10 things you need to know about the circular economy

A working circular economy could be a practical solution to the planet's emerging resource problems. Here's 10 facts you should know.

 

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10 things you need to know about the circular economy Photograph: Allstar/WARNER BROS/Sportsphoto Ltd./Allstar

 

1. Why do we need one?

The circular economy is touted as a practical solution to the planet's emerging resource crunch. Reserves of key resources such as rare earth metals and minerals are diminishing, while exploration and material extraction costs are rising. The current 'take-make-dispose' linear economy approach results in massive waste – according to Richard Girling's book Rubbish! published in 2005, 90% of the raw materials used in manufacturing become waste before the product leaves the factory while 80% of products made get thrown away within the first six months of their life. This, coupled with growing tensions around geopolitics and supply risk, are contributing to volatile commodity prices. A circular economy could help stabilise some of these issues by decoupling economic growth from resource consumption.
2. It is more than just recycling
While substituting secondary materials for primary materials can offer a part solution, recycling offers limited appeal as its processes are energy-intensive and generally downgrade materials, leading to continuing high demand for virgin materials. The circular economy goes beyond recycling as it is based around a restorative industrial system geared towards designing out waste. This graphic from the Ellen MacArthur Foundation shows how recycling is an 'outer circle' of the circular economy, requiring more energy input than the 'inner circles' of repair, reuse and remanufacture. The goal is not just to design for better end-of-life recovery, but to minimise energy use.
3. Celebrities are shouting about it
The notion of a circular economy was first touted in the 1970s by environmental academics John T Lyle and Walter Stahel, but only really caught on when former sailor Dame Ellen MacArthur set up the Ellen MacArthur Foundation in 2010 to champion the concept. Since then, the foundation has been hugely influential in making it resonate among world leaders, global corporations and academic institutions. Several celebrities have since lent their endorsement to the circular economy and its related cradle-to-cradle principles. Brad Pitt is a member of the Cradle to Cradle Product Innovation's founding circle while fellow actors Arnold Schwarzenegger, Meryl Streep, Susan Sarandon and Will.i.am are all vocal supporters.

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4. The economics stack up
The business case for a circular economy is compelling. Analysis by McKinsey estimates shifting towards circularity could add $1 trillion to the global economy by 2025 and create 100,000 new jobs within the next five years. Under the Waste & Resources Action Programme's Circular Economy 2020 Vision, the European Union (EU) could benefit from an improved trade balance of £90 billion and the creation of 160,000 jobs. Manufacturers are most likely to reap the benefits quickest given their reliance on raw materials – McKinsey argues that a subset of the EU manufacturing sector could realise net materials cost savings worth up to $630 billion per annum by 2025.
5. Business leadership
Ground-level 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. These companies have the power to effect change quickest, given their geographical reach through global supply chains, and their efforts are likely to accelerate with the emergence of a business-led platform for collaboration, the Circular Economy 100. While the circular economy also relies on the involvement of SMEs, take-up in this sector remains limited. A recent survey of nearly 300 small businesses across England, France and Belgium found almost 50% had not heard of the concept.
6. Government intervention
Scaling up a circular economy on an international level will likely require government support. A co-ordinated 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 – China has set up CACE, a government-backed association to encourage circular growth while Scotland has issued its own circular economy blueprint. In a highly significant move the European Commission's circular economy framework, released next month, is expected to introduce higher recycling targets and a landfill ban on recyclable materials across all 28 EU member states.

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7. It will change how we consume
Our relationship with the products and services we purchase could be radicalised under a circular economy. What if we didn't buy the goods we use, but instead favoured access and performance over ownership? 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. Philips, Kingfisher Group and Mud Jeans are already piloting product-as-service models, which would see us become users rather than consumers. Such a shift would not only allow companies to retain product ownership for easier repair, reuse and remanufacture, but might result in producer responsibility obligations being extended to users as part of the purchase agreement.
8. New skills, please
Making the transition to a circular economy will be complex as it requires systems-level redesign and a pressing need for new skills, not just within the STEM (Science, Technology, Engineering, Maths) subjects, but across the creative disciplines of design, advertising and digital. At a higher level, systems thinking and modelling is likely to come to the fore to help build the right frameworks and guide behaviour change. On a more practical level, educational outreach work with universities and secondary schools is being undertaken by various organisations such as the Ellen MacArthur Foundation and Circular Economy Australia.
9. Expect disruption
One of the prime enablers will be disruptive innovation – where breakthrough technology and design will spark new circular models of commerce, displacing existing markets and creating new ones. Businesses leading on this agenda are realising that they will either have to disrupt their own models from within, or risk being disrupted. Questions are also being raised over intellectual property, disclosure agreements and competition laws as companies collaborate to brainstorm and co-create. First mover advantage can be costly, and the level of perceived risk may prove a stumbling block.
10. The UK is 19% circular
Weight-based material flow analysis conducted in 2010 by Waste & Resources Action Programme (WRAP) estimated that one-fifth of the UK economy is already operating in a circular fashion. The 19% relates to weight of domestic material input (600 million tonnes) entering the economy compared with the amount of material (115 million tonnes) recycled. Future projections by WRAP predict this figure could rise to nearly 27% by 2020, if 137 million tonnes of material were recycled from a lesser direct material input of 510 million tonnes.

Maxine Perella is an environmental journalist specialising in the zero waste and circular economy agenda. She tweets @greendipped.

