Ten things you need to know about the circular economy

29 July 2014

The circular economy could be a practical solution to the emerging resource problems we face. Inspired by one of the best articles we’ve come across recently, please read on to find out ten facts you should know about the circular economy.

A circular economy – one where companies manage all resources as valuable assets – is more than just recycling. In many instances recycling may be better than linear disposal options, but not all recycling solutions are equal, nor should recycling be prioritised above interventions further up the waste hierarchy.

“To be really effective we need to avoid the creation of ‘waste’ in the first place. This can be achieved through more effective and thoughtful product design. These ‘top of pipe’ solutions must be considered if we are to have a truly circular economy,” says Paul Evans, CEO, WasteMinz, Strategic Partner of SBN work stream ‘Accelerating the Circular Economy in NZ’.

Here are 10 key things you need to know about the circular economy, a shortened version of a great article we came across in The Guardian.

1. Why do we need one?

Reserves of resources such as minerals and precious metals are diminishing, as their extraction rates increase. The current ‘take-make-dispose’ linear economy approach results in massive wasteAccording to Richard Girling’s book, ‘Rubbish!’, 90% of the raw materials used in manufacturing become waste before the product leaves the factory, while 80% of products made are thrown away within the first six months of their life. By decoupling economic growth from resource consumption, the circular economy is regarded as a practical solution to the emerging resource crunch.

2. It is more than just recycling

The circular economy goes beyond recycling, as it is based around a restorative industrial system geared towards designing out waste. The goal is not to design for better end of life recovery rates, but to minimise energy use. Click here to see a great interactive diagram from the Ellen MacArthur Foundation, which shows how recycling requires more energy than repairing, reusing and remanufacturing. 

3. Celebrities are shouting about it

The notion of a circular economy only really caught on when former sailor Dame Ellen MacArthur set up the Ellen MacArthur Foundation in 2010 to champion the concept. The foundation has been hugely influential in making it resonate among world leaders, global corporations and academic institutions. Several celebrities have endorsed the concept and its cradle-to-cradle principles, including Brad Pitt, Arnold Schwarzenegger, Meryl Streep, Susan Sarandon and Will.i.am.

 4. The economics stack up

The business case for a circular economy is compelling: analysis by McKinsey shows that shifting to a circular economy could add US$1 trillion to the global economy by 2025 and create 100,000 new jobs within the next five years. Manufacturers are most likely to reap the benefits quickest because of their reliance on raw materials.

 5. Business leadership

Innovation in this field is being driven by large corporations who are piloting business models based on leasing, product performance, remanufacture and extended lifecycle thinking.  Facilitating their work is the Circular Economy 100, a global platform bringing together leading companies, emerging innovators and regions to accelerate the transition to a circular economy.

6. Government intervention

Scaling up a circular economy on an international level will likely require government support. A coordinated approach by world leaders to introduce positive legislative drivers such as waste prevention targets and incentives around eco-design to promote products that are easier to reuse, remanufacture and disassemble would be welcomed by many. Some countries are already starting to act, including China (which has set up a government-backed organisation to encourage circular growth); Scotland (which has issued a circular economy blueprint) and the European Commission (releasing a circular economy framework).

 7. It will change how we consume

The circular economy is going to change the way we, as consumers, use resources. The ‘pay per use’ contractual agreements associated with smartphones, for example, could be extended to standard goods such as washing machines, clothes and DIY equipment. PhilipsKingfisher Group and Mud Jeans are already piloting product-as-service models, where customers become users rather than consumers. A shift like this will allow companies to retain product ownership for easier repair, reuse and remanufacture. 

8. New skills, please

A shift to the circular economy will create new jobs and require new skill sets, particularly in the fields of design, advertising and digital, with systems thinking and modelling coming to the fore.

 9. Expect disruption

One of the enablers for the circular economy will be disruptive innovation, where breakthrough technology and design sparks new, circular models of commerce. Businesses leading on this agenda are realising that they will either have to disrupt their own models from within, or risk being disrupted.

10. The UK is 19% circular

Weight-based material flow analysis in the UK indicates that one fifth of the UK economy is already operating in a circular fashion. This figure relates to the weight of domestic material input entering the economy compared with the amount of material recycled. 

Here in New Zealand, we don’t have those sorts of statistics yet. Paul says that the challenge with establishing figures like this for New Zealand is the very real lack of waste data.

“Without good, consistent, reliable and relatively complete data it makes it very hard for all stakeholders (whether it be central government, local government or commercial industry) to understand where the issues, and conversely opportunities, are. Further, it also makes it hard to fully understand the impact of any interventions,” he says.

This lack of data is widely recognised and WasteMINZ together with a broad range of stakeholders is working to collaboratively develop a National Waste Data Framework, which will help us to better understand the issues and put all parties in a better place to develop effective evidence-based solutions.

The Sustainable Business Network is working with our members to accelerate the transition to a circular economy here in New Zealand. We’re running a series of events around the country called The BIG Think, where we aim to find out what the opportunities and challenges are in doing this. Click here to find out when The BIG Think will be happening in your region.

To get involved with SBN’s ongoing work in the circular economy, contact James Griffin.

Click here to find out more about the circular economy in New Zealand.