Updated on January 6, 2020
To make our economy a bit more circular, many sectors will need to adapt and change. Since, many developments in these sectors and processes interdependent, the road to a circular economy is a major challenge. That makes each of these developments equally important. Below are various enablers mentioned in which, at least some, developments or changes are needed to bring about an inclusive circular economy.
To create appropriate products and services within the circular model, they will have to be redesigned. The designs should focus in particular on levels of circularity through product life extension, design for reuse, disassembly and recycling. Designers should take into account all phases of the life cycle depends on the business model: production, transport and retail, use and return or discard. During production various choices can be made: what material should be use and where did this come from (virgin or recycled), match life expectancy and planned obsolescence, which production processes and coatings are required, how should it be packaged with respect to transportation, what maintenance should be carried out and what’s going to happen to the product after the first use, and what after the second use?
2. Asset management
Physical asset management is about the management of products and machinery. More specifically, it considers the purchasing (sometimes partially), maintenance and phasing out of an asset from operations. When investing in new assets, the focus is often on cost efficiency, but for many companies with large capital goods such as factories and infrastructure companies are also other elements are important: the RAMSHEEP (Reliability, Availability, Maintainability, Supportability, Health, Environment and Economics).
From a circularity point of view asset management is even more: it also includes the management of the raw materials and resources that are contained in or used by the assets. A well-designed asset management supports the levels of circularity during the use phase. Especially by managing for optimal value preservation.
Chain integration is important in the circular economy as choices concerning material, assembly and processing can have a large impact on the circularity performance of all supply chain partners. When a purchaser selects a certain alternative on the basis of very narrow specifications, this can have a negative effect on the materials and production techniques higher up in the chain. However, most effects are generally accumulated at the end of the chain because reusability, disassembly and sorting become difficult. As a result, it may sometimes be better for the entire chain to choose an apparently less ideal solution higher up in the chain. For example, because additional investments are made in the design and production to allow disassembly of a product, maintenance will be easier and cheaper extending the life span of a product. Also the discarded product may yield a larger profit during recycling. If the total gains of such investment are to be returned to all involved partners, the additional investment may become attractive.
Logistics, and in particular ‘reverse logistics’ and ‘last mile’ are important elements in the circular economy. To keep materials at their highest quality, effective and efficient logistics flows are required. Highly meshed logistics and return flows are important aspects in that respect. The transport component of logistics is burdensome in various ways. In the current system, simple and often short return flows are handled by waste processors as they are located relatively close to the consumer. But in the circular economy, various business models require reverse logistics from consumer back to the manufacturer.
The current one-way logistics from producer to consumer should be doubled for two-way traffic. This means that there are smarter with transport needs to be worked. Especially in cities, it is expected that the number of vans, as it could grow explosively thing regarding mobility and air quality is not desirable.
5. Business models
New business models are evidently needed to keep financially interesting possible additional costs, but also new business models that generate additional revenue as new services are offered. Ancient known models are rental and leasing. The merits of products (Product Services), a large growth is expected. Buy we are still lights and cars, we’ll be buying light hours and kilometers of travel comfort. Here, the producer guarantees that the light always does and thereby creates and paid for all conditions (fitting, housing, energy consumption). Not only producer-consumer relationships can change by new models, but also the relationship in business-to-business. For example, because the ownership of raw materials no longer proceed from business to business, but that a single party is responsible for coordinating in a chain by retaining ownership of the materials and other parties in the chain only provide a service. Such as where network operators that remain from all the brass owner in the cables. At the end of life leave the grid cables merge into new usable buyer and give this buyer then loaned to a factory that makes new cables for the network operator, the melt and producing cables has become a service. The advantage is that the price of copper can be removed from the chain and thus fluctuations in price due to the commodity market.
6. Open data
To efficiently chains with each other and integrate different chains be able to pick up on each other, it is important to balance supply and demand can match. That must take place continuously in complex chains. The use of open data to facilitate exchange of data is essential. Also, in order to get on a smaller scale matching efficient raw materials of the ground, it is important that it is clear when to use which release materials. Through this clever set up might perhaps less transport are needed and are also shorter and more efficient chain possible.
Purchasing, procurement and investment are needed to make companies give the room the changes that are needed. Through sourcing and procurement providers may well be encouraged to provide circular solutions and thereby be certain that it is taken. Procurement is therefore a way to boost this movement. Investment is especially needed for the setting up of new plants and process technology that in practice has not yet been proven.
Another element of finance is the way of value determination in the books. Purchases are almost always written down to zero over a period of time. That’s actually quite strange. All of these products still have a residual value which, if in the proper way, can be easily recovered. This allows capital goods which contain valuable raw materials that last go even pay for themselves. The principle behind it is that a product is not only seen as objects that played a particular function, but at the same time is a resource bank.
8. Living Labs
How new processes, services and products should be designed in circular economy has not yet crystallized. Ideas need to be able to test his experiments, often so that is achieved scale. For this pilot or living labs are great. These are increasingly being used by governments in collaboration with industry, universities and sometimes also civilians. This living labs can not only provide valuable knowledge but also to create sufficient demand that companies get around their business case. Often living labs set up from a certain aspect: technology, a social problem, an economic challenge. A good living lab does so from all these perspectives. Regarding SmartCity living labs is often only developed from technology and thus underestimated the impact and dependence on society. Another problem related to living labs is that they can be developed without having to meet specific ethical or other conditions that guarantees the interests of for instance people. So people often do not know that they are part of an experiment and privacy is often violated.
9. Regulation and policy making
It is also good tune with laws and regulations is an important condition to trigger the renovation strokes required in previous enablers. Designs that may make use of recycled materials, allowing new business models, to allow experiments in unconventional ways. Often, this point is referred to as one of the barriers. Yet it is questionable whether this is so. Often it is only necessary to interpret some law or regulation differently than we do now, there are almost always exception- and experimentation capabilities possible. What is possible is stimulating laws and regulations establishing a preference for a particular technology or way of working is through financial benefits for example.
