Circular Economy: Good for Business?

By Judith Sykes

Discovering the many materials inside an LED light disassembled during one of our workshops on closed loop design

Discovering the many materials inside an LED light disassembled during one of our workshops on closed loop design

I was really intrigued by this article in the Guardian last week, citing the circular economy as a new way of doing business. It really isn’t. But it is brilliant rebranding.

Models of circularity have been around for centuries from the rag and bone man, to launderettes, and charity shops, and more modern day freecycle. These are all examples of circular business models.  For some material systems, economics has driven high recycling rates, for example steel and aluminium.

But what has changed in recent years is the pace of consumerism, rising demand for products coupled with global population growth. Further products are also increasingly complex and include a much wider range of materials. They have been optimised for in use performance and consumer satisfaction often making it very difficult for disassembly and material recovery.

The disaggregated global supply chain further complicates matters. Our work with organisations in this area highlights collaboration with partners as one of the key ways of getting circular business models off the ground, a theme echoed by friend and colleague Sophie Thomas at The Great Recovery.

So models of circularity are not new, but historically have been driven by economics. So why don’t we leave the market to drive new solutions?

Well global demand for resources, geopolitical risks and speculation are contributing to higher and more volatile commodity prices.  The EU has identified 14 elements essential to industry that are a supply risk. At the same time, some 90% of materials are lost within 6 months of extraction [1], we are literally throwing away gold. So by recovering materials, we can try to stabilise pricing and importantly keep these at risk materials in our own hands.

So investigating circular opportunities is at least good risk management and can have economic, environmental and social benefits.

But we do need to be careful in our pursuit.

The circular economy is an ideal of sustainable material management at a macro scale. In theoretical terms this means circulating materials through the economy with minimum loss of quality or value, and keeping technical separate from biological cycles.  A criticism of this theoretical model is that it ignores energy impacts of a carbon based economy. Even if we were to substantially decarbonise and move to solar energy sources, energy impacts are significant in terms of their knock on material contribution to infrastructure requirements (generation, transmission and storage).

Systems theory is one approach both to avoiding unintended consequences and revealing the range of opportunity for redesigning products and business models.

[1] Factor Four: Doubling wealth, Halving Resource use. Lovins, 1998

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