The Circular Economy

Roughly three quarters of all industrial energy consumption is associated with the extraction or production of basic materials like steel and cement, while only about one quarter is used in the transformation of materials into finished goods such as machines or buildings. The converse is true of labour, about three times as much being used in the conversion of materials to finished products as is required in the production of materials.

An increase in the transformation-type industries, such as reconditioning, thus corresponds to a substitution of labour for energy. Skilled and experienced craftsmen are needed in repair and reconditioning activities which can be undertaken in comparatively small workshops scattered widely throughout the country wherever there are goods in need of renovation and customers for them, as is still the case with car-repair workshops. These enterprises can be located in any rural or urban area with high unemployment, making reconditioning a doubly attractive proposition for job creation.

- Walter Stahel, The Potential for Substitution Manpower for Energy' ,European Commission Report, 1976

While there is still room for the linear model to expand geographically and realise even higher efficiencies, there are signs that the coming decades will require productivity gains and quality improvements at a new order of magnitude. As the global middle class more than doubles in size to nearly 5 billion by 2030, consumption and material intensity will rise accordingly, driving up input costs and price volatility at a time when access to new resource reserves is becoming more challenging and expensive. Perhaps most troubling is that this sudden surge in demand may have adverse effects on the environment that further constrain supply. Symptoms of these constraints are currently most visible in the food and water supply. Declines in soil fertility are already estimated to cost around USD 40 billion globally.
Modern circular and regenerative forms of consumption—so far limited to a few high-end categories—represent a promising alternative and are gaining ground. Powerful examples of their economic viability at scale exist today, from anaerobic digestion of household waste to apparel recovery. While these examples are still limited in geographical scope, we estimate the full potential of the circular economy to be as much as USD 700 billion in global consumer goods materials savings alone.

- Ellen MacCarthur Foundation, Vol. 2 Towards a Circular Economy, 2013

Introduction

The traditional economy is called the linear economy because material flow start at an origin and flows in one direction – straight for the dump.  Raw material is manufactured, goods are consumed and at the end of life, goes into the landfill. This traditional model relies heavily on materials and energy, economies of scale and extensive global supply chains with much of the infrastructure cost borne by the public and much of the profits to an elite minority. Within this economic paradigm, the OECD estimates that a typical citizen of an OECD country (essentially a developed country) annually consumes:

  • 800 kg of food and beverages,
  • 120 kg of packaging,
  • 20 kg of new clothing and shoes

The Circular Economy (Source: Ellen MacCarthur Foundation)

Approximately 80 per cent of these materials will come to a dead end, ending up in incinerators, landfill or wastewater. This linear model may have worked well in the past when our population and levels of consumption were small relative to the world. With “human progress”, however, we have exponentially grown both our population and levels of consumption to such an extent that we are now bumping into planetary limits.  Dennis Meadows and his group at MIT issued warnings as early as the 1970’s in their groundbreaking Limits to Growth – warnings that were ridiculed as absurd and ultimately  too threatening to the sacred cow of unlimited economic growth.

Having lost 4 precious decades, it is beginning to finally dawn that waste is an antiquated concept belonging the industrial age and is based upon two assumptions which are no longer valid:

  1. endless resources
  2. the planet is an infinite sink which can take limitless amounts of air, water and solid pollution

Figure 1:Increase in consumption expected by 2025 (Source: Ellen McCurthur Foundation: Towards  a Circular Economy Volume 2)

As the diagram above shows, a massive increase of the middle class is projected by 2025, along with substantial increase in consumption. This will stress a linear economy model to the extreme because resource shortages and pollution are already having tremendous impact on human society.

The solution? A circular economy. A circular economy is defined as one in which material flows in a circle rather than a straight line. A circular economy is designed to efficiently recirculate the raw material and technical nutrient feedstock used to produce goods.  It is based upon the assumption that raw material extraction exacts a heavy toll on the environment both in terms of ecosystem damage and expensive energy requirements. Already processed material is far more valuable than virgin raw material because it is already processed and, if designed properly, should require substantially lower energy to re-process into a virgin feedstock. By way of  1) designing products for recovery and 2) developing processes to recover technical nutrients from goods that have reached their end-of-life, the linear flow of raw material to landfill can be broken.

