DELIVERING THE CIRCULAR ECONOMY A TOOLKIT FOR POLICYMAKERS

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22 • DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS The circular economy provides multiple value creation mechanisms that are decoupled from the consumption of finite resources. Consumption should in a true circular economy only happen in effective bio-cycles; elsewhere use replaces consumption. Resources are regenerated in the bio-cycle or recovered and restored in the technical cycle. In the bio-cycle, life processes regenerate disordered materials, despite or without human intervention. In the technical cycle, circular economy technologies and business models aim to maximise the value extracted from finite stocks of technical assets and materials, and thereby address much of the structural waste in industrial sectors. In the biological cycle, a circular economy encourages flows of biological nutrients to be managed so as not to exceed the carrying capacity of natural systems, and aims to enhance the stock of natural capital by creating the conditions for regeneration of, for example, soil. In a diverse, vibrant, multi-scale system, restoration increases long-term resilience and innovation. 1 The systems emphasis in circular economy matters, as it can create a series of business and economic opportunities, while generating environmental and social benefits. The circular economy does not just reduce the systemic harm engendered by a linear economy; it creates a positive reinforcing development cycle. The circular economy rests on three key principles, shown in Figure 1. • Preserve and enhance natural capital by controlling finite stocks and balancing renewable resource flows—for example, replacing fossil fuels with renewable energy or using the maximum sustainable yield method to preserve fish stocks. • Optimise resource yields by circulating products, components, and materials at the highest utility at all times in both technical and biological cycles – for example, sharing or looping products and extending product lifetimes. • Foster system effectiveness by revealing and designing out negative externalities, such as water, air, soil, and noise pollution; climate change; toxins; congestion; and negative health effects related to resource use. These three principles of the circular economy can be translated into a set of six business actions: Regenerate, Share, Optimise, Loop, Virtualise, and Exchange – together, the ReSOLVE framework (see Figure 2). For each action, there are examples of leading companies that are already implementing them. Each of the six actions represents a major circular business opportunity that, enabled by the technology revolution, looks quite different from what it would have 15 years ago or what it would look like in a framework for growth in the linear economy. In different ways, these actions all increase the utilisation of physical assets, prolong their life, and shift resource use from finite to renewable sources. Each action reinforces and accelerates the performance of the other actions. The ReSOLVE framework offers businesses and countries a tool for generating circular strategies and growth initiatives. Many global leaders have built their success on innovation in just one of these areas. Most industries already have profitable opportunities in each area. A short description of these levers, and examples of businesses that are implementing them, follows below. REgenerate. Shift to renewable energy and materials; reclaim, retain, and regenerate health of ecosystems and return recovered biological resources to the biosphere. Cumulative new investments in European renewable energy represented USD 650 billion over the 2004–13 period. 2 The Savory Institute has influenced the regeneration of more than 2.5 million hectares of lands worldwide. 1 John Fullerton, (Capital Institute) Regenerative Capitalism: How Universal Principles and Patterns Will Shape Our New Economy, (2015). 2 Angus McCrone, Global Trends in Renewable Energy Investment 2014 (Frankfurt School-UNEP Collaborating Centre for Climate & Sustainable Energy Finance, the United Nations Environment Programme (UNEP) and Bloomberg New Energy Finance, 2014).
DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • 23 Share. Keep product loop speed low and maximise utilisation of products, by sharing them among different users (peer-to-peer sharing of privately owned products or public sharing of a pool of products), by reusing them through their entire technical lifetime (second hand), and by prolonging their lifetime through maintenance, repair, and design for durability. BlaBlaCar is one famous car example growing at 200% per annum with 20 million registered users in 19 countries. BMW and Sixt’s Drive Now offer by-the-minute rental of cars that can be collected and dropped anywhere in a city centre. Lyft matches passengers needing a lift with drivers of their own cars willing to provide one through a smartphone app. In housing, Airbnb has more than one million spaces listed in more than 34,000 cities across more than 190 countries. Optimise. Increase performance/efficiency of a product; remove waste in production and supply chain (from sourcing and logistics, to production, use phase, end-of-use collection etc.); leverage big data, automation, remote sensing and steering. All these actions are implemented without changes to the actual product or technology. A wellknown illustration of this lever is the lean philosophy made famous by Toyota. Loop. Keep components and materials in closed loops and prioritise inner loops. For finite materials, it means remanufacturing products or components and recycling materials. Caterpillar, Michelin, Rolls Royce, Philips or Renault are just a few companies exploring this direction. For renewable materials, it means anaerobic digestion and extracting biochemicals from organic waste. The Plant is an example of closed loop, zero-waste food production located in Chicago. Virtualise. Dematerialise resource use by delivering utility virtually: directly, e.g. books or music; or indirectly, e.g. online shopping, autonomous vehicles, virtual offices. Google, Apple, and most OEMs plan to release driverless cars on the market in the next decade. Exchange. Replace old with advanced non-renewable materials, apply new technologies (e.g. 3D printing or electric engines) and choose new products/services (e.g. multimodal transport). For instance, in 2014 Chinese company WinSun 3D-printed ten houses, each about 195 square metres, in 24 hours. BENEFITS OF THE CIRCULAR ECONOMY The transition towards the circular economy can bring about the lasting benefits of a more innovative, resilient and productive economy. The principal benefits to moving to the circular economy are as follows: • Substantial net material savings and reduced exposure to price volatility: based on detailed product-level modelling, the Ellen MacArthur Foundation has estimated that, in the medium-lived complex products industries, the circular economy represents net material cost savings at an EU level for an ‘advanced’ scenario of up to USD 630 billion annually; in fast-moving consumer goods (FCMG) at the global level net materials savings could reach USD 700 billion annually – see Figure 3. • Increased innovation and job creation potential: circularity as a ‘rethinking device’ has proved to be a powerful new frame, capable of sparking creative solutions and stimulating innovation. The effects of a more circular industrial model on the structure and vitality of labour markets still need to be further explored, but initial evidence suggests that the impact will be positive (see below). • Increased resilience in living systems and in the economy: land degradation costs an estimated USD 40 billion annually worldwide, without taking into account the hidden costs of increased fertiliser use, loss of biodiversity and loss of unique landscapes. Higher land productivity, less waste in the food value chain and the return of nutrients to the soil will enhance the value of land and soil as assets. The circular economy, by moving much more biological material through
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