Circular Economy 101: Designing Regeneration into the System
Excerpt from the Economic Design course
By Daniel Christian Wahl | 20 February 2017
“The circular economy refers to an industrial economy that is restorative by intention; aims to rely on renewable energy; minimises, tracks and eliminates the use of toxic chemicals; and eradicates waste through careful design. The term goes beyond the mechanics of production and consumption of goods and services […] (examples include rebuilding capital including social and natural, and the shift from consumer to user). The concept of the circular economy is grounded in the study of non-linear, particular living systems. A major outcome of taking insights from living systems is the notion of optimising systems rather than components.” — Ellen MacArthur Foundation (2013a)
Questions about how to create a circular and regenerative economy based on the resource and energy flow patterns we can observe in ecosystems have inspired thought-leaders and innovators in ecological design and ecological economics for a number of decades; now these questions are being asked by global financial institutions, the European Commission, leading companies, and mainstream consultancies like McKinsey.
In recent years, the Ellen MacArthur foundation and its CE100 initiative has taken the conversation about how to facilitate the transition towards a circular economy into corporate boardrooms around the world. Here is a short video (3:49mins) explaining the basic concept of the circular economy.
The CE100 unites businesses and local authorities in different regions around the globe with innovators in ecological design to enable rapid information exchange and collective intelligence. It aims to facilitate the swift implementation of industrial process improvements that have been estimated to be worth more than US$1 trillion to the global economy. The CE100 offers a best practice and best process database so businesses can learn from each other’s experiences. It also offers an online executive education programme to help get industry leaders and their management teams on board and informed. Here is a short video by the foundation explaining how the CE100 Initiative helps to implement the circular economy.
The kind of transformation needed to implement the circular economy approach locally, regionally and globally can only occur if it is driven by widespread cross-sector collaboration. Business leaders are waking up to the multiple benefits of focusing on collaborative advantage rather than competitive advantage.
In A New Dynamic — Effective Business in a Circular Economy (Ellen MacArthur Foundation, 2014) Walter Stahel highlights a series of characteristics of a circular economy that distinguish it from a linear economy based on extraction, production, consumption and disposal (waste):
- “The smaller the loop (activity-wise and geographically) the more profitable and resource efficient it is”. The aim is not to create one globalized circular economy, rather, the most effective strategy is to appropriately scale-link multiple circular economies at local, regional and global scales.
- “Loops have no beginning and no end”, so they require continuous collaboration along the entire value chain.
- “The speed of the circular flows is crucial: the efficiency of managing stock in the circular economy increases with a decreasing flow speed”; and therefore companies will have to rethink strategies based on ‘planned obsolescence’ and create high-quality, durable products.
- “Continued ownership is cost efficient: reuse, repair and remanufacture without change of ownership save double transaction costs”. This creates an incentive for companies to sell (lease) the use or service provided by their products, rather than the products themselves.
- “A circular economy needs functioning markets” (Stahel, 2014).
The current market system, far from being a free market, is regulated in ways that privatize profits and externalize the costs of the social and environmental damage as collateral damage rather than including them in the true cost accounting of a given product. To create functioning markets we need legislation insisting that social and environmental cost are included in product pricing, and a shift from taxing work to taxing resource and energy use. Done well, the shift from a linear to a circular economy has multiple economic, social and environmental benefits. It is also of crucial importance to pay attention to the scale at which we aim to create circular resource-product-service flows.
The schematic diagram below was created by the Ellen MacArthur Foundation and maps out the various elements of a circular economy. The foundation’s publications provide an excellent resource to learn more about the circular economy approach and its increasing acceptance among major industries (see Ellen MacArthur Foundation, 2012, 2013b, 2014b; this last was also published by World Economic Forum, 2014).
The RSA’s The Great Recovery project aimed at helping design professionals design regeneration into their product and service systems. It offers another excellent starting point to learn more about the design of circular economies.
Moving from circular economies to truly regenerative economies we need to do more than simply recycle or upcycle resources into new products. We need to pay attention to the the appropriate scale at which to create these circular flows. We need to chose wisely what kind of biomaterial based feedstocks we use in these economies and how to regenerate them sustainably. We need to reduce the input of fossil materials and energy as much as possible and shift towards renewable resources. Maybe most importantly we need to think how these economies are contributing to ecological and social regeneration at the local, regional and global scale. We are not there yet, but we have started this important journey.
ABOUT THIS ARTICLE
This is an excerpt from the Economic Design dimension of Gaia Education’s online course in Design for Sustainability, recently revised and re-written by Daniel Christian Wahl on the basis of an earlier version by Jonathan Dawson (now Head of Economics at Schumacher College). Much of the material used in authoring the curriculum content for this course is based on the years of research he carried out for his recently published book Designing Regenerative Cultures.