Why should companies take an interest in the circular economy?
"The circular economy is primarily an economic and commercial innovation opportunity. Since the start of the Foundation eight years ago we have spoken regularly to companies that are grasping this opportunity. They realise that our current linear system, where we take resources out of the ground, turn them into a product, and discard it after use doesn’t work. The circular economy is different because it is about moving away from this ‘take-make-dispose’ economy towards one where you design out waste, keep products in use, and regenerate natural systems.
Interest in the circular economy seems to follow a hockey stick curve. The examples of its use increase by the day. Just two years ago the European Commission issued a directive, cities and governments have released roadmaps, numerous big businesses have been vocal about the adoption of circular economy principles, and many start-ups have emerged with innovative solutions. We are not there yet and there is much to do, but the advances have been considerable."
How is the circular economy different from traditional sustainability?
"Sustainability has gathered pace over the past decades and made considerable headway in many boardrooms. But unfortunately, a lot of traditional sustainability up to a couple of years ago focused on optimising a linear system that has been in place since the first industrial revolution. It therefore focussed largely on symptoms rather than causes. The circular economy redesigns the system into one that can work long term. In this sense, it aligns commercial interests with those of the environment and society, and so makes sustainability sustainable."
Some argue that the circular economy and economic growth are ultimately incompatible – are they?
"In the circular economy, growth is increasingly decoupled from resource constraints. It designs out waste and restores natural systems while keeping products in use. Hence more circular economic activity would be positive: the more you do, the greater the beneficial impact. As a result, economic growth and enhanced prosperity are possible while regenerating the natural environment. Rather than blindly focussing on growth, we should ask the question: ‘What are we growing?'"
Can adopting a circular approach to business create new opportunities for companies? How?
"The circular economy is enticing for businesses – it acts as a lens for innovation. It aligns environmental goals with economic interests and is fundamentally different from business as usual for most companies. That creates a strong rationale for profit-driven organisations.
How does this work in practice? In the auto sector, for example, cars are traditionally sold as a one-off purchase yet (in Europe) they sit idle 94% of the time, and even when they are driven it is hardly ever at full passenger capacity. So what if you could sell the service instead of the product – what if you could sell mobility instead of the car? This flip in business model would shift manufacturers’ income from pushing the product to a more consistent revenue stream, would optimise car usage, and design out the waste of materials used in their construction. It aligns the interests of the manufacturer, the consumer, and the environment. It is in the best interests of manufacturers to make the car reliable, energy efficient, easy to repair, and constructed from high-quality materials because ultimately the company will be providing access to that car as a service over time. And the customer, or user, will only pay when and where they need mobility. This is a dramatic shift."
If everyone wins, why is this business model not already dominant?
"In most organisations, we find it is not necessarily a lack of ambition, intent or innovation. Instead, the issue is typically cultural and about organisational mindsets. Often disruptive innovations challenge core ideas within a company that activate its immune system to resist change.
But innovation is getting through. To go back to the auto industry, all big car companies are looking at mobility services and many have invested in or started ride-sharing solutions. Companies are recognising that there is a new generation of consumers emerging, who live in cities and simply want to get from A to B. The sense of freedom associated with car ownership – even in US cities – is changing."
Can circular models be applied to all products?
"It can work for any product provided the material input fits the system: for example, a product made from certain composite materials might be hard to move to a circular model as these materials can be very difficult to separate at the end of the product’s use phase. However, it is possible to create and design most things with a circular system in mind. For those products with a longer life, such as washing machines, phones or cars, it may make sense to move to a service model. For items with a short life or single use, such as packaging, the emphasis is instead on capturing the products after-use and recycling or biodegrading them to facilitate a circular model.
The opportunities for implementing the circular economy are effectively endless. Early on in the life of the foundation, Ellen was speaking to design students. At the end of the talk, one of the students approached her and said he had spent years wondering what he could create that might be better than the many incredible designs that already exist. He said that understanding the circular economy made him want to redesign everything."
How great a challenge will it be to overcome consumers’ associations with status and product ownership?
"We know that it is hard to change consumer behaviour. Despite decades of effort, the percentage of materials recycled remains low. Instead, it is better to fix the system so the consumers can make a positive contribution without even trying. While we see some indications of consumer mindsets shifting, the circular economy should be about creating products and services that give people a choice. However, one could question if they really need to know that their new smartphone is part of a circular model. Perhaps not: to most it’s more important that the product delivers the right service and meets their needs. Circular models can actually be more convenient and often cheaper – that will be the attraction to customers rather than the ideas behind the models themselves."
Can greater circularity in our economy be achieved by voluntary action by companies? Or is legislation/regulation necessary?
"This shift in our economic operating model requires first and foremost the collaboration between businesses, policymakers, and academia. The transition will come from entrepreneurs big and small but to innovate they need an environment that makes a circular economy feasible. So, for example, governments and cities can create the enabling conditions and advocate the take-up of circular economy ideas. There are many encouraging developments where policymakers are taking an active promoting role. For example, the Netherlands has put in place procurement targets for circular sourcing, London has set up a fund to invest in start-ups as well as creating an environment for circular economy entrepreneurs to prosper. China, which is pivotal to the global economy, is making great strides in stimulating circular economy activity. Of course, more could be done, including changing the incentives available to businesses. Walter Stahel, one of the leading thinkers on the performance economy – one of the schools of thought on which the circular economy is based – is very vocal about shifting the tax burden from labour to the extraction of raw materials. This could dramatically shift how such resources are used and accelerate the transition to a circular economy."
Will a circular economy be a reality in our lifetime?
"Yes, I believe it will. The take-up of ideas is gaining momentum both in companies and governments. Google search data on the circular economy shows that interest is growing at a rapid pace – backed up by bold company ambitions and real policy action. The renewables sector provides an example. It took considerable time to generate momentum but it is now a globally important and competitive industry. Similarly, three years ago few might have imagined that 12 of the largest brands, retailers, and packaging companies would have committed to making all their plastic packaging recyclable, reusable or compostable by 2025.
Progress will not be in a straight line. With any change comes resistance. Again, look at renewable energy: the US has seen a lapse back to coal mining, for example, which is an understandable reaction of a system fighting change. But as we’ve seen, these actions are not preventing the continued growth of renewables."
What are the CE100’s objectives?
"Many times when we speak to people in organisations about the circular economy they have an epiphany when they realise it makes perfect sense. But it is rapidly followed by questions about where to start, what strategy to employ, and how to overcome hurdles in order to unlock circular economy opportunities.
The CE100 is a global innovation platform bringing together leading companies, start-ups, academics, and governments to accelerate the transition to a circular economy. It is about creating a playground where we bring in the tools and the organisations develop and test their solutions. It is a way to learn faster, share more, and collaborate in a pre-competitive environment. We have seen some surprising bedfellows!
The circular economy can certainly give companies a competitive edge in the long term. But most of them recognise that years of linear thinking have created hurdles that can only be overcome through collaboration."
What are CE100’s greatest achievements to date?
"We’ve seen companies that are rivals in sectors like consumer electronics work together to develop new insights, start-ups like [Noble, which has developed a composite building material called] Ecor or Ohoo [which has developed an edible water bottle] that have brought in new ideas and grown rapidly as a result. Some collaborations have been so effective that they have brought together companies from different sectors to form joint ventures to take advantage of new market opportunities. Most encouraging is the strength of the community and the openness to collaborate on real problems, which in itself will feed the entrepreneurial spirit that drives the transition."