The New Face of Circular Economy – More Than Just Hype?
Major companies are embracing circular economy as a guiding principle. They say we need to shift from a linear system of make-use-discard to a system that closes the loop and reuses waste materials. This sounds like a good idea. But is it?
Re-using Materials – A Shortcut To Sustainable Solutions?
The focus on closing material loops is not new. In fact, we have seen several generations of this concept, starting in the early nineties when design for recycling was a major hype. It resulted in this funny coding of plastic parts, showing what type of plastic they were made of. Apparently, the idea was that we would establish factories where workers with good reading glasses would carefully disassemble products, read the labels and throw each part into the right bin. As a sustainable solution, this was too complex. In real life, products are not disassembled, but shredded. So we found something better: design for shredding. New technologies do a reasonably good job of sorting out the different materials. But we should still be wary of trying to close the loops and reuse materials to make new products - for plastics, for instance, the recycled material is still of low quality and value. Instead, we should make sure we're not barking up the wrong tree, and look for other ways waste materials can contribute to sustainability. Transform them, instead of merely reusing.
Circular Reasoning Can Result in Even More Unsustainable Solutions
But we should make sure we’re not barking up the wrong tree. If done without thinking things through, design for recycling can even have a negative impact on sustainability. In 1992, I was involved in an eco design project on a new instrument panel for the no longer existing Dutch department of Volvo. The design team had decided to use only recycled plastics for this instrument panel. This meant that it would be about 50% heavier than a panel made of new plastics. I told them they were making the wrong decision. Adding weight to a car will increase its fuel consumption. After some research, we found that adding 1 kg to the car would cause an additional fuel use of 5 to 8 kilogram. Using recycled plastic for the panel would save you about half a kilogram of oil. In that case, closing the loop is not going to be a sustainable solution. Instead, the focus should be on weight reduction.
There are many other situations in which closing the loop is not worth striving for. If your products are dispersed over large markets an fast regions, it is difficult and inefficient to collect them for recycling. What is worse, post-consumer recycled plastic usually has very low value as most plastics cannot be mixed. The resulting products are often dirty and polluted with paints, fillers, and other impurities that result in reduced quality.
Integrate Loops For Truly Sustainable Decision Making
There is a bias in our thinking: we consider tangible items, like plastic parts, more valuable than dirty liquids like oil. We should learn to look beyond the separate loops, and instead base our solutions on sustainability as a whole. Old plastics are very good fuel, and oil is a very good raw material to make plastics from. So why all this effort to keep plastic in the plastic loop? Especially when it means simply burning oil, a very versatile raw material?
Together with the new technologies, new regulation has helped increase sustainable use of resources. In the northern part of Europe, all landfilling is banned, even with construction waste. This led to a healthy recycling and incineration industry that is now an important contributor to our energy supply.
Circular Economy - Just a Misguided Hype, Or Is There More To It?
The new face of circular economy is more than just a hype. Clever companies realise that a linear supply chain is not optimal; it is much wiser to manage the entire life cycle. They use the term circular economy in a different context – to move away from selling products to selling services.
Take street lighting. Traditional street lanterns are not that expensive, but the electricity they use costs much more than the lantern. Modern lanterns cost more to buy, but use far less energy. Overall, replacing the old by the new is an excellent business case. For many municipalities, however, the purchasing costs as a hurdle that prevents them from making that shift. That’s why companies like Philips are not selling lanterns anymore. They’ve switched to selling light as a service. They can offer new lanterns for an annual cost that is much lower than today’s energy costs. Switching to new street lighting becomes a no-brainer solution for the municipality. If there are no investment costs and the service fees are lower than the energy savings, the business case is clear. And Philips is no longer in a price completion with old technology, but can focus on high tech products for the future. The only loser is the electricity company.
This is just one example. About ten years ago, we collected a large number of such examples in an EU funded project on product service systems. We discovered that implementing these solutions generally does have sustainability benefits.
- A carpet company named Interface introduced lease contracts for carpets. It works, not only from a sustainability point of view, but also in terms of customer loyalty, since the company stays in contact with the user.
- Large technology company Xerox introduced moving from selling photocopiers to selling copies. It works well for them.
- A small company in the Netherlands switched from selling pesticides to selling pest-free crops. They took over crop protection from the farmer. This changed their incentive from selling as much pesticide as they can to using as little as they can, to save costs. They even started to work with biological pest control, as that is cheaper.
If the new face of circular economy means retaining ownership and providing products as a service, I am in.