From Linear to Circular

As described earlier, in a linear economy companies take resources from the environment in order to make products. Products are subsequently disposed of as waste by the consumer. This is the take → make → waste economy, and it occurs due to a lack of incentives for both the producer and consumer to do otherwise, resulting in a global economy that is only 8% circular, according to the World Business Council for Sustainable Development (WBCSD)[18]. Abundant natural resources, efficient supply chains and legacy waste removal and disposal mechanisms have been optimized for consumption and convenience. Pollution and climate change have not yet affected consumer purchasing behavior and biodiversity, health and social costs have been isolated in their own silos as policy makers and business leaders avoid addressing the negative effects from a systemic perspective. Neither legislation nor existing business models provide incentives for businesses to source more recycled materials and for consumers to sort and recycle. As populations grow, resource demand grows to create more products. Consumers, even those wanting to recycle and compost, often have few or no options to participate. Those that do never know if the material actually gets recycled or composted. There is a fundamental disconnect between the importance of recycling and the solutions (and incentives) to match.

A circular economy aims to save money and resources from material recovery rather than incur full supply chain costs from mining, processing and transporting; and related costs including energy and labor, not to mention environmental and social costs. There are two broad resource categories, each representing 50% of total material sourcing and corresponding waste: technical/finite and biological/renewable. Both categories can be optimized to be very efficient and produce little to no waste. First, technical resources constitute anything that does not degrade as part of the natural cycle. Most technical resources can be recycled, if a product is disassembled and its components are sorted by material type. For example, battery connectors, circuit boards, and microphones from e-waste (electronic waste) all are technical products which can be recycled almost indefinitely, much like glass. Higher recycling volumes can also lead to greater processing efficiency. One example is glass ovens at bottling companies which can operate at lower temperatures with more cullet. For every 10% increase in the amount of recycled glass used, energy costs decrease by 2-3% and CO2 emissions are reduced by 5% whilst extending the lifespan of the oven. Ovens can typically receive up to 99% recovered glass, but often run with less than 5% in cullet due to challenges of sourcing recovered glass containers and products from the market, thus requiring that 95% of inputs such as sand, soda ash and limestone be extracted from nature. When scaled up, one hundred kilograms of recycled glass replaces 120 kilograms of virgin raw materials. By replacing 100% of the virgin materials with recycled glass, CO2 emissions are cut by about 58%. Reusable bottles can be used 40 times on average before needing to be recycled the first time[19]. An efficient reuse and recycle technical economy improves efficiency and reduces costs by extending the life-cycle of raw materials and feeding them back into the system, all the while ameliorating the waste landfilling and/or incineration problems.

Second, biological resources are those that we can source infinitely if done responsibly. This encompasses the manner in which we plant and draw from nature to create biological products and the processes by which we return organic matter to the natural environment, re-inserting them into the biological cycle. In practical terms, we can access a wide variety of bio products which can later be decomposed naturally in composting heaps along with food and green waste that together become the nutrients that restore topsoil for future plant growth. In fact, biological products are a useful additive in helping to structure composting heaps, aiding with aeration while also providing the carbon needed for optimal compost outcomes. Biological products are often called “compostable” or bioplastic[20] because they biodegrade naturally and, ideally, at the same velocity as food and green waste in compost heaps. These are not to be confused with biodegradables, which are still derived from petroleum and thus eventually become microplastics when they degrade naturally. Microplastics wreak havoc on ecosystems. The scientific community is still studying the precise impact that microplastics have on animal and human health[21], but one can assume that less is better. The labeling of products as biodegradable is likely the greatest example of greenwashing (a solution falsely claiming to be green) to date.

A deeper understanding of both the technical and biological cycles demonstrates just how profoundly our economies will need to change to become more efficient and circular. Ron Gonen, author of the Waste-Free World and CEO of Closed Loop Partners on a podcast claimed “we view the transition to a circular economy as the biggest transition of capital from one system to another since the Industrial Revolution.”[22] The crypto community may challenge that, but imagine the two in combination?! Below is an all-encompassing framework of the many secondary and tertiary uses of recyclable materials that contribute to a circular economy provided by the Ellen MacArthur Foundation, an organization leading the transition.

Figure 7: The Circular Economy. Source: The Ellen MacArthur Foundation

Existing and new service industries for recycling and refurbishing products, sharing of products and equipment (the sharing economy) as well as remanufacturing will see significant growth. Many businesses will transition from selling products in units to selling product-use services, known as product-as-service or the Service and Flow Economy[23] that includes recycling. Apple is a good example of this service at scale with the iPhone Upgrade program (that involves a monthly subscription[24]) and there are indications that these services may expand more broadly within the company to Everything-As-A-Service[25]. Accenture’s Peter Lacy states “By turning waste into wealth with new business models, companies can boost their competitiveness by reducing dependence on scarce resources and generating new innovative services that grow revenues.[26]” Apple’s investment in in-house recycling demonstrates their concurrence.[27] Paul Hawken and the Lovins in the book Natural Capitalism[28] argue that Radical Resource Productivity, Biomimicry, Service and Flow Economy and Investing in Natural Capital are the best long-term course for the global economy, and therefore, for business. “Together they can reduce environmental harm, create economic growth, and increase meaningful employment.”

The opportunity presented by transition to a Circular Economy by 2030 is estimated at US$4.5 trillion by the World Business Council for Sustainable Development (WBCSD)[29] and

Accenture Research. Accenture also expects the opportunity to be US$25 trillion by 2050, according to the book Waste to Wealth[30]. The Carrot Foundation estimates the opportunity in waste collection, hauling, and recycling alone to be US$1.9 trillion per year and in urban environments at US$1.1 trillion by 2030, offering a massive opportunity for new businesses to enter the sector. The decentralization of existing waste management systems and introduction of incentive structures that reward individuals and businesses to recycle while also informing users of the recyclability of products at point-of-sale offer great promise to transition from a linear to a circular economy.

18. World Business Council for Sustainable Development - “The circular economy’s natural logic”

19. FEVE: The European Glass Federation, Vision - Environment

20. ScienceDirect - Bioplastics, 2013

21. Nature - Microplastics are everywhere — but are they harmful?

22. Impact podcast with Josh Shegerian - A Waste-Free World with Ron Gonen

23. Natural Capitalism, p.19 by Paul Hawken, Amory Lovins and L. Hunter Lovins

24. Apple site: Iphone Upgrade Program

25. Computer World - “Everything-as-a-service, Apple, and the future of business”

26. Accenture “Waste to Wealth” book.

27. Apple site: recycled materials across its products

28. Natural Capitalism, p.19 by Paul Hawken, Amory Lovins and L. Hunter Lovins, p.15 & 19

29. World Business Council for Sustainable Development - “The circular economy’s natural logic”

30. Accenture “Waste to Wealth” book.