Trash Talk #3: What is the Circular Economy?
“Yes, you want your company to be profitable so you know it has a future. But I think the purpose of a business is what it does — what service it provides, what product it makes, how it helps people, society, planet. I wanted to create a business that puts those things first.”
The above quote is by Tom Szaky, Founder of TerraCycle, a leading innovator at the forefront of creating circular business models. TerraCycle’s tagline is “Recycle everything with TerraCycle.”
The circular economy concept has been around since 1966 but was recently popularized by the Ellen MacArthur Foundation, who collaborated with McKinsey & Company to release a report in 2012 titled “Towards the Circular Economy: Economic and Business Rationale for an Accelerated Transition.” This report was the first of its kind to consider the financial opportunity present in moving away from our current “linear” economic model to one that is “circular.”
So, what’s the difference between the two?
Linear Economy
Our current “linear economy” adopts a “take, make, dispose” model of production. Once a product reaches the end of its lifespan, it is discarded as waste.
Each time we do this however, we eat into a finite supply of resources, often producing toxic waste as a byproduct. As it’s become more and more apparent in recent years, this approach is not sustainable in the long term.
Circular Economy
The “Circular Economy” is the concept of a closed-loop economic system, in which waste is eliminated, and the value of raw materials are continually re-captured and re-used. It is a regenerative approach modeled after the natural world’s “living” systems, in which all “waste” becomes “food” for another process. In the economic sense, a circular economy recovers materials for industrial uses through “technical cycles” (e.g. metals), or as regenerative components for nature in “biological cycles” (e.g. compost).
The closed loops in the Circular Economy allow raw materials to lose as little of their original value as possible by placing systems thinking at its core, all supported through a transition to renewable energy sources. It is well explained by this entertaining animation:
How to Get There?
To achieve this new circular model, the Ellen MacArthur Foundation proposes four essential building blocks:
- Circular Economy Design — Companies need to build core competencies in circular design to facilitate product reuse, recycling and cascading; this requires advanced skills, information sets, and new working methods.
- New Business Models — The shift to a circular economy requires innovative business models that either replace existing ones or seize new opportunities.
- Reverse Cycles — New and additional skills are needed in delivery chain logistics, sorting, warehousing, risk management, power generation, and even molecular biology and polymer chemistry in order to facilitate the final return of materials to the soil or back into the industrial production system.
- Enablers and Favorable System Conditions — For widespread reuse of materials and higher resource productivity to become commonplace, market mechanisms will need to play a dominant role, supported by policy makers, educational institutions, and popular opinion leaders.
Re-imagining a New World
What is incredibly exciting is that many companies are already starting to adopt circular economy principles:
- Rent the Runway paved the way for re-imagining individual ownership in the clothing industry, inspiring other apparel startups and existing retailers to test out rental-based business models.
- Adidas has been turning recycled ocean plastic waste into sneakers and sportswear through their Parley collection, aiming to replace all virgin polyester with recycled polyester by 2024. Their next project is the Futurecraft Loop shoe, intended to be 100% recyclable into another shoe through an entirely closed loop manufacturing process, expected to launch in 2022.
- TerraCycle has become a global leader in recycling hard-to-recycle materials. In May 2019, they launched a new circular delivery system called Loop, in which they partner with multiple large consumer goods corporations such as Procter & Gamble, Unilever, PepsiCo, and Nestlé to sell their products in reusable containers, that are then shipped back to the manufacturer and refilled.
To learn more, the Ellen MacArthur Foundation’s website contains an incredible learning hub of resources, which dive deeper into how circular concepts can be applied various sectors of the economy.
