1. science
2. ecology
3. waste management
4. recycling

Circular economy
Scaling up best practices worldwide
Summer 2014
Circular economy
Scaling up best practices worldwide
Summer 2014
Brussels
Table of contents
This report reflects the rapporteur’s understanding of the views expressed
by participants. Moreover, these views are not necessarily those of the
organisations that participants represent, nor of Friends of Europe, its
Board of Trustees, members or partners.
Reproduction in whole or in part is permitted, provided that full credit is
given to Friends of Europe and that any such reproduction, whether in
whole or in part, is not sold unless incorporated in other works.
Foreword
6
The circular economy is the basis of a new EU
industrial policy
Jamie Butterworth and Jocelyn Bleriot, Ellen MacArthur Foundation
8
Contrary to European policy, the Chinese version of the
circular economy takes a top-down approach and uses
command-control instruments rather than
market-based ones
Zhu Dajian, Institute of Governance at Tongji University in Shanghai11
The next President of the European Commission should
make the circular economy a central political project
for the coming five years
Ida Auken, Social Liberal Party's14
Enhancing recycling rates would be only one of the steps
towards a more resource-efficient economy
Anders Wijkman, Club of Rome and Member of the Swedish Parliament 16
The key to increasing resource efficiency is to intervene in
materials' journey from resources towastes
by preventing their loss of value
Paul Ekins, European Resource Efficiency Platform
Zero waste has been ineffective in the West, even
if it's had limited success in Asia
Walter R. Stahel, Product-Life Institute in Geneva What does make sense would be to celebrate the human
footprint on this planet instead of trying to minimise it
Michael Braungart, Erasmus University in Rotterdam
Without waste separation, recycling and incineration,
we will be left with landfills and harmful air emissions,
as well as the loss of raw materials and energy
that this involves
Barbara Hendricks, German Federal Minister
Rapporteur: David Koczij
Publisher: Geert Cami
Director: Nathalie Furrer
Programme Executive: Danuta Slusarska
Programme Assistant: Jenni Heikka
Photographer: François de Ribaucourt
Design & Layout: Cristina Frauca
© Friends of Europe, Summer 2014
Europe, too, could boast the close contact of
policymaking and day-to-day circular practice
that we are striving for in the Netherlands
Arjanna van der Plas and Guido Braam, Circle Economy
The basic principle of the circular city is that all product
and material streams can be brought back into
the cycle after use, and become resource
for new products and services
21
24
27
29
32
Jacqueline Cramer, Utrech Sustainability Institute and Dutch Minister
35
policy Insight
39
ANNEX i - Programme53
6
Friends of Europe | Europe's World
fOREWORD
Advocates of the “circular economy” argue that the entire model of global
economic activity needs an overhaul. They say today’s linear production and
consumption patterns, in which products are used for a short time and then
discarded, result in massive waste. They set this view against the background of
a rising world population, the emergence of a global middle class, set by some
estimates to reach five billion people by 2020, and emerging economies’ quest
for prosperity, arguing that all these are increasing pressure on the environment
and the earth’s natural resources.
Breaking this vicious circle, say those urging for a circular economy, means
adopting a “closed-loop” way of thinking to decouple economic growth from
resource consumption by encouraging re-using, re-manufacturing and recycling.
Such an approach could bring important benefits of cost-savings, job creation,
innovation, productivity and resource efficiency in both developed and developing
countries. But translating the circular economy concept into practice is going to
demand strong business leadership, smart regulation, international co-operation
and the energetic spreading of best practices.
This report includes guest contributions also published in the summer issue of
Europe's World, co-published by Friends of Europe, and highlights the outcomes
of a Policy Insight organised on the occasion of the Green Week 2014 conference
"Circular economy-saving resources, creating jobs".
In an introductory article, Jamie Butterworth, CEO of the Ellen MacArthur
Foundation, hails the circular economy as the “basis of a new EU industrial
policy”, and explains how it will stimulate economic growth and competitiveness
while protecting the environment. Following that, there are examples from people
working on the ground of how a “thinking globally, acting locally” approach has
fared in cities and regions across Europe, and in China too.
Guidelines and policy recommendations on how to scale-up circular economy
practices, from policies on resource efficiency to regulatory measures to industrial
co-operation are provided by ministers, experts and the man generally credited
as the inventor of the circular economy, Walter Stahel. Another approach to these
Special section: Towards a circular economy | Summer 2014
problems is suggested by Michael Braungart, who argues that “closing the loop
is not the answer” and advocates an innovative and alternative, way of thinking.
The articles that make up this special section try to make the concept of a circular
economy accessible to anyone interested in a greener, more sustainable future.
They set out ways to move towards a “zero-waste” world where environmental
and competitiveness concerns can be reconciled, and Europe could again lead
the way on climate and industrial policies.
7
8
Friends of Europe | Europe's World
“The circular economy is the basis of a new EU
industrial policy.”
By Jamie Butterworth, CEO of the Ellen MacArthur Foundation and Jocelyn
Bleriot, Head of its Editorial & European Affairs
The European Commission’s paper “For a European Industrial Renaissance”
underlines the importance of boosting manufacturing industry's share of the EU’s
GDP to around 20% by 2020 from 15% today. To reach that, adjustments to
the regulatory framework will be vital. Although derided sometimes as the “old
continent”, Europe is nevertheless very well placed to kick-start a new industrial
era around the world thanks to its wealth of productive infrastructure, its skilled
workforce and innovation capital.
But first, what must Europe, as cradle of the industrial revolution, do to re-invent
itself and re- think the future? Faced with unprecedented price rises and volatility
on commodities markets, Europe’s industrial economy needs tangible solutions
if it is to be at the forefront of globalisation. For many corporate strategists
and economists, it’s becoming clear that traditional routes to greater efficiency
can have only a limited impact when faced with the systemic shifts the global
economy is undergoing.
It’s a scenario that’s causing business leaders and politicians to suggest that
the throughput economy has since the industrial revolution been based on a
take-make-dispose flow of resources and energy no longer provides the socioeconomic solutions we need. The rules of the game have changed, with a century
of commodity price declines erased in a decade, three billion new middle-class
consumers around the world expected by 2030, and unprecedented price
volatility in the markets. The search is on for alternatives.
The idea of moving away from the linear “take, make and dispose” model is
gaining traction. A circular economy would be regenerative, and would rely
primarily on optimising biological and technical material flows. Products and
services in this circular economy will be so designed that biological materials
return to the food and farming system, while technical materials are kept in
production and use loops without any loss of quality. This circular model will
generate new revenue streams, reveal overcapacities and put assets to good
Special section: Towards a circular economy | Summer 2014
use. As one leading performance economy thinker, Walter Stahel, has put it, the
circular economy will ensure that the “goods of today become the resources of
tomorrow, at yesterday’s prices”.
To help make the business case for circularity, the Ellen MacArthur Foundation
has worked with McKinseyConsultants on three economic reports that show
how circular economy would help de-couple economic development from finite
resources and create a $1tn opportunity for businesses that are progressive
enough to kick-start a transition.
Our first report shows that for Europe, the greatest potential offered by
circular processes precisely matches the EU’s strongest points in high-value
manufacturing, with up to $630bn in net material savings achievable yearly.
The Brussels Commission paper has emphasised that Europe already has a
daily trade surplus in manufactured goods of a billion euro (€365bn annually),
generated mainly by a few high and medium technology sectors. These include
the automotive, machinery and equipment, pharmaceuticals, chemicals,
aeronautics, space and creative industries sectors, and high-end goods in such
other sectors as food. Our research suggests much untapped potential in reuse, refurbishment and re-manufacturing, and these would have the added
benefit of reducing the energy needs.
Businesses are already starting to seize this opportunity. Renault is expanding
operations at its Choisy-le-Roi plant in France, where four types of components
are remanufactured using a process that restores used parts to their original
quality, but at 30-50% of the cost. Another company, Kingfisher, is investing in
innovations that include the ‘mining’ of resources from recovered power tools,
while also piloting tool rental schemes.
The European Union, too, has now seen the potential benefits of the circular
economy, and is introducing ideas for building a policy framework that encourages
a shift towards the wider use of circular practices. The crucial but unanswered
question, though, is whether such measures will prove to be bold enough to
bring about a paradigm shift? The risk is that the EU’s recommendations will fall
short of that and amount only to tweaks in Europe’s existing economic model.
