The release of Walter Stahel’s book “The Circular Economy: A User’s Guide”, with a foreword by Ellen MacArthur, offered the ideal moment to bring together these prominent figures of the circular economy. We’re delighted to share the (almost) complete transcript of the conversation between Ellen and Walter, as their insight on these questions is vast and worth your time.
For those of you who are not familiar with the work of Walter Stahel, he has been researching the circular economy in detail for almost 40 years, and is the founding father of the ‘Performance Economy’. His latest book, released in June, presents a summary of a lifetime’s journey into the circular economy. You can find out more about the new book at the end of the interview.
Ellen MacArthur: Firstly Walter, welcome to the Foundation’s offices. It’s fantastic to have you here. You’ve been a good friend to the Foundation for a long time, and we’re really pleased you could join us for this conversation.
You have been absolutely fundamental in the development of circular economy, and the work you’ve done has led to some of the main thinking on the circular economy and the performance economy. Thank you for being one of the pioneers, and for continually inspiring us.
This conversation is also timely because you have just brought out a new book The Circular Economy: A User’s Guide, which for us is phenomenal because it helps to spell out in greater detail what the circular economy is, and brings together all your wealth of knowledge. Everything you’ve put together over the years comes to fruition in this book, which is very exciting for us to discuss.
Some people might be surprised to hear that you’ve been working on the circular economy for so long — it’s not a new idea, is it?
Walter Stahel: Well first of all, circularity is in nature. It has always existed. But when people suffer from a lack of goods and materials diversity, the circular economy of necessity — of poverty — has developed. It was natural because there was no other choice: ‘use it up, wear it out, make it do, or do without’. There was also no defined frontier between nature and people; they were using the same natural materials. So in that sense, a circular economy of necessity is very close to nature, but then through industrialisation, we learnt to overcome our scarcity of goods and scarcity of materials, and we never gave any thought to what that actually meant for the future.
EM: And the complexity of those materials and how we would deal with them. Our material world has become very complex and incredibly hard to read, so you can’t tell what’s in a product just from looking at it.
WS: Yes, and then the next problem was when we started developing materials that no longer existed in nature, like plastics. Nature, of course, cannot deal with these goods, these materials. In a smartphone for example, I think you have around 70 chemical elements. We cannot separate them, but nature has no idea what to do with them.
EM: That first point is interesting, to think that circular economy has existed forever in the natural world. That idea that you can feed a material back into a system. That’s exactly what we’re trying to achieve today with those technological materials: a system whereby you can identify exactly what is in a product, what it’s made of, and how to recover it. It is, in a way, artificially recreating that natural cycle to create the circular economy.
WS: The ideal solution would be to recover atoms and molecules, but de-bonding has never been at the forefront of research. We can de-bond water into hydrogen and oxygen for example, but it takes a lot of energy. We have no clue if and how we can de-bond metal alloys. De-bonding chemicals may be possible through polymerisation, but there’s definitely no way nature can deal with it. So we have put ourselves in a situation where we always think about improving production and performance but we rarely give the same thought to we do with the product at the end.
EM: And that’s why it’s so fantastic to see so many businesses that are really driving this change. It is more and more included in the design brief, and we see that with more complicated technologies, but also with plastics, which is very encouraging.
WS: We can be very optimistic for the future indeed, because we now know we need a circular chemistry, we need different molecules, different plastics. The problem is the legacy. We have plastics in the oceans, fish eat them, then we eat fish with plastics. We have 200 tons of man-made materials on the moon but not the strategy to recover or eliminate them.
EM: To follow up on your point on optimism I certainly feel that we are now, perhaps for the first time, really beginning to understand there are real consequences to the linear leakage because we didn’t even know there was a problem, or we choose to ignore it, perhaps.
The mindset and approach many have applied in the past has been to simply use less, reduce, and try and do ‘less bad’. How is the circular economy different?
WS: A circular economy is about managing stocks: assets of cultural, natural and human nature, and manufactured objects. We have to learn how to maintain these stocks, because in industrialised countries we have a society of abundance. We have everything we need, but we have to learn how to look after it, and to care for it.
EM: But the news of recent months and years suggests that we don’t seem to be doing a very good job of that.
WS: Nature will survive, but possibly without us.
ES: Absolutely. Understanding the value of what we have is very important. When we make something, keeping it at its highest value and keeping it in use as much as possible is crucial. This doesn’t mean we have to keep the same technology forever, but maintaining that value for as long as possible. And then having designed the product intelligently, you can take the materials out and feed them into the next wave of technology, whatever that may be. Are you hopeful? You said that you’re very optimistic. Are you hopeful we can achieve that, have you seen any change?