10. Consumer behavior
Not least, culture is a key enabler and one that is often forgotten. It is also perhaps the most elusive, but a true change in need, but also will take place largely automatically. Namely culture changed continuously as the development of values and norms. The culture is changing in particular valuation, consumer behavior and social awareness. For example, the value assigned to property versus availability, social awareness around food and energy waste, and its impact on consumer behavior which will trigger another question.
Even though there is no clear moment in time when the Circular Economy came into being, we can describe the history of related paradigms and ways of thinking that led to our current understanding of the Circular Economy. Circularity and Circular Economy thinking is based on various sustainability principles and paradigms. People often refer to Industrial Ecology, the Performance Economy, Cradle to Cradle and several other ideas of scholars and organisations pursuing sustainability or seeking new business models. Understanding the history of various events and the paradigms may help to develop a more comprehensive view on the Circular Economy.
The Industrial Ecology paradigm took off in the 1960s, a decade that was highly influenced by the space exploration ambitions. The first images of Earth from space were taken in these years and are claimed to have influenced mankind’s awareness of Earth’s fragility. It was also in this decade in which several books and reports supporting the idea of Industrial Ecology, referred to the Earth as a finite spaceship. For example, in 1966 Boulding wrote an essay titled “the Economics of the Coming Spaceship Earth” and two years later architect Buckminster Fuller wrote a book called “Operating Manual for Spaceship Earth”. Boulding mainly indicated in his essay that the economy should be looked at from a different perspective as the current economic system doesn’t take into account the limited number of material resources. Fuller did not only describe the challenges like Boulding did, but also gave guidelines as how mankind should take care of the Earth such as by using only our daily energy income.
A decade later, in 1977, Stahel and Reday-Mulvey wrote a report to the Commission for the European CommunitiesThe European Communities was the predecessor of the European Union and existed from 1967 until 2002. called “The Potential for Substituting Manpower for Energy”. In this report they reason that due to limited resources manpower will be favourable over machines since machines use energy generated from these limited resources. Besides, promoting manpower over machines helps to prevent emissions and create new jobs. They suggest setting this transition in motion by introducing recycling and reconditioning into the industry. This report is not so much based on the material efficiency but focuses more on energy efficiency, an important topic in the 1970s due to the energy crisis.Whether manpower should be substituted for energy in the future has become more debatable due to growing use of renewable energy resources which takes away one of the main reasons Stahel and Reday-Mulvey put forward as energy used by machines may become fully renewable and unlimited in the future. The socio-economic argument of job generation for their reconditioning and recycling system remains uncertain due to continuing trends of work week reduction and automation of labour intensive jobs such as sorting out products or waste separation. However, current projects like the Ex’tax project still aim to reduce the tax on labour and increase tax on resources, secondary in favour of job creation but mainly to promote resource efficiency and services instead of consumption of products.
Up till now, the term circular economy had not been used. Only in the nineties Pearce and Turner introduced it in their book “Economics of Natural Resources and the Environment”. The Brundtland commission had written their report, “Our Common Future” on sustainable development just three years earlier when Pearce and Turner developed the first fully closed circular model. They based it on Boulding’s conclusion that the Earth is the system boundary of our economy with negligible amounts of matter exchanges across that system boundary. The second law of thermodynamics also inspired Pearce and Turner in their fundamental premise by stating that the economy is a process that increases the entropymeasure of disorder, systems naturally progress from order to disorder of materials. This would mean that a larger turnover within the economy (a measure for economic growth) increases the rate at which entropy increases. Nature and other ecological systems on Earth are in a process of locally decreasing entropy with help of (external) solar energy.
[pullquote align=”full” cite=”Brundtland Commission” link=”” color=”” class=”” size=””]Sustainable development is development that
meets the needs of the present
without compromising the ability of future generations
to meet their own needs.[/pullquote]
It is striking that Pearce’s model includes a welfare factor (utility), being one of the first to identify and embed social aspects within the paradigm and not just money or jobs. Their approach comes close to what the Brundtland commission identified as key concepts for sustainability in 1987 considering limitations of our Earth’s resources and secondly the social impact or equity which, in be Pearce and Turners model would be the utility factor. Pearce and Turner state that consumption and resource contribute to welfare, while too much waste (the waste exceeds the assimilative capacity of the environment) has a negative amenity and hence reduces welfare and limits future generations.
After the turn of the millennium, the Circular Economy gained attention in China especially due to the fact that China’s economic growth has correlated to the amount of resources used. To avoid future problems of scarce materials, China wanted to decouple economic growth from their consumption and pollution and hence move to a more sustainable economic structure. Because of this China implemented a thorough set of regulations in a previous five-year plan to make the Circular Economy a national strategy. Their main focus of most of these regulations are to keep the materials flow in cycles. Chinese scholars generally refer to this method as 3R, being an abbreviation for implementing reduce, reuse and recycle.
China tries to implement this paradigm not just at product or company level but at several higher of the economy. For example by developing eco-industrial parks and even eco-industrial networks on the regional level and with that including entire product, material and energy chains.
In the last few years the Circular Economy is gaining momentum in Europe. The reasoning to implement the Circular Economy is not always consistent, however it is often focused on financial benefits and job creation. These are supposed to be achieved through new business models that would push for waste reduction, resource efficiency and other environmental gains. The resource efficiency is supposed to have a direct effect on reducing costs while new business models often encompass services throughout the life cycle of a product. These are supposed to create a more continuous income over the life cycle of the product spreading but increasing turnover as well as requiring more jobs to manage these new services.
In 2002, the Ellen MacArthur Foundation published its first report on the Circular Economy that included one of the most widely used diagrams of the Circular Economy (the one above). The Ellen MacArhtur Foundation states that it is inspired on various schools of thought such as Cradle to Cradle, Industrial Ecology, Blue Economy and Biomimicry. The diagram clearly distinguishes between two material cycles: the bio-based (green) and the technical (blue) sphere. Next to that it includes the principle of cascaded usage and the waste hierarchy. One of the criticisms to this diagram is that is still includes a form of leakage of materials from the economy through incineration and land fill.
In the last few years the Circular Economy idea is spreading around the world. From the South America’s, South Africa and Australia. This seems to be diversifying the number of interpretations on the paradigm. Especially because governments and other policy-makers see the premise of the Circular Economy as an opportunity to tackle local socio-economic issues.