9
10
Friends of Europe | Europe's World
The manifesto of the European Resource Efficiency Platform (EREP) in
December 2012 produced agreement amongst its members that “the EU
has no choice but to go for the transition to a resource-efficient and ultimately
regenerative circular economy”, that would put the emphasis on job creation
and global competitiveness. EREP underlined the importance of phasing out
harmful subsidies that distort prices, especially in support of fossil fuels. Its report
suggested a ‘product passport’ to document the contents of a product and
provide much more transparency on how it can be repaired, remanufactured
or recycled. High-quality recycling was seen as having “significant potential for
creating jobs and growth”, and would align with the EU’s own objective of nearzero landfill by 2020 without resorting to the shortcut of using waste to fuel
energy processes. These recommendations are clearly designed to avoid making
circularity little more than a regulatory hoop through which industries jump, but
instead a policy that sends positive signals on the economic advantage to them
of circular business models
The challenges that still lie ahead if the circular economy’s potential is even
to be realised also mean that its fundamental principles must be questioned:
for instance, can a regenerative model emerge without any changes to fiscal
policies? The importance of the shift’s impact on commodity markets, coupled
with the pressing need to address unemployment in Europe, raises important
questions about the wisdom of continuing to tax labour rather than resources.
There seems an increasingly widespread view amongst European business
leaders that our current economic models will not provide long-term prosperity
in the context of global population growth and resource constraints. We believe
that a circular economy framework offers guiding principles for re- thinking and
redesigning our future. There have been promising signs that a shift is taking
place, but reaching our goal will demand a pioneering sense of purpose if our
ambitions are to be fulfilled with a system that rebuilds our economic, social and
natural capital.
Special section: Towards a circular economy | Summer 2014
“Contrary to European policy, the Chinese version
of the circular economy takes a top-down approach
and uses command-control instruments rather
than market-based ones.”
By Zhu Dajian, Director of the Institute of Governance for Sustainable
Development at Tongji University in Shanghai
China’s circular economy has seen three development stages in less than 20
years. Between 1998 and 2000, the concept was first introduced and theoretical
studies conducted in higher education institutions. The second stage from 2001
to 2005 saw the advent of clean production in enterprises and eco- industrial
parks, at a time when the government’s environmental protection department
had begun to increase.
But since 2006, China has been facing increasingly serious resource challenges
and environmental threats, so the circular economy was soon being presented
as an alternative development model by China’s Nation Development and
Reform Commission (NRDC). This kick-started the third stage, and from that
point onwards, the Chinese government has been taking action in four main
areas.
First, there have been efforts to establish China’s circular economy “promotion
law”. In 2008 The National People Congress of China (NPC) introduced a law
to promote these initiatives with three main focuses; One of the law’s aims is to
decouple economic growth from resource consumption and pollutants. Rather
than being a simple environmental management policy, the circular economy
was introduced as a green economy measure and also as a new development
model that could help China leapfrog earlier practice to a more sustainable
economic structure.
Another focus of the law is to shift from a narrow vision of solid waste treatment to
the idea of closed- loop material flows at all the stages that run from exploitation
to production, distribution, consumption and treatment of waste. The law
11
12
Friends of Europe | Europe's World
addresses the recycling of waste, the re-using of products and parts and the
idea that we should be selling services instead of products.
The third aspect of the law has established basic systems to facilitate the
development of the circular economy at national, provincial, municipal and county
levels, introducing policies and instruments for controlling the total quantities
of resource consumption and pollutant discharge, extending manufacturers’
product responsibilities and improving the examination system based on indices
of resource input, recycling and pollutant discharge. Contrary to European policy,
the Chinese version of the circular economy takes a top-down approach and
uses command-control instruments rather than market-based ones.
The second area in which China is taking action is by setting goals for resource
productivity improvement. The 2006- 2010 National Economic and Social
Development plan succeeded in reducing energy intensity in the economy by
20%. More generally, the 2011- 2015 plan set resource productivity improvement
targets at 15% every five years. But simply raising resource productivity isn’t
enough when dealing with an annual growth rate of 7-10%, so in 2012 China
resolved to create a more detailed plan for the circular economy. This will control
the country’s total consumption of water, land, energy and materials, as well
as the discharge of main pollutants. It will also adjust the speed and scale of
economic growth so as to enable a sustainable transition to green growth.
Third, China places a strong emphasis on local experiments. Governments
have been learning from pilot projects and are gradually expanding the circular
economy to include the whole country.
Pilot schemes have been in place for eight years on three different levels. The first
is the micro level, which covers single enterprises in high-resource-consumption
and high-discharge industries and waste- recycling enterprises. The second is
the meso level and is represented by eco-industrial parks and symbiosis. And
the third is the macro level, involving cities and regions, including some resourcedependent areas in the central and western regions, and even large cities with
scarce resources like Shanghai and Beijing.
The early experiment units have mainly focused on low-level waste recycling so
we need to further develop the high-level re-using of products and the product
Special section: Towards a circular economy | Summer 2014
service system. A new group of experimental units has now begun, and China
expects to see circular economy practices working nationwide by 2020. By then,
more re-manufacturing of auto parts, machinery and product-service systems
will be available so as to reshape business models along circular economy lines.
The government’s final measure is to develop appraisal indices for the circular
economy. The State Development and Reform Commission, working with the
State Environmental Protection Administration and National Bureau of Statistics,
has published an index system for appraising four aspects of the circular
economy: resource productivity or material intensity, waste discharge, the
comprehensive utilisation of resources and waste treatment.
The resource productivity or material intensity index refers mainly to GDP
produced by per unit of resource; the discharge of waste index reflects waste
generation per capita; the comprehensive utilisation of resources index concerns
reclamation and utilisation of solid waste, wastewater, urban household garbage;
and the waste treatment index mainly describes the treatment rate of solid waste,
wastewater and could reflect the finally reduced discharge (disposal) quantity of
waste. In future years, these indices will be studied, improved and linked more
closely with circular economy targets to measure more effectively the degree
of decoupling economic growth from resource consumption and pollutant
discharge and raising the ecological efficiency of economic growth.
13
14
Friends of Europe | Europe's World
“The next President of the European Commission
should make the circular economy a central
political project for the coming five years.”
By Ida Auken, “40 under 40” European Young Leader and Former Danish
environment minister and is currently the Social Liberal Party’s spokesperson
for business and European affairs
The circular economy offers the EU a chance to develop a positive new vision
for Europe. It is a concept that has it all – new jobs, security of supply, a better
quality of life, improved competitiveness, green growth and a path towards the
re-industrialisation of Europe. The circular economy represents our chance to
create a more sustainable, resource-resilient economy, and combine our hopes
for continued economic growth with staying within the planet’s ecological limits.
The next President of the European Commission should make the circular
economy a central political project for the coming five years. The EU is a large
net importer of resources – as well as energy, there’s copper, gold, phosphorus,
steel and many rare earths. Europe is a continent rich in ideas, but poor in natural
resources. During the first decade of this century, resource prices increased
by more than they had decreased in the previous 100 years and the signs are
that this will continue to be the case. This should act as a wake-up call for
politicians, business leaders and consumers too. We are at a point in history
where resource prices are rising twice as fast as wages, so any business should
see the importance of focusing on resources to ensure competitiveness.
To create a common European response to this situation, we should first make
the transition towards a circular economy in which resources are used again
and again, and in which materials continue to circulate instead of ending their
lives in waste dumps or incinerators. This will entail a re-design of the way we
produce and consume, and it also means that many companies must rethink
their business model. Can they shift to leasing, repairing or take-back models?
Could we design products that they can be dismantled in a such way that all their
component materials can be used again? Could institutional investors focus their
investments on more resilient business models?
Special section: Towards a circular economy | Summer 2014
The incoming Commission should look closely at the following areas coming
under the headings of vision, regulation, innovation and partnerships.
• A strong common vision is crucial, along the lines of “EU without waste
2050”. How should the EU look at materials now in circulation and what
would it take to get 100% of household and industry waste recycled? What
opportunities could be create to ensure that all products are designed to
be disassembled?
• From a regulatory viewpoint, we need to set new targets for increased
resource-efficiency and the recycling of waste, and to widen the Eco- design
directive so as to set standards for materials’ recyclability in electronic
products. We must look at standards for longer life warranty and demand
open standards so producers share repair manuals.
• As to innovation, making the circular economy a clear priority in the EU’s
science and innovation programme would have a great impact.
• It is essential that the EU should facilitate meetings of those partners
that could have a real impact on markets, for instance by persuading the
retail sector to set standards for plastic packaging that would ensure their
recyclability.
The list of sectors that would benefit from circular economy thinking goes on and
on, and the incoming members of the Commission who will have responsibilities
for industry, competitiveness, environment, science and employment could each
contribute in their own way. In line with the EU’s internal market and the free
movement for people, we now need to integrate the policy solutions that are
capable of tackling the resource crisis.
15
16
Friends of Europe | Europe's World
“Enhancing recycling rates would be only one
of the steps towards a more resource-efficient
economy.”
By Anders Wijkman, Co-president of the Club of Rome and a former member
of the Swedish parliament and of the European Parliament
When the Club of Rome presented its “Limits to Growth” report more than
40 years ago, its chief message was that the depletion of vital resources and
pollution of all kinds represented major risks for the global economy in the first
half of the 21st century. Few reports have been so controversial, nor so criticised
among economists and others. The chief criticisms were that the report was
based on rising consumption trends, without taking into account technological
developments, along with substitution and price correction mechanisms.
