A New Understanding of Economic Growth
Prioritizing people and ecological systems can create more sustainable economies. According to the United Nations, the conception and application of a circular economy has the potential to positively impact the progress made on several of its Sustainable Development Goals, which provide a framework for putting the global economy on a healthier, more sustainable path by 2030.
Traditional economic systems and growth expectations generate unhealthy tension by being extractive by design. On one hand, such linear, extractive approaches have generated unprecedented economic gains and prosperity - by 2015, a record low 10% of the global population was living in extreme poverty, according to the World Bank.
And, these approaches have generally spurred the provision of natural resources and workers in ways designed to achieve optimal profitability and productivity.
On the other hand, any extractive economy will eventually be faced with potentially dire threats to biological and cultural diversity, an inevitable increase in the intensification of resource exploitation, and an ever-present threat of resource scarcity.
There is also no guarantee that the short-term gains afforded by this model will be equally shared and accessed. Its trajectory usually involves simply regenerating itself by shifting focus to a new type of resources to be extracted and exploited - which by definition is not sustainable.
This pattern often results in periods of relative short-term abundancy, followed by periods of progressive scarcity prior to the identification of new resources to tap.
It is important to understand exactly how a circular economy approach can break the vicious cycle inherent in linear and extractive economies - and forge a new way forward.
The potential for a circular economy to limit the extraction of resources and instead regenerate the material necessary for further production can bolster Sustainable Development Goal 12, ensuring sustainable consumption and production, not to mention SDG 6 (ensuring the availability of water and sanitation for everyone), SDG 8 (promoting sustainable economic growth and decent work), SDG 11 (making cities more inclusive and sustainable), SDG 13 (taking urgent action to combat climate change), SDG 14 (sustainably use the ocean and seas), and SDG 15 (halting and reversing land degradation biodiversity loss). Ultimately, the circular model also has positive implications for SDG 10 - reducing inequality.
Technologies Enabling Circularity
Tools like artificial intelligence can help improve efficiency and reduce waste. Artificial intelligence can also help make infrastructure more resilient, optimize the logistics required to sort and disassemble products, remanufacture components, and recycle materials. Yet, for the most part, artificial intelligence is an as-yet largely untapped resource for bolstering circularity.
The technologies underpinning the Fourth Industrial Revolution, like the Internet of Things and artificial intelligence, can help accelerate a global transition to a more circular economy. They are fundamentally shifting the ways economies function by enabling more virtual work (something that has been particularly helpful during the pandemic), and greater transparency in terms of the products we buy and the materials used to make them.
Through the increased collection and analysis of data, we can now better identify issues related to material flows and structural waste - and more effectively inform decision-making. In nearly every industry there has been an increase in the quantity and sophistication of data collection - on the condition of factory equipment, and on parts and supply chains in the aerospace and rail transport sectors, where assets are being equipped with sensors to monitor pressure, temperature, and vibrations that may indicate risks by flagging maintenance and repair needs and when components need to be replaced before failure. In addition to ensuring safety and continuity, this information is also key to extending the use of properly-functioning equipment.
Artificial intelligence can help facilitate circular business models such as car sharing through better demand prediction, inventory management, and early warnings for maintenance needs. The same is true for bicycle-sharing services in urban areas; according to one estimate, bike-sharing schemes have proliferated since the first was rolled out in Amsterdam in 1965, with more than 1,000 in over 50 countries by 2014.
Artificial intelligence can help these schemes predict demand for bikes in real-time, and help users understand where bikes are available and in what quantity at any given time.
Businesses and organizations around the world are increasingly implementing circular strategies that use artificial intelligence to help design more durable and reusable products, and components - not least by more efficiently choosing the right materials for this purpose through closer (and more cost-effective) analysis, and by improving manufacturing techniques.
CIRCULAR ECONOMY
Traditional, “take-make-dispose” economies have had devastating impacts on people and the environment. But the circular economy model has the potential to trigger far-reaching change and put the world on track to achieving the United Nations’ Sustainable Development Goals.
While the predominant approach to economic growth has created vast amounts of waste to profit relatively few people, a circular model could treat waste as a design flaw and generate more distributed and inclusive systems.
The Circular Economy ultimately offers an opportunity to rethink, redesign, and reconceptualize economies to better address human needs and make more efficient use of natural resources - and its relatively nascent state makes it ripe for innovation.
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A Regenerative Food System
It has become clear that this traditional approach is not fit for the 21st century. While it may be highly resource-efficient and productive in the short- and even medium-term, the relentless drive to specialize and increase the scale of operations often leads to an over-reliance on just a few productive varieties and an over-dependency on biological materials and technology.
We can rethink the ways we grow, produce, eat, and think about food. Shifting to regenerative systems will require the widespread adoption of circular economy principles not only at large-scale commercial farms, but also at the smallholder farms where most of the world’s food is now produced. As an estimated 80% of food will be consumed in urban areas by 2050, cities also have a pivotal role to play in this transition away from “take-make-dispose” and “winner-take-all” systems.
According to researchers at Wageningen University & Research, moving to circular agricultural production relies on three principles: plant biomass as the basic building block of food for people; by-products from food production, processing, and consumption being recycled back into food systems; and the use of only biomass unsuited for direct human consumption for animal feed.