A circular economy stresses reuse. By design, it recycles all the “waste” products at the end of their lifetime. Materials are manufactured and processes are developed to optimally recover technical nutrients and transform them back into primary feedstock, effectively breaking the linear economy model. A properly designed circular economy reduces pollution to zero or near zero. Recycling and remining the 80% of technical nutrients currently ending up in incinerators and landfills is the only feasible way to meet these future demands but instead of seeing this as a problem, it is one of the greatest business opportunities in history. The amount of recoverable waste estimated by the Ellen MacCarthur Foundation is truly staggering. In Towards a Circular Economy, vol. 2, 2013, the foundation estimates $2.6 trillion (USD) in lost materials and a recovery market potential worth $2 trillion USD.

Origins of Cradle-to-Cradle 

The Circular Economy is therefore a concept for a sustainable economy based on the concept of zero waste. From a manufacturing perspective, a circular economy requires a paradigm shift in manufacturing towards a Cradle-to-Cradle approach, a way of designing products so that technical nutrients can be fully recovered at the end of the products life. This concept was first proposed by Walter Stahel, an architect, economist and one of the founding fathers of industrial sustainability. More recently, it has been popularized by architect William McDonough and chemist Michael Braungart  who together, founded MBDC and the cradle-to-cradle certification organization C2C.

To Stahel is attributed the 5 pillars of a sustainable society:

Figure 2: Walter Stahel’s 5 pillars of a sustainable society

It stresses a closed loop manufacturing model in which resources are put into product life extension, reuse and recovery materials at the End-of-Life of products.  This strategy solves 2 fundamental problems at the same time:

  1. substantially reduce waste
  2. reuses waste as primary feedstock for manufacturing

Figure 3: The basic concept of Cradle-to-Cradle originated by architect Walter Stahel (Source: Product-life.org)

Stahel is credited with having coined the expression “Cradle to Cradle” in the late 1970s, Stahel worked at developing a “closed loop” approach to production processes and founded the Product Life Institute in Geneva more than 25 years ago to spread the vision. As Stahel’s diagram above shows, there are 2 ways products can flow, linearly or in loops. The traditional cycle industrial production has followed is cradle-to-grave linear pathway. The circular economy is based upon circular flows, effectively eliminating the concept of waste or at least significantly reducing it.

To achieve a circular economy, we must minimize the linear flow of raw material to the landfill through such initiatives as:

  • product-life extension
  • long-life goods
  • reconditioning, reuse activities
  • waste prevention

The circular economy focuses on three objectives:

  1. economy
  2. regional job creation
  3. reduce CO2 and greenhouse gas emissions

and it is based upon Stahel’s important observation that energy and human labor have an opposite relationship:

Energy

  • 3/4 of energy raw material production
  • 1/4 of energy in manufacturing goods

Labor

  • 3/4 employed in manufacturing goods
  • 1/4 employed in raw material production

Stahel’s assertion is clear if not radical; our high energy society today spends 75% of the energy budget on raw material production, creating massive carbon pollution as a consequence. The Circular economy would shift paradigms to a labor intensive instead of energy intensive industrial production system. Repair, reuse, life extension and remanufacturing will create significant employment and wealth while at the same time significantly reducing energy and carbon pollution. This approach preserves water, energy and natural resources.  A circular economy is a fundamental paradigm shift from the current economy;  it is far more labor-intensive than the heavily automated manufacturing systems so familar to us today. Effectively, it is a substitution of energy for labor. Shifting to this new paradigm will require us to refrain from the habitual tendency of technocrats to want to automate everything. Saving human labor is not the ultimate goal after all.

The Circular Economy depends on 5 pillars:

 

Figure 4: The 5 pillars of a circular economy based upon cradle-to-cradle strategy

Founder of the idea of Cradle-to-Cradle, Walter Stahel speaking on the Circular Economy

The Business Opportunity

Figure 5: Business opportunity in Consumer Industries

The Ellen MacCarthur Foundation is the leading proponent of the circular economy. In Volume 2 of its Towards a Circular Economy report released in 2013, it estimates that the opportunity is worth in excess of $2 trillion USD.

