Circular Economy

Here’s what's needed to build a circular economy

To mitigate the worst impacts of climate change we’ll need to build a circular economy and rethink how we make and use things.

To mitigate the worst impacts of climate change we’ll need to build a circular economy and rethink how we make and use things. Image: Photo by Marc Newberry on Unsplash

Linda Lacina
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Circular Economy

This article is part of: The Davos Agenda

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  • To mitigate the worst impacts of climate change we’ll need to build a circular economy and rethink how we make and use things.
  • Experts share what systems, business models and communities will help build that circular economy, ensuring cities, regions and countries can eliminate waste, circulate materials, and regenerate nature.

Nearly half of all global emissions come from how we make and use things. To tackle climate goals, we need to take a fresh look at how we approach our goods and services.

New processes will benefit from the circular economy. This approach to redesigning, producing and using goods looks to eliminate waste, circulate materials, and regenerate nature.

Building this circular economy will take a range of new changes to how businesses run and to how consumers live. In this special piece, we collected a range of insights from leaders as well as excerpts from Agenda articles to showcase the many changes we'll see with a circular economy in place. These insights provide a sense for the shift that’s needed - and the potential ahead for rethinking classic approaches.


We’ll build ‘hubs’ for circular innovation

100 billion tons of emissions globally per year exceed the capacity of the planet. The number equates to 40kg per person and day on average globally, including all emissions from CO2 over construction waste to municipal waste. The linear economy has created much prosperity over the last two centuries, but now threatens our livelihoods. Consumers, politicians, entrepreneurs and activists alike are aware of this.

Developing alternatives and solutions requires collaboration across the value chain and across industries. Circular Economy clearly needs to go beyond only finding recycling solutions for post-consumer products. Design for recycling and manufacturing in ways that allow for later disassembly require collaboration of many partners.

Circular Valley, the Rhine-Ruhr metropolitan area, is creating a model for this type of collaboration, building what is poised to become the global center of the Circular Economy. The initiative is strategically located in Germany's largest metropolitan region. This location helps draw a dense landscape of global market leaders from all sectors and value chain parts with a need for circular solutions. This region is also host to more than 70 universities and scientific institutions with a focus on material and production topics, ensuring easy access to the latest research and innovation. Hubs like these, pulling leaders with a range of expertise and ideas, will be critical to harnessing capabilities from across sectors.

- Prof. Dr. Andreas Pinkwart, Minister of Economy of North-Rhine Westphalia

We’ll design new, circular business models

Knowing that we only have one earth that does not provide a limitless supply of materials has increasingly given the circular economy a proper stage.

The coronavirus crisis has made us look at consumer behaviour through a different lens and the value of a circular economy may never before have been so clear. New business models that stem from these developments, like product-as-a-service, provide a solid opportunity to the global community to move from talking to actioning.

The circular economy is here to stay, and perhaps more mainstream than we realise. As consumers, we make conscious choices in our daily lives, and more and more companies are crafting circular business models and initiatives that the market is embracing.

Combining consumer demand and corporate opportunity within the boundaries that the earth provides us has never been this concrete. It all contributes to a society without waste. And that’s exactly what circularity is all about. We will do all we can to be part of this eco system and provide financing to speed up the process to a circular economy. We can all make a world of difference. New models will help us do it together.

- Robert Swaak, CEO of ABN AMRO Bank N.V.

Ellen MacArthur Image: PACE

We'll 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.

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.

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.

Ellen MacArthur, Founder, Ellen MacArthur Foundation. Learn more in the article she co-wrote: 3 shifts can scale the circular economy – triggering a more resilient, prosperous system


We’ll share data and reinvent infrastructure

To maximise the reuse of materials, the Netherlands Department for Public Works together with Rotterdam and Amsterdam, developed a national bruggenbank, or National Bridge Bank. The Bridge Bank is a registry of all (soon-to-be) dismounted bridges and elements thereof. This marketplace for bridges contains information on a bridge’s construction materials and parts available for reuse, and can connect construction companies and municipalities. So far, 13 bridges are registered on the Bridge Bank.