Developing regenerative food systems requires first identifying the many shortcomings of “linear” systems - as related social and ecological problems mount. Food production and the management of food by-products are endangering biodiversity and human health; according to a study published in 2019 by the Ellen MacArthur Foundation, the costs associated with this approach amount to $5.7 trillion per year globally, equivalent to the total incurred to fight obesity, diabetes, and malnutrition combined.
New, regenerative food systems could be underpinned by circular models where food production improves rather than degrades the environment, and people have ready access to healthy and nutritious calories. Circular principles emphasize a symbiosis among plants, animals, agroforestry, and agroecology to help prevent soil erosion, preserve the quality of groundwater, and reduce the use of fertilizers - while sequestering carbon.
Ultimately, cities can become crucibles where different economic, ecological, and social initiatives combine to trigger a broad shift to more regenerative systems - by, for example, sourcing more regeneratively-grown food locally, designing out food waste (by making greater use of by-products and circulating nutrients), and creating and marketing healthier types of food. When pursued simultaneously, these practices can form a genuinely beneficial, circular economy for food that brings with it multiple benefits.
A Circular Economy in Cities
Urban areas now consume three-quarters of all-natural resources, but that can change. By the year 2050 more than two-thirds of the global population is expected to be living in cities, compared with less than one-third as recently as 1950, according to the United Nations.
A circular economy could provide a way to rethink and reshape how cities make and use the things they need, and enable new ways of ensuring long-term prosperity.
The implementation of a circular economy could bring economic and environmental benefits, while making cities thriving places where productivity is boosted by reducing congestion, eliminating waste, and reducing unnecessary costs - and by tapping new economic opportunities, supporting the acquisition and development of more contemporary skills, and increasing meaningful employment.
The sharing economy, enabled by emerging digital technologies, could thrive within circular-economy cities, and enable greater access to public spaces, products, and mobility - while helping reconnect people with their neighbors and communities. Under this model, many people may increasingly shift from owning things to sharing them via product-as-a-service contracts, which could in turn incentivize businesses to keep products in use for longer periods. In this way, cities can become more liveable thanks to improved air quality and health, reduced emissions and pollution, and healthier social interaction.
Urban centers are suffering from the effects of the current, “take-make-dispose” economy - which has them consuming more than 75% of the world’s natural resources while producing more than half of all global waste, and generating between 60% and 80% of global greenhouse gas emissions.
A circular economy can also bolster urban resilience by keeping more durable materials in use, reducing the exploitation of virgin materials, fostering partnerships with more local producers, and harnessing digital technology. However, this will rely on changing the ways urban systems are planned, designed, and financed - and the ways that they are built and repurposed. For example, buildings could be designed to be more adaptable, modular, easier to maintain, and built with materials that last longer. These materials can be healthier for both people and the environment by being easily and safely compostable, and reusable.
Buildings can theoretically be constructed without producing waste, though this will require methods like on-demand and on-site construction using burgeoning 3D printing techniques.
A Systems Perspective on Circular Change
Circular Business Models
In general, most materials are under-utilized and discarded after short periods - and efforts to correct this problem often treat its symptoms rather than root causes. Our individual consumption, as well as that of organizations and entire countries, must be considered in the context of both social needs and planetary boundaries (beyond which we subject the planet to existential risk). Eliminating wasteful practices and ensuring sustainable consumption requires systemic change.
There is an urgent need for a fundamental rethink of industrial systems, coupled with changes in behavior and governance. However, this can only occur through unprecedented collaboration among manufacturers, retailers, and governments. When it comes to materials like textiles, food, and plastics, entire value chains need to be aligned around a shared vision.
People around the world are responding to these challenges by changing the way they shop, what they choose to eat, and how they live - and substantial sums are being invested in removing plastic from the ocean, rivers, and streets. All of this work will be for nothing, though, if increasing amounts of plastic continue to be landfilled, burned, or otherwise deposited into the environment.
High-level commitments, smart incentives, and action are required from everyone with a stake in the way materials cycle through an economy. In the textile industry, for example, if fashion brands and retailers can commit to a standard garment collection scheme, the volume of what is recovered could justify the necessary investment in technology and infrastructure.
Businesses and governments need to work together more closely to design ways to produce, consume, and re-use materials, and a systems approach to developing such a circular economy means tying together the various social and ecological systems that underpin economies - and adopting a more expansive view. The products and services likely to result would be both decentralized and interconnected, and would depend on meaningful collaboration among businesses, governments, and communities.
In the case of food, farmers, food brands, retailers, and city governments can similarly collaborate on a broad scale.
Eventually, a shift could get underway to systems where all of the food we eat is designed to be part of a regenerative cycle of edible products and fertilizers. When it comes to plastics, however, there are particularly complex challenges in terms of how we use them to package and consume things.
Opportunities abound to reimagine consumption with products designed for sharing, durability, and reuse. Business models that emphasize access over ownership, and selling performance rather than the product itself, will likely be able to keep things in use longer - even as they are used more intensively.