Most economists still treat the report with condescension. They simply refuse
to accept that the combination of resource constraints, rapid population growth
and increasing pollution and waste can create major problems, and even the
collapse of the world economy. But it’s a debate that is far from over.
With the 40th anniversary of "Limits to Growth" approaching, a stack of
international reports have confirmed most of the Club of Rome's conclusions.
The authors of these reports include research institutions, the UN’s SecretaryGeneral, the European Commission and the OECD, along with organisations
linked to the private sector. All of these reports strongly warn against the
combination of an increasingly unstable climate and the overexploitation of so
many important ecosystems and resources, both renewable and finite. Among
these reports, the ”Imperative to Act” one, signed in 2012 by all 18 recipients of
the prestigious Blue Planet Prize conveys a stark message: ”The human ability to
do has vastly outstripped the ability to understand. As a result, civilisation is faced
with a perfect storm of problems driven by overpopulation, overconsumption by
the rich, the use of environmentally malign technologies and gross inequalities.
The rapidly deteriorating biophysical situation is more than bad enough, but it is
barely recognised by a global society infected by the irrational belief that physical
economies can grow forever.”
Special section: Towards a circular economy | Summer 2014
The scale of these challenges is underlined by increases in both population and
economic growth. Up to three billion new middle-class consumers are likely to
emerge by 2030, up from 1.8bn today, and so driving up demand for many
different resources. Soaring demand will make finding new and reasonably
priced, while environmentally sound, alternative sources increasingly difficult.
Most companies have in the past benefited from falling commodity prices over
long periods of time. The focus on productivity has consequently been on labour
and capital rather than resources. But times are changing; while the real price for
most commodities, other than crude oil, declined during the 20th century – on
average by 70% – that decline has been fully erased over the last ten years. And
although modest efforts have been made to enhance resource efficiency, the
demand for both energy and resources continues to increase. Companies are
therefore beginning to realise that the linear system of resource use now exposes
them to a number of risks.
Resource constraints, along with growing volumes of waste and pollution, are
likely to pose an increasing threat to profits and business continuity because of
the higher input costs of energy and key raw materials, increased competition for
resources in general, political instability and resource protectionism among the
key producing regions. This seems certain to be increasing social pressure about
resource stewardship and climate change.
Governments and businesses must therefore work together to develop resource
strategies that can avoid resource constraints while addressing the problems
of waste and pollution. The productivity concept must be broadened to include
the use of natural resources. Leveraging technology to enhance productivity is
nothing new, and a prominent example is labour productivity which has increased
by at least a factor 20 since the beginning of the industrial revolution. But as my
colleague Ernst von Weizsäcker has said, “it is not labour that is in short supply
in the future but rather basic resources, like energy and water. This will call for
a new way of thinking: the same level of innovation and effort must now go into
using technology for resource productivity as was the case with labour.”
What has to be questioned, then, is the way production and consumption are
organised. An important first step towards a more efficient use of resources –
and a circular economy – is to significantly increase recycling rates in society.
17
18
Friends of Europe | Europe's World
Special section: Towards a circular economy | Summer 2014
According to a 2011 report by the United Nations Environment Programme
(UNEP), recycling rates of metals are in many cases far lower than their re-use
potential. Less than a third of the 60 metals studied have an end-of-life recycling
rate above 50% and 34 elements are below 1% recycling. In theory, metals can
be used over and over again, minimising the need to mine and process virgin
materials and thus saving substantial amounts of energy and water while reducing
environmental degradation and CO2 emissions to a minimum. Yet despite all of
this, recycling rates for most metals remain very far from optimal. When looking
at the electronics sector, the picture is particularly worrisome, with an estimated
50m tons of “e-waste” being generated each year. The U.S. Environment
Protection Agency estimates that no more than 15-20% is recycled, with the rest
ending up in landfills or incinerators. This sort of waste is not noly hazardous but
also a potential source of valuable and scarce materials.
services.Since responsibility for the material used in a product remains with
the manufacturing company, strong incentives are created to exploit materials
and earn money for as long as possible on what already has been produced.
It contrasts strongly with today's system in which new models are constantly
launched and consumers are encouraged to trade in generally adequate
products for the newest thing. The products should instead be designed to last
longer and be easy to upgrade, re-use and recycle.
Enhancing recycling rates would be only one of the steps towards a more
resource-efficient economy. The main challenges are the more or less linear
flows of resources in society. Decades ago, the concept of “Cradle to Cradle”
was introduced to focus attention both on enhancing efficiency and also on
increasing effectiveness. What the founders of the concept – Stahel, Braungart
and McDonough – were advocating was to “do things right”. The background, of
course, was the realisation that indefinite material growth on a planet with finite
and often fragile natural resources cannot be sustainable. These principles – to
extend wealth, to minimise waste and to go for maximum re-use and recycling of
materials – are gradually gaining ground. The 2012 Ellen MacArthur Foundation’s
report “Towards a Circular Economy” – backed up by a group of leading
multinationals, like B&Q, British Telecom, Cisco, National Grid and Renault –
makes a strong pitch for a ”circular economy”. That its radical definition for a
future industrial system is supported by a group of multinational companies is
no small feat, and represents a fundamental shift in perspective away from the
industrial system we have today.
The challenge for the future is to generate a strong breakthrough for the
concept of "service instead of products" for a wide array of consumer products,
computers, cell phones, household appliances, cars, furniture and textiles. Even
in the property market, the same principles apply. Construction modules and
interiors, which currently have a limited lifespan can instead be rented out, so
that existing materials are reused.
In his seminal book “The Performance Economy”, published in 2010, Walter
Stahel presents a convincing case for extending wealth and replacing material
throughput with activities like recycling, re-use and reconditioning. Business
models today are still based on maximising sales of various products, but an
alternative Stahel advocates is a transition to services. Sales of products in
many areas, he argues, will be replaced by leasing coupled with exceptional
The crucial question then is how to move society in the direction of a circular
economy. It ought to be obvious that activities like recycling and extending
products’ lifetimes will help reduce companies’ costs of materials and waste
management. The question then is how these positive elements can compete
with the present production system that is optimised for maximum throughput of
energy and materials. How can the principle of “earning revenue by selling more
Examples of companies moving in this direction are mainly business to business
(B2B) activities. For these companies, the new way of working has meant that
both energy and raw material consumption is reduced significantly, and the same
applies to CO2 emissions. And because profitability has improved, it becomes a
win-win proposition.
The implications of a model in which goods become services seem unambiguously
positive. Producers will be responsible for products and materials throughout
their life cycle and at the time of eventual disposal. The management of waste
and residues are internalised and become the responsibility of the producer
rather than being a cost for society. This model would also lead to more new
jobs created locally in such activities as maintenance and servicing, recycling,
recovery and reconditioning. Above all, the really significant benefit is a reduction
of the pressure on natural resources and the lowering of emissions, not least
CO2.
19
20
Friends of Europe | Europe's World
stuff” be replaced by a business model where revenue primarily results from
quality of service?
The rapid price rises in recent years of so many commodities, including energy,
ought to encourage the business community to search for new ways to manage
materials. But the idea that price signals alone will be enough to initiate the
transition to a circular economy is probably naive. What will be needed is policy
action on three fronts.
First, we must create binding resource efficiency targets by setting these well
above the expected growth rate in the economy. That would send the right
signals to industry to focus on the maximum re-use and recycling of materials.
Second, we need to focus on sustainable innovation by giving priority to
sustainable design and closed material loops. That would ensure the research
community gives maximum attention to the principles of a circular economy.
Last, we must look to tax reform; by lowering taxes on labour and raising them
on the use of virgin materials, we would create similar incentives to those already
in play through binding resource efficiency targets.
Special section: Towards a circular economy | Summer 2014
“The key to increasing resource efficiency is to
intervene in materials’ journey from resources
towastes by preventing their loss of value.”
By Paul Ekins, Director of University College London’s Institute for Sustainable
Resources and a member of the European Resource Efficiency Platform
The EU has identified resource efficiency as one of the key issues underlying its
Europe 2020 strategy of achieving by then an economic growth pattern that is
‘smart, inclusive and sustainable’. The rationale of including resource efficiency
as a priority goal (or ‘flagship initiative’ in the language of the Europe 2020
strategy) spans three aims; to move towards a low-carbon energy system, to
increase the EU’s resource security and to build a more competitive economy.
These three needs derive from strong evidence that global greenhouse gas
emissions need to be reduced in order to mitigate climate change. Also that
resource security in the EU, because it is a major importer of raw materials, is
threatened by growing global demand for resources and by potential bottlenecks
in supply. And third, that there are many measures for both the private and public
sectors that could increase resource efficiency with very short payback times,
thereby also increasing competitiveness by reducing spending on resources.