WS: I think what we need is a fundamental change in policy because we have two resources that are very special. One is people, which is a renewable resource, and is the only resource that can be improved through education and training. But if we don’t use people, or train them, they will lose their skills. At the moment, we are incredibly negligent with the way we’re using this human capital.
The second one is water. Water is the only resource for which there is no alternative and we are equally wasteful with water. More than half of water consumption goes into agriculture, but there are much more intelligent ways to use water. We have to apply the knowledge we have to everything.
EM: It’s also being aware that it’s a system and everything is linked. Health is linked to pollution, pollution is linked to manufacturing. It’s a big system, you can’t take small pieces in isolation.
WS: No, you will need a holistic way of looking at it. That means that science, academia, and politicians have to break out of their silos and try to understand their role within the whole system.
EM: There’s a lot of tension today around the notions of economic growth versus collapse. Is the circular economy an answer?
WS: I think we have two possibilities. Either we choose the circular economy as a strategy for the future, or nature and external factors will force it upon us. And with our resource scarcity here in Europe, we are dependent on inputs of resources from developing countries, therefore we are exposed to any kind of political pressures.
On the other hand, we have stocks of materials with urban mining. Many goods are here, we just haven’t learned to use them so far. So again, I think the circular economy is a question intelligence and modesty. We have to accept that we have achieved many things, but we don’t enjoy them, we always want something new.
EM: There seems to be a realisation, now more than ever, that we’ve tried to squeeze what we can out of the linear system. And we’ve tried to pretend that’s okay. I think that companies and countries are trying to get more and more out of this system every year, but are realising that, actually, linear cannot work, and that’s a hard stop. We don’t know everything about the circular economy, but what we do feel is that the linear model cannot work in the long term.
WS: The problem is, in less developed countries there often isn’t the infrastructure in transport, water supply, sewage, education and health. These governments have to invest into buildings, and manage the stocks of assets in the long term. So some of the most urgent questions of the circular economy today lie within the society of abundance, which means industrialised countries.
And then if we, as users, not consumers, start to ask service companies for repair, remanufacture and to build markets for reuse, then we can share this wealth.
EM: What’s also interesting is looking at the economics behind this. That’s what we’ve tried to do right from the beginning here at the Foundation: understand the economic rationale. In every case that we’ve looked at, that shift to the ‘performance economy’ — as you coined — delivers more value for companies. So while there is a driving element from us as users, there is also an advantage for many companies to shift from the selling of products to the provision of service. This has been your area of expertise for many years.
WS: Well, if manufacturers want to stay in the game of the circular economy, they have to start managing these stocks, and the easiest way they could do it is by retaining ownership: sell goods as a service, molecules as a service. But that also means that they have to retain the liability, and risk management has to become a very important part. Managing stocks of objects is very different from manufacturing them because they’re everywhere. Therefore you cannot use economies of scale but you can make much bigger profits because you don’t have to buy the resources, instead you manage the resources in your possession.
EM: And in that space, there are many opportunities for having a better relationship with your client or with the user of your product. Today, the product is sold and it has to break, otherwise you’ll never sell another one and you’ll never grow the company. Within the circular economy, there’s a lot of opportunity, not only to decouple the company from its resource constraints, but also to have better relationships with customers or the users of the products. And from the analysis we’ve done, it’s a win-win situation economically, we get a better product, we pay less because we don’t physically buy the materials, and the company makes more money because they’re not tied to buying new raw materials every time you make a product.
WS: You can see this wherever objects are already sold as a service: airlines, hotels, railways. The competition then is really on service and service quality. Then the manufacturers now also have the choice of becoming fleet managers and not selling the product.
EM: What do you think has to happen for the circular economy to come to fruition?
WS: We need policy innovation, social innovation and technical innovation. We already talked about technical innovation, such as dealing with the legacy issues of the linear economy, and the new materials that will be needed for circular chemistry. The tricky one is the policy innovation. Because policymakers very often see themselves as fostering growth, in other words fostering production, but they have to look at things like taxation, liability, obviously we should not tax renewable resources such as work. If the state has a problem with waste that it cannot solve, then it should give it back to whoever created the problem. The Extended Producer Liability is the only way for the producer to think how it can avoid creating this waste. And so there are a number of issues that are not being discussed today.
