Circular Economy
An Introduction
Astrid Severin & Katharina Krell
Varna, Bulgaria
September 2014
11th
The Linear Economy
• Current economic model
of ‘Take-Make-Dispose’
• World as unlimited
resource and waste bin;
• 65 billion tonnes of raw
materials enter the
economic system, p.a.;
• Around 60% of waste
ends up in landfill…
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Limits to the Linear
Economy
• Rising prices for materials and
energy;
• Supplies of precious materials
running low;
• Environmental damage from
resource extraction, landfilling
and waste disposal;
• Improving efficiency offers only
short term gains.
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Impact on Companies
• Natural resources make up 4550% of costs for the average
manufacturing company;
• Labour costs are falling as a
percentage of total costs, whilst
materials and energy costs rise;
• Small Business Act (2010)
estimates that better resource
use could save European
industry €630billion;
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What is the Circular
Economy?
“A circular economy is an
alternative to a traditional linear
economy (make, use, dispose) in
which we keep resources in use for
as long as possible, extract the
maximum value from them whilst in
use, then recover and regenerate
products and materials at the end
of each service life.”
~ Waste & Resource Action
Programme – UK (WRAP)
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Circular Economy
Concepts
Improved efficiency will not solve the problem of finite resources – a full
system change is needed.
McDonough & Braungart (2002) - two types of material flows in a
circular economy:
• Biological (‘consumable’) Materials – Re-enter the biosphere to build
natural capital;
• Technical (‘durable’) Materials – High quality, high added-value.
Designed to circulate and not enter biosphere.
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Value Creation
• Inner Circle – Minimising
comparative materials use, through
re-use. The tighter the circle, the
less it has to be changed to be
returned to use (with higher
savings)
• Circling Longer – Maximising the
number of consecutive cycles of
reuse, to avoid production of a new
component
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Value Creation
• Cascading – Diversified re-use
across the value chain, substituting
previously used virgin materials
with existing materials (including
symbiosis);
• Pure inputs – Avoidance of
contaminated materials to increase
collection and re-use efficiency
whilst maintaining quality.
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The Functional Service
Economy
• Closed-loop systems advocate a ‘functional service economy’ in
which manufacturers and retailers shift from selling products to
services.
• Products are designed for a cycle of disassembly and re-use.
• Companies maintain ownership of products and act as a service
provider.
Such a model promotes:
• More durable products – longer life-span = lower demand for energy
and materials;
• Disassembly and refurnishing – rather than disposal;
• New economic opportunities – through product and service shifts.
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Business Models
Mudjeans (NL)
- Jeans rental – returned to be re-used once worn out;
- Old jeans recycled into new denim, used to make bags
or furniture, or re-sold as vintage;
- Free repair service during rental period.
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Business Models
Rolls Royce (UK)
- Power by the Hour (PBH) model
for aircraft engines – performance
based contracting that shares risks
between supplier and contractor;
- Provides airlines with engine and
fixed cost maintenance over a
period of time;
- Users are guaranteed a set
maintenance costs; Suppliers
encouraged to improve efficiency
and quality.
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Business Models
Les Petits Riens (BE)
- Social enterprise –
businesses run to fund
social actions against
poverty and social
exclusion;
- Collects clothing,
furniture, and other
second hand objects;
- Upcycling of old objects
to be re-sold.
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What is the Circular
Economy?
YouTube
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Circular Economy
Communication
• COM(2014)398 – Communication: ‘Towards a circular
economy: A zero waste programme for Europe’
– Sets out how to establish a framework to promote the circular
economy;
– Communication sets out how to move the EU towards a zero-waste
economy:
•
•
•
•
New innovations in markets for recycled materials;
New business models;
Eco-design, and
Industrial Symbiosis
– Combination of smart regulation, market-based instruments,
incentives, information exchange, support for voluntary
processes.
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Circular Economy
Communication
Enabling Policy Framework
1. Designing and innovating for a circular economy;
2. Unlocking investment in circular economy solutions;
3. Harnessing action by business and consumers and supporting SMEs.
Modernising Waste Policy: Waste as a Resource
1. Defining waste targets for a move to a recycling society
2. Delivering simplification and better implementation of waste legislation;
3. Tackling specific waste challenges.
Setting a resource efficiency target - Proposed target for 30% resource
efficiency improvement in review of Europe 2020 strategy.
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Waste as a Resource
• Waste is an economic opportunity, if collected and
treated correctly;
• Treatment options other than landfilling:
–
–
–
–
Recycling;
Biological reprocessing (organic waste);
Energy recovery (pyrolysis or gasification);
Incineration.
• Recognition that waste is a resource accounts for shift
towards greater recycling and recovery.
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The Waste Hierarchy
• Hierarchy informs and shapes
EU waste policy;
• Waste hierarchy sets out most
favourable to least favourable
options for waste management;
• Reduction and reuse are most
favoured options – fitting for the
circular economy.
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EU Waste Policy
The EU encourages reduction of landfilling and better use of waste
resources:
• 1999 – Landfill Directive (1999); Waste Incineration Directive (2000);
Waste Framework Directive (2008)
EU legal instruments prioritise waste prevention and decoupling of
economic growth from waste generation
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Municipal waste
generated (kg/capita)
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Municipal waste
treatment in 2011
09.04.2015
21
Municipal waste
treatment in 2011
Landfilled
Incinerated
Recycled +
Composted
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Recycling Targets
• Commission proposal on 2030 recycling targets:
– Increase recycling and re-use of municipal waste to 70% by
2030;
– Increase re-use or recycling of packaging waste to 80% by 2030
(with material specific targets of 90% for paper, 60% for plastics,
80% for wood and 90% for ferrous metals, aluminium and glass);
– Phase out landfilling of recyclable waste by 2025;
– Reduce food waste generation by 30%, and;
– Increase the cost-effectiveness of Extended Producer
Responsibility schemes.
• The Commission estimates 580,000 new jobs could be
created through meeting these targets.
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The Case for the
Circular Economy
• Growing world population and new middle-class consumers in
developing world will further increase resource use and costs;
• Circular model generates wealth and employment by creating more
value from a single unit of a resource than traditional linear model;
• Re-use of materials makes good economic sense for companies
when resource prices are rising;
• Technological enablers – including IT and Communications – are
emerging (‘Internet of Everything’);
• Consumer preferences are moving to ‘Access over Ownership’ / On
Demand models;
• Governments noticing that resource policy is potent industrial policy
– stimulus and support available.
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Supporting the Circular
Economy
Measures include:
• Increasing the time products deliver their service before
coming to the end of their useful life (durability);
• Reducing the use of materials that are hazardous or
difficult to recycle (substitution);
• Creating markets for recycled materials (standards,
public procurement);
• Designing products that are easier to repair, upgrade,
remanufacture of recycle (eco-design);
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Supporting the Circular
Economy
• Incentivising waste reduction and high-quality separation
by consumers;
• Minimising costs of recycling and reuse with separation
and collection systems;
• Facilitating industrial clusters that exchange by-products
to prevent them from becoming wastes (industrial
symbiosis);
• Encouraging wider consumer choice through renting or
leasing instead of owning products (new business
models).
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www.greenovate-europe.eu
astrid.severin@greenovate.eu
katharina.krell@greenovate.eu
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