The latest development on policy-making side is the presentation of the EU Circular Economy package in December 2016. It is a package that contains an action plan and legislative changes. The legislative changes mainly focus on waste managementbased on EU waste hierarchy while the action plan also includes production and consumption elements. Right now the EU’s presidency of the Netherlands uses this Circular Economy package to promote the developments in the Netherlands such as Netherlands Circular Hotspot.
Scientific development and discussions on the concept, definition and principles could get some more attention if so many governments are basing their policies on it, companies their sustainability strategies and consumers their purchases.
NB. This blog post is largely based on my thesis. You can find it here, also for a full list of the references.
Boulding, K. E., 1966, The economics of the coming spaceship earth, in Environmental Quality in a Growing Economy, pp. 3–14. Buckminster Fuller, R., 1969, Operating Manual for Spaceship Earth, 2013th ed. Lars Müller Publishers. Dajian, Z., 2008, Background, Pattern and Policy of China for Developing Circular Economy, Chinese Journal of Population Resources Ellen MacArthur Foundation, 2012, Towards the Circular Economy Economic and business rationale for an accelerated transition, Ellen MacArthur Foundation. Harlem Brundtland, G., Khalid, M., Agnelli, S., Al-Athel, S. A., Gonzalez Casanova, P., et al., 1987, Our Common Future. Pearce, D. W., Turner, R. K., 1990, Economics of natural resources and the environment, 1st ed. Hertfordshire: Harvester Wheatsheaf. Stahel, W. R., Reday-Mulvey, G., 1977, The Potential for Substituting Manpower for Energy, Brussels. Turner, R. K., Pearce, D. W., Bateman, I., 1993, Environmental economics An elementary introduction. Baltimore: Johns Hopkins University Press.
Updated on February 15, 2019
The Circular Economy is seen by many as the holy grail for a sustainable and future proof economy. Billions of euros of cost reductions and the creation of many new jobs are expected as a result. Also the recently published plan of the European Commission refers to these opportunities. I don’t doubt these opportunities, but what the possible risks are, is barely being discussed.
When people discuss the risks of the Circular Economy, they are generally talking about the risks for achieving the circular economy, or actually the challenges with regards to its implementation. For example, the need to radically change production, use and processing of products, the change of business cases without the guarantee for success or the challenge to fully recycle all resources without any quality loss (MVO Nederland).
Of course, these challenges can be risks for individual businesses, but they don’t pose any substantial risk to the economy or to society. And for most of these challenges solutions are already available or under development. But since we’re talking about an economic system shift from the “take-make-waste” economy to a circular one, we should also look at the systemic risks that it may bring about. Risks that do not pose a threat to individual companies but to entire sectors, cause social disruption or new environmental issues. I will discuss four systemic risks that I can foresee if some of the current ideas and trends will gain more momentum. I have called these: too big to fail, a resource bubble, ecological poverty and shifts of power.
1. Too big to fail
So now and then I have the feeling that Babylonian confusions occur when people discuss the Circular Economy. Do we speak the same language? You can find many different perspectives and definitions on the circular economy in science and on the internet.
Meanwhile, governmental policies and legislation are being developed in support of the Circular Economy. But the Circular Economy does not exist. Even though the idea exists since the seventies, the meaning, implementation and effects are only starting to emerge. Especially within an era in which minerals are traded globally, resources become scarce, technology advances quickly, new business models are being developed and the importance of our ecological system is only starting to get acknowledged.
So what’s the risk? That we are about to roll into a generally accepted system of which the derivatives and dependencies are not incalculable. Sounds familiar? Indeed, that happend as well in the system that we are getting out of and of which the most recent crisis was its result. That was an economic system in which banks became too big to fail. And when they did fail they either went bankrupt, and many lost their savings (Lehman), or they were saved by states through loans and debts causing increased taxes and social pressure. Especially when we want to keep meeting our physical needs (food, shelter, healthcare, mobility) in a sustainable way, we should prevent that organisations on key positions within that economic system become too big to fail. Because that is a system, we have learned, is not future proof.
2. Resource bubble
One of the many assumptions is that the Circular Economy is about the preservation of resource value within the economy. Sharing, reuse, refurbishing and upcycling are all important ingredients to extend life span and keep that value within our economy. To achieve this, we are constantly developing new technological processes to recycle old materials to new ones with even better properties. But while we are doing this, we learn that some man-made materials are not that good or useful as initially expected. Asbestos, CFS’s, once technological highlights that are now causing health and environmental problems. Large investment have to be made to remove these materials from production methods and sanitize places where they have been used. The insight that a material may have very negative effects will cause inherent value loss even though the materials may be recycled rather easily. This value loss can be a result of the harmful effects that materials may cause on the long run, but also because materials slowly leak away into nature or because reuse or recycling is just technically impossible on the long run.
Since we are developing more and more synthetic materials every year, the chance increases that there will be materials that cause problems on the long term. Some of these, initially highly valuable materials, will need to be depreciated prematurely resulting in big financial losses. With that in mind, if more materials will emerge that need to be prematurely depreciated but companies await hopefully for new technological advancement, a resource bubble will be created with an increased risk of bursting and huge effects for the economy.
3. Ecological poverty
Currently we are still mining more resources from nature (the ecology) than that same ecology can “produce” and regenerate. Next tot that we try to keep these materials as long as possible within our economy. Because resources often leave the economy through influence of ecological mechanisms such as corrosion and decomposition, the value starts to decrease. Various organisation state that the Circular Economy aims for increasing the time that materials stay within the economy. This process of retrieving more materials from the ecology than it can produce and keeping them as long as possible in the economy prevents the ecology to make use of these materials for its own mechanisms and keep its cycle going. This may result in ecological poverty.
An example is the top-soil depletion that is currently occurring all around the world. Because we use more and more land for economic activities, room for plants and animals that keep the soil “alive” and fertile is decreasing. Next to that, mown grass, fallen leaves and remnants of harvested crops are removed and used as cattle feed or for generating bio-energy. This way important nutrients within this “waste” is taken out of the biological cycle causing top-soil to slowly deplete.
