A Rare Critical Look at the Concept of a Circular Economy

Jamie McIlhatton
Apr 5 · 9 min read
Photo by Chaitanya Tvs on Unsplash

So the theory is, that before 2030, we need to create systems and business models to actually produce no waste and zero emissions. Pipe dream? We don’t really have much of a choice. I mean, preferably businesses will actually act as carbon sinks and remove carbon from the atmosphere but now I’m just sounding silly.

Okay, so let’s break down how this can be made possible across the ‘Triple-Bottom Line’. Environmental / Economic / Social.

Transitioning to a circular economy will require businesses to transform their current linear (Cradle-to-Grave) models to a system with the values of a circular model (Cradle-to-Cradle), based on the principles of reducing, reusing, and recycling. One of the key features of this approach is that products must be designed in a way that increases the life of materials, with a ‘closed-loop’ cycle in mind; thus reducing the use of finite resources.

Circular business models follow the waste hierarchy guidelines in that reuse and remanufacture of materials and products are preferable to recycling. This means that the value of the materials used, remain in production and less energy is required.

Evidence illustrates that there are some considerable benefits to be had from incorporating this new economic model. However, there are some contestations to its acceptance as being a “solution”.

According to Georgescu-Roegen (1971), an economist specialising in entropy; the law of thermodynamics states that the recycling process will always require energy and produce waste products. This would mean that closed loops would be practically impossible. However, as mentioned previously, recycling would be treated as a last resort in a Circular system and thus boundaries must be defined to establish what is included within the remit of a closed-loop system. We must not over-rely on a highly flawed recycling system.

Korhonen supported the criticism through stating that regardless of the economic model, the expansion of the global economy, if not controlled, will inevitably lead to detrimental levels of resource depletion and waste production. Despite this argument, it was agreed that this would take considerably longer to occur than a ‘business-as-usual’ approach.

One of the more commonly discussed benefits is the potential for a decrease in production costs, thus reducing the cost of the final product and improving the bottom line. This would appear to be a further incentive for businesses but some also propose that a reduction in product cost may have a ‘rebound effect’ and result in significant increases in consumption, in turn being counter-productive to the original environmental benefits.

Photo by Dominik Lückmann on Unsplash

A key feature of the circular economy concept, and a reason why it has been supported as a prospect, is that it may allow for the decoupling of economic growth and resource use. Theoretically, its implementation would not result in a reduction of that growth but would allow for the mitigation of environmental harm.

According to Chesbrough (2007), complete transformation of business models to a more circular model are suspected to produce higher returns than merely focusing on adapting the products or processes. Furthermore, there are suggestions that these sustainable models may also be more effective at mitigating risk and act as more resilient for the long term (Choi & Wang, 2009). These points illustrate that there are incentives available to encourage companies on a large scale to make the transition.

There are a wealth of arguments to suggest that the social aspects are left as an afterthought in the research of the Circular Economy concept. The original scope of the model claimed that social equity was an integral part of the circular economic model. However, there appears to be no clear understanding of how the model contributes meaningfully to social aspects of sustainability. Chinese case studies described the circular model as able to promote greater social equity but the claims were not supported by quantitative evidence.

It’s worth noting also that their perception of equity was attached to a rise in GDP. An increase in GDP does not directly result in social equity improvements, it can only be considered as an indicator at best.

Some of the largest corporations in the world and the most significant polluters are investigating the potential for ‘closing the loop’ on the manufacture of their products. One company acting as a catalyst for this change is Terracycle; an innovative recycling company based in the US but now with branches in multiple countries including the UK. Terracycle is the parent company of an initiative known as ‘Loop’. Loop is a circular e-commerce platform aiming to collaborate with the largest brands to reduce their social and environmental impact through the redesign of delivery systems (New Plastics Economy, 2019). You should check them out, it’s a fascinating example of how logistics will look soon enough.

Their aim is to create a circular delivery model through a more affordable ‘use and collect’ platform. They partner with large companies such as Unilever, Nestle, and Mars Inc. to deliver their products in durable packaging which can be used, collected, cleaned, and then reused. They aim to encourage partner brands to refrain from the use of plastics and to trial the use of appropriate closed-loop materials such as aluminum and heavy-duty glass.

Due to their ownership by Terracycle, with an already established recycling framework, they are able to offer a collection of non-recyclable products such as razor blades, toothbrush heads, and used diapers to divert as much waste from landfills as possible.

In January 2019, Nestle partnered with Loop to replace their single-use plastic and to create a refillable Häagen-Dazs container for ice cream products in the US. This was intended to be the pilot run before looking to implement the same model in different countries across a range of their products.

20% of Nestle’s water products are currently sold in refillable packaging which they are actively planning to increase. Another large corporation following suit is Danone who produced approximately 750,000 metric tonnes of plastic in 2018. They currently produce half of their water products in reusable packaging but their goal is to increase this, as well as creating their own alternative delivery models by 2025 (This is the important part of it all for me, but that’s another conversation). They’re currently piloting new returnable packaging for Evian through also partnering with Loop. (New Plastics Economy, 2019).