Modular projects and infrastructure marketplaces are scalable, and are crucial for the development of more circular models in the Netherlands and beyond. These projects demonstrate the vast potential of construction to slash emissions. For instance, in the Netherlands, circular bridges and viaducts can reduce Co2 emissions by up to 63%, and virgin steel consumption by up to 60% simply through the reuse of steel elements.

Share of smartphones discarded before they were out of use
Share of smartphones discarded before they were out of use Image: Circular Valley

We'll drive investment towards early-stage innovation

Two of the biggest obstacles to creating more innovation are a) early-stage technologies are concentrated in developed markets, lacking capital, and risky to transfer to emerging markets; and b) applying such innovations in emerging markets carries additional risks, including legal/regulatory, management expertise and workforce, and supply chain risks.

To address these issues, financial institutions can deploy capital at scale by investing in and/or underwriting via early-stage innovation funds, such as Sky Ocean Ventures Fund, with $25 million deployed to new technologies, materials, and business models, and companies, such as RWDC Industries (a Singapore-registered/US-located facility), a PHA-based biomaterials producer which raised $133 million in Series B funds in May 2020.

As we start to understand the linkages between investing in the circular plastics value chain and climate change outcomes, recycling and circular economy investments must become part of the consideration set for climate-oriented investors. The case for institutional capital to step up has never been stronger, and we need financial institutions to begin allocating their capital to recycling and circular economy if we want to stem the tide.

- Rob Kaplan, Chief Executive Officer, Circulate Capital. Learn more from his article: Here's how private investors can turn plastic into gold

A circular economy will make repair easier

The impact of repair can be dramatic. Considering just smartphones alone, the Restart Project estimates that on a global level, increasing the lifespan of a smartphone by 33% (e.g. replacing after 4 years instead of 3) could prevent annual carbon emissions equal to the annual emissions generated by the entire country of Ireland.

Incentivising repair will require changes in consumer mindsets, manufacturing approaches and incentives from governments. These changes have already started to emerge. The EU’s ‘Right to repair’, enshrined within its trailblazing Circular Economy Plan, is already triggering change in Europe by enforcing minimum repair and durability standards. In France, a self-declared repairability index was introduced in 2021, which aims to inform consumers on how easily different electronic devices can be repaired, providing consumers with this transparency at the point of purchase.

As repair and durability are enforced and incentivized, fewer resources need to be extracted and processed, protecting nature and reducing both carbon emissions and waste streams.

Repair will become easier and cheaper as more providers enter the market. Self-repair should also become easier for a range of products (including smartphones), as repairability, availability of spare parts and documentation / instructions increase, while repair cafes will continue to demystify repair and provide consumers with a more affordable way of extending the lifespans of their gadgets and appliances.

Mo Chatterji, Project Fellow, Scale360°, World Economic Forum. Learn more about the benefits of repair, check out the Pro-long Electronics campaign here.


We’ll make waste a thing of the past

A circular economy eliminates the concept of waste altogether, moving us into a more closed-loop system where materials and products are kept in use as long as possible.

In doing so, the circular economy tackles some of our greatest social and environmental challenges while unlocking $4.5 trillion in economic value by 2030.

Two examples:

1. Tossing textiles. We will throw away 148 million tonnes of clothing each year by 2030. $500 billion in value is at stake by adopting circular fashion solutions, keeping valuable materials out of landfills and reducing our reliance on virgin commodities.

2. The gold in our trash bins. Today we’re throwing away over 50 million tonnes of electronic and electric goods, worth over $62 billion, every year, including rare earth minerals, gold and copper.

By keeping materials in play, circular economy business models offer a clear pathway toward achieving our collective climate goals, and tackling the greenhouse gas emissions tied to the extraction, processing, manufacturing and landfilling of goods.

Jessica Long, Managing Director and Chief Strategy Officer, Closed Loop Partners. To learn more, read Jessica's piece 7 surprising facts to know about the circular economy.

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