Extending an item’s lifespan can be achieved through designing for durability, though in order to truly unlock greater value sustainable design strategies should be deployed in combination with innovation related to maintenance, repair, the standardization of parts, disassembly, refurbishment, and re-manufacturing.
Much of the material used for production ends up being wasted, and a lot of the value we attempt to create in the process is forfeited. Moving towards a more circular economy entails a radical shift away from this dynamic - and large companies can play a significant role by using their scale to drive circularity into the mainstream.
Manufacturers can increase profitability through greater durability, reusability, and energy and water efficiency - and therefore have an incentive to use better-designed products. Customers can also benefit from greater circularity, as paying for a service instead of acquiring an asset means they can enjoy benefits without bearing responsibility for maintenance, repair, and disposal - while accessing products that might have otherwise been out of reach.
Successful circular economy businesses and initiatives can inspire well-known brands to follow suit, and while models supporting the shift to a circular economy will vary, the key consideration is always whether a business is creating value through extraction and consumption, or through regeneration and restoration.
By actively rethinking consumption, businesses can be successfully reoriented for the circular economy, and help preserve the value in social and ecological systems.
While cars can be shared among multiple users on peer-to-peer platforms (such as Zipcar or Car2go), power tools can be made available by the hour from local libraries, and clothing can be rented as needed (the New York Public Library lent out professional attire intended use at job interviews in 2018, and the LENA fashion library in Amsterdam operates a membership-based clothing lending service).
Ultimately, whereas companies used to only sell cars, they are now selling mobility, and while they once just sold clothes, they can now provide access.
Circular Finance
Financial firms and other investors need to zero in on environmental, social, and governance considerations. There is clearly a growing amount of interest in environmentally- and socially-responsible investing.
As of 2020, sustainable investing assets (those purchased by institutional investors like pension funds that take into account environmental, social, and governance factors) in Europe, the US, Canada, Japan, Australia, and New Zealand totalled $35.3 trillion, according to the Global Sustainable Investment Alliance - a 15% increase compared with 2018.
This shift is already evident in the form of new environmental rules and regulation, and heightened expectations for sound environmental, social and governance (ESG) principles in the face of a mounting climate crisis. Reputational risk and public pressure can help prompt banks and other investors to make the right decisions, nudge them in the direction of innovative, circular economy-focused businesses, and steer economies in a more constructive direction.
The financial sector can play a decisive role in mitigating the risks inherent in linear economic models, and in transitioning to a more resilient, circular economy.
The industry can choose between a business-as-usual approach, by continuing to finance extractive and highly-polluting industries like oil and mining, or it can help enable the shift to a more regenerative global economy - where waste and environmental damage are proactively limited.
Yet, many circular economy investment opportunities remain untapped. The finance sector can encourage and support businesses transitioning to a circular model by providing more related financial solutions and advisory services, and by honing their own understanding of the particular risk and return of circular business models - to help firms reorient strategy accordingly.
Directly comparing the performance of traditional businesses with that of circular businesses can obscure the risks inherent in both - as circular models create value in novel ways.
Finance will inevitably play a vital role in adopting circular thinking at scale, not least by allocating the necessary capital to boost related projects, fund the necessary research, and build enabling infrastructure in the form of safe and renewable materials and products.
Ultimately, a circular economy could generate a wealth of new investment opportunities, and direct trillions of dollars in global capital in search of profit in ways that manage to protect the environment and bolster the social fabric.
Circular Design
Inclusive and regenerative design can fundamentally address environmental and social problems rather than treating symptoms. Designing for circularity from the very start can improve products and services, create stronger relationships with customers, and minimize the cost of resources and energy.
More broadly, it can help fundamentally address some of our biggest economic, social, and environmental challenges - rather than just treating the symptoms. However, this will only be possible if organizations, corporations, and governments truly enable designers to create products and services tailor-made for a regenerative, circular economy.
The shortcomings of current economic models are embedded in their designs - which preordain negative impacts. These models are generally constructed for constant profit growth through extracting resources, an ethos that makes its way into how we manufacture and buy products and services, and the ways we use and eventually dispose of things - whether in an incinerator, landfill, or the ocean.
The impacts set in motion at the design stage can be profound, and send ripple effects far and wide - as has been painfully evident in the seemingly-irreversible impacts of plastic use and disposal that damage the natural environment, animals, and people in ways that create serious social issues.
Design choices can determine whether an item can be shared, easily repaired or recovered, remanufactured, or composted. While designers themselves have an immediate responsibility for these choices, it is the obligation of the organizations, corporations, and governments they work for to set the right course.
Still, designers should ask themselves whether or not their work aligns with the circular economy. That is, are they reinforcing the status quo of extraction and consumption, or aspiring to reuse and regenerate - and put back more than they are taking out. Related choices may include what type and variety of materials a product is being made of, whether it is assembled using glues or screws, and if it can be upgraded or improved in the future.
Ultimately, the design of products and services stems from decisions made at the top of organizations, corporations, and governments. If these decisions are made to spur consumption without encouraging longer product end-use, and incur increasing amounts of waste, then design will follow suit (selling a product is no longer the only option, for example, as sharing and incentivized return models have shown).