Why the Circular Economy Is the Future
Grow equals wealth – that’s been the dominant equation in business for decades. But the hunger for growth also leads to existential problems for mankind and the entire planet. When it comes to pollution, resource depletion, and greenhouse gas emissions, clearly we need to rethink our current approach.
The good news is that there are other, better ways to do business. The concept of a circular economy is all the rage these days, and for good reason. It’s a way of doing business that’s efficient, protects the planet’s resources and provides a wealth of opportunities for creative entrepreneurs.
Think upcycling – like when fishing nets get a new life as fabric for car seats or shipping containers become swimming pools. Smart recycling can be good for the planet and your wallet, for example when you buy a refurbished smartphone at a fraction of the original price.
Let’s take a look at why we need to reinvent the economy to make it future-proof, and what the most promising solutions are.
Revisit DLD Circular
Our hybrid conference in Munich, co-hosted by BMW Group, brought together international speakers from business, arts and science to provide fresh perspectives on the circular economy. Among them were composer Hans Zimmer, pioneering designer Es Devlin, award-winning architect Francis Kéré, Chloé Creative Director Gabriela Hearst, and many more. You can revisit the conference by going to our DLD Circular page, which has video recordings of all sessions.
Time for a Turnaround
Every year, the world consumes some 100 billion tons of raw materials to produce anything from planes, trains and automobiles to furniture, smartphones and socks. “Of this massive amount, only 8.6% is cycled back into the economy”, the Dutch NGO Circle Economy notes in its Circularity Gap Report 2021.
At the same time, greenhouse gas emissions keep rising, pushing the level of CO2 in the atmosphere to record levels. The 412.5 parts per million measured in 2020 were the highest average ever, and “around 50% higher than when the industrial revolution began”, according to the International Energy Agency.
In many ways, preventing waste and fighting the climate crisis are connected. Take plastic pollution: Producing water bottles, plastic bags and packaging materials consumes enormous amounts of oil and energy – yet much of this material is quickly discarded. “Plastic pollution is not only an environmental tragedy”, the authors of a landmark report on plastic waste note, “it is also economically imprudent – billions of dollars of economic value are ‘thrown away’ after a single, short use.”
A world awash in plastic: In a business-as-usual scenario, plastic waste is projected to double by 2040 – most of it polluting the environment. (Source: Breaking the Plastic Wave report by Pew Charitable Trusts.)
This is true of many other products as well, of course. In the fashion industry, McKinsey observes, “as much as 12% of fibres are still discarded on the factory floor, 25% of garments remain unsold, and less than 1% of products are recycled into new garments.”
Across all sectors of the economy, the consultancy says, the “value of material in fast-moving consumer goods thrown away across the globe each year” adds up to a staggering $2.6 trillion.
Sot there’s a clear upside to managing our resources better – and consumers are pushing for change as well. In a recent Ipsos survey for the World Economic Forum, 85% of adults across 28 countries said that product labels should include information about the use of scarce natural resources. Almost three out of four respondents (71%) favor higher taxes on companies using scarce resources – even if that increases the price of products.
Roadmap to a Circular Economy
Think DISRUPT, with each letter providing a hint on what we can do better – a handy visual guide published in the Circularity Gap Report 2021.
Turning the linear, wasteful economy into a circular one is an enormous, global effort. But there are many roads to success. On an individual level, each of us can change habits and buy products that are more sustainable. More broadly, startups around the world are discovering circular business models as an enormous opportunity to reinvent the economy. And new technologies such as 3D printing promise to prevent waste altogether, because additive manufacturing only uses as much material as is absolutely necessary. Let’s look at a few examples.
How about handbags that suck CO2 out of the atmosphere? Eco-friendly packaging made of mushroom roots? Or window panes using upcycled crop waste that generate energy from sunlight? There’s an abundance of new solutions based on repurposing natural ingredients and clever R&D. This page by the Ellen MacArthur Foundation offers a good overview of “The circular economy in action”.
Hold on to your laptop
Our love of electronics leads to ever-growing mountains of electronic waste. Already at 7.3 kilograms per capita, the amount of discarded smartphones, laptops and other gear is predicted to almost double by 2030. Unless we do something about it. You could, for example, buy a smartphone that’s modular and easier to repair – such as the Fairphone or Shift phone. Or stick with what you have for a little longer. Producing a medium-sized laptop, for example, emits roughly 260 kilograms of greenhouse gases – the equivalent of a flight from London to Berlin. Extending the lifespan makes a huge difference, as the British Restart Project explains.
Recycling only works when it’s clear what materials the products are made of. In many cases, this crucial information is missing. Now, around the world, manufacturers and IT firms are working on new ways to give products a digital passport that identifies all ingredients. In fashion, the CircularID project has already won the support of brands like Target and H&M. In retail, the German R-Cycle initiative aims to develop a global tracing standard for plastic packaging. The European Brands Association pursues a similar goal with its Digital Watermarks Initiative HolyGrail 2.0, which is backed by more than 80 companies such as Bosch, Coca-Cola, Nestlé and Microsoft.
The most exciting opportunities for a more sustainable economy maybe be opening up at the intersection of biology, material science, and nanotechnology. The possibility to create products on a molecular level “has profound implications for business, but also for the health of the planet”, as the French NGO Hello Tomorrow explains in its report Nature Co-Design: A Revolution in the Making. “The market opportunity is in the trillion dollar range”, the authors conclude, predicting that “nature co-design is coming fast and will impact every industry, in every economy.”
When tech meets nature: This graphic, taken from Hello Tomorrow’s Nature Co-Design report, explains the key elements of the concept.
Circular – Like a Doughnut
There’s another way of looking at what the world needs, and how we can comfortably live within the planet’s boundaries: Think of a doughnut, where the outer edge defines the ecological limits of economic growth, and the inner rim defines the minimum needs of society – how much food, water, energy, housing almost 9 billion people require to create a “just space for humanity”.
These are the words of British economist Kate Raworth, who came up with the concept of a Doughnut Economy to describe a better economic model than the current one.
“It becomes a balance between meeting the needs of all people within the means of the planet”, she explained in a DLD Sync session last year. To truly make a difference, she launched the Doughnut Economics Action Lab which has spawned dozens of projects and a worldwide community.
This illustrates a key aspect of the circular economy: Positive change requires a global approach and systemic change on every level.
Skeptics may doubt that such an enormous effort can be successful, but in many ways the transformation has already begun. Now, as in the early days of the digital revolution, the future is likely to reward those who embrace change – especially when it’s for the good of society and the planet.