EM: One thing we found when it comes to the circular economy and policy is that in the past you often had that real conflict between companies who were lobbying against any changes, because it restricted what they could achieve, and the legislators who were trying to put the best system in place. There was a conflict and what we’ve seen with the circular economy is that in many areas there is alignment between companies and policy, where the companies want a level playing field to develop circular activity, and they understand that this is about their competitiveness moving forward. The policymakers want to create circular economy because it solves many of the problems with regards to waste, and that implies extended producer responsibility. But you have both of those sectors, large or small companies in the same room having the same conversation, almost trying to achieve the same goal. For us, that’s been a very interesting narrative to follow. Instead of trying to lobby and squeeze more out of the linear system, we see businesses working alongside governments to move in the right direction.
WS: But I think the conflict has now moved into this social innovation area. There’s no sharing without caring, so if you want good public transport, parks and so on, we need caring, because vandalism can ruin anything. But there is also social sharing, through innovations like Airbnb and Uber, that can enter into conflict with the traditional manufacturing and selling philosophy. And again, the policymakers are overwhelmed by the problems because they didn’t think that would ever happen. Take the repair cafes for example, they work, but the traditional economic actors don’t see their role in it and policymakers don’t know how to — if they want to — control it.
EM: And it’s happening so quickly. When you look at the growth of Airbnb and Uber, they’ve come from nowhere and in five years they virtually dominated the market. They’ve made people really think on their feet and, I guess when you have such a big change in the system from that kind of innovation, you do have social questions that really have never been asked before. Of course, there’ll be challenges on the way, but it is interesting to see some of those challenges with regard to legislation, which obviously are going to have to be dealt with in order for this to continue at scale.
WS: Yes, and if Uber is pushing out traditional taxis, or AirBnB competing with traditional hotels…I’ve just learned that Airbnb, here on the Isle of Wight, is now pushing some of the traditional BnBs into financial difficulties…so where is the philosophy? Where is the thinking about how best to structure these solutions?
EM: But we know that diversity is strength so we need a range of different size companies, different innovations.
So we know that there are parts of this transition that are still unknown. But do you think the circular economy is inevitable?
WS: In a town like Paris for example, one of the biggest problems is construction waste. There are no more landfills or sites where you can dump stuff. So if you can’t get rid of your construction waste, the obvious solution is a circular economy in which you renovate buildings, and keep the stock you have. Recent studies have shown that by moving on a national level into performance economy, you can reduce CO2 emissions by 66% and create jobs, and we can do it now. So we have a solution, it may not be the only one, but we have a solution. So let’s now accept that these people are right, and apply and convince the people involved to change.
EM: You mention CO2, and climate change is another challenge in need of a systems view, as there’s been a very siloed approach to energy. It’s been presented as simply shifting from coal fired power stations to renewable energy. But it’s much, much more than that. Because when you look at the statistics around remanufacturing, products as service, and keeping those products at their highest value and utility, that massively decreases the CO2 emissions. You’re using the materials that you have, and as you say Walter, you’re managing those stocks intelligently.
WS: And you have to include agriculture, because one of the big producers of CO2 is agriculture. So if we change the way we eat, especially with regard to meat and animals, we can massively reduce our CO2 emissions.
EM: Not just the way we eat, but the way we farm. Farming is incredibly linear. On the majority of our land we use fertilisers, we put it on the soil, the soil degrades, there’s no biomass going back to the soil, soil washes away and we have eutrophication. We found in our Growth Within report that only 5% of fertilisers applied to farms actually goes into the food, the rest is lost, it’s washed away, or it is not used in the part of the plant that we eat. And in our latest report on food, we found that the things we add to keep producing food in this linear way are damaging our health overall.
So it’s that systemic approach that looks at the whole picture, with everything from remanufacturing to performance economy — it can’t just be energy, it can’t be that siloed.
WS: There’s innovation in this space too. The Dutch have developed soil-tolerant and even soil-resistant plants for food, which can be used in desert situations near the sea, so you can actually use the salt water. So you can open up new arable land, which reduces the pressure on existing arable land.
EM: For so long, we’ve been trying to make productive land last a bit longer. Here we have the opportunity to regenerate farmland, which is promising. This is about taking biomass, taking it back to the farms, improving the health of the soil, supporting the nutrients and microbes that sit within the soil. These challenges related to food are urgent, so the faster we move to a circular economy, the better.
It’s about asking ‘what do we want to achieve?’ What does our global economy look like if it really works, now and in the future? That’s where I began this journey, and to me the answer was — and still is — a circular economy.
To find more information on Walter’s book at the publisher’s website, and use the code SOC19 at check out to receive a discount on your copy.