requires facing some major challenges like, integrating life cycles and industries leads to complex systems that may hamper competition and leave the economy vulnerable to disruptions. Most importantly, the circular economy should not only create monetary benefits but also meet the need for reduced environmental impacts.