Circular Economy Explained by Ellen MacArthur (Beyond Recycling)

My background isn’t in global economics at all, but it’s actually in offshore racing. I used to sail solo non-stop around the world, which was a bit crazy because when you do that, you take everything you need for your survival for that 3-month journey, and you manage those resources down to the last drop of diesel and the last packet of food. And no experience can ever give you a better understanding of what finite means. Because when you’re on that boat in the middle of nowhere, what you have with you is all you have. There really is no more. And I’d never translated that understanding of finite that I felt on the boat to anything outside of sailing until I set foot off the boat at the finish line. And I suddenly realized our global economy is no different. It too is dependent on finite resources that we fire through the economy. And since the industrial revolution, our speed of use of those resources, which are ultimately finite, has gone up and up and up. A good way to understand a circular economy is to compare it to our current predominantly linear economy whereby today we take a material out of the ground, we make something out of it and then ultimately that product that gets made out of it gets thrown away and we do recycle some of the material from it but ultimately it’s designed for a linear system. Ultimately that product will come to the end of its life. And the circular economy is a fundamentally different economic model. It’s taking the entire global economy, looking at it through a different lens and saying how can we valorize our economy to a higher level. So never at any point would anything made within a circular economy become waste. Everything would be designed so the materials within them can ultimately be valorized. But they can also be kept at their highest utility at all times. A ton of food waste could turn into $6 of heat, $18 of fertilizer, and $26 of electricity. Or you could look at timber as being a big piece of wood that’s cut down that yes you could burn, but you could also build a table out of it. Then you could at the end of the life of the table, recover that material and turn it into particle board or chipboard, then into particle board, ground down board, and then ultimately the end of the life of that board, you could then biodegrade it and feed it back into the fertilizer and energy system. One of the things that really struck me on my journey of learning was just looking at basic resource prices. You know, look at the commodity indexes of the last h 100red years, we saw that price come down for a century. And then in just 10 years, those raw material price decreases were just wiped out. The problem is those prices have more volatility in them than we’ve ever seen before in history. And a figure that really struck me was that between January 2011 and January 2012, your average European car manufacturer saw a raw material price increase of500 million e. Now that’s something they have no control over and in order to make money they have to buy new raw materials. They need to make vehicles and sell them. So much of the strategy around uh protecting companies from resource volatility was around being efficient. And you know you talk to chief executives and they’d say you know our goal is to be more efficient how with the way we make our products. So we use 10% less material. We use 10% less energy every year. You know that’s to make us less exposed to those volatile prices. But actually if you pan that out 10 years, does that mean that in 10 years you make nothing with nothing and have no employment? You know that does buy you time which of course is vital in the transition. But the the fascinating fact for me was in the transition to what what could actually work. There is often circular activity already in existence within the business. So sometimes the first step is and is is identifying that circularity and then building on that. So for example with Renault with whom we’ve worked now for many years they already had remanufacturing. They already had this incorporated into much of their design. But when you look at it as a whole systems approach rather than the design of the cars here or the remanufacturing being something separate you suddenly end up with a with a a systemic change that can happen through the whole business. The role of the circular economy is not trying to improve what we have at the end of the pipe through a lot of consumer engagement or recovering higher values of materials from what we have in the economy today, but it’s going to the beginning of the pipe and it’s building a system that can really run in the long term. So it’s working with businesses, with regions, with governments and ultimately at the end with individuals to build a system whereby people have the choice to switch to more circular models. You could ask the question, how would you get people to switch to more circular models? How would you get them to buy more circular products? And I think them understanding what the word circular economy mean are irrelevant. You don’t really need them to. If you shift your mobile phone contract from being buying the phone and then when you get the next one, you throw the old one away or you resell it into secondary markets. If that contract shifted to being a performance contract where every year you got a brand new phone, but you just happen to send the old one back to the system, what we’ve seen from the studies is we get a better phone more regularly and the manufacturer or the service provider knows that phone will go back in. So they can equally valorize it. So it tends to be a win-win situation, doesn’t need to say circular economy anywhere on it. It’s just a better value proposition. I think some interesting things to bear in mind if you’re looking at shifting your business from linear to more circular. Uh one would be what circular activity already exists within your business and in most cases we’ve looked into that already exists and how can you build on that and communicate on that throughout the business so people understand the direction of the business. Another question would be how resilient is your business in a world where we have more price volatility than we’ve ever seen before in history and indeed what is your opinion on how circularity can make you a more resilient business and can isolate you through having those resources having those products cycling at a higher level within the business. I think systemic change within the business. So bring all the parties on board. This can’t just be a question to discuss with the design team but it’s the marketing team, it’s the financing team, it’s the it’s everyone within that business. People just seem to understand that they they understand the reorientation of the business. They understand it delivers more value and that really helps people to get on board the understanding that this is systemic change. It’s not just one department.