What is... | April 2, 2015

What is the circular economy?

There’s a saying “what goes around comes around”. It suggests that our actions have consequences and are part of some sort of cycle.


It’s worth bearing the idea "what goes around comes around" in mind when thoughts turn to the circular economy. Since the industrial revolution we have taken a “take, make and dispose” mentality to production. This has brought us great prosperity, but the negative impact on the environment can no longer be ignored. In a circular economy as much as possible is reused, recycled, or even remanufactured to reduce or eliminate waste.

The case of the circular washing machine
Writing in a BBC article, environmental analyst Roger Harrabin said people could benefit from a more “circular” approach to producing and using goods such as, for example, washing machines – and not just because they go around and around. He argues that the 40kg of steel and all the other materials used to make a washing machine tend to end up in landfill after a few years, and the owner may still have to buy another one.

Instead of taking a resource, making it into something, selling it, using it and finally disposing of it, the whole system could be redesigned to be more sustainable at each point in the process. A 2014 French study lists China, Japan and Germany among the countries pioneering the approach and examines how to adopt the economic model elsewhere. Research has also been done on using circular economy ideals in new village construction in China and in industries such as tourism

An ultimate answer?
Research in 2015 by ING senior economist Gerben Hieminga notes there is still misunderstanding about how to finance the circular economy and its risks and opportunities. However, the concept is entering the mainstream and becoming better understood. “The circular economy is the ultimate answer to solving the problem of the depletion and economic scarcity of resources,” Hieminga explains.

Changing consumption
At one level, living the circular economy idea might mean sharing goods and services in a form of collaborative consumption. Car-sharing schemes such as ZipCar are one example. Durable goods such as washing machines might be rented to consumers—rather than bought outright. “Manufacturers would be able to supply top-end machines most economical in energy and water; it would be in the makers’ interest to maximise longevity to minimise service bills; and it would create a supply-return loop so that old machines went back to makers to be refurbished, updated or taken apart and cannibalised – and in the last resort melted down,” Harrabin wrote in his BBC article.

Global leaders at the 2014 World Economic Forum in Davos have taken the concept seriously, as have certain manufacturing giants. And the European Commission has been grappling with how to apply the concept within the European Union.

What’s the catch?
Leaving aside a raft of potential technological and logistical problems, one difficulty is getting people around the world – individuals, businesses and governments – to adapt and work together to reduce waste. There might be issues with the natural human desire to own things, to indulge in conspicuous consumption, and to compete with each other. On the other hand, the circular economy will help develop new technologies and markets in which everyone can participate with a clear conscience.

EconomicsSocietyEnvironmentSustainability

eZonomics team
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