Five ideas that demystify the circular economy

Much of the mater­i­als, water, or energy that we pro­duce today is either lost, wasted, or dis­carded from the eco­nom­ic sys­tem even though they still have value. A cir­cu­lar eco­nomy mod­el ques­tions how that value can be retained or even cre­ated from resources – that would, under oth­er cir­cum­stances, be lost or wasted – through reduc­tion, reusing, repair­ing, reman­u­fac­tur­ing, recyc­ling and recov­er­ing of these resources. Hence, a cir­cu­lar eco­nomy is an oppor­tun­ity to rebrand unwanted waste and losses into valu­able resources.

Let’s re-estab­lish the truth around a com­mon mis­con­cep­tion: cir­cu­lar eco­nomy is not a nov­el revolu­tion­ary idea. As far back as 1966, the eco­nom­ist Ken­neth Bould­ing defined what we can qual­i­fy as the embryon­ic notion of cir­cu­lar eco­nomy. In his essay, “The Eco­nom­ics of the Com­ing Space­ship Earth,” he describes an eco­nomy of the past as one with seem­ingly unlim­ited resources, reck­less and exploit­at­ive beha­viour of extrac­tion, pro­duc­tion, and con­sump­tion. He com­pares it to a closed eco­nomy of the future, which he calls: the “space­man” economy.

In a space­man eco­nomy, “the Earth has become a single space­ship, without unlim­ited reser­voirs of any­thing, either for extrac­tion or for pol­lu­tion, and in which, there­fore, man must find his place in a cyc­lic­al eco­lo­gic­al sys­tem which is cap­able of con­tinu­ous repro­duc­tion of mater­i­al form even though it can­not escape hav­ing inputs of energy.” Also, in 1990 the term cir­cu­lar eco­nomy was expli­citly coined in an envir­on­ment­al eco­nom­ics book¹ and in the Chinese law pro­mot­ing cir­cu­lar eco­nomy². 

The Ellen MacAr­thur Found­a­tion (EMF) and the con­sult­ing firm McKin­sey joined forces to strengthen the argu­ment for the solu­tion pro­posed by the cir­cu­lar eco­nomy to the prob­lems cre­ated by the lin­ear eco­nomy. They stag­ger­ingly suc­ceeded in embark­ing a wide pan­el of eco­nom­ic act­ors and poli­cy­makers through a well branded and attract­ive dis­course, clear visu­al rep­res­ent­a­tions of cir­cu­lar bio­lo­gic­al and tech­nic­al fluxes, can­vas, and con­crete models.

As such, cir­cu­lar eco­nomy was then per­ceived as a way out of the eco­nom­ic crisis of 2010. Back then, the eco­nom­ic sphere suffered from the soar­ing prices of raw mater­i­als due to the high demand inflic­ted by the Chinese eco­nom­ic devel­op­ment, the glob­al embargo by China on rare metals, and the glob­al envir­on­ment­al degrad­a­tion and dam­ages trans­lated by con­crete indic­at­ors and proofs³. Oth­er insti­tu­tions fol­lowed the lead of the EMF and star­ted intro­du­cing their own per­cep­tions and defin­i­tions for cir­cu­lar eco­nomy⁴, such as the French Agency for Eco­lo­gic­al Trans­ition (ADEME). To date, there are more than 100 defin­i­tions car­ry­ing dif­fer­ent mean­ings⁵!

A cir­cu­lar eco­nomy where waste no longer exists, and all resources are indef­in­itely val­ued is unreal­ist­ic. In any prag­mat­ic sys­tem, it is impossible to have per­fectly closed resource loops con­tain­ing indef­in­itely recycled or recyc­lable mater­i­als and entirely recovered dis­sip­ated energy due to ther­mo­dy­nam­ics con­straints⁶.

A cir­cu­lar eco­nomy is an oppor­tun­ity to rebrand unwanted waste and losses into valu­able resources.

In fact, there are lim­it­a­tions in mater­i­al prop­er­ties lead­ing to unavoid­able wear and tear⁷. For example,  due to mater­i­al fatigue after use, the recyc­ling of alu­mini­um is lim­ited to a num­ber of cycles, and to ensure it meets qual­ity stand­ards, the addi­tion of approx­im­ately 5 % pure vir­gin alu­mini­um is required⁸. Also, mul­tiple plastic recyc­ling cycles reduce the poly­mer chains they con­tain, which degrades qual­ity⁹. There are also lim­it­a­tions in tech­no­lo­gies lead­ing to inev­it­able dis­sip­a­tion in the envir­on­ment, pos­sible con­tam­in­a­tion, and retain­ing of haz­ard­ous sub­stances in the eco­nomy when enga­ging in cir­cu­lar eco­nomy activ­it­ies.  Illus­trat­ive examples of this issue are sludges from indus­tri­al waste waters, that con­tain nutri­ents like phos­phor­us, and incin­er­a­tion bot­tom ashes con­tain­ing scrap metals. They can respect­ively be used as fer­til­izers and con­struc­tion aggreg­ates whilst avoid­ing the extrac­tion of vir­gin mater­i­als such as min­er­al fer­til­izers and gravels. How­ever, their level of pol­lut­ants is high­er than the tra­di­tion­al mater­i­al they replace¹⁰. These factors make it hard for com­pan­ies to replace well-func­tion­ing value chains with primary resources with waste as a resource from cir­cu­lar activity.

