2013-02-01

Co.Exist

With Resources Running Short, It's Time To Move To A Circular Economy

We simply can’t solve the fundamental issues of the global economy without rethinking the entire underpinnings of our "take-make-dispose" model of consumption.

On average, developed-world citizens consume 1,764 pounds of food and drink annually, 265 pounds of packaging, and 44 pounds of new clothing and shoes--80% of which finds its way to incinerators, landfill, or wastewater. It "comes to a dead end," as a new report puts it.

This is the "take-make-dispose" model of consumption. But there is an alternative: a circular economy, where instead of mining millions of tons of new inputs, you recover, reuse, and reconstitute as much as possible. Why? To reduce pressure on the environment, obviously; but also to reduce pressure on companies, which face growing resource constraints.

Last year, the U.K.-based Ellen MacArthur Foundation published an influential report on the circular concept, based on a McKinsey analysis. By designing products for re-use and component recovery, or by switching to business models based on sharing, leasing, and renting, rather than ownership, it said European manufacturers alone could save $630 billion by 2025. That report largely looked at durable goods, such as washing machines. Now, MacArthur is back with a new study, this time focused on fast-moving goods.

At the heart of the circular, or regenerative, economy is the fear that many virgin resources are running low. And that’s before the world adds an expected 3 billion people to the middle class by 2030. Not only do richer people consume more, they also consume differently. They tend to buy more highly processed branded goods, with higher energy and resource inputs, and greater amounts of packaging.

The report says the "linear economy" isn’t going to cut it. Even increasing efficiency won’t produce sufficient things at affordable prices. "Efficiency can lower the amount of energy and materials used per dollar of GDP, but fails to decouple the consumption and degradation of resources from economic growth. This calls for system level redesign."

Fast-moving consumer goods (FMCG) account for 35% of material inputs worldwide, and about 75% of municipal waste. The report says they have a total material value of $3.2 trillion, and that industry could raise the proportion recovered from 20% today to 50% "without the dramatic application of bio-based products and the full redesign of supply chains."

For example, food waste could be used to generate biogas or agricultural nutrients. Brewing by-products could be turned into animal feed. Old clothing can be made into insulation, or recycled into yarn to make new clothes. Packaging can be recovered after-use and reused and converted for other purposes. The report says FMCG companies could reap $700 billion in material savings using these processes, as well as exploring concepts such as product-to-service, as Patagonia has done.

"Capturing the new opportunities will require leading corporations and municipal authorities to develop a new set of ‘circular’ muscles and capabilities along their traditional supply chains," the report says.

The report does see some hopeful signs: for example, tagging technology that better traces waste, "volume aggregators" (such as this outfit) that create clothing after-markets, or "urban loop providers," such as this remarkable vertical farm in Chicago. MacCarthur itself has set up the Circular Economy 100--a group of businesses it believes are already employing circular concepts, or can be persuaded to.

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6 Comments

  • James Greyson

    Circular
    economy is right. It's been right since it was set out compellingly by Kenneth
    Boulding in 1966. Yet it hasn't happened - why?

    One reason is that decade after decade people get distracted from what it would take for an actual whole system change. There's talk of systemic change and new economic models but what happens in practice is a series of brave localised examples of circular economy. These examples may actually be counterproductive as they create the illusion of a transition. Attention goes to designing the product or the business but the design of the circular economy is neglected.

    Circular economy needs to be connected to decision making throughout the whole system. For example, food waste in our area does not generate biogas or nutrients. It generates greenhouse gases and deadly nano-scale particulates in a private-profit incinerator with a cosy 30 year lock-in. A local circular economy would need to end this contract and begin democratic decision-making on local waste issues.

    A basic starting point for any actual circular economy would be the pricing of 'risk of waste' for products, from food to consumer products to fuels. Then the products of the linear economy, and their downstream impacts of waste, toxics and emissions, would become uneconomic. Business and product designs would self-organise. The circular economy would happen for real.

  • Double

    Good discussion for a post-apocalyptic world...Unfortunately, the title of this article is false.  There is no proof from any respectable source that says our resources are running short.  It's an argument from so-called intellectuals that want to remove the elderly and the unborn from the "productive population."

  • James Greyson

    "If a company can keep materials in circulation, they can significantly
    reduce material and energy costs and become more resilient to external
    shocks."

    Significant resilience means a global whole economy shift to circular economy. Not sure that shifting "a company" is so significant.

    This is important for strategy. When we're talking to companies let's be clear that their big chance for significance is not to play better but to change the game.

  • Ellenmacarthurfoundation

    This is a good point - there is a debate about how much 'stuff' we have left, when we will run out and so on. However something that has been reported is the issue of price volatility. We've seen a century of price declines erased in the past decade, and some are saying that's here to stay. Also, price volatility has risen well above long-term trends in recent decades - this is something that is difficult for businesses to deal with. If a company can keep materials in circulation, they can significantly reduce material and energy costs and become more resilient to external shocks.

  • okram ovič

    great topic. should be reported about and discussed much more. would be also fine to see some graphs or charts about running low on some earth elements or other crucial resources.