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Intellectual property is putting circular economy in jeopardy

Manufacturers like BMW, Apple and Nikon could accomplish far more if they worked with independent businesses, instead of against them

• Kyle Wiens
• Guardian Professional, Wednesday 4 June 2014 07.00 BST

Why isn't BMW recycling more of its own cars in Europe? Even if they wanted to, they probably couldn't. Photograph: Bloomberg/Bloomberg via Getty Images

I watch as workers at BMW's Recycling and Dismantling Centre fish around for an alternator under the hood of what must have been a mid-sized saloon- except this car doesn't have a bonnet anymore. In fact, this car doesn't have much of anything anymore. Its skeletal remains picked clean of most detachable components, this car is one of about 6,000 BMWs recycled at the centre every year.

The international car manufacturer has been disassembling cars in Landshut, Germany since 1994. For a brand of luxury cars, the disassembly centre is surprisingly low-tech. No scientists with clipboards swirling reclaimed motor oil around in beakers. No lab-coated boffins testing car components. Instead, the centre is a familiar industrial mix of overalls, forklifts, and stripped-down cars, just like every other scrap facility I've been to in my life.

But this recycling centre is pretty unique for BMW. After all, BMW makes cars; they don't usually unmake them. Still, in order to meet European environmental standards, BMW has to prove that their cars are 85% recyclable and reusable. So, BMW runs a European recycling plant, where they recycle concept cars, prototypes, and crash-test specimens - cars with components that, for intellectual property reasons, can't be reused.

The 6,000 cars recycled here are just a drop in the bucket compared to what BMW ships worldwide: nearly 1.8m cars in 2012 alone. So, why isn't BMW recycling more of its own cars in Europe, where programmes—like the circular economy—have driven home the profound importance of recycling and reuse at the manufacturer level?

The short answer: even if they wanted to, they probably couldn't.

Like all mass-produced products, BMWs are everywhere: in Manchester, in Stuttgart, in Metz. When those cars come to the end of their useful lives, they don't drive themselves back to the recycling centre in Landshut. The cars stay in Manchester, in Stuttgart, and in Metz. BMW would never be able get all their products back to a single collection centre.

And BMW isn't the only one.

I've spoken with a lot of companies that are interested in circular economy principles and they're all saying the same thing. They want to recycle their own goods. Even more than that, they'd like to repair and refurbish their products for resale (reusing old products is more profitable and more green than making new ones, even from recycled material). But manufacturers just haven't been able to get enough of their own products back from consumers. The products are just too dispersed.

IKEA can't put a collection bin in every community where someone bought a sensibly-priced bed. Philips can't send a company representative door-to-door to collect the nation's broken kettles. And BMW can't run a scrap-yard in every city where someone's purchased a car.

Luckily, they don't have to.

There's a legion of recyclers, refurbishers, and repairers that could do it for them - millions of small businesses already on the ground in Manchester, in Stuttgart, in Metz, and in every other city around the globe. And those small-scale, independent businesses are much more efficient at reuse than their manufacturing counterparts.

So while BMW will never be able to recycle all its own cars, the open market can do that and more. In California, there's a small business that specialises in BMW recycling. They repair, refurbish, and resell car parts directly back to the public, and there are thousands more small, independent scrap-yards like them.

That's the circular economy at work, and it works so well in the automobile market. Thanks to a vast ecosystem of independent refurbishers and recyclers, very little goes to waste. Instead, every valuable bit of the car is repaired and resold. Only when something is beyond salvage does it get melted down for recycling, where the material finds a new life again. This thriving open market is the reason why it will always be easier (and sometimes cheaper) to find another muffler for your Ford Fiesta than it will be to find a replacement circuit board for your iPad.

The trouble is, most manufacturers don't embrace the open markets, especially when it comes to reuse. Reusing and repurposing devices may require technicians to reverse engineer them, to hack them, and to digitally unlock them. Repairing modern machinery requires access to diagnostic codes, circuit schematics, and replacement parts that manufacturers zealously protect. And refurbishing can require access to proprietary tools that manufacturers have been historically reticent to share.

At the BMW recycling centre, technicians showed us a tool they had developed to drain oil from the shock absorber, so the oil could be reused. A useful innovation. But when a member of my tour group asked if BMW sold it to other refurbishers, the man holding the tool looked confused, as though the suggestion was patently absurd. That tool was their intellectual property; it was developed by BMW for BMW. And the patent they filed for the tool ensures that no-one else can invent something similar. Never mind that BMW only recycles only a tiny fraction of their own cars.

And that's how something like intellectual property can strangle the circular economy. Information and innovation are the currency of circularity, but sharing either with independent businesses is not something that manufacturers have been willing to do.

Technology companies are some of the worst offenders. Apple, for example, doesn't release their internal service manuals or sell replacement parts to the public, to independent repair technicians, or to unaffiliated recyclers and refurbishers, even though that information would certainly help to close the loop. Likewise, in 2012, Nikon USA stopped selling replacement parts to camera repair shops that weren't inside their circle of "authorised" repairers. Their decision to do so hasimpacted countless small business owners, stifled competition, and given Nikon a monopoly over the aftermarket of their products.

Those policies might seem good for manufacturers in the short run, but building walls around products —around intellectual property— is self-defeating. Apple could make hundreds of millions if it sold replacement parts to the public, just as BMW could certainly find a wider market for their proprietary tools. And, as the price of raw materials continues to skyrocket, working hand in hand with the small businesses that already process their products just might mean manufacturers would be able to reclaim the materials they need for remanufacturing.

Imagine how much more manufacturers could accomplish if they worked with the open market, instead of against it. The market opportunity is immense in providing tools and services to the thousands of small businesses that specialise in reuse, refurbishment, repair, and recycling. An inclusive ecosystem is the best shot we have at closing the loop. Without them, we won't reach the economies of scale that the circular economy needs.

Kyle Wiens is CEO of iFixit and Dozuki

The circular economy hub is funded by Philips. All content is editorially independent except for pieces labelled advertisement feature. Find out more here.

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