We waste much of everything. Research in Europe on consumption habits provides statistics that show how often the resources we have end up wasted. For instance, in tonnage terms, only 40% of rubbish (pdf) in Europe is recycled.
Not only this, but waste doesn’t consist only of the remainder of what is consumed, waste also exists in the way we use our resources. The researchers found (pdf) that cars in Europe are parked 92% of the time, and offices are used only 35-40% during working hours. With this knowledge in hand, the opportunity for new efficiencies across all industries and consumer lifestyles is greater than ever.
The circular economy is, by and large, recuperative in nature. It isn’t so much about “doing more with less” but rather, doing more with what we already have. In other words, the circular economy is largely about eliminating missed opportunities and solving the problem of low utilisation.
Though a circular economy may sound idealistic, the truth is that our world is changing. Our economic productivity on a global level is already affected by the rapid depletion of existing and readily available natural capital. Since the 1970s, productivity gains in grain crops have fallen steadily, despite advances in fertilisation and irrigation techniques over the decades. Mining is becoming more expensive as the average percentage of metal in extractions from the earth are falling in terms of both concentration and quality. At the same time, according to the Organisation for Economic Cooperation and Development (OECD), the global middle class is estimated to become over 3 billion by the year 2030.
These numbers illustrate that we cannot continue to grow and enjoy high quality of life without changing the way we do things.
Policymakers are still working out how to best apply a new circular growth model in our economies and societies. The EU government has already taken the first step by launching a public consultation to gather information on how to best set up policies that work towards such a model. However, we believe that besides drawing up new legislation, policymakers should focus on finding solutions to these three obstacles that could prevent the shift to a circular economy.
Resistance from existing business
One of the most important drivers of the circular model is sharing. Car-sharing schemes like Uber help create less waste given that fewer people might have the urge to buy cars and cars already on the road are used by more people. Yet, there has been a lot of resistance to Uber. The fact that taxi drivers took to the street to protest shows that it is not enough to simply take on new circular economy policies. Existing companies need to be given new perspectives on how to prosper in the circular economy and undestand what circular market opportunities they can reap in the short term.
The rebound effect
The circular economy can bring new growth through efficient management of resources. It’s estimated that (pdf) disposable income of European households by 2030 could be as much as 11% higher in a circular economy, relative to the current development path. That is equal to about 7% more in GDP terms. In spite of all benefits presented by a circular economy, certain systems need to be designed to bring out these benefits. There are some key points worth attention.
The pursuit of ever more waste reduction is important. However, resource productivity could lead to the so-called rebound effect: when the relative price decreases due to increased resource productivity mean consumers tend to use more, which in turn could negate benefits achieved. A group of researchers at Yale University have found that when it comes to things like fuel efficient vehicles, 5 to 30% of energy savings may be lost due to greater use. Therefore, how to limit the rebound effect while maximising waste reduction is worth thorough consideration by policymakers.
Managing perceptions of product obsolescence
Given the fact that consumers have the tendency to replace products prematurely, a tendency which has been greatly promoted by various marketing practices, there is a need to influence businesses to prevent, or at least postpone perceived product obsolescence. It is also important to alter consumers’ perceptions of obsolescence, so the average longevity of products can be prolonged.
While the above may come across as idealistic, the current policies set forth by the European Commission seem to be truly supportive of a circular economy and might even become Europe’s primary policy agenda. Who knows, this time we may truly make it happen.
Mark Esposito is professor of economic strategy at Harvard Extension School and Grenoble School of Management, Terence Tse is associate professor of finance at ESCP Europe Business School and Greta Seeger is co-create lead at Philips Design.
Content on this page is paid for and provided by Philips, sponsor of the circular economy hub