4. Shifts of power
One of the reasons to move towards a circular economy is the increasing resource scarcity. We simply want stable prices and we want to be independent of unreliable partners. New business models are being developed to avoid these problems. One of these models is about companies organising their own resource bank. By keeping resources under management of a single party, while they are flowing throughout the supply chain, allows the resource price to be removed from every transaction. This can be achieved because the chain manager stays owner of the material and asks other chain partners for a service instead of a product. For example, in Germany there are various energy network operators that do not sell their waste or other materials leaving their operations, but lease these resources to disassemble and smelt them according to various specifications. Meanwhile the material stays in the possession of those network operators. The company smelting the metals has become a service company instead of a company that needs to buy its feedstock and sell high quality metal. The network operators then ask a cable factory to make new cables from their recycled metals. This way, the chain managers keep ownership and control over the flow of resources.
Because a single party within the supply chain becomes owner of the resources, a shift in dependency may occur. Currently all parties in that supply chain are interdependent of each other. In various circular economic business models, they become dependent of a single party that manages the resources. That party controls who has access to those resources and who does not. A form of power of which we cannot foresee all socially and economic effects.
The risks that may occur are predicted extrapolations of the current ideas and implementations of the circular economy. The problem here is that the actual definition and principles of the circular economy are still ill-defined. That increases the uncertainty on the chance that these risks may occur. However the same goes for all opportunities that many write about. But to have a fair discussion on the risks we should at least start talking about them and not only preach about the beautiful opportunities that the Circular Economy may bring about. It is important that we start to talk the same language.
Especially when we speak about systems and transitions that affect and are expected to secure our future welfare. As it affects us all, we should be able to discuss and question these ideas and concept openly and publicly. One issue that often occurs, is that new concepts or business models are blindly accepted as holy grail and repeated over and over again. Above all, those who make their money on the Circular Economy and spread the word should also be more outspoken about the possible disadvantages. The need for an improved economic system in which we move away from a take-make-waste principle is crystal clear for many. The time has come to have a fair discussion.
Updated on February 17, 2019
Within the Circular Economy people often refer to the waste hierarchy as main guideline. The higher up the hierarchy, the less energy and material is spilled and therefore achieving a higher level of circularity. However, there are a various number of versions of that hierarchy and a more in-depth analysis is often lacking. In this post I will introduce the various takes on the hierarchy, collect them into a single resource hierarchy and give an initial analysis.
For the visually minded, here is an infographic of the complete resource hierarchy that I have developed:
Various Takes on the Resource Hierarchy
With the newly proposed circular economy package of the European Commission, understanding and applying the waste hierarchy is becoming more important. The European commission refers to its definition of the waste hierarchy several times
Back in 1979, the Dutch politician Ad Lansink, proposed one of the first waste hierarchies. Busy with waste management he noted down the various ways to process waste. He ordered them in a way such that the best possible option was at the top. For example separation at the source is better than separation at a later stage. Within the proposal the hierarchy use the letters A-F, a grading system that has been used for many other environmental guidelines such as energy efficiency.
Even though the proposal was approved, it was only embedded within legislation 13 years after, again 13 years later the European commission embedded Lansink’s Ladder in their waste directive.
Prevention is about avoiding the initial use of resources. Hence, if yo limit or avoid resource usage they will also not become waste.
Reuse is about postponing and substitution. When reusing products no new materials are needed to fulfill the need (substitution) and the reused product will have an extended life therefore only become waste later down the line (postponing).
Recycling is generally the physical and chemical process of turning the material back into its pure and fluid state. From there on it can be used to produce new virgin-like materials or building blocks.
Energy, this step states that energy generation from waste is preferred over lower levels of the hierarchy. Energy can be generated through incineration or gasification. It often comes at the cost of destruction of the material.
Incineration is similar to the energy production level, but is about getting rid of the material by destroying it. Incineration has several by-products such as heat generation, gas emissions and ash.
Dump (land fill) is the excretion of obsolete materials from the economy back into ecological spheres of the Earth. This can also be air fill such as emissions, waste water or forms of energy such as heat.
Also called Moerman’s scale or the food waste hierarchy, is all about avoiding food waste. Except for the name, aim and basis of the ladder, I could not find the origins of the scale. So if any one knows its history please leave a comment!
Moerman’s ladder is adapted from the more general Lansink’s ladder. It focusses on food waste and hence the biological cycle. It states that the use of biological material for food is preferred over the use of biological material as industry feedstock or for energy generation. It consists of the following levels:
Avoid food waste is mainly about reduction of food loss through more efficient use and more effective supply chain. Most food waste is generated either in the chain or after sales at the consumer.
Human food. In case prevention of food waste is not possible, it would be second best to still use it as human food without any processing. For example through redistribution.
Convert to human food. Sometimes the food isn’t good enough to directly use it as human food, conversion of the food waste could be an option. Processing could be simple heating to make jam to creating oils or other food extracts from the waste.
Animal feed, if the quality of food is too low to use it for human consumption, the next option can be to create or process it into animal feed. For example chaff and leaves or bones and marrow for cattle and pet feed.
Raw materials. If there is no food to be made from the food waste or other biological materials, the next best option is to process it into feedstock for industrial processes and non-edible products. For example bio-plastics or perfumes.
Make fertiliser. Once the material cannot be used for direct economic purposes you can process it to make fertiliser for cofermentation, which can result in additional energy output, or to make fertiliser through composting.
Use for sustainable energy. The next step is to gain energy from the biological material that is left and cannot be used anymore for any of the options above. The aim here is to retrieve as much energy from the material in any form possible such as heat and gas.
Burning as waste. The last option is to get rid of the waste as composting or using if for energy production is not efficient or applicable. This can be the case for material from which all nutrients are extracted or they are contaminated with non-biological or toxic materials. In this case controlled incineration is often applied with the aim to destroy the material. Energy that is retrieved from this process is a by-product.
3R, 6R and xR approach
Since the circular economy has gained attention, several people started to refer to the 3R’s or 6R’s. In China the 3R approach is common and refers to reduce, reuse and recycle. The 3R approach strives to reduce harmful impacts of economic activities on the environment by minimizing impacts throughout the product life cycle (production, distribution, and, consumption). The 6R is an extension of the 3R with additional steps that define recover, remanufacture and redesign.