In the light of all these benefits of greater resource efficiency, not least its
widespread cost effectiveness, it might be imagined that both companies
and governments would find it attractive to adopt the measures that could
dramatically improve it. But there is now substantial evidence that this simply
isn’t the case. Instead, there is a web of interacting constraints, comprising a mix
of political, institutional, financial, organisational, behavioural and technological
factors. These operate systematically to militate against businesses adopting
seemingly rational resource efficiency measures, and which also make it difficult
for governments to put in place policies that would stimulate businesses to
adopt them.
The EU’s hope is that, by making resource efficiency a key aim, member
governments will be encouraged to overcome these difficulties, so that businesses
and to a lesser extent consumers will implement the necessary measures.
21
22
Friends of Europe | Europe's World
For greater resource efficiency to be encouraged in this way, there needs to
be greater clarity as to how it should be measured, and how progress towards
this goal can be monitored. There has been considerable progress in this area
since the European Commission first proposed resource efficiency as one of
Europe 2020’s ‘flagship initiatives’. It then adopted a roadmap that identified five
main resource categories: biodiversity and ecosystem services; energy, carbon
emissions from which need to be reduced; materials whose use is measured
through material flow analysis; water, which is becoming scarce in some parts of
the Europe; and land, in the EU and elsewhere, which is the base resource for
biomass production.
The European Commission has also identified priority sectors like food, buildings
and transport that are responsible for most of households’ resource use. The
next priority is to agree and implement policies that will allow progress towards
the targets that have been set.
In 2012, the Commission set up a European Resource Efficiency Platform
(EREP), involving five members of the Commission, MEPs, member states’
ministers, business leaders, and representatives of academia, NGOs and civil
society. EREP issued a “manifesto” on resource efficiency at the end of that year
and recommended ‘Action for a Resource-Efficient Europe’ in mid-2013, with
the objective of creating growth and jobs and providing incentives to overcome
barriers to resource efficiency. It also sought to put a proper value on resources,
measure progress and promote new business models. In March of this year, EREP
called for a doubling of the rate of increase of resource productivity (measured
by the ratio of GDP to the EU’s use of raw materials, including imports) over the
period 2001-2008, which would entail an increase of at least 30% by 2030.
Achieving these kinds of resource efficiency increases demands action on a
number of fronts. To understand the potential benefits of resource efficiency,
all concerned need to recognise that in their journey through the economy,
materials have value added to them and become resources and products.
But they can also lose value, as resources and products become ‘wastes’,
which may be seen from an economic perspective as materials with negative
value. Traditionally, the waste management industry adds value to wastes by
separating, transporting, or recycling them. As far as the economy as a whole is
concerned, this adding value from waste management represents a cost. The
key to increasing resource efficiency is to intervene in materials’ journey from
resources to wastes by preventing or delaying their loss of value.
Special section: Towards a circular economy | Summer 2014
The kinds of policies needed to deliver more resource efficiency include some
that need to be implemented at EU level. And there are also those that will be
more or less completely in the hands of member states. These policies include:
• Reducing the quantity of materials needed to deliver a particular service
(lightweighting)
• Increasing the length of time that materials and products remain viable
before becoming wastes (product durability)
• Reducing the use of energy and materials needed both to produce a product
and in its use phase (efficiency)
• Reducing the use of materials that are hazardous or difficult to recycle or
dispose of (substitution)
• Making it easier to recycle materials by differentiating between wastes and
recyclables (by-products)
• Creating markets for recycled materials through product specifications and
green public procurement (standards and regulation)
• Designing products that are easier to recycle (eco-design)
• Incentivising waste reduction and high-quality separation by consumers
(e.g. variable waste charging, or Pay-As-You-Throw)
• Incentivising separation and collection systems that minimise the costs of
recycling and re-use (e.g. deposit-refund schemes)
• Facilitating industrial clusters that exchange materials while they are still
resources to prevent them from becoming wastes (industrial symbiosis)
There is already a useful body of experience in many member states
regardingthese measures and techniques. The resource efficiency policy toolbox
is well developed andconsiderable experience with most of these policiesnow
exists. What is required is a much more systematic implementation of these
policies and measures right across Europe.
23
24
Friends of Europe | Europe's World
“Zero waste has been ineffective in the West,
even if it’s had limited success in Asia.”
By Walter R. Stahel, Founder of the Product-Life Institute in Geneva, and a
Visiting Professor in the Faculty of Engineering and Physical Sciences at the
University of Surrey. His 1976 report to the European Commission defined
the concept of a “circular economy”
Among the challenges that confront a zero-waste world is the hard truth that
sustainability is not a popular vote-winning proposition. Among the reasons for
this is the fact that the sustainability discussion is often driven by environmental
rhetoric rather than incentives for people to do the right things. Nor does public
policy inspire people instinctively to choose sustainable paths and show them
how ‘to close the loop’. And the idea of ‘zero waste’ doesn’t itself inspire; zero
accidents or zero casualties have long been used as incentives in industry, but
zero waste has been ineffective in the West, even if it’s had limited success in
Asia.
What alternatives are there, then, to these traditional approaches? The circular
(or ‘loop’) economy can in fact achieve a number of objectives at the same time,
because it enables manpower to be substituted for energy, it offers resource
security and waste prevention, and it greatly reduces greenhouse gas emissions.
Optimum value of the circular economy is made possible by its value preservation
rather than value added, by using the smallest loops (the re-use, repair and
remanufacturing of goods on a local scale) instead of global supply chains, and
through smart stock management as opposed to throughput management.
The performance (or ‘lake’) economy is the most profitable and environmentally
efficient business model of the circular economy and it maximises profits in a
number of ways. It can sell goods as services (for instance ‘power by the hour’
for jet and gas turbines), it can retain the ownership of goods and their embodied
resources (materials, energy, water), giving fleet managers resource security, it
internalises the risk and waste costs, so providing strong economic incentives
for loss and waste prevention over the full life-time of products, and it exploits a
combination of sufficiency and efficiency strategies, leading to higher profits and
increased competitiveness.
Special section: Towards a circular economy | Summer 2014
Societal wealth is measured in stock, not throughput. The circular economy is
therefore a ‘societal mainstream’ as it focuses on the intelligent management of
stocks so as to increase their utilisation value. Caring is the principle of managing
stocks (capital) and is generally accepted by policymakers, except those in
the industrial economy, with regards to: natural capital and the environment
(biodiversity, fish stocks, clean water and arable land); cultural capital such
as UNESCO’s world heritage sites and immaterial culture like crafts or music;
acquired human capital, which includes knowledge and skills, capabilities and
experience, science and technology; and of course financial capital.
A circular economy would extend this caring principle to the stocks of:
manufactured capital (infrastructure, buildings and goods, refined raw materials);
and human capital, which would involve guaranteeing citizens’ education and
health for their life-span beyond the age of 60. Its tools are the re-use and
service-life extension of goods through repairs, remanufacturing, technological
and fashion upgrading, retrofitting and the re-marketing of manufactured capital.
It is crucial to note here that caring activities are different from manufacturing
because they are labour-intensive and decentralised, have to be carried out
where the clients are and cannot easily achieve economies of scale. Examples
include education and health services, organic farming and cultural capital.
Today’s policies are split between caring – the preservation of natural and
cultural capital – and fuelling the industrial economy. If we were to fully transition
to a caring circular economy, programmes such as the Car Allowance Rebate
System, which offer economic incentives to people to trade-in less fuelefficient vehicles for more environmentally friendly ones, would be upgraded to
‘automobile remanufacture-and-retrofit’ policies. In this case, local workshops
could remanufacture mechanical parts and convert cars to run on compressed
natural gas.
Environmental policies of present driving the circular economy mainly include
those to do with:
• Resource extraction, such as the OECD code of conduct, U.S. SEC rules
on resource imports, or the Global Reporting Initiative (GRI),
• The efficient use of resource stocks (eg. UN mercury agreement),
• Waste prevention (such as the EU’s 2008 waste directive).
25
26
Friends of Europe | Europe's World
These are all commendable, but there is a significant lack of policies that
provide incentives as major levers for change. The latter are the sort of policies
(like sustainable taxation) that must be considered because they are simple,
convincing and create self-reinforcing virtuous loops. We should not, for instance,
tax renewable resources, including human labour, but instead non-renewable
resources, wastes and emissions. Nor is it advisable to levy Value Added Tax
(VAT) on value preservation activities. Finally, it is worth giving carbon credits to
carbon emission prevention (smart stock management) at the same rate as to
carbon emission reductions (cleaner throughput).
