Not many people have heard about the ‘circular economy’, and even fewer know what it means. But, among environmentalists, it’s increasingly talked of as a major new economic trend.
It’s a term that means different things to different people. But the core of the idea is resource efficiency, the idea of reusing and recycling materials, and maximising the economic value of the things that we produce. It is a move away from the linear economic model of ‘make-use-dispose’, and a way to promote sustainable growth in a future of resource scarcity and a growing global population.
Making the circular economy a tangible concept can be hard. In the Green Alliance’s 2015 report on the circular economy, they outlined some of the different examples of circular economy activities. These include:
· Reusing. Using the finished product for the same purpose as it was originally manufactured (e.g. using a second-hand iPhone)
· Servitisation. Using assets more efficiently, such as through leasing or short-term service provision (e.g. renting a room via AirBnB)
· Recycling. Using recovered materials to create new products
· Biorefining. Extracting useful, valuable material from biowaste
Domestically, ministers at Defra are supportive of the circular economy. In December 2015, the EU Commission published a new action plan on the circular economy, which includes new common targets for EU Member States on waste and landfill use. It’s something that will increase in importance, therefore, in the coming years. This blog will look at some of the evidence around the economic and environmental impact of the circular economy.
There are significant economic benefits for businesses of cutting waste and being more efficient in their consumption of resources. A circular economy approach can help firms reduce their costs and make them more competitive globally.
Last year, the Green Alliance analysed the impact of the circular economy on employment. They studied the performance of the waste and recycling industry between 2000 and 2010, a period in which landfill declined and recycling rates rose. During that time, employment in the sector increased from 75,000 to 130,000 people, and sales turnover nearly tripled, up from £6.5 billion to £19 billion. They also examined the potential for the whole circular economy up to 2030. They found that there’s the potential for between 54,000 and 102,000 net jobs to be created in that time.
As more resources are consumed and they become scarcer, businesses that rely on natural resources will become more susceptible to price volatility. The circular economy reduces businesses’ exposure to these price risks. The Ellen MacArthur Foundation, an organisation set up to promote the circular economy, has worked with McKinsey to quantify the benefits to businesses of being more resource efficient. They have found that, by reducing the amount of raw materials businesses need, the net material savings across the whole EU could be between $340-630 billion per year.
As well as offering economic benefits to businesses, there are advantages to the environment of a circular economy approach. The circular economy recognises that some natural resources are limited. To achieve sustainable economic growth, countries cannot rely on infinite consumption of finite resources.
Many activities associated with the circular economy reduce greenhouse gas emissions, and therefore support efforts to mitigate climate change. For instance, recycling food waste rather than sending it to landfill reduces harmful methane emissions. Through the process of anaerobic digestion, food waste creates biogas, a low-carbon energy source that displaces fossil fuels.
Circular economy approaches can also reduce pollution that is harmful to the natural environment. For example, the Ellen MacArthur Foundation has produced a report on plastics and the circular economy. Eight million tonnes of plastic leaks into the ocean every year, adding to the total of 150 million tonnes of plastic that is in the ocean today. Plastics also represent about 6% of global oil consumption, and is thus a major driver of fossil fuels use. In a circular economy, these environmental impacts could be mitigated through greater recycling, greater use of reusable packaging, and the use of compostable packaging.
The more the circular economy approach is adopted, the greater the scale of economic transformation is required. For instance, the Chatham House has argued that a circular economy implies the decoupling of rising prosperity with growth in resource consumption. This talk of economic revolution can make conservatives anxious.
The idea of a circular economy, however, shouldn’t be seen in such stark terms. Organisations like WRAP and the Ellen MacArthur Foundation partner with businesses to develop circular economy approaches that increase their profits. It can be a very practical way of reducing inefficient economic activity and improving the natural environment. Conservatives should ignore the hyperbole, and embrace the opportunity that it offers.