Circular Economy

3 shifts can scale the circular economy – triggering a more resilient, prosperous system

Old discarded cellular phone components.

Old discarded cellular phone components. Image: REUTERS/Tyrone Siu

Ellen MacArthur
Founder, Ellen MacArthur Foundation
Frans van Houten
Chief Executive Officer, Co-Chair PACE, Royal Philips
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Circular Economy

  • It’s time to leave behind current wasteful and polluting models to usher in growth-based business models and innovative regenerative strategies.
  • Scaling circular economy efforts globally will mean triggering strategic shifts across sectors.

Approximately $57 billion of global electronic waste is generated every year. Additionally, food loss and waste accounts for $950 billion in lost value – a number equivalent to the Netherlands' annual GDP.

Given the twin crises of the pandemic and the global economic downturn, system reset is more relevant than ever. It’s time to leave behind current wasteful and polluting models to usher in better growth-based business models and innovative regenerative strategies. Such a transformation is possible – but requires scaling circular economy solutions and forging new collaborations, across businesses, governments, researchers, financial institutions, and civil society organizations.


What is the World Economic Forum doing about the circular economy?

Stepping up circular economy efforts globally will also mean triggering strategic shifts across sectors. To that end, these 3 shifts are key:

Shift #1: Design for circularity

In the circular economy, waste is eliminated, products and materials are kept in use throughout their product lifecycle and natural systems are regenerated. Such an approach is dependent on systems designed with a focus on reuse, repair, refurbishment and (when a product can no longer be of use) recycling. That means changing what we produce and how we produce it – both in terms of inputs and when it comes to the end of its first useful life. It can mean adopting modular design, designing for renewable materials, designing for easy repair and disassembly, and designing new products with backwards compatibility in mind, so that parts can have multiple applications and be used longer.

Making sectors circular: What change could look like

  • For consumer products (such as clothing): Shifting from textile blends that can’t be separated and towards natural fibres or blends that lend themselves to be cycled.
  • For consumer electronics: designing products with less raw materials and using more recycled plastics or parts, and designing for disassembly.
  • For capital equipment producers: Designing for serviceability, upgradability, modularity, and refurbishment.

Who’s already benefiting: Many success stories already exist, such as the Ellen MacArthur Foundation’s Jeans Redesign, which brings together key brands working towards a world where clothes never become waste. To date, over 65 organisations have committed to produce nearly 2.5 million pairs of jeans in line with the Jeans Redesign Guidelines by May 2021. Such projects reflect the growing recognition that circular design is a significant business innovation opportunity, one that allows us to create value without relying on the consumption of finite resources.

What’s needed next: Favoring circular design requires a host of measures that encourage and enable this shift. That could include increasing the supply of competitively-priced recycled materials in order to meet demand. It could also require investing in new technology and significantly scaling up facilities.

Image: PACE

Policy makers also play a key role. Regulators could consider legislative incentives that include circularity in public procurement guidelines or tax incentives that encourage the use of reused, refurbished or recycled products and materials.

Governments, businesses, and researchers can also collaborate to develop and harmonize the way we measure circular design, and to create and implement product design standards or repairability requirements.

Have you read?

Shift #2: Shift to new business models

There is huge growth potential for new business models that move away from short-lived products that quickly end up as waste. Where a business shifts to a ‘product as a service’ model, customers pay for any resulting value, outcome or service, but any physical products are owned by a business. Models such as subscription, rental, and re-commerce keep products and their components in use for longer periods of time while preserving and maximising value. This offers a clear incentive for companies to keep products and materials in use for longer. Meanwhile, customers benefit from being able to access products without the full cost of buying it upfront.

Who’s already benefiting: New circular models already work well for capital equipment. Large machines such as MRI scanners or agricultural equipment are inherently of high value and it’s easy to make the business case for repair and refurbishment. Philips, for example, is working with many others in this field as part of PACE’s Capital Equipment Coalition.

Following the World Economic Forum pledge in 2018, they are now repurposing all large medical equipment that becomes available to them in a responsible way. Healthcare customers have the opportunity to buy a refurbished MRI scanner, a pre-owned system that has been thoroughly upgraded and quality tested. Through these kind of practices, Philips no longer relies on the use of natural resources.

Image: PACE

What’s needed next: There is an important role for research organisations to develop new science-based methodologies and tools to guide new business model design and measure impact, and we also need to see governments and financial organizations provide an enabling environment to support companies implementing these kinds of circular business models.

The incentives must be put in place for both consumers and business-to-business customers to return products through deposit and buy-back schemes, and refurbishment. At a consumer level, there is an important role for information campaigns, as well as initiatives such as pricing schemes that make circular solutions attractive. It will also be crucial for businesses to share their success stories and learnings to show the way.

Image: PACE

Shift #3: Resource management systems that preserve value

The fundamental shifts already described eliminate waste from the system through deliberate upstream strategies. This focus must be complemented by resource management systems that enable value to be preserved. Such an approach includes reverse logistics, the separation of technical and organic by-products to avoid contamination (and generate “clean” flows), and refurbishment and remanufacturing. It also means leveraging high-quality recycling facilities as a last resort.

Who’s already benefiting: Investment in innovative recycling technology ensures that the maximum value of products and systems can be maintained for as long as possible. For instance, Apple’s disassembly robot Daisy can disassemble 200 iPhones an hour. This makes it possible to recover key materials (such as tungsten and rare earth magnets) in higher quantities and at higher qualities than most conventional recycling processes.

Additionally, the Producer Responsibility Organization established in Nigeria, with the help of PACE and UNEP, has created one model for a circular electronics system to be applied in Nigeria and replicated across other countries in Africa. By convening public and private partners it supports the recovery of valuable materials at the end of their use for their reuse in local production processes and the safe handling of hazardous components. It also strengthens the enabling conditions for a self-sustaining system of extended producers’ responsibility legislation for the electronics sector in Nigeria.

"Only with collaborative action can we realize systemic change needed to scale circular innovation."

What’s needed next: For the circular economy to reach scale, governments and businesses need to invest in collection and sorting facilities – and plan them strategically so they’re in the right place and work efficiently. It is also important to enable efficient transboundary reverse supply chains, in compliance with the Basel Convention, so that products can be shipped to the places where they can be reused or processed.

Looking Ahead:

Only with collaborative action can we realize systemic change needed to scale circular innovation. That’s why PACE (Platform for Accelerating the Circular Economy) recently created the Circular Economy Action Agenda, which aims to help this co-creation process and stimulate actions we should all take. Everyone has a role: governments, by taking away roadblocks and stimulating green regulation and sustainable production; businesses, through execution and leading by example; NGOs through promoting, and critically, monitoring efforts and progress.

The Agenda draws from the collective knowledge, experience and expertise of more than 200 experts from 100 organizations and provides guidance on how to drive and adopt circular practices and ways of working in five key areas — plastics, textiles, electronics, food, and capital equipment.

The knowledge, expertise and analysis forming the Action Agenda is informed by PACE members and learnings from a vast portfolio of concrete initiatives (among which the New Plastics Economy, New Vision for Electronics, and the Capital Equipment Coalition). They provide the blueprint we need to decide our future direction. Every single actor (corporates, citizens, governments, academics, and more) needs to play an integral part in the transition to a circular economy, and increased consumer demand will accelerate the shift.

It’s time to accelerate and achieve scale. With our focus on identifying opportunities, a clear sense of direction supported by the Action Agenda and strong public-private collaboration, we call on all business leaders and governments to join us and help design a system for prosperity and resilience.


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Circular EconomyClimate Action
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