This is an article from Business
Insider describing some of the macro economic ideas about The Circular Economy and how this will make huge changes
in the future economic models. This is big idea stuff and should not be
underestimated.
The Circular Economy: Will Its Sphere Of Influence Usher
In Huge Change?
PREETAM KAUSHIK, MAR 19, 2014,
05.20
The closing
chapters of the 20th century heralded the death of Communism and Capitalism
seemed to have won the battle of the '-isms' quite decisively. But the first
decade of the new century has made any Capitalistic victory sound hollow.
For one, we have witnessed the worst financial crisis the world has ever seen. Big financial institutions, synonymous with the Capitalistic way, had to be rescued by large government bailouts. And 99% people are increasingly demanding that the inequities of Capitalism should give way to a more humane and just economic order.
With the Left and the Right extremes of economic ideology having lost their moorings, it is surely the right time to explore alternative economic systems. One such alternative is the concept of the circular economy, which is rapidly gaining traction in terms of practical use cases, as well as believers.
Coming full circle
To understand what is meant by circular economy beyond a simplistic one-line definition, we should first understand that it is a counter-reaction to a central tenet of Capitalism - consumption. And there's no place better than the US to observe the first-hand excesses of a consumption-based economic system - right from the burgeoning landfills that fail to handle the needs of the most wasteful nation on earth to rising levels of obesity among a population hypnotised into consuming more than the body can take.
The damning second and third-order effects of overconsumption can be seen in phenomena like the subprime crisis and environmental degradation. However, typical criticism of consumption has come from the Left Wing, itself devoid of all credibility, and their agenda seems to have more to do with politics than economics.
It is, therefore, refreshing to see that the circular economy advocates are neither calling for dismantling of the consumption economy, nor suggesting superficial tweaks to it. Instead, they are asking us to re-imagine the economy as a large circle. As opposed to a linear system, in the circular economy, there is no net waste. Goods get produced for a long shelf life and are readily reusable and recyclable when they reach the 'end' of their operating life. Instead of unidirectional value chains, industry has to imagine being part of a circular value chain where what goes around, literally comes around.
This almost Zen-like formulation of hard economic realities seems completely alien to modern-day human sensibilities and it is natural to be sceptical about how governments, corporations and individuals would embrace a new set of beliefs so divergent from business as usual.
Fortunately for it, this new religion has some pretty energised evangelists.
Knights of the Round Table
There's something curious about Britishers and the way they work out new doctrines of economy. Whether it is Adam Smith and his laissez fairedoctrine or the creation of an entire new branch of economics due to the work of John Maynard Keynes, natives of this island nation have consistently punched above their weight. It's no accident that the widely respected publication, The Economist, dispenses its sagely observations from London.
Still, you don't expect a record-smashing woman sailor, awarded an MBE in 2002, to be at the forefront of shaping the circular economy. But that's what Dame Ellen MacArthur and her foundation (Ellen MacArthur Foundation) have been engaged in, along with a mini army of powerful and high profile personalities from Unilever, BT Retail, Cisco and Renault, to name a few.
In a study partnered with McKinsey & Company, advocates of the circular economy contend that by applying the principles of the circular economy, material wastage in Europe alone could be reduced by $380-630 billion, depending on the scale of transition.
The study says that with the expected Rise of Asia, there will be the rise of the Asian middle class, which will account for 90% of the 3 billion new members added by 2030. This is estimated to drive consumption levels to $30 trillion by 2025. Compare that with $12 trillion spent in 2010 and you get an idea of the explosion in consumption that modern economies are ill-prepared to handle - be it waste management, agricultural output or energy production.
Thanks to the efforts of the circular economy movement, which has only been around in a cogent form for the past five years, at least there is some recognition of the challenge and an understanding of the proposed course of action.
But what exactly are the high priests and priestesses of the circular economy preaching? Moreover, is anyone practising what they are preaching?
Microsphere
There are certain fundamental principles on which the circular economy operates. The first of these is to 'design out' waste. When designing a product, creators should know how the materials they are using are going to be recycled or reused eventually. Currently, it seems to concern waste management professionals alone.
The second is to build flexibility in production processes. This enables manufacturing units to scale up or down, and adapt to changes in the business environment more readily than the present set-ups. This, in turn, helps avoid inventory pile-ups and obsolescence, and improves efficiency of material utilisation.
The power required to run these systems should essentially come from renewable energy sources. The Sun, the Wind and the Water have to be the new holy trinity of power generation, with sprinklings of biomass thrown in.
Finally, a shift to systemic thinking when planning projects is essential. Everything is connected in the circular world and figuring out how different elements of an ecosystem impact each other requires a very different mindset from planning set-piece projects that look great on paper, in isolation.