To close the loop and move towards a zero-waste world, we need better resource
policies. That demands the following actions. We must:
• Foster policies which create virtuous loops by incentivising individuals
towards a caring attitude to all stocks
• Develop policies which promote economic sectors that smartly exploit
mostly human and manufactured capital, such as forestry and a circular
economy
• Promote sustainability through taxation policies that give individuals and
economic actors an incentive to work creatively to maximise income and
minimise consumption of non-renewable resources
• Inspire people to switch to a sustainable lifestyle
• Remove fossil fuel subsidies
• Push for most efficient resource exploitation: stakeholders should demand
managers to transform one tonne of resource into one tonne of product
• Promote the move to a resource-miser economy: measured in a higher
resource performance economy using adequate absolute decoupling
indicators, such as value-per-weight and labour-input-per-weight ratios
• Measure societal wealth and wellbeing (and economic growth too) in stock
– the sum of quality and quantity of all stocks.
Special section: Towards a circular economy | Summer 2014
“What does make sense would be to celebrate the
human footprint on this planet instead of trying to
minimise it.”
By Michael Braungart, Cradle-to-Cradle chair for Innovation at the Erasmus
University in Rotterdam
Many cities and communities want to be climate-neutral, and aim to become
low-carbon societies by reducing their ecological footprint. But there is only one
way to achieve this goal, and that is by not existing on this planet at all. Have you
ever seen a climate-neutral or a low-carbon tree? Of course not. Trees are not
a problem of course; they are beneficial, they clean the air and water, and they
support bio-diversity. There are still more than 600bn trees left in the Amazon
region, and thankfully not one of them is climate-neutral.
Most people seem to think that the world would be a better place if we weren’t
here at all. Yet goals like “zero waste” are bizarre, because aside from being
unachievable, it isn’t even desirable. Thinking about “zero waste” means you
are still thinking about waste. We need to begin thinking in a completely different
way.
Almost everyone now talks about closing the loop. Maybe closing the loo
sometimes makes sense, but why would we want to close the loop? It means
that products will be recycled when they shouldn’t even exist in the first place.
Old PVC-plastics with cadmium and lead-stabilisers will be recycled into new
PVC- products. Old plasticisers, which destroy fertility and contain endocrinedisrupting chemicals, are now finding their way into new products with recycled
content.
Closing the loop is naïve – we shouldn’t be re-using the same materials and
products over and over again.
Instead of closing the loop with products containing the wrong substances, it
makes much more sense to follow an approach which manages products either
for the biosphere or the technosphere. Goods that are solely used for services,
like washing machines or TV sets aren’t actually consumed, so they need to go
27
28
Friends of Europe | Europe's World
back into the technosphere so they can be permanently re-used. On the other
hand, products and materials that are consumed, like food, shoe soles, brake
pads or detergents, need to be designed to go back into the biosphere, because
their chemical, biological and physical composition was changed when they
were used. What we need is to reinvent all our products to be “good” instead of
merely “less bad”.
Environmental protection should go beyond minimising damage. Traditionally,
protecting our earth has been defined as “destroying a little less”. You hear
phrases like, “To protect the environment, you need to reduce your water
consumption, your energy bill and your waste production”. But this has nothing
to do with protection – it is only minimising damage.
Many existing products are terrible because by “optimising” them, we make
products that are inherently bad seem perfect. Tires, for example, today last
twice as long as they did 30 years ago, but the materials have never been
optimised for abrasion. Nowadays, their abraded particles are much smaller,
making them more easily available for the biosphere and for the technosphere.
Yet this also means they can be inhaled much more easily. About 500 chemicals
used in making tires were never intended to be inhaled, so we are causing a
massive health problem by exposing people to such fine dust. Inhaling fine dust
reduces our life expectancy twice as much as does drinking alcohol.
Neither a zero waste world nor the concept of closing the loop therefore makes
sense. What does make sense would be to celebrate the human footprint on
this planet instead of trying to minimise it. The northern approach, where every
footprint destroys the soil in Sweden, should not be the global standard. When
you walk along a river in Italy, water will stay longer in the meadow because your
footprint created retention space for the rain. So why not make a large footprint
that becomes a wet land,creating a new habitat for other species along the way?
If there is no sense in becoming neutral or closing the loop, the traditional ecosustainability way of thinking must be reformed. We need to look past ecoefficiency and instead consider eco-effectiveness.
Efficiency means doing things right. But when they are wrong from the beginning,
they become perfectly wrong when we optimise them further. Effectiveness
means doing the right thing, which is to reinvent everything to be good (great,
even) instead of “less bad”.
Special section: Towards a circular economy | Summer 2014
“Without waste separation, recycling and
incineration, we will be left with landfills and harmful
air emissions, as well as the loss of raw materials
and energy that this involves.”
By Barbara Hendricks, German Federal minister for the environment
Climate change and competition need not be in contradiction – not in the circular
economy, at any rate. Modern disposal infrastructure that’s built on the ‘polluter
pays’ principle would create environmental as well as economic benefits – all in
keeping with the spirit of the Green Economy.
But an essential prerequisite is the willingness to take the political decisions
and provide the right legal framework. Clearly formulated state-of-the-art
requirements, supported by state-level monitoring and enforcement of standards
will set a framework for environmental development by economic operators.
The economy must supply the services, but the rest is up to the community and
the state. Political decisions of the sort needed can only stem from citizens’ and
companies’ own awareness of being waste generators. They have to accept
that they must pay the costs of disposal of their own waste. They can, though,
reduce these costs by keeping different types of waste separate so as to enable
high-quality recycling.
Citizens can have a significant impact on society’s progress towards a circular
economy through their behavior, and it is this that requires willingness and
responsibility. We need citizens to understand how their own actions can
contribute to protecting the environment, and we need to persuade them to rely
on products that consume fewer resources and so can be recycled more easily.
The high levels of education in Europe can do much to help, and in Germany
90% of people questioned say that they try to make a significant contribution to
environmental protection by sorting waste.
Companies can generally make huge savings in their material throughput,
their energy balance and their waste generation by converting or streamlining
29
30
Friends of Europe | Europe's World
their processes. The financial incentives to do so are, unfortunately,often too
small, so disposal costs along with more information and guidance could give
greater impetus. Investment is also needed on the disposal side to meet legal
requirements. The cost could be amortised through guaranteed prices and fees
paid by waste producers.
It would be a mistake to believe in a "zero-waste world”. As long as there is
human life on earth, there will always be a considerable amount of waste to
be treated. Any policy arguing that modern waste disposal infrastructure could
be replaced by waste prevention is counterproductive: only sophisticated and
expensive technology can create the initiatives needed to reduce waste. Without
waste separation, recycling and incineration, we will be left with landfills and
harmful air emissions, as well as the loss of raw materials and energy that this
involves. Yet this is still the policy in the vast majority of EU member states, where
most waste is untreated in landfills despite the European Union’s rules.
In Germany and some other EU countries, very high recycling and recovery rates
have been achieved by means of the circular economy. Thanks to measures
first introduced in the 1980s, 63% of Germany’s municipal waste is now being
recycled, with most of the residues used to generate energy. The overall recycling
rate is 71% and the recovery rate (including waste-to-energy) is 77%. 14% of all
raw materials needed in the German economy are already generated from waste.
Waste intensity, the ratio between GDP and waste generation, recently fell to
75%, and 20% of our climate protection targets under the Kyoto Protocol were
achieved by the waste management industry alone. About 3,000 companies,
using 15,000 disposal facilities that employ over 200,000 people, together enjoy
a combined annual turnover of more than €30bn.
But as I’ve already said, a prerequisite for the ecologically and economically
profitable development of a “Green Circular Economy” is an awareness that
we have reached the limits of the resources capacity of our earth. We have
to combine this with the knowledge that we can use market mechanisms to
overcome part of our global challenges. "True" prices for raw materials and
energy that reflect not only today’s scarcities of production factors but tomorrow’s
too, and pass these prices on as a cost to polluters, will be key to solving our
resource problems. We may for the time being be far away from seeing these
Special section: Towards a circular economy | Summer 2014
prices in the global marketplace, but both nationally in Germany and in the EU
we should be setting ourselves this goal.
All this must be connected with education, support and legal barriers. The EU
and its institutions already have a special role in this regard because present
requirements must be enforced. A unified, modern and sustainable Europe
needs high standards and a level playing field – and that means a common
policy. Positive examples exist in a number of European countries, and these
must set the pace for joint, EU-wide action. Only then will the circular economy
be able to make its full contribution to resolving both our environmental and
economic challenges
31
32
Friends of Europe | Europe's World
“Europe, too, could boast the close contact of
policymaking and day-to-day circular practice that
we are striving for in the Netherlands.”
By Arjanna van der Plas and Guido Braam, Executive Director of “Circle
Economy”, a Dutch non-profit foundation aiming to accelerate the transition
to a circular economy
The circular economy demands a fundamental systems change so supporting
it demands different skills and new attitudes by policymakers. That’s why this
article proposes a new role for government.
