Introduction to the Circular Economy

While businesses have largely embraced the notion that they must manage their direct carbon emissions – in terms of gas, electricity and vehicle fuel – there is a growing awareness that embodied carbon has an equally significant, although less direct, effect. For every mobile phone, washing machine or vehicle that is produced, carbon emissions are created at every stage of the lifecycle; from extracting the raw materials used in its manufacture to managing its disposal at end of life. And as the global population grows, urbanises and becomes increasingly prosperous, the amount of goods we consume grows, too. This has the dual effect of both increasing carbon emissions from the manufacture, transport and use of the products and also putting stress on the raw materials used to manufacture and transport them. This stress leads to prices of raw materials becoming both higher and more volatile, creating clear economic risks for business through the whole value chain from raw material extraction right through to the retailer.

The concept of the Circular Economy is a provocation to move from the traditional linear “take-make-waste” model of consumption to a model where resources are used more efficiently and can cycle through the economy multiple times. A Circular Economy describes an industrial system designed to be restorative or regenerative, where end of life products become a source of materials for other processes. It is consistent with a transition from fossil fuels to renewable energy, the elimination of toxic chemicals that impair re-use of materials and promotion of product design that seeks to reduce waste, facilitate repair and make disassembly and materials re-use the norm.

A Circular Economy is based on three core principles. Firstly, it aims to ‘design out’ waste. In a Circular Economy waste simply does not exist—products are designed and optimised for a cycle of disassembly and all resources are re-used. These resource cycles define the Circular Economy and set it apart from disposal and even recycling where large amounts of embodied energy and labour are lost. Secondly, circularity differentiates between consumable and durable components. In the Circular Economy consumable components are largely made of biological ingredients or ‘nutrients’ that are at least non-toxic and possibly even beneficial, and can be safely returned to the biosphere—either directly or in a cascade of consecutive uses. Conversely, durable components such as engines or computers are made of technical nutrients, like metals and most plastics, and are designed from the outset for reuse. And finally, the energy required to fuel this cycle should be renewable by nature, to decrease resource dependence and increase system resilience.

The Circular Economy also redefines the customer’s need as functionality rather than necessarily the ownership of a product. This can lead to a new relationship between businesses and their customers based on product performance. An economy where users usually buy products outright encourages industry to make them “to a price” which can lead to longevity being designed out in order to remain competitive at the point of sale. In a Circular Economy, durable products are leased, rented or shared – and if they are sold, there are incentives in place to encourage the return of the product or its components and materials at the end of its period of primary use, so that they may be re-used. The innate resistance to paying more for a durable product that will last longer may be addressed by new “pay as you use” pricing models.

From a business perspective, the Circular Economy doesn’t just address the risks of resource scarcity and price volatility, it offers the opportunity to create new customer value through disruptive innovation. It invites businesses to re-think how they fulfil customer demand and to develop new business models that continue to create wealth and provide employment while at the same time conserving resources and reducing carbon emissions.

 

The Ellen MacArthur Foundation has fantastic free resources for educators and businesses who want to learn more.

The ethics of conservation

A report published today lists, for the first time, the 100 species at the greatest risk of extinction, prompting a discussion on BBC Radio 4 this morning about whether or not species that offer no apparent benefit to mankind should be saved. If resources for conservation are limited, how should we prioritise? Is it right to focus on those plants and animals that have a positive influence on humankind, or does every living thing - including perhaps those that pose an actual threat, such as the malarial mosquito - deserve an equal chance of life?

The dilemma is challenging enough when applied only to animals and plants, but the choices we make could set a dangerous precedent for a resource-constrained future. Fast forward 50 years, to a population in excess of 10 billion trying to survive on a planet that can't produce enough food and water to nourish everybody. In a perfect world, we would adopt a collective approach that shares the Earth's resources equally among all its people. But humanity's record doesn't support such an optimistic outcome.

If we're prepared to let another species die out because it's not sufficiently useful to our particular species, can humanity be trusted not to do the same thing to a country or an ethnic group that doesn't contribute sufficiently to the economy of a resource-impoverished world?

Why we need to stop talking about climate change

Today's scariest headline screams "The World as We Know It Is About to End, Say Some Really Frightened Scientists". Alarmist, perhaps - but it hasn't drawn the fire of the climate change deniers to anything like the extent we are used to. That may be because the study that prompted it was compiled by biologists, not climate scientists. Thanks to its focus on fossil fuels, the issue of climate change has become highly contentious, with the ranks of the oil industry and others mobilised - and well funded - to defend their livelihoods. And because it relies on projections that have no precedent, the theory of anthropomorphic global warming is vulnerable.

More robust, however, is the theory of carrying capacity. There are numerous, well-documented examples of both animal and human populations that have collapsed because they outstripped the carrying capacity of a bounded environment. We only have one planet, and no immediate prospect of colonising another. Therefore it follows with chilling logic that if our population - and its rate of consumption of finite resources - continues to increase there will come a point where there are no longer sufficient resources to sustain it.

Even for those who buy in to the science, climate change is a difficult concept to engage with. But every household already has to embrace the concept of living within its particular limits and every business has to balance the books. Economic sustainability is a good proxy for environmental sustainability and thanks to the economic crisis we're all too familiar with what happens when we live beyond our means financially. Transpose that understanding and we may just have a chance of  securing the future of humanity.

Resource scarcity could hamper business growth, says Defra

Defra has conducted research to determine how scarcity of materials and resources could affect the viability of businesses in the future. Its Sustainable Consumption and Production (SCP) Evidence Programme concluded that the depletion of some materials and resources might lead to price volatility as well as restricting their availability. The consequences could affect both the viability of businesses and their ability to deliver on policy goals.

Resource efficiency is a key focus for Defra. It considers that awareness of the threats is patchy and as a result not enough businesses are taking action to conserve limited resources and to find alternatives. This is very much a commercial issue: Defra has calculated that UK business could save over £6 billion by adopting resource efficiency measures that cost nothing or would pay back within a year.

Defra has already begun to tackle this issue with the ‘Saving Money, It’s Your Business’ campaign and the  ‘Can You Afford Not to?’ booklet. This new report identifies the resources posing the greatest risk to specific business sectors because of anticipated threats to their availability, providing data that will enable Defra to engage efficiently with individual sectors to mitigate the risk, as well as highighting opportunities for new markets and technologies.