Comparing the 3R and 6R with Lansink’s or Moerman’s ladder they are basically the same. Instead the 3 and 6R approaches use words that start with the re- prefix. This helps to remember that all things you can do to improve the sustainability of products and services may start with words that use this prefix. This has started a race to the top of scales that use 7, 8, 9, 10 or even more verbs that follow this line. For example Jacqueline Cramer published a list of 7R’s, but also one of 10R’s (both in Dutch). Each list that is being published is different but the approach and principles are the same. The unfortunate thing is that nearly never a more thorough analysis is given except for an explanation of the terms. Things are therefore getting more cloudy instead of useful…
Zero Waste hierarchy
Zero Waste Hierarchy of Highest and Best Use is a hierarchy that is similar to the 3R’s. However, where the 3R has a manufacturer perspective, this hierarchy has a more governmental perspective. It was developed by the Zero Waste International Alliance (an alliance of governments, NGO’s and businesses) in response to the European waste hierarchy that was not found to be ambitious enough. The European only “focuses on designing waste out of the system instead of trying to perfect bad ideas such as incinerators or landfills”.
It adds three additional levels of which two are in between the reduce and reuse and focus on encouraging different behaviour and design of the product, the third is at the bottom and focusses on regulation of disposal. Especially the level that focus on encouraging and regulation is somewhat abstract to be address by chain partners. However, the waste hierarchy is not simply about regulation as the other levels from the 3R’s are more applicable to manufacturers and the rest of the supply chain.
That design is in this hierarchy can also be questioned, for sure it’s position. If designed well, the entire product life cycle is addressed and thus supports all other levels in the hierarchies: it addresses the reduction of material and energy usage, it allows for reuse of the product or components, and it eases recycling by avoiding difficult disassembly or compound materials. And if design support all other levels, aren’t there any other elements that support them as well?
Looking at the various ladders and scales there are various observations that can be made. Most of them are similar but use slightly different terminology. They are based upon each other and further developed. Each of them seems logical and applicable. But the question is how and when to apply them?
Interestingly, the Ellen MacArthur Foundation developed a model of the Circular Economy that includes the idea of the resource hierarchy. Especially for technical materials their model distinguishes between various circles and states that inner circles are preferred over outer circles as the savings are larger due to more value preservation within the product. For the biological cycle there are no specific inner circles, but cascading is one of the key elements here. This refers to the Moerman scale approach.
Within the Ellen MacArthur Foundation’s model there is a clear separation of the biotic and abiotic or biological and technological materials. This idea of resource separation comes from the Cradle to Cradle paradigm. It is useful as for most* biological materials nature can be used to regenerate them. This is on a rather small time scale, from a few months to several years most biological materials can be regenerated. However, technological materials such as metals or man-made materials such as plastics and composites, nature can’t seem to regenerate them within a time-horizon that humans can oversee. Therefore it is reasoned to keep those materials separated: products should either be made from biological materials or from technical materials. In case they are combined disassembly should be easy.
But the question is whether distinguishing between only these two cycles is enough. Especially because it can be argued that the Earth’s system could als regenerate other materials. Processes taking place deep down in the Earth’s crust (lithosphere) or high up in the atmosphere can also help to regenerate and balance out certain materials. However, these processes are not well-known and their time-frame may be very different from the biological regenerative cycle.
This leads to the circular approach. Most waste hierarchies end with land fill or incineration. They do show the options of cycling materials longer within the economy through for example reuse or recycling. A proper answer is never given to what can be done at the end of the life cycle. Incineration and land-fill are said to be no-go’s, but at one point materials will be degraded so much that they can’t be given another purpose within our economy. Therefore the final stage is probably return to the Earth’s ecological systems. The return should be well considered since it should do no harm to these ecological systems and preferably even support them. In other words, each material may have a different place where it should be ideally returned.
Life cycle approach and resource usage
Like the Zero Waste Hierarchy, there are several other scales to be found that also list levels (such as design) that do not seem to fit within the hierarchy. Reinvent is also an example of this. These actions can be applied to any of the levels to improve the sustainability of a product. Therefore the hierarchy developed here is based on the physical life cycle process: the take, make, use and waste stages. When applying these to the hierarchy it shows that some levels or measures fit in a specific life cycle stage. This may help businesses that operate in a specific life cycle stage to focus on measures that mostly apply to them.
These measures can also be linked to the effect on resource usage. For example, rejection of materials has a preventative effect, while recycling increases efficiency of the material (it can be used longer). These material usage effects are also in relation to the life cycle stage and therefore indicate that further down the life cycle it becomes harder to have the best effect possible on material usage and preservation.
Two resource domains, materials and energy, are often referred to within the hierarchies. There are savings on these domains (in the prevention level), costs (energy used for recycling) or returns (energy from incineration). Sometimes other material resources are also mentioned separately such as water usage. Even though the effects of the hierarchy levels on these resource domains cannot be generalized, it seems that in some levels there is a higher possibility to have positive effects on certain resources.
To allow, support and encourage manufacturers to effectively apply a resource hierarchy the right conditions should be available. As discussed before, one of these conditions, or enablers, is design. Designing, redesigning or even reinventing allow the manufacturer to make more efficient, effective or even prevent use of certain resources. This will bring him higher up the hierarchy. Next to designing there are various other enablers that support technical, cultural or economic development in such a way that additional steps on the hierarchy can be made. For example supply chain integration, legislation or logistics.
An Integrated Waste Hierarchy
Combining the various hierarchies with the analysis a resource hierarchy can be developed that shows the hierarchy, the resource separation, the life cycle stages and resource usage as well as the various enablers that support implementation of the hierarchy.
Within this resource hierarchy the perspective of the physical parts of the supply chain have been included. All that does not fit within this supply chain is moved to the bottom as bricks that may support the implementation of the hierarchy. The number of levels has been chosen such that there are always some levels that apply to a certain industry or supply chain partner.
Is the Resource Hierarchy always applicable?