We live in exponential times. It has never been tougher to predict even the shortterm future. Extrapolating history is no longer an option because disruptions
seem to have become a daily pattern. Everything – industry, finance, people and
nations – is inter- connected much more than ever before. A minor change on
one side of the world can lead to turmoil on the other.
What does this mean for policymakers, especially in terms of the circular
economy? There’s no way to predict when or how the transition towards a
circular economy will happen, and there are no rules yet for how to accelerate
that transition. The most common trend is to become no more than a facilitator
of whatever change is occuring, but we believe that the approach being taken in
the Netherlands to combine strong vision with a facilitating attitude is the more
effective.
Last year, we at Circle Economy signed a ‘Green Deal’ with the Dutch government
that jointly committed us, along with the Dutch Social Economic Council, De
Groene Zaak, MVO Nederland and the Amsterdam Economic Board, to the
creation of a national program aimed at positioning the Netherlands as a circular
hotspot. This not only challenges us to accelerate the transition towards a circular
economy at home, but is also designed to encourage other countries to follow
suit. If we’re going to make this dream come true, we need all stakeholders –
from business to science, and from the financial world to our government – to
become actively involved.
Special section: Towards a circular economy | Summer 2014
In helping to decide the Dutch government’s role in the shift to a circular economy,
we have been inspired by the UK-based economist Mariana Mazzucato and
London Business School’s management specialist Lynda Gratton. At first glance,
their theories may appear totally different, but we believe that both apply to the
challenges a circular economy faces. In her work ‘The Entrepreneurial State’,
Mazzucato describes how governments have often been the source of the
most radical, trail-blazing types of innovation through their funding of highly risky
research. She cites the rise of Silicon Valley, saying the U.S. federal government
rather than venture capitalists laid the foundations for the booming internet hub
through pre-competitive seed-funding.
Gratton, though, advocates a hotspot creation approach. “You always know
when you are in a Hot Spot”, she says. “You feel energized and vibrantly alive
when the ideas and insights from others miraculously combine with your own in
a process of synthesis from which springs novelty, new ideas, and innovation.”
Gratton believes that you must create the right conditions with a vision that
excites, which could be a perfect recipe for a circular hotspot. This requires our
government to be visionary and inspiring as well as merely facilitating bottom-up
developments. These endeavours must fit real needs, rather than perceived ones,
and the conditions must be created in collaboration with hotspot stakeholders.
One of the many important lessons we have learned from working with the
members of our non-profit cooperative Circle Economy fits perfectly with these
ideas. Each of our members committed themselves to starting up a circular
project by creating inspiring examples and paving the way for others. We soon
discovered that it’s not just about doing lots of projects, but more about effective
projects. Helping a dairy factory to make better use of manure is a good idea,
but it might have more impact to discuss whether intensive livestock is the best
way to use scarce land. We therefore developed ‘Circle Scan’, as a method for
locating the real leverage points in a system. This allows us to identify projects
that are genuine system changers, for instance the circular investment strategy
we are currently developing with the largest of the Dutch pension funds.
We are taking much the same approach to turning the whole of the Netherlands
into a circular hotspot; we’re collaborating with the most visionary leaders we
can find in science, business, and government to build a shared vision of what
the Netherlands as a circular hotspot would look like, and what’s needed to get
33
34
Friends of Europe | Europe's World
there. To support this, we are developing a ‘Circularity Framework’, intended to
guide decision-making on a national and organisational level. At the same time,
we are mapping and then reaching out to bottom-up initiatives that are already
operational in the Netherlands, so that the government can support them by
creating the right conditions.
What we are now doing in the Netherlands can be translated to Europe as
a whole. Many people still see Europe as an abstract and somewhat distant
concept, but an inspiring man-on-the-moon vision backed up by a solid circular
economy framework can help create cohesion and synergy on a Europe-wide
level. Europe, too, could boast the close contact of policymaking and day-to-day
circular practice that we are striving for in the Netherlands, and could advocate
this vision by facilitating a multi- stakeholder approach at a European level. But it
will, of course, take some getting used to.
In an economy, as in nature, we can only create growth by providing the right
conditions. We therefore need to carefully select the right incentives for boosting
circular bottom-up initiatives, and this may mean replacing our policy instruments
with new unfamiliar ones that have been co-designed with those intended for the
initiatives. That will take some getting used to, but if we believe in the circular
economy, now is the time to be brave.
Special section: Towards a circular economy | Summer 2014
“The basic principle of the circular city is that all
product and material streams can be brought back
into the cycle after use, and become resource for
new products and services.”
By Jacqueline Cramer, Director of the Utrecht Sustainability Institute and
former Dutch Minister of Housing, Spatial Planning and the Environment
Scaling up the circular economy to a size where it can have a real impact is
crucial and setting the right price is the easiest way to trigger that. When external
costs like pollution of producing and then discarding goods are internalised, the
need to close the resource loop becomes all too evident. It’s a claim that’s been
made for decades, yet still hasn’t materialised. There are unfortunately too many
obstacles and vested interests that continue to hamper a fundamental greening
of the pricing system. Breaking this deadlock so as to move forward on the
circular economy means that alternative policy strategies have to be developed.
A particularly promising approach would be to close the resource loops at city
level. Cities are an attractive starting point for making the transition to a circular
economy. They are where products are produced, consumed and discarded in
large quantities and their high population density and industrial productivity mean
that waste streams can be cost-effectively collected, transported and recycled.
Systems for sharing services and setting up repair, thrift and re-manufacturing
facilities have large potential markets, so cities are increasingly being seen as key
players against global warming and resource depletion.
The basic principle of the circular city is that all product and material streams
can be brought back into the cycle after use, and become resource for new
products and services. This means that waste as such no longer exists. This isn’t
yet the case, but a growing number of municipalities have gained experience on
the road towards being a circular city. Waste streams like glass and paper are
sustainably recycled and the re-use of products is encouraged via repair and
thrift shops or charity organisations.
35
36
Friends of Europe | Europe's World
The primary focus, though, is still on managing waste streams rather than
optimising and renewing product and material chains. It is when cities eventually
move into this that benefits will be great. On top of environmental gains, there
can be cost reductions through resource efficiency, along with major indirect
benefits like more jobs, new businesses and innovation.
There are a number of roads cities can follow towards a circular economy, but
it is important to start with the most promising resource streams. Selection
criteria can include high volumes and significant reductions of environmental
impacts combined with profitable economics and societal advantages. For each
resource stream tackled, the options for closing the loop should be assessed
in consultation with the stakeholders, who are the producers of the product or
material chain, innovators in the market, knowledge partners and end-users.
After selecting the most promising options, strategies should be developed to
put those in place.
Closing the product loops and materials chains implies a shift to new economic
models. Instead of selling a product, its producers may instead lease or rent
their product and take after-use responsibility for it. Circular chains can only be
created, though, through cooperation between companies working in consortia
and involvement of end-users and local governments. Such consortia usually set
up new financial and legal arrangements needed for a positive business case.
It’s a strategy that has been followed, for example, by the ‘Circle city Rotterdam’
initiative, which has created a consortium consisting of a social housing
organisation, a demolition firm, a recycler and a municipal cleansing company.
It closed the loop of construction and demolition waste and is rebuilding the
neighbourhood with recycled materials. All this was made possible by sharing
costs and benefits via integral cost accounting.
The primary responsibility for creating a circular economy has to be in the hands
of industry, but local governments can play the role of facilitator and orchestrator.
When traditional regulation hampers innovation, the municipality can help change
the rules of the game, and it can enhance investment opportunities for circular
economy businesses via spatial planning and economic policies. The most
important mechanism municipalities can use to promote the circular city is to
Special section: Towards a circular economy | Summer 2014
include circular thinking in its public procurement. In the Netherlands, pro-active
municipalities and provinces like Amsterdam and Utrecht have been making a
start with this approach.
Circular city strategies need to go hand in hand with bottom-up initiatives by
citizens and private companies. Empowering people to bring their own ideas
into practice generates enthusiasm for the circular economy and mobilises the
people’s creativity. It’s a change in culture that may eventually lead to political
support for more fundamental changes in our pricing system.
37
Policy Insight | Circular economy: Scaling-up best practices worldwide | Summer 2014
Policy Insight
As the world’s population continues to grow, the demand for prosperity from an
expanding middle class in emerging economies has laid bare the deficiencies
in the global economic model of linear production and consumption, noted the
panellists at Friends of Europe’s Policy Insight debate, held in the context of the
European Commission’s Green Week 2014.
“We need to change the model of the way in which we live and in which
goods are produced and consumed,” underlined moderator Monica Frassoni,
Friends of Europe Trustee and Co-Chair of the European Green Party. The
reigning linear model is fraught with waste and resource inefficiency and, while
there exists a discussion on how to adapt the global economy to increasingly
scarce resources, the results of this debate remain marginalised.
“We need to change our lifestyles and
reconsider the way goods are produced and
consumed.”
