023 The Circular Economy

Impact Revolution

The circular economy is a fascinating concept: it is a way to reorganise our society in a more sustainable way that creates a win-win-win situation for consumers, producers and the environment. I’m a huge fan myself and believe that everyone interested on sustainability topics should know something about the circular transformation. And that's why this episode is dedicated to circularity!

So what is this circular economy?

As it’s name suggests, the circular economy reorganises our economic system in continuous circles, or loops. It is built on Michael Braungart and William McDonough’s principle of “cradle to cradle”, the understanding that all resources shall be used and reused over and over again. By seeing waste as food for new things, the circular economy eliminates the idea of trash as we know it, and sees every component as valuable even after the life cycle of its original use is over. And of course, the circualr economy uses renewable energy sources of greener production, too.

The circular ecocnomy uses a methodology called biomimicry, which basically means imitating nature. Think about it: in nature, waste simply doesnt exist, everyhing is one ecosystem. If a tree produces an apple, it gets eaten and digested by an animal, then pooped out somewhere else where a new plant can grow. Each leave that falls down or animal that dies will naturally decompose into healthy soil. Landfills, and the accumulation of resources that find no further use are a fairly stupid invention of human beings that have never before existed in the natural environment.

Why do we need a circular system?

There is a strong connection between globalization, our spike in consumption and climate change: In the last century, the world population has quadrupled and our economic output was multiplied by twenty, and we’re now stretching far beyond what our planet can naturally provide.

Last year, human production and consumption already needed 1.7 earths to recover all the resources we used - this means we are irreversibly damaging the natural ecosystem. On top, our waste generation is getting out of hand, household trash alone is expected to double and reach 3,000 million tons per year in 2030.

And as the population keeps rising, so does the amount of people entering the middle class and aspriring the western lifestyle - so increasing the demand for cars, meat, devices, clothes and so on, or to put it simply: stretching our resource extraction and waste generation even more.

It's not only the amount of resources and products we consume and the trash we generate, it is also the way we do it.

We buy, use, and throw away, we make, take and dispose. Every few months, it seems, we need a new cellphone, every few weeks new clothes. And what happens with our stuff after we use it is something we barely think about - all that matters is to be always up to date.

Global supply chains make us forget where our products even come from, how they work and how we could repair them. On top, products are often engineered in a way that is neither made to last nor to repair, a strategy called built-in obsolescence.

The cost for the environment of our linear economy is huge: Just the electronic waste we produce in Europe per year amount to 1.500 million tons of co2, as much as the energy production in Germany, the UK and Poland together, as the European Environmental Buerau calculates.

As Ken Webster, one of the leading economists of the Ellen McArthur foundation, points out, the linear "take, make dispose" model is based on on short-term profitability and dependent on the abundance of materials, easy credit, low-priced energy and cheap labour. However, all of these factors are becoming more and more expensive due to legislations, economic development, increasing labour right awareness and learnings from the global financial crisis.

Changing the way we make things

The circular economy on the other hand frees itself from the dependency of such factors by redesigning production and consumption.

As Hawken, Lovens and Lovens describe in their book Natural Capitalism, increasing natural productivity and moving from a product- to a service based economy are some ways to realise the circular economy. It provides us with an opportunity to source from materials that are already available and engage in new sorts of innovation. This way, we can alleviate many of the previously mentioned pressures on the natural environment: it reduces virgin resource usage, carbon emissions, waste creation and the release of toxins.

Creating a win-win-win situation

he fantastic news is that the circular economy can provide a win-win-win situation: companies can grow their profits, customers save costs and the environment become more sustainable. McKinsey has calculated that circular economy has the potential to generate annual economic benefits of €1.8 trillion by 2030 in Europe alone. Even though you might think that we Europeans are not doing not such a bad job in recycling, research shows that we currently capture only 5% of raw materials this way - that leaves a 95% opportunity for improvement and value creation!

