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The future of business is circular, and there’s no room for waste in it. The new circular economy program aims to bring circularity into the heart of business leadership and practice.
But what is Circular Economy?
The circular economy is a model of production and consumption, which involves sharing, leasing, reusing, repairing, refurbishing and recycling existing materials and products as long as possible. In this way, the life cycle of products is extended.
In practice, it implies reducing waste to a minimum level. When a product reaches the end of its life, its materials are kept within the economy wherever possible. These can be productively used again and again, thereby creating further value.
Looking beyond the current take-make-waste extractive industrial model, a circular economy aims to redefine growth, focusing on positive society-wide benefits. It entails gradually decoupling economic activity from the consumption of finite resources and designing waste out of the system. Underpinned by a transition to renewable energy sources, the circular model builds economic, natural, and social capital. It is based on three principles:
- Design out waste and pollution
- Keep products and materials in use
- Regenerate natural systems
Let’s see the concept of a circular economy
- In a circular economy, economic activity builds and rebuilds overall system health. The concept recognizes the importance of the economy needing to work effectively at all scales – for large and small businesses, for organizations and individuals, globally and locally.
- Transitioning to a circular economy does not only amount to adjustments aimed at reducing the negative impacts of the linear economy. Rather, it represents a systemic shift that builds long-term resilience, generates business and economic opportunities, and provides environmental and societal benefits.
Technical and biological cycles
- The model distinguishes between technical and biological cycles. Consumption happens only in biological cycles, where food and biologically-based materials (such as cotton or wood) are designed to feedback into the system through processes like composting and anaerobic digestion. These cycles regenerate living systems, such as soil, which provide renewable resources for the economy. Technical cycles recover and restore products, components, and materials through strategies like reuse, repair, remanufacture or (in the last resort) recycling.
Origins of the circular economy concept
- The notion of circularity has deep historical and philosophical origins. The idea of feedback, of cycles in real-world systems, is ancient and has echoes in various schools of philosophy. It enjoyed a revival in industrialized countries after World War II when the advent of computer-based studies of non-linear systems unambiguously revealed the complex, interrelated and therefore unpredictable nature of the world we live in – more akin to metabolism than a machine. With current advances, digital technology has the power to support the transition to a circular economy by radically increasing virtualization, de-materialization, transparency, and feedback-driven intelligence.
- A circular economy is an industrial system that is restorative or regenerative by intention and design. 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 return to the biosphere, and aims for the elimination of waste through the superior design of materials, products, systems, and business models.
- Such an economy is based on a few simple principles.
- At its core, a circular economy aims to design out waste. Waste does not exist: products are designed and optimized for a cycle of disassembly and reuse. This tight component and product cycles define the circular economy and set it apart from disposal and even recycling, where large amounts of embedded energy and labour are lost.
- Circularity introduces a strict differentiation between consumable and durable components of a product. Unlike today, consumables in the circular economy are largely made of biological ingredients or ‘nutrients’ that are at least non-toxic and possibly even beneficial, and can safely be returned to the biosphere, either directly or in a cascade of consecutive uses. Durables such as engines or computers, on the other hand, are made of technical nutrients unsuitable for the biosphere, such as metals and most plastics. These are designed from the start for reuse, and products subject to rapid technological advancements are designed for an upgrade.
- The energy required to fuel this cycle should be renewable by nature, again to decrease resource dependence and increase systems resilience (to oil shocks, for example).
Let’s see, why do we need to switch to a circular economy?
The world’s population is growing and with it the demand for raw materials. However, the supply of crucial raw materials is limited.
We need to transform systems across the global economy to ensure that in 2050 more than nine billion people can live well within the limits of our planet. We must see raised ambition across businesses and governments to scale up climate action towards a carbon-neutral economy.
The urgency is clear: business, government, and civil society must go further, faster to avoid detrimental impacts to people and the planet.
How to switch?
What was previously viewed as waste now has value. However, those ecosystems are complex and include many interdependencies and feedback loops. Digital technology has the potential to provide visibility and enable improved decision-making when it comes to raw materials and services. Already, 35% of companies believe that digital technology will be a key enabler for their circular economy strategies, but very few are leveraging the technology for this purpose yet.”
2020 is the “super year” for climate and many more sustainability-related ambitions including food, nature and the SDGs in general. It will be a defining year if we want to save our planet.
Combating climate change and transforming the energy system are core challenges on the path to a sustainable future for business, society and the environment.
Let’s see benefits out of Circular Economy:
Moving towards a more circular economy could deliver benefits such as reducing pressure on the environment, improving the security of the supply of raw materials, increasing competitiveness, stimulating innovation, boosting economic growth, creating jobs.
Businesses will be capable to capture more value from their materials and resources and also build loyalty with their customer base. Consumers will also be provided with more durable and innovative products that will increase the quality of life and save them money in the long term.
Circular business advantage offers a pathway for both large and small organizations to identify, capture and retain additional revenues or reduce costs while meeting customer demands in new ways. This can lead to relative decoupling of resource use and through lowered costs of access and ownership which benefits economic growth.
Using the tools of a circular economy offers all organizations a lasting advantage by combining more productive ways of doing things while engaging in more system-wide activity: ‘feeding the forest’ and not just ‘doing less harm’.