Monica Frassoni, Friends of Europe Trustee and Co-Chair of
the European Green Party
Though the world survived resource scarcity throughout the 20th century,
the systemic nature of global resource use has reached unprecedented and
unsustainable levels, indicated speaker Jane Feehan, Natural Resources
Specialist at the European Investment Bank (EIB).
“There is a fundamental mismatch between supply and demand worldwide,” she
added. “This, combined with climate change and ecosystem mismanagement,
has left us outside of the safe operating space for humanity.1 We have gone
too far and cannot continue as we are without further eroding the functional
capacity of global ecosystems.”
1
As outlined by the Planetary Boundaries Framework developed by an international group of scientists and
presented by the Stockholm Resilience Centre.
For more information: http://www.stockholmresilience.org/21/research/research-programmes/planetaryboundaries/planetary-boundaries/about-the-research/the-nine-planetary-boundaries.html.
39
40
Friends of Europe | Europe's World
In relation to the pre-crisis economic model, the notion of circular economy
is beginning to take hold, Frassoni noted, adding that “we need to take best
practices in circular economy, bring them into the mainstream, and actually
change the world. Old narratives are still strong and the old guard is not yet
ready for a change.”
The concept underlying the circular economy goes beyond addressing
resource scarcity through reducing, reusing, and recycling, indicated Michael
Kuhndt, Director of the Collaborating Centre on Sustainable Consumption
and Production (CSCP), Germany. New global perspectives are needed on
resource management systems throughout value chains, from production
to consumption and back again. This is a difficult undertaking, however,
considering the variety of different actors and their needs throughout these
chains.
“We have to find new business models that resonate with
consumers and convince the business sector to accept that
circular economic principles can have a real effect.”
Valdemar de Oliveira, Impact Business Director for the Latin American foundation
‘Fundación Avina’
Policy Insight | Circular economy: Scaling-up best practices worldwide | Summer 2014
Rethinking consumption and
production
“The greatest challenge we face in scaling up the circular economy is ourselves
as consumers,” Kuhndt underlined. “We are hard-pressed to see the value
of being circular.” Current figures in the EU show that average consumption
levels are between 40 and 80 tonnes per annum, with the German average, for
example, being 70 tonnes a year.
In order to remain within the capacity of the earth’s natural resources, these
figures should be brought down to 7-10 tonnes a year per capita, taking into
account the emerging global consumer class, he added.
Furthermore, of the products owned in the richer parts of the world, up to 50%
of them are seldom used, while 60% are not only unsustainable but non-durable
as well, needing to be replaced or thrown away after being used for a year or
only several months.
As it stands, consumers are unwilling to change their lifestyles without clear
understanding of the value of shifting from unsustainable consumption
patterns. Large-scale solutions are needed to convince consumers to shift their
consumption patterns to more sustainable paradigms.
As consumers are not so keen to change, so too are producers and businesses
reluctant to risk shedding growth in order to adopt a new and largely untested
circular growth model. Business leaders and policymakers should be enabled to
consider solutions in waste management, recycling, re-purposing, and so on,
from a consumer perspective.
“Changing consumer perspectives is essential to scaling up the circular
economy,” noted Valdemar de Oliveira, Impact Business Director for the Latin
American foundation ‘Fundación Avina’. “Another key component is the market.
We have to find new business models that resonate with consumers and
convince the business sector to accept that circular economic principles can
have a real effect.”
41
42
Friends of Europe | Europe's World
“We must examine the interdependency between production and consumption,”
Kuhndt concluded. “If producers and consumers alike can gauge consumption
levels and needs and link them to viable practices, we can shift away from
unsustainable business models and enable sustainable infrastructures, lifestyles,
and societies.”
Opportunities in the circular economy
Over the last four years, Renault-Nissan Alliance has been implementing
circular economic principles, with environmental considerations at the core of
decision-making, noted Jean Philippe Hermine, Vice President for Strategic
Environmental Planning at Renault-Nissan Alliance. 70% of the company’s R&D
budget is dedicated to circular economy practices.
Policy Insight | Circular economy: Scaling-up best practices worldwide | Summer 2014
43
The most important principle underlying the circular economy is inclusiveness,
agreed the panellists. “Changing consumption patterns has to involve personal
decisions by consumers,” Frassoni said, “but companies, investors, researchers,
and policymakers must also be convinced. The issue of scaling up the circular
economy implies believing that it can be a good bet for consumers, businesses,
citizens, and for society as a whole.”
"We invest in end-of-life development to capture value and
materials in order to rethink productivity and competitiveness.
And it works.”
“For years, car manufacturers have taken a beating from environmental
challenges,” he said. “We are committed to addressing these concerns, going
beyond corporate social responsibility and putting environmental awareness
forward as a key element of our competitiveness.”
In considering this new growth model, Renault-Nissan, which already included
up to 30% recycled material in its new cars, moved one step further to find
solutions for cheap and reliable materials salvaged from vehicles at the end of
their lifecycle.
As founding partners of the Ellen MacArthur Foundation,2 Renault-Nissan
supports the principles underlying the circular economy across its value chain
and various activities, he underlined, adding that “we invest in end-of-life
development to capture value and materials in order to rethink productivity and
competitiveness. And it works.”
As an example of how circular economic principles can be applied to largescale industrial production, he noted that, following his company’s decision
to invest in over 300 independent recycling businesses in France, repair and
remanufacturing services offered with second hand parts and material are less
expensive and more interesting for customers. Currently, 60% of engines and
gear boxes used in repairing Renault vehicles are remanufactured.
2
The Ellen MacArthur Foundation works with its global partners to conduct research and provide a platform for
ideas and innovation on the circular economy. For more information, visit www.ellenmacarthurfoundation.org
Jean Philippe Hermine, Vice President for Strategic Environmental Planning at
Renault-Nissan Alliance
“Our work in the circular economy is as important for the small local companies
that we have involved as it is for us,” concluded Hermine. “Waste is a local
business and so is innovation and, without our local partners and customers
supporting us throughout our value chain, we would not have the opportunity to
create new products and engage with a new business model.”
44
Friends of Europe | Europe's World
Policy Insight | Circular economy: Scaling-up best practices worldwide | Summer 2014
Combining efforts to scale up the
circular economy
“In China,” Zhou underlined, “we define circular economy as reusing, reducing,
and recycling in the whole production process. Moreover, we have extended this
definition to all of our social and economic activities.”
Over the past decade, Chinese policymakers have been at work developing
elements of a circular economy, indicated speaker Zhou Hongchun, Director of
the Department of Social Development Research at the Development Research
Centre of the State Council of China. These developments have been aided by a
strong cultural tradition of reusing and saving.
To aid in this development, China’s decision makers have created the Circular
Economy Promotion Law, working through policies and regulations that aim to
facilitate the collection and reuse of raw materials and electronic devices, as well
as create a framework for systems-based approaches to agriculture, industry,
and other areas.
Sustainable consumption is one of the most pressing issues for China, noted
Kuhndt. With average consumption levels set to rise to 40 tonnes of raw material
per year by 2030, the Chinese are aiming to build sustainable communities and
policies for a circular economy.
“Public policy is one of the main pathways towards scaling up the circular
economy,” underlined de Oliveira, “though we must seek solutions in other areas
and from all actors in society. We will not succeed by simply imposing regulation
and legislation.”
For example, social networks and person-to-person interaction is important for
changing individual behaviour and promoting circular principles, while research
and development into innovative technologies is absolutely essential. In the
circular economy, technological innovation is married to new business models,
each being unable to function without the other, he said.
Circular business models must include equality and ease of access for the world’s
poor. “New technology only reaches populations that can afford them,” he added.
“The objective is to retool business models to take advantage of the coming
tidal wave of sustainable innovation in order to deliver social and environmental
impact. Business as usual means that new technology only reaches the poor
after it has become obsolete.”
The circular economy must by its nature be a collaborative effort, Feehan
underlined. It requires policymakers to legislate, business leaders to be willing to
adopt new growth models, consumers to support its principles, and researchers
to innovate. Furthermore, it requires investors willing to take financial responsibility
for its implementation.
Speakers at the Policy Insight debate entitled "Circular economy: Scaling-up best practices
worldwide", co-organised by Friends of Europe and the European Commission
45
46
Friends of Europe | Europe's World
Financing circular economy
“Investors have an important role to play in providing the resources to make the
circular economy a reality,” Feehan said. “Investing in a new model is as much
about what we do as about what we do not. We stand ready to invest in the
circular economy.” To this end, the EIB has a set of social and environmental
safeguards to support projects in climate action, resource efficiency, and the
protection of biodiversity, as in the exclusion of projects that promote logging in
tropical forests.
“Investors have an important role to play in providing the
resources to make the circular economy a reality.”
Policy Insight | Circular economy: Scaling-up best practices worldwide | Summer 2014
It was suggested in an audience intervention that, in order to jumpstart the circular
economy, investment banks need to move away from large-scale investments
and focus more on local efforts in, for example, recycling schemes, as previously
mentioned in the case of Renault France.