The general assumption of most waste hierarchies (whether it is Lansink, Moerman, or any other), is that they are always applicable. The idea that distinguishing between various measures and sort them by resource intensity results in a useful tool holds true for most materials. However, that does not mean that it works for every material. For example, products made from brittle materials may require a lot of energy to create the conditions that it can be repurposed or remanufactured. Therefore it may be better recycle them as the total energy required will be lower. Also the amount of materials lost may be less.
The idea of the waste hierarchy, or parts of it, apply to various sustainability or economic paradigms. The Ellen MacArthur Foundation already related the waste hierarchy to the Circular Economy, but more paradigms are somehow related: either directly represented in the levels of the hierarchy or through the enablers of the hierarchy. The extended hierarchy below shows this:
If you’d like to download the resource hierarchy or the extended version in pdf. Right below are the download links.
I have been asked various times what my take on the Circular Economy is. Since I have had a dedicated focus on the Circular Economy both academically as well as practically I feel that I developed one that is good enough to share.
As a starters, a short, abstract and somewhat theoretical formulation which allows room for improvement is the following:
I see the Circular Economy as a complete System Earth that includes our human activity, the anthroposphere, at the same level of integration and interaction as the other ecological spheres of our Earth.
Putting it this abstract requires some explanation. It is not perfect yet as I would like to include a social element in there. But before getting into that, maybe I should first state why I developed my own definition: I am not happy with the conventional definitions of the Circular Economy. Let me explain by having a look at two of them.
The conventional idea of the Circular Economy
[pullquote align=”right” cite=”Circle Economy” link=”http://circle-economy.com” color=”” class=”” size=”small”]The circular economy concept provides a future proof alternative to our current lineair take-make-waste model, by decoupling growth from the use of natural resources and ecosystems. [/pullquote] The company Circle Economy defined the Circular Economy as ‘a future proof alternative’, but when they explain what it is, they actually only tell what it is not. It is not our linear take-make-waste model, and our growth is no longer linked to the use of natural resources and ecosystems. This reminds me of the pink rhinoceros. Okay, that is not totally fair, because as you can read on their website they state that the Circular Economy results in an economy:
- In which materials streams are efficiently managed and recycled;
- That runs entirely on the basis of renewable energy; and
- Without negative effects on human life or the ecosystem.
Or as I would rephrase the last bullet: with only positive effects on human life and the ecosystem. These things are nice, but is it actually a good thing that all material streams are actively managed and recycled by us?
Let’s look at a more international reused definition. The one of the Ellen MacArthur Foundation.
[pullquote align=”left” cite=”Ellen MacArthur Foundation” link=”http://www.ellenmacarthurfoundation.org” color=”” class=”” size=”small”]A circular economy is one that is restorative by design, and which aims to keep products, components and materials at their highest utility and value at all times, distinguishing between technical and biological cycles. [/pullquote] I like the idea of being restorative, however, this apparent goal of the circular economy may actually be countered by the aim set in the rest of the definition: to keep products in their highest value at all times. Why so? Keeping products at their highest utility can’t be counter productive to our economy? I could hear you say. Well that is actually my criticism on most of the conventional interpretation of the circular economy.
Let me explain through some depictions of what the circular economy is supposed to look like. Again, world-leading here is the Ellen MacArthur Foundation. They portray the Circular Economay as two spheres (the biological and technical) in which materials flow down through a central spine and back up through their respective sphere. The central spine are the production and usage stages. The way back indicate various levels of recycling or reuse.
This could basically be a closed circular economy or industrial system. However at the top, we see that raw (virgin) materials may enter the economy, and at the bottom they leave this system again through incineration (air-fill) or land-fill.
The European Parliament and commission depicted the Circular Economy in a more abstract way. They combined both biological and technical sphere into one showing the various product life cycle stages within the circle. However, the circular economy in this depiction again has a starting point where the raw materials enter the circle, and some ending point where residual waste leaves the circle.
So if both of these diagrams are supposed to depict that important change from a linear take-make-waste system to a closed loop system, then the question arises how those raw materials that enter the circle and the land-fill or residual waste can be reconciled with that closed loop? Where do those raw materials come from? And where does the residual waste go to?
It’s just not that simple
Well, some of you may say that the aim of the circular economy is to reuse your current waste and avoid using virgin materials. If we do that completely we won’t have any residual waste either. But what about the population growth and the technological innovations pushing the demand for more rare Earth metals. That doesn’t match with what we currently have available within our economic system. And what about asbestos or CFC’s, those demands are decreasing. Should we keep them at their highest value in our economy just for the sake of a closed material loop? Many new materials are developed each year of which we have no clue what their effects will be on the long run. Thus we will keep on having residual waste consisting of materials that were thought to be great innovations. Forcing them to stay at their highest utility in the economy may create a material bubble on the long run.
That disadvantage is part of our drive for innovation and economic progress. So the question remains: how can the demand for more and new materials as well as inherent residual waste be reconciled with the idea of a circular economy? To put it bluntly, these depictions are no circular economies but an helical economy: One that looks like a circle from the top, but from the side it goes down and so now and then things fall off at the bottom. Basically the materials are temporarily buffered into the economy. On the one hand that is a good thing because we may need less energy to produce new goods and services, on the other hand it is just delaying our craving for new materials and the deposit of our economic excrements and technical failures.
[pullquote align=”right” cite=”Maurits” link=”” color=”” class=”” size=””]A healthy society is a society that does not exhaust and neglect its resources but maintains and reuses them.[/pullquote]
Next to these issues arising from population growth and the imperfect technological development, there are two other perceptions of the circular economy that do not always hold true. One considers the efficient use of material and energy: turning off the water tap. The other one considers the “less is more”-mantra.
Reducing the amount of material or energy is not always in favour of the other. There are various trade-offs when dealing with this. For example in the case of the energy grid, the usage of heavier high quality cables reduces the amount of energy losses. Energy that is often generated from the incineration of fossil fuels. So what would be better: using much more copper to reduce the amount of fossil fuels, or using less copper requiring to burn more fuel. If you will consider the complete chain of mining, manufacturing and transport, it becomes a rather complex trade-off.
