Circular Economy: Why? How? What?

Why do we need to change the system?

Our economy is based on the "take, make, dispose" model. This basically means the following: We take a tree down, we make a table out of it, and when we grow tired of it we dispose it as waste. However, this linear model does not work anymore in the long run due to the fact that a lot of the world's natural resources are finite. We require more and more resources because of the exponential growth of the human population - currently we are at about 7.6 billion people and counting... Simply stated: The demand for raw materials by humans is more than the world is able to supply. However, not all natural resources are alike, so it is necessary to make a distinction.

"Humans require 1.7 planets to offset the use of natural resources every year."

Renewable and non-renewable resources
The world's natural resources can be broadly categorized as renewable or non-renewable. Renewable natural resources can easily be replenished naturally, like wind, sunlight or air. Also, we consider natural resources like forests, water and fisheries as renewable. However, when our consumption rate of these resources is higher than the renewal rate, it threatens its sustainability. Good examples of this phenomenon are deforestation, overfishing or water pollution. So how are we doing? Pretty bad, as humans require 1.7 planets to offset the use of natural resources every year.

Non-renewable natural resources, however, do not restore themselves and are not sustainable in the long run at all. Most importantly, this category includes fossil fuels (such as natural gas, crude oil and coal), earth minerals and metal ores. Nevertheless, the world's economy still largely depends on these non-renewables. So how are we performing? About 80 percent of the world's energy consumption still derives from fossil fuels. The Netherlands performs even worse with a staggering 91 percent and Sweden performs well with 27 percent (largely due to nuclear and hydroelectric power). Using these non-renewable resources is linear by design, as we can only use them once. In the image below you can see estimates of when we will run out of which non-renewable resource (source).

Thus, it is crucial to stop using non-renewable resources and to start using renewable resources more efficiently. We can do so by shifting from a linear economy with a "take, make and dispose" model, to a Circular Economy (CE) in which we rethink, reuse and renew our world's resources.

Poof!

How does a Circular Economy work?

A widely accepted definition of CE is given by The Ellen MacArthur Foundation, a global thought leader, with the aim of accelerating the transition towards a circular model. They define CE as: "Looking beyond the current 'take, make and dispose' extractive industrial model, CE is restorative and regenerative by design. Relying on system-wide innovation, it aims to redefine products and services to design waste out, while minimizing negative impacts. Underpinned by a transition to renewable energy sources, the circular model builds economic, natural and social capital."  

In short, it means that we use our resources efficiently and repeatedly, instead of consuming them once, to then throw them away. A paradigm shift in order to do so is to not look at a production process as a 'value chain' (from beginning to end), but to look at it as a 'value circle' where the value is preserved instead of wasted. Ellen MacArthur's Butterfly Diagram below depicts this way of thinking perfectly.

Butterfly diagram CE

It is not a new concept, right?

Indeed, thinking about resources in a sustainable way is as old as mankind. Swedish Vikings already drank their water and mead from reusable horns for well over a thousand years ago. Also, in Medieval times, Dutch people already pickled their beloved herring in order to preserve it for longer periods. These are perfect examples fitting in the diagram above. Even though resource efficiency might be nothing new for our countries, it is our future. We cannot continue with our current economic model due to the developments described before. We need a drastic transition, as a few initiatives simply do not cut it anymore. So what is necessary to make it happen?

What is necessary to make it happen?

A complete change of our current economy is not something we can alone, or in a short period of time. We need the active and continuous support of the entire ecosystem of consumers, companies, NGO's, educational institutions and governments. This might sound harder than it is. More and more of these stakeholders are already aware of the necessity to change our linear economy and started the transition. So what are some positive trends that show the ongoing shift towards circularity in Sweden and the Netherlands?

Consumers
Sweden experienced a recycling revolution in the last decades. In 1975 only 38 percent of all household waste was recycled in one way or another. Today, a staggering 99 percent is being recycled (most Swedes already separate recyclable waste themselves). Still, Sweden could improve the way they retain value from household waste as about half the household waste is merely burnt for its energy.

Dutch consumers are also aware of the necessity to change their behavior and become more circular. Research indicates that about 74 percent of Dutch people are willing to change their consumption pattern and buy more circular products.

"Companies realize that by becoming circular they could be doing well by doing good."

Companies
There are countless Swedish and Dutch exciting start-ups and innovative SME's offering ways to disrupt the linear economy in order to become circular (keep following this community to read more about it). However, it is great to see that large companies use their influence for this transition as well. The image below shows some of the Swedish and Dutch big corporates that could be considered as circular leaders. The economic potential is huge for these companies. Researchers expect that CE in the Netherlands, for example, will account for an annual market value of 7.3 billion euros and for 54,000 jobs, by 2023. In short, companies realize that by becoming circular they could be doing well by doing good.

Companies

Governments
Luckily, the necessity and potential of CE is not lost on governments either. The Dutch government launched a government-wide programme to stimulate CE. This programme is aimed at developing a circular economy in the Netherlands by 2050. The interim objective is to realize a 50% reduction in the use of primary raw materials (minerals, fossil and metals) by 2030.

Sweden is working on transforming varying CE-initiatives within the government towards a more holistic approach to stimulate CE. They decided to form a delegation for nationwide cooperation, as soon as possible.

Our countries cannot do this alone. So it is good to see some movement in the EU as well, as the European Parliament has just voted in favor of the EU’s landmark Circular Economy Package (CEP). Unfortunately, though, this Package is merely focused on reducing waste and increasing recycling rates instead of including the entire value chain.

In conclusion, the developments show that our countries should not wait for others, but rather move ahead of the pack, together. Sweden and the Netherlands must join forces, in order to become world leaders in CE. To do so, it is crucial to share knowledge - which is exactly what we hope to be able to contribute to at the Netherlands embassy in Sweden.

This article is written by Rutger Oorsprong and was originally published 18 May 2018 on LinkedIn.