“Though the EIB tends to invest mainly in large-scale projects,” Feehan noted,
“there is an increasing range of tools tailored towards smaller projects.” One
such example is the Corporate Innovation Platform (CorIP),3 which is part of the
European Investment Fund, a branch of the EIB Group.
The CorIP is a public-private partnership investment program which will
make available 600mn euro for SMEs. One of the key areas of this platform is
sustainability and the circular economy, meaning that SMEs involved in areas
such as recycling could be eligible.
Another hotly debated area for financing is the issue of tax reductions and green
taxes. “Though many people are talking about green taxes as a way to fund
circular projects, our experience has shown us that VAT reductions on recycled
or second-hand products is of more value to industry,” Hermine underlined.
Jane Feehan, Natural Resources Specialist at the European Investment Bank (EIB)
Moreover, she added, the EIB prioritises resource efficiency and climate action
throughout its portfolio, maintaining a target of 25% of its overall investment
budget dedicated to climate action and developing resource efficiency as a new
focal area in its growth and employment facility. This facility, which will be investing
between five and seven billion euros per year over the 2013-2015 period, is at
the core of EIB projects.
3
For more information, visit http://www.eif.org/news_centre/publications/eif_flyer_corip_en.pdf
47
48
Friends of Europe | Europe's World
As full VAT is paid on a product the first time it is put on the market, one could
imagine a reduced VAT if it is reused. This is a measure that could boost the
circular economy and is already under consideration in some countries, he
added. While reducing VAT could be considered a strong signal by policymakers,
it is not sufficient without an accompanying cultural shift towards acceptance of
the circular economy by industry and consumers alike.
“In terms of taxation, China is doing a lot to promote the
development of the circular economy and sustainable resource
management.”
Policy Insight | Circular economy: Scaling-up best practices worldwide | Summer 2014
Examples of best practices worldwide
Though still in early development, there exist several small-scale projects that
demonstrate the viability of circular principles for producers, consumers, and
society in general. Concerted efforts are needed to scale up the best of these
initiatives and make the global circular economy a reality.
In China, noted Zhou, economic and political actors have conceived of three
categories of circular economic activities: demand-driven, problem-driven, and
target-driven. He indicated the following examples of activities in each category:
1.China’s electronics industry, driven by demand for spare parts is the final
destination of 80% of the electronic waste from the West, which is recycled
into new products.
2.When faced with a problem in industrial production, circular principles are
applied to develop new products and better utilise scarce resources as in
the gold mining industry in the eastern provinces of Shandong and Henan,
where new technology is being applied to extract gold from a mineral base
containing less than 10 parts per million.
Zhou Hongchun, Director of the Department of Social Development Research at
the Development Research Centre of the State Council of China
In recent years, China has developed a special tax policy to promote the circular
economy, Zhou said. This policy has three important elements, the first of
which offers tax incentives to companies to encourage the comprehensive use
of resources and to reduce waste. Secondly, he noted, are VAT incentives as
described above and, thirdly, there is a shift in the tax regime for businesses
dealing with recycling and waste management that allows deductions for the
use and reuse of raw materials. “In terms of taxation,” he concluded, “China is
doing a lot to promote the development of the circular economy and sustainable
resource management.”
3.Having set targets for the application of circular principles, Chinese
economic actors are applying innovative approaches to extract resources
in a comprehensive way. The process of coal extraction, for example,
has been supplemented with energy generated by first extracting coal
bed methane, thus creating added value and a diminished threat of lifethreatening accidents.
In addition to these examples, China is also investing heavily in reusing products
in schools, government offices, businesses, and so on, having launched several
circular economy demonstration programmes focussed on recycling and the
comprehensive reuse of waste.
De Oliveira, working through ‘Fundación Avina’ in Latin America, indicated
several initiatives that strive to introduce the principles of a circular economy in
impoverished regions. “We are making efforts to create a space for different actors
in society to collaborate and advance the agenda of sustainable development,”
he said.
49
50
Friends of Europe | Europe's World
Working with rural communities in the Amazonian basin, Fundación Avina is
implementing a collaborative business model to create co-owned processing
plants that aim to reduce the environmental harm caused by deforestation while
ensuring financial rewards. “Working with our global and local partners, we are
developing applied technology to fit the parameters of the poor from the outset,”
he concluded.
Finally, Hermine underlined the success of Renault-Nissan’s latest manufacturing
plant, inaugurated in February 2012 in Tangiers, Morocco. Working with Veolia
Environnement and the Kingdom of Morocco, Renault-Nissan has taken
advantage of the most up-to-date green technology to build a plant with zero
carbon emissions and industrial liquid discharge.4 The Tangiers plant runs on
renewable energy and uses technology to recycle energy from one process to
another, as well as recycling 100% of its water.
Policy Insight | Circular economy: Scaling-up best practices worldwide | Summer 2014
Conclusions
Though the circular economy has yet to reach its tipping point, its pioneers
are working to overcome the challenges facing it, as increasing numbers of
producers, policymakers, researchers, and consumers are becoming aware of
the possibilities it offers. The long-term shortcomings of current linear models
of economic growth in a world that does not have the necessary resources to
support an affluent lifestyle for an ever-growing global middle class means that
the time to act is now.
“Our imaginations should not rest on linear
production models. We need to find a new
system to generate value that respects
our planetary boundaries. Consumers and
producers alike must invest in new lifecycles
and new lifestyles.”
Michael Kuhndt, Director of the Collaborating Centre on
Sustainable Consumption and Production (CSCP), Germany
“Our imaginations should not rest on linear production models,” concluded
Kuhndt. “We need to work globally to build a strong vision on how to scale up
the circular economy to meet our needs now and for the future. We need to
find a new system to generate value that respects our planetary boundaries.
Consumers and producers alike must invest in new lifecycles and new lifestyles.”
“We need efforts from all directions,” Frassoni concluded. “However, these efforts
will not come without real will to change and perhaps a real battle. Policymakers
need to wake up and understand that what citizens want are healthy and
sustainable lives. Consumer needs, business growth, collaboration, and equality
are the elements that need to be combined to make this revolution a reality.”
4
For more information, visit http://www.renault.com/en/capeco2/laisser-moins-de-traces/pages/usine-tangersite-industriel-pilote.aspx
51
Policy Insight | Circular economy: Scaling-up best practices worldwide | Summer 2014
Annex I – Programme
POLICY INSIGHT DEBATE
Circular economy: Scaling-up best practices worldwide
The global economic model needs an overhaul. Current linear production and
consumption patterns, in which products are used for a short time and then
discarded, result in massive waste. At the same time, a rising world population,
the emergence of a global middle-class (set to reach 5 billion by 2020 according
to some estimates) and emerging economies’ quest for prosperity are increasing
pressure on the environment and on natural resources. Breaking the vicious circle
requires the adoption of a “closed-loop” thinking, which decouples economic
growth from resource consumption by encouraging reusing, remanufacturing
and recycling. Such an approach could bring important benefits as regards
cost-saving, job creation, innovation, productivity and resource efficiency in
both developed and developing countries. Translating the circular economy
concept into practice requires however business leadership, smart regulation,
international cooperation and spreading best practices.
How should the private and public sectors be working together to move to
the circular model of economic growth? What measures and incentives at
international, national, local levels have proven most successful in encouraging
the transition and in unlocking investment and innovation? What are the best
examples of product redesign, transformation of waste into resource and
company-to-company cooperation? Which barriers are blocking the scaling
up of circular economy practices worldwide and what support do developing
countries need to adopt a less resource-intensive model of development?
Can the new model be a win-win solution to stimulate economic growth and
competitiveness while protecting the environment?
Jane Feehan
Natural Resources Specialist at the European Investment Bank (EIB)
Michael Kuhndt Director of Collaborating Centre on Sustainable Consumption and Production (CSCP), Germany
Jean-Philippe Hermine
Vice President for Strategic Environmental Planning at
Renault-Nissan Alliance
Zhou Hongchun Director of the Department of Social Development
Research at the Development Research Centre of the
State Council of China
Valdemar De Oliveira
Impact Business Director for the Latin American
foundation ‘Fundación Avina', Brazil
Co-moderated by Monica Frassoni, Trustee of Friends of Europe and Hugh Schofield,
BBC Journalist
53
Europe’sWorld
The only eUrope-wide policy joUrnal
Great minds
don’t think alike
Check them out on
www.europesworld.org
Facebook.com/EuropesWorld - Twitter.com/EuropesWorld
Friends of Europe – Les Amis de l’Europe
4, Rue de la Science, B-1000 Brussels, Belgium
Tel.: +32 (0) 2 893 98 17 – Fax: +32 2 893 98 29
Email: info@friendsofeurope.org
Website: www.friendsofeurope.org