Interview with Walter R. Stahel: A New Policy Impetus for a Circular Economy in Europe

On behalf of the Covenant Circular Economy I had a conversation with Professor Dr h.c. Walter R. Stahel on the circular economy in Europe.

Walter R. Stahel is founder and director of the Product-Life Institute in Geneva, Switzerland. He is also a member of the Club of Rome, a visiting professor at the Faculty of Engineering and Physical Sciences, University of Surrey, UK, and l’Institut EDDEC Montréal (environnement, développement durable et économie circulaire).

A ‘circular economy’ turns goods that are at the end of their lifecycle into resources, closing loops in ecosystems and minimizing waste. I’ve asked Walter what policymakers can do to make this happen.

MT: When the EU Commission withdrew the first version of the circular economy package it intended to be ‘more ambitious’. To be ‘more ambitious’, in 2016 is different than end of 2014! What is your opinion on the level of ‘ambition’ of the current package?

WS: Ambitious policymakers would put themselves into the logic of the circular economy, which differs fundamentally from the traditional linear industrial economy. Firstly, the circular economy is about preserving value and managing stocks, not about value added and waste management, which are objectives linked to the linear economy. Secondly, the circular economy is about the use phase of goods as opposed to the linear economy focused on manufacturing goods.

Nevertheless, the linear and circular economies are not only in opposition but also complementary to each other.

Europe does need innovative manufacturing to take advantage of the scientific and technical progress but that progress often happens in components. It therefore becomes important to design systems solutions that enable integrating technical progress into existing products, such as reprogrammable microchips.

Policymakers have several options to choose from: they could give a value to end of life goods, which ensures their remarketing, or they could impose a take-back liability on manufacturers / importers, or they could promote rental business models instead of sales, so that lifelong ownership is maintained and goods never become abandoned waste.

The biggest lack of ambition in the circular economy package is that it does not differentiate clearly between reuse and recycling.

Reuse saves the energy, water and materials embodied in goods; recycling does not. Some obstacles to reuse could be overcome by a legal definition of property rights, which emphasizes stewardship before ownership. With regard to recycling, the package should demand annual minimum rates of material preservation (stock) i.e. what percentage of resources may be lost per annum, not what percentage of waste (flow) should be recycled. This is fundamental for short-lived goods, such as packaging and drink containers.

MT: What are the governance mechanisms needed for an integrated policy strategy to shift towards a sustainable and resource efficient economy?

WS: In order to capitalize on the advantages of a circular economy, Governments have to apply systemic multi-factor instead of silo decisions. The circular economy is a holistic approach that enables not only to minimize waste volumes and resource consumption but also to re-industrialise regions, to create skilled jobs in a local context and to substantially reduce CO emissions. The circular economy substitutes manpower for energy; governments and policymakers could boost it by taxing resource consumption instead of taxing labour.

The circular economy is about managing stock or capital: natural, manufactured, human, and cultural capital. Of all these assets, the only one with a qualitative component is human capital. Governments improve the “quality of people” through education and vocational training, but if people cannot use these capabilities and skills in the market they are quickly lost and people become unemployed or even unemployable.

Governments have a moral imperative to promote the use of human capital before any other resource.

MT: Circular economy requires innovation, technological as well as societal. Which are the ones you are looking for and why?

WS: The biggest innovation gap that Europe is currently facing is in what I call the era of “D”, i.e. technologies and policies to de-polymerize (plastics), de-alloy (metals), de-laminate (carbon laminate), de-vulcanize (rubber tires), de-coat (surfaces) and de-construct (infrastructure and buildings).

Hundreds of scientists across the world are working to create new molecules but, if we really aim at moving towards a circular economy, scientists also need to focus on process innovation that will ultimately enable us to split molecules into atoms.

The final objective should be to recycle atoms instead of secondary resources.

Purity is equal to value; these are big challenges that will require lots of money and lots of energy to solve, but unless we learn how to do it, we will never reach a zero-waste society.

The circular economy brings about societal innovation because its foundation is caring and stewardship, not consumption.

MT: Who are the champions of a circular economy strategy that other parties should draw inspiration from and why?

WS: There are hundreds of champions; the problem is that we often don’t recognize them as being part of the circular economy. Champions of reuse are for instance eBay and fashion-resistant citizens, but also antique dealers who “buy junk and sell antiques”. Champions of repair are the innumerable SMEs maintaining equipment, vehicles and buildings. Champions of remanufacturing are companies like Xerox and Caterpillar offering rent, lease or buy options, as well as fleet managers, such as airlines and shipping lines, armed forces and hotels — in fact, most service industries.

However, the biggest champions are economic actors which have implemented the concept of “pay for performance”, i.e. selling goods as services through rent, lease and share business models.

These champions of the “performance economy” develop systems solutions by combining efficiency with sufficiency, and internalize and minimise all liabilities and costs to increase their competitiveness. For instance, some pharmaceutical companies have started to charge for very expensive treatments only if the treatment is effective. This is not an example of the sharing economy which has recently caused a big hype. There is a difference between sharing society and sharing economy; the sharing economy implies that there is a liable owner and a user paying him for the use. The sharing society includes self-help groups, such as repair cafés for private goods, but also overuse of public goods because there is no ownership or punishment — overfishing of the seas and other tragedies of the Commons are sad examples.

My preference is for policies where liability and ownership are well defined, preventing problems of abandoned waste of no value or abandoned people with no future, situations which lead to a socialization of all costs. Promoting comprehensive business models is a challenging task for todays’ policymakers.

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Marco Torregrossa is External Adviser at European Partners for the Environment. He is also Secretary General at the European Forum of Independent Professionals and Managing Director at Euro Freelancers. He tweets here.