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The challenge of circularity in a growth-based economy

What will it take for more companies to be circular?

Craftsman repairing computer keyboard in workshop.

Keeping products and materials in use is a key principle of the circular economy, according to the Ellen MacArthur Foundation.

This is an excerpt from "Rethinking Corporate Sustainability in the Era of Climate Crisis — A Strategic Design Approach." It is reproduced here with permission. [Editor's note: The text has been lightly edited to meet GreenBiz style standards.]

Interest in the circular economy has been growing over the last three decades. The introduction of the circular economy as a concept is attributed to David W. Pearce and R. Kerry Turner, and its roots are connected to earlier work by Kenneth Boulding, Walter R. Stahel and others. The concept of the circular economy is also drawing on different schools of thought, including industrial ecology, regenerative design, biomimicry and cradle to cradle. While frequently associated with improving waste management, at its core the circular economy offers an alternative approach to value creation that aims to replace the current "take–make–waste" linear economic system.

According to the Ellen MacArthur Foundation (EMF), the circular economy is built on three principles: designing out waste and pollution; keeping products and materials in use; and regenerating natural systems. (There are over 100 definitions of the circular economy.) Furthermore, EMF, currently the most prominent promoter of the circular economy, sees it as a way to decouple economic activity (or growth) from the consumption of finite resources. This is also how the EU and China view the circular economy, according to Patrizia Ghisellini of the University of Naples Parthenope and her colleagues.

On a product-based level, the circular economy approach aims to significantly reduce products’ environmental impact while enhancing their durability. According to Ruud Balkenende, a professor of circular product design, and his colleagues,"This is achieved by designing for long product life and by enabling effective repair, refurbishment, remanufacture, parts harvesting and recycling in order to loop back used products, components and materials into the economic system." These strategies can also be described in terms of closing, slowing and narrowing resource loops. They have also been integrated into circular business models, defined as "business models that are cycling, extending, intensifying, and/or dematerializing material and energy loops to reduce the resource inputs into and the waste and emission leakage out of an organizational system."

At its core the circular economy offers an alternative approach to value creation that aims to replace the current 'take–make–waste' linear economic system.

While a growing number of companies have been exploring how to redesign everything from raw materials to production processes to business models in a more circular manner, the effectiveness of the circular economy as an approach to significantly improving companies’ sustainability remains unclear. On a product or business model level, it seems plausible that circular design strategies, such as designing for material efficiency, material substitution or design for durability, may result in reduced environmental impacts. For example, in "Longer Lasting Products: Alternatives To The Throwaway Society," Tim Cooper notes that "broadly speaking, doubling the life span of most consumer durables will halve their environmental impact." At the same time, there are more skeptical views, such as that put forward by Jason Hickel, an anthropologist at Goldsmiths, University of London, who notes that "in the end, only a small fraction of our total material use has circular potential."

Even if we assume that circular strategies can generate meaningful reductions in environmental impacts on a microlevel (at the level of the product or business model), a key challenge is whether this can be done on a macro level, be that a company, an industry or an economy as a whole. The main debatable variable is growth in economic activity. For example, if a company reduces the carbon footprint of a product by 50 percent using circular design strategies, but doubles the sales of this product, then the total carbon footprint will not change at all. There seems to be an inevitable tension between the sustainability ambitions of the circular economy and the growth-based economy it is situated in.

As Kris De Decker, creator and author of Low-tech Magazine, explains, "Growth makes a circular economy impossible, even if all raw materials were recycled and all recycling was 100 percent efficient. The amount of used material that can be recycled will always be smaller than the material needed for growth. To compensate for that, we have to continuously extract more resources." Beyond the potential difficulties of significantly reducing the use of new raw materials in a system optimized for growth, there is also the issue of energy use. While the goal would be to use 100 percent renewable energy, the processes involved in slowing, narrowing and closing the material loops also require energy. Thus, in a growth-based economy, as Hickel notes, it will be very difficult to provide the necessary energy supply for the economy using only renewables.

These concerns echo earlier questions about the potential of ecoefficiency and decoupling strategies to advance sustainability at scale. So far, empirical evidence appears to support those who have doubts about decoupling; however, proponents of decoupling have put their faith in technological innovation and supporting policies that will make decoupling work. Thus far both of these potential drivers seem to be lagging, leading to disappointing results, especially when it comes to technological innovation, which is still more of a promise than a reality.

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