But it is difficult to walk the talk, as Germany is finding out from its energy transition strategy. Still, it is good business if you get it right as the UK-based recycled textile start-up Worn Again has demonstrated to sceptics with its pioneering 'closed loop' resource model. You might see its end-products on the seat covers of Virgin Airlines or on the Eurostar train, as a train manager's bag.
Measuring Gross Circular Product could be a reality soon.
For one, we have witnessed the worst financial crisis the world has ever seen. Big financial institutions, synonymous with the Capitalistic way, had to be rescued by large government bailouts. And 99% people are increasingly demanding that the inequities of Capitalism should give way to a more humane and just economic order.
With the Left and the Right extremes of economic ideology having lost their moorings, it is surely the right time to explore alternative economic systems. One such alternative is the concept of the circular economy, which is rapidly gaining traction in terms of practical use cases, as well as believers.
Coming full circle
To understand what is meant by circular economy beyond a simplistic one-line definition, we should first understand that it is a counter-reaction to a central tenet of Capitalism - consumption. And there's no place better than the US to observe the first-hand excesses of a consumption-based economic system - right from the burgeoning landfills that fail to handle the needs of the most wasteful nation on earth to rising levels of obesity among a population hypnotised into consuming more than the body can take.
The damning second and third-order effects of overconsumption can be seen in phenomena like the subprime crisis and environmental degradation. However, typical criticism of consumption has come from the Left Wing, itself devoid of all credibility, and their agenda seems to have more to do with politics than economics.
It is, therefore, refreshing to see that the circular economy advocates are neither calling for dismantling of the consumption economy, nor suggesting superficial tweaks to it. Instead, they are asking us to re-imagine the economy as a large circle. As opposed to a linear system, in the circular economy, there is no net waste. Goods get produced for a long shelf life and are readily reusable and recyclable when they reach the 'end' of their operating life. Instead of unidirectional value chains, industry has to imagine being part of a circular value chain where what goes around, literally comes around.
This almost Zen-like formulation of hard economic realities seems completely alien to modern-day human sensibilities and it is natural to be sceptical about how governments, corporations and individuals would embrace a new set of beliefs so divergent from business as usual.
Fortunately for it, this new religion has some pretty energised evangelists.
Knights of the Round Table
There's something curious about Britishers and the way they work out new doctrines of economy. Whether it is Adam Smith and his laissez fairedoctrine or the creation of an entire new branch of economics due to the work of John Maynard Keynes, natives of this island nation have consistently punched above their weight. It's no accident that the widely respected publication, The Economist, dispenses its sagely observations from London.
Still, you don't expect a record-smashing woman sailor, awarded an MBE in 2002, to be at the forefront of shaping the circular economy. But that's what Dame Ellen MacArthur and her foundation (Ellen MacArthur Foundation) have been engaged in, along with a mini army of powerful and high profile personalities from Unilever, BT Retail, Cisco and Renault, to name a few.
In a study partnered with McKinsey & Company, advocates of the circular economy contend that by applying the principles of the circular economy, material wastage in Europe alone could be reduced by $380-630 billion, depending on the scale of transition.
The study says that with the expected Rise of Asia, there will be the rise of the Asian middle class, which will account for 90% of the 3 billion new members added by 2030. This is estimated to drive consumption levels to $30 trillion by 2025. Compare that with $12 trillion spent in 2010 and you get an idea of the explosion in consumption that modern economies are ill-prepared to handle - be it waste management, agricultural output or energy production.
Thanks to the efforts of the circular economy movement, which has only been around in a cogent form for the past five years, at least there is some recognition of the challenge and an understanding of the proposed course of action.
But what exactly are the high priests and priestesses of the circular economy preaching? Moreover, is anyone practising what they are preaching?
Microsphere
There are certain fundamental principles on which the circular economy operates. The first of these is to 'design out' waste. When designing a product, creators should know how the materials they are using are going to be recycled or reused eventually. Currently, it seems to concern waste management professionals alone.
The second is to build flexibility in production processes. This enables manufacturing units to scale up or down, and adapt to changes in the business environment more readily than the present set-ups. This, in turn, helps avoid inventory pile-ups and obsolescence, and improves efficiency of material utilisation.
The power required to run these systems should essentially come from renewable energy sources. The Sun, the Wind and the Water have to be the new holy trinity of power generation, with sprinklings of biomass thrown in.
Finally, a shift to systemic thinking when planning projects is essential. Everything is connected in the circular world and figuring out how different elements of an ecosystem impact each other requires a very different mindset from planning set-piece projects that look great on paper, in isolation.
But it is difficult to walk the talk, as Germany is finding out from its energy transition strategy. Still, it is good business if you get it right as the UK-based recycled textile start-up Worn Again has demonstrated to sceptics with its pioneering 'closed loop' resource model. You might see its end-products on the seat covers of Virgin Airlines or on the Eurostar train, as a train manager's bag.
Measuring Gross Circular Product could be a reality soon.