The less is more idea does not always hold true either. The mainstream idea is to become as efficient as possible and making things light weight – lean manufacturing, reduce transport costs, etc. However, if you want to be able to reuse materials from a building once the building gets dismantled, you may want to have materials that are of certain standardised proportions. Proportions that were not the most efficient when the building was constructed. A great example is the town hall of the Dutch municipality Brummen. The constructor suggested to use larger wooden beams such that he could reuse them again in a next project.That way the material will last longer without the need to mine new materials. With that idea in mind the town hall became a real material bank!
So all in all the following facts do not speak in favour of the conventional idea of the circular economy:
- Global population growth increases hunger for newly mined materials
- New technologies or discoveries require new (virgin) materials or existing materials to become obsolete and therefore need to be phased out.
- The trade-off between material and energy efficiency: Using more material may make products more energy-efficient
- Using more more material may increase longevity and reusability
So that means that our economy will always require some feed-in of new feedstock, either of biological or of technical nature and also some form of sink where obsolete materials can go to.
A wider perspective
Does that mean that the simplicity and beauty of a circle doesn’t match with the idea of a circular economy? No, we should zoom out a bit. In my opinion we’re forgetting to look at the complete picture. So how does this complete picture look like? Let me guide you through it step by step.
Let’s look at the economy itself – without its feedstock or its excrements – and we reduce it to its essence. Simply put, this is the trade of goods and services in exchange for money. The money keeps on flowing around. A flow that can be depicted by a circle. We could trade faster or print more money to increase the thickness of the circle and think that our economy grows, but in the end we’re just decreasing the temporal value of that money.
But as we concluded the, the economy will need a feedstock of materials and some sink where obsolete materials can go to. As long as we will not retrieve these materials from outer space and do not send our waste there, the Earth will be our best friend. That Earth consist of an autonomous ecological system of various layers. Summarized, the layers or spheres that we can use are:
- The lithosphere from where we mine our metals,
- the biosphere that provides us with food and composts biological waste,
- the hydrosphere that we use for drinking or cooling,
- and the atmosphere that is host to our exhaust gasses.
When making this a bit more abstract we could see them as four circles. Circles that are in constant interaction. A great illustration of this is the painting Catopaxi by Frederic Church. In a single painting he illustrated the interactions of stone and water forming soil for trees to feed on, all in a dramatic landscape of ash clouds partially hiding the sun being the power source of that system.
So what we do in our economy? First, we retrieve resources from these ecological spheres. Then the materials are used once, or multiple times through recycling or remanufacturing. And at one point these materials have degraded so much or they became obsolete that we need to get rid of them by giving them back to these ecological spheres.
So in general, our economy should be in balance with these ecological spheres of system Earth. However if we look at what is currently happening, we are retrieving a lot of virgin material to sustain our technological needs and the population growth. At the same time people are telling to keep materials longer in the economy through reuse and recycling.
While these materials are in our economy they have no use to the other spheres. And the moment material leaves our economy, in many cases it is to no use to the ecological sphere: excess of carbon dioxide or small plastic particles in the water, etc. The image on the right tries to depict this situation.
Furthermore, if we keep on accumulating material in the economy, the interactions within the ecology would get limited. These interactions are currently helping to support our economic needs, but by retrieving more and giving nothing useful back, it could backfire on us.
Of course this is a bit exaggerated, but the point is clear. We should avoid a imbalance between the spheres. How? By letting our economy be symbioses with the other spheres. We should not aim for having to recycle everything in our economy. If the other sphere’s are helpful in that process, use them because they need a feedstock as well. Easy to implement examples are biobased solutions. However solutions can certainly be found in the other spheres.
We could argue that the economy is just another sphere that is working our Earthly system, next to the ecological spheres. To put that in the same terms, the economy would be the anthroposphere, the sphere based upon mankind. Since this sphere has become so dominant on Earth we could therefore call the current age the Anthropocene.
If we would then extend the definition of the circular economy with the interactions with the rest of our Earthly systems, the circular economy is not an economy based upon man-made solutions only. It would be one that is in symbioses with the already available systems the Earth provides and making use of them in a responsible way.
What this vision means in practice is something to elaborate on in a few more blog posts. So stay tuned for the next parts about my vision of the Circular Economy in practice, the social responsibility aspects, and more!
Recently a organisation of Dutch academics, Het Groene Brein, published 10 research questions they consider important for developing the Circular Economy.
The first question is directly a philosophical one: does the concept of Circular Economy mean the same for everybody? A very legitimate question. Especially since more and more companies, organisations and governments are (ab)using the term while often not really understanding what it actually implicates. And alike other popular concepts, it threatens to become an all-purpose word and may perish of its own popularity. Understanding what people actually mean by the Circular Economy helps to put their claims in the right context. Next to that it can support the definition of the basic principles of the Circular Economy, and hence give a more comprehensive definition.
For my master graduation (Sustainable Technology for Product Development), I researched the Circular Economy in relation to Asset Management. During my desk research I noticed that there are various takes on the concept of the Circular Economy and thus I asked myself the same question as Het Groene Brein does. Even though it was not the focus of my research I briefly addressed the issue within my thesis. Initially I identified various perspectives, for example the difference between China and western Europe. However, also within western Europe there are different takes on the matter. Below I’ll describe two of those perspectives: the legitimacy of the Circular Economy and the Scoping of the Circular Economy.
Why one should implement, seek for, or support the Circular Economy? Many reports and articles legitimise or incentivise the Crcular Economy from a certain perspective. Three different perspectives can be identified: the economic, business and environmental sustainability. A mere social perspective has not been identified, although it is sometimes an additional reason given for the concept.
A sole economic perspective receives quite some attention due to the promising advantages that are being portrayed by various organisations research institutes. Exemplary advantages are the thousands of jobs that the Circular Economy is supposed to create, economical growth and additional economic activity.
