What is the circular economy?

Dr. Boidurjo Rick Mukhopadhyay

(The author, international award-winning development and management economist, formerly a Gold Medalist in Economics at Gauhati University)

Dr B K Mukhopadhyay

(The author is a Professor of Management and Economics, formerly at IIBM (RBI) Guwahati. He can be contacted at m.bibhas@gmail.com)

''The Stone age didn't come to an end because they ran out of stones". Building an economy where we could 'use' resources rather than 'use them up' and thereby crafting a future that would last in the long term. The economy is a part of society and society is part of the environment. In the living world, there is no landfill, instead, materials simply flow. The waste of one species is food for another. Things grow and fade in time, and nutrients safely return to the soil. We, humans, however, do 'Take. Make. Dispose of'. With increasing existing and new needs, we eat into the finite set of resources and therefore - more and more waste, less and fewer resources available. The question is how our waste could build capital rather than reducing the latter? So, the idea around the circular economy is if we could move to 'Make. Use. Return', both in mindset and practice, to be like the natural world. The central idea of circular economy is marrying resourcefulness, design thinking for products built to last and recyclable, retrieving raw materials, and change in ownership models.

A) What is a circular economy?

In 2021, the European Parliament defined, "The circular economy is a model of production and consumption, which involves sharing, leasing, reusing, repairing, refurbishing and recycling existing materials and products as long as possible. In this way, the life cycle of products is extended." Three components that could be picked up from this fairly spot-on definition of circular economy is how we could a) Reduce waste to a minimum, b) After a product reaches the end of its life cycle, the raw materials could be disassembled and kept within the economy wherever possible to be able to use them again, thereby creating further value.

The World Economic Forum's definition is a lot more comprehensive, "A circular economy is an industrial system that is restorative or regenerative by intention and design. It replaces the end-of-life concept with restoration, shifts towards the use of renewable energy, eliminates the use of toxic chemicals, which impair reuse and return to the biosphere, and aims for the elimination of waste through the superior design of materials, products, systems, and business."

The challenge is about changing our mindset, how we think, how we behave, and how we consume. The idea is to see if the goods of today could become resources for tomorrow. For example, changing the way we can cycle valuable alloys, polymers and metals so that they can maintain the quality and continue to be useful beyond the shell life of an individual product. It certainly makes a lot of commercial sense. In the process, we would move away from the 'use and throw' culture that we are so used to, and we could consciously pivot towards a more 'return and renew' approach where products could be disassembled and regenerated. Thereby, continuing to add further value instead of ending it. The circular economy isn't about one manufacturer changing one product, it is about all of the interconnected companies that form our infrastructure and economy coming together.

Therefore, across industries, the idea is to design the product that could be disassembled systematically once the consumer has finished using them, re-manufacture them and give it out again. This not only contributes to the circular economy which then focuses on 'cradle to cradle' rather than 'cradle to grave' but the production cost goes down drastically. For example, in the clothing industry, instead of garments lying waste in a landfill, clothing companies could collect them back and reuse them to make new products and as a consequence – make a profit out of the waste.

Everything is healthy food for something else. We constantly use resources from nature. Everyday products from shoes to mattresses can be manufactured in a way that could be fully recyclable. For example, the fast-fashion brand H&M had committed to using 100% sustainably sourced material. The circular economy is inevitable and it is not about a problem to be fixed but redesigning the entire system that could fight climate change, fighting pollution and waste.

B) Sustainability vs circular economy

Very often, in popular literature, the concept of 'sustainability' is used almost in direct relation to the Circular Economy, if not synonymously. This is rather a misunderstanding although both of the concepts address issues around decarbonization, energy transition, and waste minimization narrative, amongst other things that include local and 'glocal' actions and strategies. The two concepts, however, remain quite distinct.

Sustainability, by a large measure, is a systems-level approach that encompasses environmental, social, and economic factors and assesses how they interact. We also add the concept of the Triple Bottom Line (i.e., people, planet, profit) in the context of business organizations and how they can contribute to the cause of sustainability. The concept of Sustainability also helps us to evaluate the risks, trade-offs and externalities (positive or negative consequences), from a life cycle perspective, across the entire value chain. This is what leads to long-term system balance. Fundamentally, however, sustainability is an umbrella term that addresses a wide range of scenarios and issues and not only focusing on conservation, choosing presumed eco-friendly options, or switching to renewable energy.

Research by MacArthur Foundation argues that Sustainability does not have a singular focus on any individual part and rather the concept helps us to understand how the parts interrelate to enable effective overall outcomes. In other words, "individual parts cannot be optimized without optimizing the whole". E.g., an electric vehicle is not sustainable if we factor in the unquantified and unaccounted social and environmental externalities that span the lifecycle of the lithium-ion battery that powers the vehicle—from mining, processing, smelting, trade, and transportation across the globally networked supply chain to the lack of recycling and reuse options for the battery at its end-of-life.

C) Examples of circular economies

Certain industries have taken the lead to rethink and redesign how they manufacture, the choice of raw materials, and how they recollect products once consumers have ended the use of the same.

BSH, selling home appliances-as-a-service promoted reuse, repair and extend product lifecycles. BSH goes beyond selling home appliances and instead offers them as a service, delivering, installing, repairing, moving, adjusting and picking up the appliances again at the end of the contract.

In the agriculture sector, going with affordable bio-based solutions for recycling nutrients from agriculture goes a long way. Using Hybrid Biofilter is a scalable solution that prevents nutrient leakage from fields and thereby improves local water quality. At their end-of-life, the biofilters can also be reused in several applications to release the captured nutrients back to their natural cycle.

Nike launched the recycled-content version of the Converse Chuck Taylor All-Star series and introduced 'exploratory footwear collection' made from factor and post-consumer waste. At the Tokyo Olympics, the athletes representing the US, France, and Brazil Tokyo Olympics, used Nike-sponsored uniforms made with 100 per cent recycled polyester.

A closely related example would be Adidas who have rolled out a fully recyclable version of the Ultra Boost running shoe collection made from a single material without glue, similar initiatives also exist by Puma and Timberland.

IKEA launched the buyback programme where customers can receive up to 50 per cent of an item's original price in the form of a store voucher. Also, the items that are not sold gets recycled or donated to the local community projects.

Philips, their products designed for hospitals – medical equipment such as MRIs and CT Scanners, are trading in their old equipment for a discount on new systems. They disassemble the collected equipment, refurbish and upgrade them to sell it again. This is a 'win-win' model since hospitals get financial returns from their older equipment while also efficiently upgrading to the latest technology. This also addresses the e-waste recycling challenge that we face today.

H&M, the leading fast-fashion brand, encourages customers to return used clothing to stores and receiving discount vouchers for future purchases at the store. The company classified the collected used clothing into a) Rewear, b) Reuse and c) Recycle categories and they work across partners to continue with their sustainability measures.

Cut to credits, we require a mindset shift to dream of "prosperity in a world of finite resources". In a world where a third of all food is rotted, even as the Amazon was deforested to produce more. And 1,000 litres of water get used up to make a pair of jeans. Some choices are controllable. Do we still want more plastic remains than fish in the world's oceans? Do we continue to ceaselessly release nitrates and phosphates leaching from fertilized fields? We have the choices today to be 'user' of services than 'consumer', to pay-for-use (like we do in the Gig and Sharing economy) rather than 'owning' a service. The choice is as much individual as it is collective, so we can stop being free-riders in the economy, and as the Dalai Lama once said "if you think you are too small to make a difference, try sleeping with a mosquito".