The goal of circular economy is to abandon the current linear model characterised by the take-make-dispose model of resource consumption.
In a circular economy, products, at the end of their use, can be re-used, re-manufactured, recycled, or go back into the biosphere so that we can use the resource on earth over and over again.
It is also a new paradigm of growth that can allows profitability and economic growth, while spurring job creation and innovation.
A business model of the future
Johnson Yeh, Associate Director for Environmental Initiatives of the World Economic Forum, believes that the circular economy may be the start of a new industrial revolution, since it is based on using our resources more efficiently.
“A circular economy is an excellent business model of the future, and it is being promoted by the development of internet of things as well as increasing awareness regarding risk management for resource input. The model offers a solution for limited resources and increased structural unemployment while innovations promote equal economic growth,” Yeh says.
Several factors have made the circular economy successful on a global scale. The global population will increase to 8.3 billion by 2030. The consuming middle class will amount to 3 billion. Raw materials will become scarcer, prices will increase and price fluctuations will be more pronounced.
Consumers opt for circular economy
The change will also be driven by the development of technology as many internet services enable the sharing, trading and tracking of products. In addition, consumers are starting to understand the benefit of access over ownership. Instead of wanting to own things, they opt to use commodities by renting or borrowing them, which is in turn a big driver for circular economy.
“Mature markets also need local jobs and local growth, which means that labour-intensive activities – such as maintenance and re-manufacturing – provide excellent opportunities. We are currently at a transitional phase where the first challenge is proving to businesses that this model will provide growth and benefit them.”
The EU alone could – by promoting the collection and recycling of resources – reduce the material needs of its member states by 17%, increase economic growth and create 1.4 to 2.8 million new jobs.
Guided by limited resources
The emerging markets in Asia are developing and industrialising at a fast pace. For example, the GNP of China has increased on average 7.5% per year. Such fast changes require a lot of raw materials, water, energy and food. Limited resources and increasing fluctuating prices drive China towards the circular economy too.
“China is the world’s largest factory and the world’s most important manufacturing country, which means that its economic growth is based more on industrial manufacture than a strong service sector. Regardless, I believe that services of the circular economy will become China’s key strengths too because it has a good political vision geared towards the long run,” Johnson Yeh says.
Cooperation between the US, China and Europe
Unlike other Asian countries, China has promoted the circular economy with legislation since 2009. Still, the awareness of consumers and their position as part of the industrial recycling chain are still being developed.
“The Chinese government has, however, realised very well many other changes, such as the symbioses of production facilities in industrial areas and ecological cities with infrastructures that are very well suited for the circular economy,” Yeh adds.
He is of the opinion that a transition to the circular economy requires close cooperation between the three major industrial regions.
“I believe that the circular economy will be based on new innovations and business models created in the US, political changes to be implemented by China in the long term and the excellent awareness of the circular economy among European companies and consumers.
Ecodesign rules in black and white
The World Economic Forum has actively promoted a circular economy and brought together businesses from different sectors. For example, suppliers and the brewery industry in the UK will start to use bottle caps with less colour pigments. This will reduce the costs of recycling caps.
Yeh says that cooperation influences the economy: it allows us to increase interaction between different parties involved in the delivery chain and reduce obstacles to the recycling chain. Furthermore, pioneering companies will benefit from their position because they will be able to plan their future business one step ahead of the competition.
Promoting the recycling of paper
The World Economic Forum and the Confederation of European Paper Industries (CEPI) are currently implementing a cooperation project to promote the recycling of paper. The paper industry suffers because of the decrease in recycling and the increased price of recycled fibre.
“If we are able to bring together the different parties involved in the delivery chain, such as paper manufacturers, chemical suppliers, printing ink manufacturers, printing houses and distributors, to discuss how the costs of recycled fibre could be lowered, we could save up to USD10 billion per year”, he estimates.
Towards a global standard
The goal is to draft eco-design rules that could improve the recyclability of fibres by reducing the use of chemicals, glues and other additives in end products.
“Once all the parties involved in the delivery chain are willing to fine tune their business models, this cooperation will result in a global standard that national and local decision-makers will be able to use when adapting their policies. This will allow us to drive changes that will benefit everyone involved”, Yeh concludes.
The European International Association of the Deinking Industry (INGEDE) aims at reducing the environmental impact of the deinking process and improving the quality of recyclable fibre.
Text Vesa Puoskari
Illustration Lasse Rantanen