[pullquote align=”full” color=”” class=”” cite=”TNO, 2013″ link=”http://www.government.nl/files/documents-and-publications/reports/2013/10/04/opportunities-for-a-circular-economy-in-the-netherlands/tno-circular-economy-for-ienm.pdf”]We estimate that the added value could amount to €7.3 billion per year, involving 54,000 jobs. It would also provide a number of spin-off benefits for the Netherlands, including strengthening the country’s knowledge position.[/pullquote]
[pullquote align=”full” color=”” class=”” cite=”Accenture, 2014″ link=”https://www.accenture.com/t20150523T053139__w__/in-en/_acnmedia/Accenture/Conversion-Assets/DotCom/Documents/Global/PDF/Strategy_6/Accenture-Circular-Advantage-Innovative-Business-Models-Technologies-Value-Growth.pdf”]In the case of the EU, for example, it has been estimated that every one percent increase in resource efficiency is worth as much as 23 billion euro for business and can create up to two hundred thousand jobs.[/pullquote]
These advantages are often referred to by governments to embrace the Circular Economy. After all, it is a nice promise to give a new impulse to the economy after the 2008 crisis.
The business perspective builds on the economic advantages that those various reports propagate, however the legitimacy for implementing the Circular Economy is more based upon image, competitive advantage, the larger fluctuation in resource prices and resource availability. This way of legitimising the Circular Economy causes a different look on assets and resources.
[pullquote align=”full” color=”” class=”” cite=”OPAi, 2014″ link=”http://www.opai.eu/uploads/ondernemen-in-de-circulaire-economie.pdf”]The circular business model becomes a driver for innovation and growth. It enables companies to increase their competitive advantage through a smarter design.[/pullquote]
If managed well, assets and resources keep value over time and can be capitalised at the end of their useful lifetime instead of thrown away as waste. In a study on Electrical Distribution Transformers in the Netherlands, current gains are €700 per asset at the end of their lifespan while, based on the value of its material content, the asset may potentially be a ten-fold of that.
The way to open up the existing value to the business is in many cases the implementation of new business cases and models. For example offering services or product service systems (PSS) instead of simple products. This changes the ownership throughout the value chain and with that the responsibilities.
Scholars tend to focus more on the sustainability perspective, often reasoning from the issues that human kind is expected to face. From that perspective it argues that our economy should be viewed from a more holistic angle including environmental and social effects on the long run.
This new way of looking at our system Earth has already started in the 60s of the 20th century when the Earth Rise photo was made. This photo became an icon leading up to the concept of Spaceship Earth and the report Limits to Growth. This caused scholars to start looking at how the economy is not an entity on its own but how it is a part of the ecology. Some people even see the economy as fifth element to the Earth’s system: lithosphere, hydrosphere, biosphere, atmosphere and antroposphere. Hence the upcoming academic field of the Earth System Sciences.
The image of Spaceship Earth, in which no material or data is exchanged with the vast black space around it, resulted in the awareness that the materials that we currently have on our planet will be the same materials that we will be using in the future. If we destroy or downgrade any of those materials now they will not come back. Therefore, a responsible management of our resources, for example through reuse and recycling, should be an inherent element of our economic system.
Scoping of the Circular Economy
Another differentiation that can be identified within the perspectives on the Circular Economy is what I call the scoping perspective. This differentiation is about the level of detail of a Circular Economic approach or solution and how one should deal with Circular Economy challenges such as the conservation of resources and materials. In general three scoping levels can be identified: micro, meso and macro. The graph below is the result of a literature study in which I could easily point out this differentiation.
The micro level is about materials and products at very local level. For example the reuse of materials within a single company or the reuse of energy in a single building. In many cases only a single party is involved in this process and therefore controlling and optimising this process is relatively easy. However, the impact on the overall circular performance is limited.
The meso level is about the use of materials and products on a local and regional level. In general there is a cooperation between various parties in a specific area. The materials that are being reused do not necessarily return to their original user or producer but stay useful and valuable to others. Examples are heat grids that transports heat from supply to demand, the cascading of materials from processes with high quality requirements to ones with a lower requirement standard.
The macro level is about the largest scale: national, continental or even global. At this level the chance that certain materials return to previous users unless a very specific process has been designed. Generally the main focus at this level is about the larger and more complicated processes. These make make it difficult to map out the exact material flows and thus the total system is difficult to assess on its circular performance. As long as each chain partner (including users) is taking responsibility and that they manage and use these materials according to the Circular Economic principles, it can be argued that the system is closed. Regulation at this level may help to ensure this argument.
Updated on February 15, 2019
Two weeks ago I finished my thesis on the inclusion of the Circular Economy in Asset Management. I wrote this thesis based on a 9-month research at the Dutch energy distributor and network operator Liander. The research focussed on investment decisions and how these decisions can take sustainability into account. The Circular Economy was used as paradigm to determine what elements of environmental sustainability are useful to consider. I will soon write more on this topic but for now I like to share my thesis.
Below you can find the abstract of my thesis and a download link to the pdf document.
A Business Case Model to Support Sustainable Investment Decisions
Adding Circular Economy to Asset Management
In recent years, resource sustainability has gained attention due to the environmental, social and financial problems our society has to deal with. The Circular Economy is a new sustainability paradigm that emphasises resource efficiency and enables new business opportunities.
Liander, a distribution network operator (DNO) based in the Netherlands, has set the aim to become the first circular grid operator. Therefore, they want to incorporate the Circular Economy and thus sustainability in their business. The aim of the research is to embed environmental sustainability in their investment decision making. However, investment decision methods that consider sustainability are still scarce. Several scholars have addressed the need for this but also pointed out that this is a complex problem. Hence, this study addresses this problem by structuring environmental sustainability from a Circular Economy perspective.
A conceptual model for a sustainable business case has been developed and it has been translated into a sustainable investment decision aiding (SIDA) model. This model aims to make asset investment processes more transparent and comprehensible. The research was guided by the Design Science Methodology and was based upon literature and a case study at Liander. Distribution transformers were the subject of this case study and acted as a test case to evaluate the model and its application.
The research concludes that environmental sustainability should be included as a separate constituent in the investment decision methodology. This constituent is defined using three indicators: (1) material usage, (2) ecological footprint and (3) environmental impact. Secondly, the SIDA model was applied successfully within the case study on distribution transformers at Liander. As follow up of this study it is recommended to validate the developed model in different sectors with assets requiring more intensive maintenance. In addition, various recommendations are given for further research, as well as to Liander and to the government.
Citation: Korse, M., 2015, A Business Case Model to Make Sustainable Investment Decisions, University of Twente.
You can also download a short hand-out of the thesis: