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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.