The Circular Economy Model: Closing the Loop (Part 2)

Read The Circular Economy Model: Closing the Loop Part 1

The macroeconomic benefits from transitioning from a linear to a circular economy will be positively felt across society and will comprise:

1. Eliminating dependency on finite resources. Instead of constantly producing new items, reusing products and materials will help to regenerate the natural system rather than degrade it. For instance, land regeneration is costly, and it doesn’t account for the alternative costs of biodiversity loss or the degradation of unique landscapes. A circular economy regenerates the land by returning biological materials to the soil when their natural cycle has ended.
2. Designing out waste and pollution during the production process. For example, if Europe committed to a circular economy by 2030, it could halve carbon dioxide emissions. The UK could reduce greenhouse gas emissions by 7.4 million tonnes annually by preventing organic waste from entering landfills. (via Ellen MacArthur Foundation).
3. Innovation – replacing the linear model will create many innovative and creative opportunities for people to develop technological solutions for a sustainable economy, improving efficiency in using new/reused materials and generating new ways of consuming energy.
4. Growth – increased growth will be achieved by implementing circular activities (upcycling products, reusing materials, and repairing) and reducing production costs through the utilisation of products. The circular way of production and consumption will be mirrored in consumers’ demand (demand will change and shift towards repair and longevity), pricing (pricing will have to adjust to reflect shifting customers’ needs) and supply (the supply chain won’t be relying on new materials but re-used materials and parts). Based on detailed product-level modelling in the EU alone for medium-lived products (e.g., mobile phones, washing machines), annual net material cost savings could amount to $630 billion. For fast-moving consumer goods, such as household cleaning products, the potential savings could go up to $700 billion globally.
5. Creating more robust employment, the circular economy model will be built on a service-based economy, generating new jobs across various sectors.
6. Lowering production costs, as there is a reduced need for new materials.
7. Constructing new profit streams, such as leasing high-end products rather than buying them, repairing, buying back parts of the products or the products themselves, re-selling refurbished products, re-selling used parts, etc.
8. Reducing exposure to materials from volatile parts of the world (war, natural disaster, human rights abuse).
9. Demand for new business sectors will grow, including collection and reverse logistics, product marketing and sales platforms, parts and component remanufacturing, refurbishment, and rentals and leasing.
10. The business will have to learn and adapt to building a lifelong relationship between customers and the company that provides the product, as it will begin offering long-term services rather than products alone.

A circular economy won’t only benefit small and large businesses/organisations, but also individuals:

1. It will provide higher disposable income. The cost of products and services will be reduced.
2. People will have less unproductive time, such as searching for a replacement for the broken product, collecting, or finding someone to fix the issue. The company from which people purchase their products will provide all logistics.
3. Customers will have a wider range of product choices, often tailored to their needs. It will be easier to choose an ethical company that promotes a circular economy in an honest manner.
4. The products will fail less often, reducing ownership costs while increasing convenience.
5. Health care costs could be reduced significantly, and many pollution-related illnesses and deaths could be avoided.

In practice, of course, shifting from a linear to a circular economy isn’t going to be easy and will take enormous human effort. From an operational perspective, many aspects will need to change, including business models, accounting practices, goods delivery, aftercare, training, and profit sharing.

Many elements of the linear economic model will need to change to achieve the desired effect; changing only one piece won’t change anything.

At the moment, we are in a perfect situation in which the economy, technology, and social factors are converging to drive change. The challenge is to ensure that the circular economy can go mainstream and scale up rapidly enough for that change to become a reality that benefits everyone, not only the “chosen” few.