April 17, 2024

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The circular economy in detail

6 min read

Systems thinking

If we do a poor job of designing systems – by, for example, leaving out key elements – we run the risk of being surprised by system failures. The diagram below is a classic example of a poorly-mapped-out system, yet it is widely used in Economics courses. This ‘circulation of money’ diagram misses out environmental factors, unpaid work, and the commons, all of which are crucial areas of our economy. One might say they are hitched to everything else.

We need to be careful that our way of thinking about the circular economy isn’t found equally wanting. Discussions about the circular economy can often be rather narrow: closed loops, product service systems, business models, and other such practical actions. But a more holistic look at the system reveals other necessary elements, such as the science and philosophy that shapes how we think and act, as well as legislation and infrastructural elements.

Instead, all of this could be characterised as a sandwich, where the tasty filling is the part most are happy to focus upon. Without the other elements there is a real risk that the circular economy becomes ‘business as usual’ with a few tweaks here and there.

The origins of the concept

An idea whose time has come.The notion of circularity has deep historical and philosophical origins. The idea of feedback, of cycles in real-world systems, is ancient and has echoes in various schools of philosophy. It enjoyed a revival in industrialised countries after World War II when the advent of computer-based studies of non-linear systems unambiguously revealed the complex, interrelated, and therefore unpredictable nature of the world we live in – more akin to a metabolism than a machine. With current advances, digital technology has the power to support the transition to a circular economy by radically increasing virtualisation, de-materialisation, transparency, and feedback-driven intelligence.The generic concept has been refined and developed by a number of schools of thought that you can read about below.

Schools of thought

Cradle to Cradle

German chemist Michael Braungart and American architect Bill McDonough, developed the Cradle to Cradle™ concept and certification process. This design philosophy considers all material involved in industrial and commercial processes to be nutrients, of which there are two main categories: technical and biological. The Cradle to Cradle framework focuses on design for effectiveness in terms of producing products with positive impact.

Cradle to Cradle’s three principles

  1. Cradle to Cradle design takes inspiration from natural systems, where there is no concept of waste: everything is a resource for something else. Biological nutrients should be safely returned to the soil, while technical nutrients should be used again and again at high quality.

  2. The second principle is to use clean and renewable energyrenewable energyEnergy derived from resources that are not depleted on timescales relevant to the economy, i.e. not geological timescales.. The argument goes that natural systems thrive on current solar income and human systems could too. Renewable energy is clean (at the point of use), low-cost to operate, creates no emissions in use, and utilises abundant resources.

  3. Finally, celebrate diversity: diversity builds resilience in natural systems, and can do so in human systems, too. Equally, no two places are the same: a diverse approach is often necessary to overcome the challenges and meet the opportunities offered by different geographies.

The Performance Economy

In his 1976 research report to the European Commission, Walter Stahel, architect and economist, sketched a vision of an economy in loops (or circular economy), The Potential for Substituting Manpower for Energy, co-authored with Genevieve Reday. The vision looked at its impact on job creation, economic competitiveness, resource savings, and waste prevention.

Credited with having coined the expression “Cradle to Cradle” in the late 1970s, Stahel worked at developing a ‘closed loop’ approach to production processes and created the Product Life Institute in Geneva more than 25 years ago. It pursues four main goals: product-life extension, long-life goods, reconditioning activities, and waste prevention. It also insists on the importance of selling services rather than products, an idea referred to as the ‘functional service economy’, now more widely absorbed into the notion of ‘performance economy’. Stahel argues that the circular economy should be considered a framework: as a generic notion, the circular economy draws on several more specific approaches that gravitate around a set of basic principles.


“Innovation inspired by nature” – Janine Benyus

The idea at the core of Biomimicry is that life has already solved most of the problems we are currently grappling with. To give some obvious examples: birds can fly with no need for fossil fuels, barnacles can adhere to underwater surfaces and have a tremendous ability to stay attached, insects outweigh humans yet cause no pollution or waste, leaves soak up sunlight and manage to efficiently and effectively transport water and nutrients through a dense network.

Biomimicry holds that we can find solutions to human challenges by emulating nature’s patterns and strategies.

Janine Benyus, author of Biomimicry: Innovation Inspired by Nature, defines her approach as “a new discipline that studies nature’s best ideas and then imitates these designs and processes to solve human problems”.

Industrial Ecology

The study of material and energy flows through industrial systems.

Focusing on connections between operators within the ‘industrial ecosystem’, this approach aims at creating closed-loop processes in which waste serves as an input, thus eliminating undesirable by-products. Industrial ecology adopts a systemic point of view, designing production processes so they perform as close to living systems as possible. This is achieved by considering local ecological constraints and looking at global impact of processes from the outset.

This framework is sometimes referred to as the ‘science of sustainability’, given its interdisciplinary nature. The principles of industrial ecology can also be applied in the services sector. With an emphasis on natural capital restoration, industrial ecology also focuses on social wellbeing.

Regenerative Design

In the US, John T. Lyle started developing ideas on regenerative design that could be applied to all systems, i.e., beyond agriculture, for which the concept of regeneration had already been formulated.

Arguably, he laid the foundations of the circular economy framework, which developed and gained notoriety thanks to McDonough (who had studied with Lyle), Braungart and Stahel. Today, the Lyle Center for Regenerative Studies offers courses on the subject.

Blue Economy

Initiated by former Ecover CEO and Belgian businessman Gunter Pauli, the Blue Economy is an open-source movement bringing together concrete case studies, initially compiled in an eponymous report handed over to the Club of Rome.

As the official manifesto states, “using the resources available in cascading systems, (…) the waste of one product becomes the input to create a new cash flow”. Based on 21 founding principles, the Blue Economy insists on solutions being determined by their local environment and physical/ecological characteristics, putting the emphasis on gravity as the primary source of energy. The report, which doubles up as the movement’s manifesto, describes “100 innovations that can create 100 million jobs within the next 10 years”, and provides many examples of winning South-South collaborative projects— another original feature of this approach intent on promoting its hands-on focus.

Why now?

Moving from vision to reality.

Our economy is currently locked into a system which favours the linear model of production and consumption. However, this lock-in is weakening under the pressure of several powerful disruptive trends. We must take advantage of this favourable alignment of economic, technological, and social factors in order to accelerate the transition to a circular economy. Circularity is making inroads into the linear economylinear economyAn economy in which finite resources are extracted to make products that are used – generally not to their full potential – and then thrown away (‘take-make-waste’). and has moved beyond the proof of concept; the challenge we face now is to mainstream the circular economy, and bring it to scale.


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