Despite years of talking, circular economy remains more talk than walk in the manufacturing industry. But three clear signals indicate that 2018 could mark the end of talk, and the beginning of implementation.
In January 2012, the seminal report Towards the Circular Economy: Economic and business rationale for an accelerated transition was released. The report, which was commissioned by the Ellen MacArthur Foundation and developed by McKinsey & Company, was the first of its kind to make the case that economic growth and the transition to circular economy can in fact go hand in hand. It argued that a subset of the manufacturing sector within the EU could realize material cost savings worth up to US$ 630 billion p.a. towards 2025. The report got a lot of attention and became widely praised – making circular economy the talk of the business town.
What is a circular economy?
The Ellen MacArthur Foundation’s definition of circular economy: “Looking beyond the current “take, make and dispose” extractive industrial model, the circular economy is restorative and regenerative by design. Relying on system-wide innovation, it aims to redefine products and services to design waste out, while minimizing negative impacts. Underpinned by a transition to renewable energy sources, the circular model builds economic, natural and social capital”.
Source: Ellen MacArthur Foundation
Today, more than six years later, circular economy remains one of the absolute hottest business mega-trends. The World Economic Forum placed circular economy on the top of their agenda this year. It remains recognized as key to safeguarding our planet and its assumed growth potential is becoming more and more substantiated. According to the report “Better Business Better World”, circular economy manufacturing holds the added value of a staggering US$ 1,015 billion by 2030.
The focus on circular economy in the political corridors is growing.
But, despite the obviousness of circular economy, widespread implementation of circular business models in the manufacturing industries remains to be seen. The sector continues to increase its carbon footprint and send waste to landfills and incineration.
But three signals could indicate that we are finally moving from talk to action and that this year could become the watershed moment for circular economy:
- A growing political commitment
The focus on circular economy in the political corridors is growing. Earlier this year, the EU passed the so-called Circular Economy Package that includes both legislation and policies as well as funds for research and innovation. Several countries including Denmark, Ireland and Slovenia have circular economy programs, the U.S. Chamber of Commerce actively supports companies in developing circular economies, and China — like Europe — has developed policies and legislation to get companies to implement circular economy. - The planet needs circular economy now – not next year!
If you combine this year’s line of new studies on the state of our climate, the fact that Earth Overshoot Day came earlier than ever this year, and the numerous warnings from experts, you get a clear picture of what the future would look like if the current linear production logic continues. According to the new study “Circular Economy – a powerful source for climate mitigation” conducted by Material Economics, a management consultancy firm specializing in sustainability and resource strategy topics, a “business as usual materials production” alone risks exceeding the total remaining carbon budget for a 2°C scenario by the end of this century – if we continue with the same production logic as today. The Intergovernmental Panel on Climate Change (IPCC) has estimated a remaining ‘carbon budget’ for this century of around 800 billion tons (Gt) of CO2. This is the amount of emissions that can be emitted until 2100 if we want to keep global warming below 2°C. The study from Material Economics estimates that, on current trends, materials production alone would result in more than 900 Gt of emissions by 2100.
The report also points to the fact that implementing circular production logic could reduce EU industrial emissions by 56% (300 million tons) annually by 2050, more than half of what is necessary to achieve net zero emissions. Globally, the reductions could be 3.6 Gt per year in the same period. Thus a more circular economy “is indispensable for meeting global material needs without exceeding the available carbon budget,” the study concludes. - Companies know it
Looking at the state of affairs of the business environment, the conclusion that circular economy is good economy is gaining ground. According to the newly published report “The New Big Circle. Achieving Growth and Business Model Innovation through Circular Economy Implementation” from The Boston Consulting Group and the World Business Council for Sustainable Development, 97% of the business leaders interviewed say that circular economy drives innovation to help make the company more efficient and competitive in areas such as sourcing, product development and production processes. 96% believed that the circular economy is important for their company’s future success. Furthermore, 84% of respondents stated they expect to increase their investments in circular economy projects in the future.
If you combine the growing focus on new regulation and more scientific proof of its impact, with business’ growing recognition of the environmental and economic potential that the circular economy holds, you get what you can call an absolute no-brainer. So what’s left, but to get on the bandwagon?