In consumer goods industry alone:

  1. 3.2 trillion USD
  2. 2.6 trillion USD in material waste
  3. 700 billion USD in recovery opportunity
Example Opportunities  in Consumer Industry:
  • Food – Household food waste
  • Biogas and nutrients for agricultural soils – $1.5 billion USD in UK. Italy is a leader in this field
  • Locating tomato or other greenhouses near energy plants to use waste heat for warming indoor environment to reduce energy costs
  • Industrial beverage waste -$1.9 USD per hectolitre for beer waste (spent grain) that can be used as meal to feed fish and livestock in Brazil
  • Textile waste – $1,975 / tonne can be generated by cleaning and reselling used clothing. UK is a global leader with 65% collection rate of discarded clothing
  • Packaging – beer bottles – savings of 20% possible in the UK if beer companies switched from disposable to reusable beer bottles

Figure 6: Potential recycling in construction and demolition industry (Source: Ellen MacCarthur)

A Practical Way Forward

Beginning in the late 80’s, Stahel met with a German chemist and former Greenpeace activist named Michael Braungart several times at conferences in Germany and discussed their cradle-to-cradle approach and swimming against the current. Braumgart was deeply influenced by Stahel and later joined forces with American architect William McDonough to publish the Cradle-to-Cradle movement’s effective manifesto, Cradle to Cradle, Remaking the way we make things in 2002 after having set up the cradle-to-cradle consulting firm McDonough Braungart Design Chemistry (MBDC).

MBDC has worked major organizations such as Ford, the Chinese Government or Nike to prove the validity of the concept, which relies on the Waste-as-Food  principle. As another example, MBDC worked with carpet manufacture Shaw Industries to redesign their entire line of carpets using only non-toxic and reusable materials.

We must challenge the fact that current  industrial processes inevitably damage nature; monitoring and banishment of toxic substances is key to a cradle-to-cradle approach. All material involved in industrial and commercial processes must be seen as nutrients, of which there are two main categories: technical and biological. Technical nutrients should include only materials that do not have a negative impact on the environment (so non-harmful synthetic ones are accepted), while Biological nutrients are organic and can be returned to the soil without specific treatment to decompose and eventually become food for the ecosystem. A cradle-to-cradle system consists of completely healthful products that are either returned to the soil or flow back to industry forever. Products should  be designed so that, after their useful life, they will provide nourishment for something new.

In pragmatic terms, the two associates gave birth to the “C2C certification”, a concept owned and implemented by the MDBC firm, which has proven its validity in the business world on many occasions – rather than being a idealistic model to aspire to, McDonough and Braungart created a tool involving precise criteria (“material health” determined by a precise chemical composition assessment, energy required for production, material re-use potential etc).

The Circular Economy based upon cradle-to-cradle methodology offers a new business paradigm that shows the economic benefits of eliminating the concept of waste by the design of products that promote the complete disassembly and recovery of their constituent biological and technical component parts (nutrients).

UK Guardian writer and author Simon Farlie sums up a circular economy well in his Guardian article Of course we need industrial goods, but to save Earth we must cut consumption in which he says:

The most obvious way of cutting production is to make things to higher standards. If everything were made to last twice as long then we would only need to make half as much of it. This requires us to slow down the rate of technological progress so that goods (and humans) do not become functionally obsolescent so quickly.

Monbiot asks how we would find “the energy required to make bricks, glass, metal tools and utensils, textiles … ceramics and soap”. Take bricks: for several years I lived in a cob house – built in 1911 from rammed unbaked earth – which was warm and delightful. I have also made unfired bricks with a device called a block ram, and 30 years later they are weathering fine.

Half of Britain sits on a limitless supply of building stone, which was formerly extracted from harmless village quarries without any assistance from fossil fuels, but which now is inaccessible because of planning restrictions. The use of cob and local stone would mean building slower and hence less – that would be a good thing. In any case, if we cut industrial production by half there would be plenty of bricks and other material to recycle from redundant factories.

As for textiles, it is plain from the charity shops that grace every high street that we suffer from a glut of clothing, while the wool from 15 million sheep is almost valueless.

Reducing consumption of goods is not a recipe for abject poverty. Half the world still lives without superabundance, but where there is misery it is because of lack of food, water, simple medicines and adequate shelter – not because of a shortage of cheap T-shirts, factory-fired bricks, or 17 varieties of cleaning product. If we consumed less in the wealthy countries there would be resources and energy available for people who really are suffering.

