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|This article may be too technical for most readers to understand. (September 2014)|
The circular economy is a generic term for an industrial economy that is, by design or intention, restorative and in which material flows are of two types, biological nutrients, designed to reenter the biosphere safely, and technical nutrients, which are designed to circulate at high quality without entering the biosphere.
The term encompasses more than the production and consumption of goods and services, including a shift from fossil fuels to the use of renewable energy, and the role of diversity as a characteristic of resilient and productive systems. It includes discussion of the role of money and finance as part of the wider debate, and some of its pioneers have called for a revamp of economic performance measurement tools.
The circular economy is grounded in the study of feedback rich (non-linear) systems, particularly living systems. A major outcome of this is the notion of optimising systems rather than components, or the notion of ‘design for fit’. As a generic notion it draws from a number of more specific approaches including cradle to cradle, biomimicry, industrial ecology, and the ‘blue economy’. Most frequently described as a framework for thinking, its supporters claim it is a coherent model that has value as part of a response to the end of the era of cheap oil and materials.
This realisation triggered the thought process of a few scientists and thinkers, including Walter R. Stahel, an architect, economist, and a founding father of industrial sustainability. Credited with having coined the expression “Cradle to Cradle” (in contrast with “Cradle to Grave”, illustrating our “Resource to Waste” way of functioning) in the late 1970s, Stahel worked on developing a “closed loop” approach to production processes, co-founding the Product-Life Institute in Geneva more than 25 years ago.
In their 1976 Hannah Reekman research report to the European Commission, "The Potential for Substituting Manpower for Energy", Walter Stahel and Genevieve Reday sketched the vision of an economy in loops (or circular economy) and its impact on job creation, economic competitiveness, resource savings, and waste prevention. The report was published in 1982 as the book Jobs for Tomorrow: The Potential for Substituting Manpower for Energy.
Considered as one of the first pragmatic and credible sustainability think tanks, the main goals of Stahel's institute are 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” and sometimes put under the wider notion of “performance economy” which also advocates “more localisation of economic activity”.
In broader terms, the circular approach is a framework that takes insights from living systems. It considers that our systems should work like organisms, processing nutrients that can be fed back into the cycle—whether biological or technical—hence the “closed loop” or “regenerative” terms usually associated with it.
The generic Circular Economy label can be applied to, and claimed by, several different schools of thought, that all gravitate around the same basic principles which they have refined in different ways. The idea itself, which is centred on taking insights from living systems, is hardly a new one and hence cannot be traced back to one precise date or author, yet its practical applications to modern economic systems and industrial processes have gained momentum since the late 1970s, giving birth to four prominent movements, detailed below. The idea of circular material flows as a model for the economy was presented in 1966 by Kenneth E. Boulding in his paper, The Economics of the Coming Spaceship Earth. Promoting a circular economy was identified as national policy in China’s 11th five-year plan starting in 2006. The Ellen MacArthur Foundation, an independent charity established in 2010, has more recently outlined the economic opportunity of a circular economy. As part of its educational mission, the Foundation has worked to bring together complementary schools of thought and create a coherent framework, thus giving the concept a wide exposure and appeal.
Waste does not exist… the biological and technical components (nutrients) of a product are designed by intention to fit within a materials cycle, designed for disassembly and re-purposing. The biological nutrients are non-toxic and can be simply composted. Technical nutrients – polymers, alloys and other man-made materials are designed to be used again with minimal energy.
Modularity, versatility and adaptiveness are to be prioritised in an uncertain and fast evolving world. Diverse systems, with many connections and scales are more resilient in the face of external shocks, than systems built simply for efficiency.
As in life, any system should ultimately aim to run on ‘current sunshine’ and generate energy through renewable sources.
The ability to understand how things influence one another within a whole. Elements are considered as ‘fitting in’ their infrastructure, environment and social context. Whilst a machine is also a system, systems thinking usually refers to non linear systems: systems where through feedback and imprecise starting conditions the outcome is not necessarily proportional to the input and where evolution of the system is possible : the system can display emergent properties. Examples of these systems are all living systems and any open system such as meteorological systems or ocean currents, even the orbits of the planets have non linear characteristics.
Understanding a system is crucial when trying to decide and plan (corrections) in a system. Missing or misinterpreting the trends, flows, functions of, and human influences on, our socio-ecological systems could result in disastrous results. In order to prevent errors in planning or design an understanding of the system should be applied to the whole and to the details of the plan or design. The Natural Step created a set of systems conditions (or sustainability principles) that can be applied when designing for (parts of) a circular economy to ensure alignment with functions of the socio-ecological system.
The circular economy is a framework that draws upon and encompasses principles from:
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. I think of it as "innovation inspired by nature. Biomimicry relies on three key principles:
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 is seen as input, thus eliminating the notion of undesirable by-product. Industrial ecology adopts a systemic - or holistic - point of view, designing production processes according to 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.
Created by German chemist Michael Braungart and American architect Bill McDonough, the Cradle to Cradle Design model considers that all material involved in industrial and commercial processes can be seen as nutrients, of which there are two main categories: technical and biological. Technical nutrients should include only materials that do not have a negative impact on the environment (so non-harmful synthetic ones are accepted), while Biological nutrients are organic and can be returned to the soil without specific treatment to decompose and eventually become food for the ecosystem. What we need are “completely healthy products that are either returned to the soil or flow back to industry forever”, say McDonough and Braungart.
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 - a point that differentiates this school of thought from the others within the Circular Economy. The report - which doubles as the movement’s manifesto - describes “100 innovations which can create 100 million jobs within the next 10 years”, and provides many example of winning South-South collaborative projects, another original feature of this approach intent on promoting its hands-on focus.
In January 2012, a report was released entitled Towards the Circular Economy: Economic and business rationale for an accelerated transition. The report, commissioned by the Ellen MacArthur Foundation and developed by McKinsey & Company, was the first of its kind to consider the economic and business opportunity for the transition to a restorative, circular model. Using product case studies and economy-wide analysis, the report details the potential for significant benefits across the EU. It argues that a subset of the EU manufacturing sector could realise net materials cost savings worth up to $630 billion p.a. towards 2025—stimulating economic activity in the areas of product development, remanufacturing and refurbishment. Towards the Circular Economy also identified the key building blocks in making the transition to a circular economy, namely in skills in circular design and production, new business models, skills in building cascades and reverse cycles, and cross-cycle/cross-sector collaboration.
On 17 December 2012, the European Commission published a document entitled Manifesto for a Resource Efficient Europe. This manifesto clearly stated that "In a world with growing pressures on resources and the environment, the EU has no choice but to go for the transition to a resource-efficient and ultimately regenerative circular economy." Furthermore, the document highlighted the importance of "a systemic change in the use and recovery of resources in the economy" in ensuring future jobs and competitiveness, and outlined potential pathways to a circular economy, in innovation and investment, regulation, tackling harmful subsidies, increasing opportunities for new business models, and setting clear targets.
In March 2014 the first large scale event for the circular economy was held with over 11,000 attendees from across the globe and all the major stakeholders in attendance. The launch of such an event signals the rise of the topic and it will act as an enabler for business to transition towards more circular business models. This annual large scale event is now growing to represent the uptake of circular economy principles. (see http://www.resource-event.com).