By Peter Desmond MA (Oxon) MA MBA FCA FRSA
Since the industrial revolution the world’s economy has been based upon a model of “Take, Make and Dispose” i.e. we extract resources from the ground, create products to use, and then dispose of them. This system is known as the Linear Economy (LE). It has served us well for over two hundred years but we are now running out of resources and creating too much waste.
There are limited amounts of non-renewable resources on our planet: they comprise metals, minerals and other natural substances which are mined and made into products used in our everyday lives. These resources are subject to volatility in price and reduced availability as virgin materials are depleted. Furthermore LE is powered by increasingly expensive fossil fuels, relies on continual economic growth and generates significant amounts of waste, the majority of which currently ends up in landfill.
An example of this problem is the proliferation of mobile phones in both the developed world and emerging economies. Developments in technology and personal computing have resulted in an increasing amount of electronic waste which is not always disposed of in a safe or responsible manner. The UN’s StEP initiative estimates that in 2014 the total amount of electronic waste generated globally was 41.8m metric tonnes (Mt) which included of 3m Mt of small IT equipment such as mobile phones (UN StEP, 2015). Furthermore the methods for disposing of electronic equipment are very complex because of the greater amounts of hazardous, scarce and valuable materials.
An alternative approach to LE is a Circular Economy (CE). This is an industrial system which benefits both society and nature; it aims to reuse products and the materials they are made of to realise their maximum value, as in a natural ecosystem. It is an industrial system that is intentionally regenerative in its design. It replaces the ‘end-of-life’ concept with restoration and moves towards the use of renewable energy. It reduces the quantity of toxic chemicals, which impair reuse, and aims to eliminate waste through the considered design of products and systems.
The idea of CE has not come from a single school of thinking but has originated over numerous decades from a number of different frameworks, including biomimicry, industrial ecology, performance economy and cradle-to-cradle principles. The CE concept has gained popularity since the 1970’s by thought leaders, businesses and academics that developed and sophisticated the concept of CE into today’s modern term.
CE thinking and methodology has been used in different business applications for some time. For example, recycling toner cartridges (HP), selling of light rather than light fittings (Philips) and motor vehicle take-back schemes (Renault). The lessons learnt in these environments are now being considered for other applications including the design and disposal of mobile phones.
CE involves the redesign of products so they are repairable and longer-lasting, devices are re-used, failed components are replaced, core elements refurbished, precious metals extracted and remanufactured into new products. This approach would keep mobile phones away from landfill while recovering high value precious metals and rare earths.
The Benefits of a Circular Economy
A recent report from the Ellen MacArthur Foundation, McKinsey and SUN estimates that a CE could allow Europe to grow resource productivity by up to 3% annually, creating a net benefit of £1.27tn by 2030 (Ellen MacArthur Foundation, 2013a). The report also suggests that CE would increase the average annual disposable income for EU households by £2,110.
The Ellen McArthur Foundation (2013b) has also built on this earlier thinking with McKinsey & Co and explains CE diagrammatically in Figure 1. They propose that CE has the potential of producing cost savings as it reduces exposure to market price fluctuations, reduces energy needs from non-renewable sources and, through recycling, releases valuable materials and energy which is being retained in existing products. The tighter the circular loops, the less needs to be done to components before they are reused, and as a result the less embedded value of labour, materials and energy is lost.
Figure 1 – CE (Ellen MacArthur Foundation 2013a)
Lessons learnt from successful CE applications in different sectors can be applied, for example, to the mobile phone industry. Philips Lighting, instead of selling light fittings, sells light for a fixed monthly sum, which includes repair and replacement. Applying this to the mobile phone industry, a consumer could pay for the use of the phone and, at the end of the contract, the old handset would be taken back by the seller in return for a new phone and a new contract. This would replace the popular current system of free upgrades which creates stocks of useable but unused handsets.
Figure 2 suggests a flow of resources and activities that a CE could be created for a mobile phone.
 Since 2000 increases in commodity prices have balanced out all the price declines of the 20th century (Ellen MacArthur Foundation, 2013a).
 Since 1980, the yield in concentration from copper mining has reduced from 0.7% to 0.55% (Ellen MacArthur Foundation, 2013a)
 John T. Lyle started looking at how biomimicry could be applied beyond the agricultural sector using a concept called ‘regenerative design’ in the 1970s where dead organisms provide nutrients for the next generation (Lyle, 1996).
 Industrial Ecology was the name given to the study of introducing circular processes into industrial systems by Walter R. Stahel in the mid-1970s
 Stahel and Reday-Mulvey (1976) further suggested that a performance economy could encourage repair, reuse and recycling of consumer goods by moving away from ownership to renting products from washing machines to clothes.
 Bill McDonough and Michael Braungart (2002) proposed an alternative to ‘cradle-to-grave’ thinking through ‘technical’ materials being reused in new technologies and ‘biological’ waste becoming nutrients at the end of their useful lives.