A Good Idea in need of Global Champions

Moisés Naím / World Energy & Oil

From Starbucks to Alaska Airlines, from Taiwan to Scotland and from William Shatner to Jane Goodall, corporations and individuals from all over the world are becoming engaged in a crusade to eliminate plastic straws. Why? This product does not belong in a circular economy.

While there is slow but growing global awareness of the effects of fossil fuels on climate, the need to tackle the pollution created by waste has received far less attention. The idea is to complement (and eventually replace) the so called “linear economy” (produce, use and discard) with a “circular” one in which products are used and instead of discarded are recycled. The circular economy seeks to retain the value remaining in the products after they are used while also curbing the waste and pollution created by discarded products.

Hitherto, efforts to champion a circular economy have been largely regional in scope and mostly led by the private sector and non-governmental organizations. Approximately 62 percent of the initiatives promoting a circular economy are based in Europe and only 13 percent in North America, while the remaining 25 percent is broadly distributed in Asia, Latin America and Africa. Over 70 percent of the initiatives have been started by the private sector, although member countries of the European Union agreed last May to approve a set of waste management regulations that will lead to 65 percent of municipal waste being reused and recycled by 2035, as compared to some 50 percent in 2010.

The Circularity Gap Report (see page 20) points out that of the 92,8 billion tons of materials placed in the economic cycle, only 8.4 billion or 9.1 percent is recycled, while the remainder is incinerated, dumped in landfills or spread into the environment. At the same time, utilization of natural resources has tripled since the 1970s, from 26.7 billion tons to 84.4 billion tons in 2015, while forecasts point to the utilization of a whopping 175 billion tons by 2050. Clearly, more and better policies that incentivize the use of the circular economy and more effective technologies that facilitate the reuse and recycling of used products are urgently needed.

Multiple definitions and diverse initiatives
In a recent article in the journal Science, Dutch Professor Julian Kirchherr and his colleagues identified and reviewed 114 definitions of circular economy. They concluded that a “Variety of understandings can result in the circular economy concept eventually collapsing or ending up in conceptual deadlock.” This tower-of Babel situation makes it harder for governments to adopt common standards which, in turn, would stimulate companies that operate in multiple jurisdictions to abide by them and thus scale up their “circular” efforts. The need for a deeper, more comprehensive and more systematic connection between efforts to promote the circular economy and those aimed at nurturing more sustainable practices is very clear.

At the same time, a review of the scant but intense global conversation about the importance of fostering the circular economy shows that the concept is still at a relatively early stage of conceptual development.

With some exceptions, most current efforts aimed at building a circular economy tend to be quite narrowly defined and are primarily centered on increasing specific economic benefits, by cutting costs for example. There are few large-scale, well endowed, public policy-backed and global efforts that try to drastically alter the ways in which humanity now creates and disposes the waste of “the linear economy.” One of these more comprehensive and ambitious initiatives is the Platform for Accelerating the Circular Economy (PACE), launched in 2017 as a public-private collaboration supported by the MacArthur Foundation, the International Resource Panel, Circle Economy and Accenture and hosted by the World Economic Forum. Other examples of important initiatives include The Circular Economy Club (CEC), a nonprofit international network active in more than 60 countries with over 2,600 circular economy professionals engaged in the creation of a Global Data Base on circular economy-related initiatives.

The gains from circularity
These initiatives are illustrative examples of the growing interest and support for the circular economy. A 2016 report by the consulting firm McKinsey and Co. describes how the concept is moving from theory into practice and points to a transition already taking place as more companies are adopting circular economy concepts. In Europe, notes the report, the adoption of circular economy practices could generate a net economic gain of almost two trillion euros per year by 2030. The report analyzes three main European sectors: mobility, food and shelter under a circular scenario and concludes that by 2050, savings could reduce mobility costs for the average European household by 60 to 80 percent, food costs by 25 to 40 percent and housing costs by 25 to 35 percent. These improvements would grow the size of European economy by 7 percent above what is now the consensus economic forecast. The McKinsey report recommends a six-point action plan for Europe to transform from a linear to a circular economy—its recommendations include shifting to renewable energy and materials, maximizing utilization of products through peer-to-peer sharing of privately owned products or public sharing of pools of products, improving the performance and efficiency of products, keeping components and materials in closed loops through recycling, emphasizing virtual delivery of utilities and replacing old materials with renewable ones. Perhaps the most important point to keep in mind is that once the incentives are in place, new technologies and business models are bound to create many more circular economy possibilities than are now imaginable.

The obstacles
The Copernicus Institute of Sustainable Development, Utrecht University, Deloitte and the Dutch government have jointly carried out research on the obstacles to the widespread adoption of the Circular Economy (CE) in the European Union. A survey of business executives of large corporations, government officials and leaders on the circular economy in businesses, government, academia and NGOs asked them to identify the main barriers. Cultural barriers appear to be the most important, including the lack of consumer interest and awareness and the strong reluctance of corporations to abandon their linear ways. Market barriers include the relatively low prices of virgin material and the high upfront investments required to convert business, governments and households from a linear to circular economy. Regulatory barriers are also hindering circular economy efforts. Not surprisingly, technological barriers were not found to pose very important impediments. However, a 2017 report by the Wuppertal Institute for Climate, Environment, and Energy suggests that the attainment of a circular economy is a rather utopian aspiration, since it would require the use of energy in sufficient quantity to become incompatible with climate control targets, a difficult dilemma that needs more research and clarification.

The circular economy: what is next?
Joss Bleriot, of the McArthur Foundation, persuasively argues that the European Commission is the world’s leading force pushing towards the large-scale adoption of the circular economy. The reasons are many: There is a greater sense of urgency in Europe about this issue because the Continent is poorer in natural resources than other areas of the world and has much less territory to accommodate waste. In 2015, the Commission agreed on a circular economy package and announced the development of a monitoring framework. The resulting package aims to contribute to broad political priorities by tackling climate change and the environment while boosting job creation, economic growth, investment and social fairness. The monitoring framework includes a set of 10 indicators to cover the different phases of the circular economy and is a key tool to measure progress. The specific targets of the Plan include halving food waste by 2030 and the reduction of marine litter, while establishing a strategy for recyclability of plastics and a revised regulation for fertilizers.

There is little doubt that the example set by Europe should become a global effort. The need for the United States, China and India as well as other large developing countries to join this effort is evident. Professor Seeram Ramakrishna of the National University of Singapore notes that during the last five decades man has consumed more natural resources than in the previous 30,000 years and generated more waste than in all of past history, while consumption of food and goods keeps increasing. In his view the circular economy, with its emphasis on extracting maximum value from resources, and recovering and recycling materials used, offers the best chance for a more sustainable future. It is hard to disagree with the professor.