At the start of 2019, PepsiCo, another of the world's largest corporations completed the acquisition of ‘Sodastream’, a company providing alternative delivery systems for sparkling water using refillable bottles, for 3.2 billion USD. From the personal care sector, Colgate-Palmolive, an organisation that produced 287,000 metric tonnes of plastic in 2018 joined the Global Commitment campaign as a signatory. They committed to investing in and trial new business models including refills for their concentrate products such as soap, toothpaste, etc. by 2025. They’re also investigating the potential of a hybrid system approach incorporating certain zero waste elements to personal care products.

So you can see from these examples that going circular is certainly not being ignored by the big players. Now, what about the challenges we face in implementing such a system?….

A review of the literature on the subject of the circular economy and its associated business models highlighted that a widely accepted definition does not yet exist. That sounds ridiculous, right? But it happens a lot more than you’d think! In order to implement a new and complex system, there needs to be a widely agreed definition and framework.

An example of a knowledge gap is the failure to clarify whether resource efficiency during production, is included within the model. Do we go as far as including material leakage and emissions as ‘waste’?

There may be consensus on the potential for it, evidence to show this kind of economic model could provide a solution. However, until all aspects of the CE have been defined and established, the adaptation to new business models may not result in successful implementation.

Photo by Edho Pratama on Unsplash

A widely accepted definition is essential for the cooperative nature of the circular business model and integration of all stakeholders. The plurality of global institutions, for instance, will inevitably impact trans-national implementation. Laws and policies will differ in each country, around remanufactured goods and the reuse of products or materials. This is further reason why a common definition is vital but also highlights the complexity of moving to a new global economic system.

Taking its complex nature into consideration, there have been questions raised over the extent to which the Circular Economic concept has been critically analysed and over its potential for benefiting the environment/economy/society. Although advocates of the model claim it aims to achieve a ‘Triple Bottom Line’ approach; there are contestations over its balance of environmental, economic, and social benefits.

A review of research shows that there is a greater weighting of focus on economics with environmental benefits but only includes some social aspects. Emphasis on an economic framing is to be expected. However, there must be development in the social rationale.

An important process for introducing any new system is the ability to track progress and quantify its success. The environmental benefits of circular business models have been suggested as being difficult to clarify due to often complex supply chains or lack of an appropriate assessment framework. Any that exist are often resource demanding such as the ISO 14040:2006.

It’s evident from the literature I’ve read, that the current linear economy is no longer a sustainable option for society and the environment. In order to reach waste targets, businesses must now adopt new models/mechanisms which take social, environmental, and economic benefits into equal consideration. This includes incorporating a wider group of stakeholders.

The circular economic model has earned widespread support and is advocated as being pretty much the only solution we have, in maintaining economic prosperity whilst placing more of a focus on environmental protection.

It is also however evident, that the concept is still in its embryonic stage. Much of the research has been carried out in recent years, suggesting that knowledge gaps still exist and further studies are required before we can claim to comprehensively understand this new economic model. The net gains from implementing circular business models over a ‘business-as-usual’ approach are clear to see. However, these benefits appear to lie predominantly with the environment and economy rather than including social benefits.

Perhaps with greater depth of research and adaptation of the circular model, the benefits for social equity may begin to appear. Potentially even with some of this research coming from a sociologist, as opposed to an economist; providing us with new framing and new perspectives.

Despite the remaining uncertainties, evidence and literature suggest that some extent of implementation is required to begin to stem the current pattern of damaging usage of finite resources. With an abundance of action plans provided by multinational corporations around the world as well as the EU and China, there does appear to be some intent and innovation. During the next decade, it is likely there will be a significant market shift and alteration in consumer behaviour, and the way they communicate with their favourite brands.

One of the key elements of this concept that requires development is its definition. There is still no widely utilised framework, which will potentially act as an obstacle for global uptake. Once a definition has been established, it will allow for legislation and policy frameworks to be created which will be significant in the influence of companies, large and small, to make the transition.

I hope you’ve enjoyed this read and thank you for sticking with me this far! I’d love to hear your thoughts and opinions, based on your own findings. I focused on a more critical view, only because I felt there was a lack of it. I am actually incredibly excited at the prospect of this system; I’ve truly bought into it. The faster we can learn and the more the term ‘Circular’ becomes embedded in our daily vocabulary, the healthier our chances of pulling back from the brink.

If you’d like to chat with me further, you can find me at sundastudio.com or on Instagram @sundastudio

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Jamie McIlhatton

Written by

Sustainability Consultant and Owner of @sundastudio // Specialty Coffee Shop owner @wyldecoffee // Just trying to take my own advice...

Climate Conscious

Building a collective vision for a better tomorrow

Jamie McIlhatton

Written by

Sustainability Consultant and Owner of @sundastudio // Specialty Coffee Shop owner @wyldecoffee // Just trying to take my own advice...

Climate Conscious

Building a collective vision for a better tomorrow

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