Con­cern­ing energy, it is in con­stant need across the world. And, while we can cap­ture, trans­form, and trans­port it, each of these oper­a­tions in turn con­sumes energy with the avail­able tech­no­lo­gies we have¹¹. Hence, hav­ing closed energy loops without addi­tion­al inputs of energy is con­sequently unfeas­ible in the fore­see­able future.

Numer­ous bene­fits can be asso­ci­ated with cir­cu­lar eco­nomy prin­ciples – namely, a reduc­tion in the extrac­tion of primary resources and waste cre­ation. How­ever, for many research­ers, there is still sig­ni­fic­ant uncer­tainty on the con­crete pos­it­ive envir­on­ment­al and social impact of cir­cu­lar eco­nomy. Some argue that imple­ment­ing cir­cu­lar strategies does not by default dimin­ish envir­on­ment­al impact¹² for a simple reas­on: The Rebound Effect (Jevon’s Para­dox). It  hap­pens “when cir­cu­lar activ­it­ies, which have lower per-unit-pro­duc­tion impacts, also cause increased levels of pro­duc­tion, redu­cing their bene­fits.”¹³

The ‘Cir­cu­lar Rebound Effect’ hap­pens when cir­cu­lar activ­it­ies, which have lower per-unit-pro­duc­tion impacts, also cause increased levels of pro­duc­tion, redu­cing their benefits.

Dif­fer­ent mech­an­isms can lead to a cir­cu­lar rebound effect¹⁴. For example, when sec­ond­ary products (from upcyc­ling, reusing, reman­u­fac­tur­ing, or recyc­ling activ­it­ies) are not adequate sub­sti­tutes to primary products (products man­u­fac­tured using vir­gin mater­i­als). A recent study showed that a com­pany selling upcycled marble slabs gen­er­ated an addi­tion­al envir­on­ment­al impact equal to 13.2% of the emis­sion sav­ings expec­ted¹⁵. The sec­ond­ary product being inad­equate for the mar­ket, it was not able to draw cus­tom­ers away from the primary product. Anoth­er mech­an­ism trig­ger­ing rebound effect is cli­ents’ beha­viour such as increased con­sump­tion or use. In the United States, research­ers showed that smart­phone reuse gen­er­ated a rebound effect that off­sets from 30 to 45 % of the expec­ted emis­sions sav­ings¹⁶. As such, avoid­ing these rebound effects requires eco­sys­tem­ic think­ing to keep an eye on the full picture.

Fur­ther­more, con­cerns are being raised about the social costs of a cir­cu­lar eco­nomy. Bad work­ing con­di­tions, power asym­met­ries, issues of equity and inclu­sion may be over­looked¹⁷.  Examples of this involve jobs in col­lect­ing and sort­ing recyc­ling con­tent, and repair­ing activ­it­ies under­taken by socially mar­gin­al­ized groups. Stud­ies estim­ated that in 2016 approx­im­ately 58% of all plastic recycled glob­ally was col­lec­ted by the inform­al sec­tor¹⁸¹⁹, often oper­at­ing in unsafe con­di­tions and without employ­ment bene­fits²⁰²¹. This leads to weak cir­cu­lar­ity²² exclud­ing social respons­ib­il­ity and rein­for­cing unequal power relations.

There­fore, pro­fes­sion­als are devel­op­ing indic­at­ors and met­rics allow­ing man­aging the deploy­ment of cir­cu­lar prac­tices and assess­ing their actu­al impact²³²⁴²⁵. The object­ive is to make it less easy to make unfoun­ded state­ments on the cir­cu­lar eco­nomy and bring real issues raised by the transition.

The meta­phor of the circle is a power­ful tool. It helps com­pan­ies rethink the way they pro­duce and the way we con­sume. It trig­gers cre­at­ive think­ing and fosters cooper­a­tion between eco­nom­ic act­ors to cre­ate bright solu­tions. It can be done through new part­ner­ships, man­age­ment indic­at­ors, meth­ods of eco-design, frugal con­cep­tion of mater­i­als and energy use, cri­ter­ia for per­form­ance eval­u­ation and value cre­ation²⁶.

Ulti­mately, the issue raised is how to stim­u­late cooper­a­tion not only with­in com­pan­ies and entire indus­tries, but also with gov­ern­ments and poli­cy­makers to make it hap­pen.  It is time for pro­du­cers and the state to reclaim the idea of strong cir­cu­lar­ity based on “a closed, mater­i­al loop lim­ited in size and space, embed­ding the prin­ciple of fair dis­tri­bu­tion of resources”²⁷. It is time to push aside false hopes and prom­ises of the uto­pi­an cir­cu­lar eco­nomy and provide care­ful explan­a­tions of its lim­its and cocre­at­ing aus­pi­cious con­di­tions to imple­ment it successfully.

Farah Doumit