Circular economy: a way out of the dead end?
Every year on Earth Overshoot Day, we are reminded of how deeply we exploit our planet’s natural resources. This is largely driven by our lifestyle and our way of doing business. Can a circular economy be a way out?
For our daily consumption, for food, clothing, for housing and for mobility, we need huge amounts of resources and energy. With an economy that is following mostly a linear principle in which products are manufactured, consumed, and then thrown away, this causes huge problems.
How can we reconcile a growing world population, prosperity, and the wellbeing of nature? Probably with an alternative to the linear "ex-and-hop" principle – such as the circular economy, an alternative economic model first described in detail by the British scientist David W. Pearce in 1990.
Circular economy: more than recycling
In the circular economy, products or their components are not thrown away after use, but reused – for as long as possible and, if possible, for an equivalent product.
For this to work, it is not only a matter of good recycling and functioning waste management. Already at the design and manufacturing stages, care must be taken to ensure that the product or its components can be reused. This means that the materials should ideally be environmentally compatible, renewable, and easy to separate for recycling.
Circular economy has great potential – but is still not very widespread.
Although currently only 7.2 percent of the world's value creation is based on a circular model, Steven Stone, Deputy Director of the Economics Division at the United Nations Environment Program, sees it as a real gamechanger. It would, he believes, allow us to tackle the problems of climate change, natural degradation and pollution at the same time. But: “the transition might not be painless,” he admits in our interview.
Stone believes that prosperity for all could be possible through a circular economy – but it would require, first and foremost, a change in thinking in the industrialized countries and a new definition of prosperity that is not based solely on gross domestic product (GDP) as the key indicator. Instead, education, health and an intact environment would have to be valued as equally important factors.
Using the example of plastic, Stone emphasizes that it is also important to make the actual price of a product clear. Because plastic, which is above all comparatively cheap to produce due to cheap oil, causes huge consequential costs. Estimates put the cost of plastic pollution alone at 300 to 600 billion US dollars a year.
Fighting ocean plastic pollution
It is difficult to estimate how much plastic ends up in the ocean each year. Estimates range from 4.8 to 12.7 million tonnes which is at least one truckload per minute, threatening our largest ecosystem. This is due to a lack of waste disposal systems. Plastic is thrown away, ending up in the sea via rivers or other paths. The Berlin-based technology start-up CleanHub has developed a solution to this problem. Its goal is to ensure that less plastic and trash ends up in the ocean.
Clean-Hub organizes systematic household collections and waste separation in regions without functioning waste management, such as parts of India or Indonesia. This is predominantly paid for by Western companies that produce or use plastic. Joel Tasche, founder of CleanHub, explains in our story how this works and what role artificial intelligence plays.
What a waste
More than 3 billion people have no access to professional waste disposal. At the same time, the amount of household waste could grow by 70 percent due to a growing world population by 2050 – if we don’t change.
The World Bank highlights the following solutions:
— Financing to developing countries for state-of-the-art waste management systems.
— Comprehensive waste reduction and recycling programs
— Consumer education
The plastic pollution of the oceans is also addressed by the Spanish fashion label Ecoalf, which recycles marine plastic for its sports collections. Ecoalf has started a cooperation with fishermen who found more and more plastic in their nets. In our video story, Carolina Blázquez, head of innovation and sustainability, reveals how a holistic circular model in fashion can look like – and how design is already crucial here.
Ecoalf focuses on the longevity of products instead of “fast fashion” – and now also offers a repair service. What is still happening here on a voluntary basis is soon to become legislation in the EU – as a right to repair, initially for electrical appliances.
Political regulation and incentives are important
The importance of such political control with binding rules and standards is also made clear by Rebecca Tauer in our interview. The circular economy expert at the World Wide Fund for Nature (WWF) is working on the circular economy strategy for Germany, which will be announced in 2024.
In France, with a view to the planned new EU legislation, there is already a Repairability Index that gives an item a score out of 10 showing consumers how ‘reparable’ it is. Together with cost benefits for energy-efficient electrical appliances, Tauer says, this will promote durable products.
Circular economy needs co-operation
It is obvious that the circular economy is more complex than a linear economic model. It requires the cooperation of product designers, manufacturers, consumers, waste managers, regulators and banks.
Deutsche Bank supports the circular economy, for example, through sustainable financing to companies that are transforming their operations, explains Charlotte Woodside, sustainability expert at Deutsche Bank. Special conditions are then available for these financings so that, for example, the conversion costs or the purchase of new machinery can be financed.
Circular economy: good for entrepreneurs, too
After all, a circular economy can make sense from a business perspective in the long term. Raw materials will become scarcer or more expensive; supply chains can collapse due to geopolitical changes such as wars trade wars, or through natural disasters – and new industries sometimes cause bottlenecks. Lithium, for example, is an important element for battery production in e-cars. The raw material is rare, mining is costly and, in addition, social standards in the mining countries, such as Chile, are often difficult to oversee. For example the German car manufacturer Mercedes is planning to build a battery recycling plant in Germany.
The company Cronimet has already been recycling metals, including nickel, for more than 40 years. Chief Financial Officer Bernhard Kunsmann confirms a significant increase in demand for recycled materials. His customers, large steel plants in Europe and the US, are listed on the stock exchange and have to submit sustainability reports – scrap metal has a much better carbon footprint than raw materials that first have to be extracted from the earth.
Macroeconomic benefits
In fact, according to the World Economic Forum, the shift to a circular economy could have a total economic benefit of 4.5 trillion dollars worldwide until 2030. Innovations in many sectors bring new jobs, and companies can save money in the long run.
The Commission for Business and Sustainability in London sees global savings potential of 1.015 trillion US dollars by 2030 if circular economy becomes widely accepted. And the European Commission, which has been promoting circular economy within the EU with its action plan since 2021, expects European GDP to grow by a further 0.8 percent by 2030 compared to "business as usual" if its plan is implemented consistently.
Less exploitation of nature
In addition to the rosy prospects for the economy, the balance for climate and nature would be positive in any case. The Ellen MacArthur Foundation, a renowned think tank on the circular economy, calculates that global greenhouse gas emissions could be reduced by a fifth by 2050. Or to put it the other way around: without a circular economy, it will be difficult to achieve the Paris climate targets.
Global raw material consumption could even be reduced by more than 30 percent. This could bring human activity and economic activity back to a level that is compatible with the planet. However, it is doubtful that the model will quickly gain popularity in all regions.
Europe as a pioneer
In its first report on the circular economy, the World Bank attests to the European Union's pioneering role and emphasizes that growth and resource use could indeed be decoupled here within a decade.
So, let's not waste time.
Sonja Dammann
… is part of Deutsche Bank's content team. She finds it particularly inspiring how new trends emerge. The more she deals with the topic of circular economy, the more she wonders why not many more companies have jumped on the bandwagon.
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