Also, the circular economy can provide new jobs and improve the overall wellbeing of everyone in society. They further estimate that each of us Europeans could save 60-80% in mobility expenses, reduce our food spending by 25-40% and also decrease our housing costs by 25-35%. In this way, fighting climate change could not only improve the water and air around us, but also give us more money to spend on things we really like. Isn’t that good news?

How to make it happen

One of the main barriers of implementing the circular economy are high economic investments from the public sector to guarantee necessary research, design, subsidies, asset investment as well as digital and physical infrastructure. The British government has calculated that on a european level, a fully efficient reuse and recycling system would require costs of €108 billion. Reality looks different: the European Commission only commits to around 6 billion euro for this program.

And apart from sufficient financing, both business and policy leaders must adopt a different mentality to think about production, product lifecycles and material usage and shift their focus from short-term profitability (or election periods) to sustainability and success in the long term. We as customers must understand and demand circular products, make switches and refuse the comfort of their current disposable lifestyle .

Furthermore, business and policy must show willingness to collaborate rather than compete, as knowledge sharing is one of the key elements of the circular economy: there needs to be an active exchange of skills, technologies and research in order to create system-wide loops and facilitate the composition, decomposition and new assembly of a variety of products. I’ve spoken about the benefits of an open source circular economy with economist and artist Lars Zimmerman, in an earlier episode of Impact Revolution.

Also, states must provide necessary infrastructure to facilitate the flow of materials, such as recycling facilities, sorting and collection systems and give access to all actors along the supply chain, including the end-user. That means that it should become easy for you as a consumer to get rid of the things you no longer use and disassemble them into their reusable components.

Circular solutions already exist

Let me give you some examples of circular solutions that area already out there!

1) Recycle and recover

These are business models based on recyclable materials which we usually see as waste. Its a very important step for greener production, as the extraction of raw resources can take around 75% of the whole energy necessary in the manufacturing process. Examples here are streets built out of plastic waste and a British brewery that uses old bread to make delicious beer. What a solution to food waste!

2) Replace materials

The Circular supply chain tries to find alternatives for rare or environmentally harmful resources, such as smartphone components or water-intense cotton and replace them with renewable, reusable materials. These are companies that make rain jackets out of pet bottles or grow vegan leather out of mushrooms.

3) Make it last

Here it is imporatant to increase the lifetime of each product. We usually throw things away becasue they break, they become out of fashion or we simply do’t need them anymore. In each of those cases, there is still some value in the product, so we need to find ways to make it easier to reuse, repair, sell second hand and update products that are already there. Secondly, companies should take the end of the product life into account by making decomposion of products as easy as possible.

4) Share

Sharing platforms are a big deal in the circular economy - and something our generation loves! I probably won’t have to tell anyone how airbnb or carsharing works and in which way it improves our resource consumption, but have you ever heard of a library of things where you can rent electric drills or lawnmowers? The digitalisation makes it so much easier to connect and share with others, especially since we use 80% of the things we own less than once a month.

5) Services, not products

Connected to the sharing economy are models where the producers remain the owner of what they make, and merely rent it out to the end users. Philips now sells light as service to buildings instead of light bulbs, which drastically shifts the objectives of their engineers and sales people. Instead of focusing at high quantity and lower quality, engineers now have to create the best and most durable bulbs, and suddenly energy efficiency of their products reflects directly on the company’s balance sheet. And even if a product fails, it goes back directly to the producer, becomes his responsibility and available for repair or reuse. See the difference?

There is hope

This podcast episode should be able to give you the basics of the circular economy, make you learn why it makes so much sense and in which way it would be possible to realise. One of the most powerful characteristics of this model is the win-win-win situation it describes, and to me the fact that both governments and corporations, as well as many entrepreneurs are already working on creating circular products and processes is a clear symbol that we're on the right way. Let's use the power we have through our purchasing decisions and support anyone in transition to this model!

If you have any further questions on this, please get in touch! You can reach me on Facebook (https://www.facebook.com/theimpactrevolution/) and Instagram (instagram.com/impact_revolution/) - I'm excited to read your messages.

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