Towards the Circular Economy Volume 1 – The Ellen MacArthur Foundation is a leading proponent of Circular Economy, educating the public that there are many opportunities that await entrepreneurs who embrace the new circular economy model. Businesses are saving money by adapting the Cradle-to-Cradle approach and entering into the Circular Economy. The Ellen MaCarthur Foundation has produced a report on the Cradle-to-Cradle economy that can be downloaded here. This report is the first ever to look at the economic and business rationale for an accelerated transition towards a Circular Economy. The report invites readers to imagine an economy which operates by the maxim Waste = Food,  in which today’s goods become tomorrow’s primary manufacturing resources, forming a virtuous cycle that fosters prosperity in a world of finite resources.

Towards the Circular Economy Volume 2 – The Ellen MacArthur Foundation released volume 2 of its’ economic rationale for a circular economy in Jan 2013. This volume analyzes the ‘fast-moving’ consumer goods sector, valued at approx. 3.2 trillion US dollars and which consists of products that typically have a lower unit cost, are bought more often, and have a much shorter service life than durable goods. Products in this sector currently account for 35 per cent of material inputs into the economy, a significant percentage of total consumer spending on tangible goods, and 75 per cent of municipal waste. The consumer goods sector also absorbs more than 90 per cent of our most strategic production – agricultural output. Currently, only 20% of materials is recovered, leaving a potential 2.6 trillion dollar market for recovered materials.

This change in perspective is considered important for addressing many of today’s fundamental challenges, especially resource and pollution limitations. Traditional linear consumption patterns (‘take-make-dispose’) are coming up against constraints on the availability of resources compounded by rising demand from the world’s growing and increasingly affluent population. Toxification of our environment has resulted in limits such as atmospheric carbon loading which provides further limitations on our waste-producing manufacturing processes. As a result, we are observing unsustainable overuse of resources, higher price levels, and more volatility in many markets.

Figure 7: Linear vs Regenerative, closed loop cradle-to-cradle approach

General

Figure 8: Circular Economy industrial technical nutrient cycle and biological nutrient cycle (Source: Ellen McCurthur Foundation: Towards  a Circular Economy Volume 2)

Figure 9: Circular Economy migration path (Source: Ellen McCurthur Foundation: Towards  a Circular Economy Volume 2)

Figure 10: Successful building blocks of a Circular Economy (Source: Ellen McCurthur Foundation: Towards  a Circular Economy Volume 2)

Agriculture

Figure 11: Reducing soil nutrient loss through regenerative practices (Source: Ellen McCurthur Foundation: Towards  a Circular Economy Volume 2)

Figure 12: Soil restoration for regenerative practices (Source: Ellen McCurthur Foundation: Towards  a Circular Economy Volume 2)

Consumer Sector: Food 

Figure 13: Material waste percentages at various stages of food supply chain (Source: Ellen McCurthur Foundation: Towards  a Circular Economy Volume 2)

Figure 14: Food & beverage material flow pathways (Source: Ellen McCurthur Foundation: Towards  a Circular Economy Volume 2)

Figure 15: Food industry profits from switching from Linear to Circular model  (Source: Ellen McCurthur Foundation: Towards  a Circular Economy Volume 2)

Consumer Sector: Clothing and Garment

Figure 16: Material waste percentages at various stages of clothing supply chain (Source: Ellen McCurthur Foundation: Towards  a Circular Economy Volume 2)

Figure 17: End-of-life pathways for clothing (Source: Ellen McCurthur Foundation: Towards  a Circular Economy Volume 2)

Figure 18: Garment circular material loop  (Source: Ellen McCurthur Foundation: Towards  a Circular Economy Volume 2)

 

Figure 19: Clothing profits from adapting a circular business model (Source: Ellen McCurthur Foundation: Towards  a Circular Economy Volume 2)

Packaging

 

Figure 20: One time vs reusable glass bottles (Source: Ellen McCurthur Foundation: Towards  a Circular Economy Volume 2)

Figure 21: Adapting circular business model for beer bottle packaging (Source: Ellen McCurthur Foundation: Towards  a Circular Economy Volume 2)

 

Figure 22: Profits from circular business model in plastics packaging in the US (Source: Ellen McCurthur Foundation: Towards  a Circular Economy Volume 2)

Walter Stahel and Product-Life Reference Papers: