Circular Economy – Why the Hype?

By Edwin Pinero
Senior Vice President, Sustainability and Public Affairs, Veolia North America

There is quite a bit of hype over the concept of the Circular Economy, yet it is rooted in some older concepts. Fundamentally, a Circular Economy is one that is restorative by design, characterized by material reuse and recycling, and renewable energy. The intent is to move away from the linear “take-make-use-dispose” model.

I have been in the environmental and sustainability business for the better part of my 36 year career, and I recognize this idea from before. The concept of Circular Economy can be traced back to the ideas of industrial ecology and design for the environment popular circa 1990s. These movements were based on the concept of mimicking nature by efficient use of materials and energy. The complementary movement of Design for the Environment encouraged product design such that end-of-use disposition resulted in less waste.

So what makes it different? What is so “new” now? The increasingly urbanized middle class is expected to mushroom from 1.8 billion to 3.2 billion people by 2020. This growth is aggravated by the impacts of climate change and previously unseen pressure on existing resources. We knew this already. The fact that growing population and economies strain natural resources is not new. Whereas the earlier movements were largely environmentally based, what’s new is a closer balance of environmental and market and economic forces.

It is the interconnectivity of environmental and economic factors that makes the current discussion new and timely. The Circular Economy concept builds on earlier efforts by adding visibility to the need to address market impacts of growing non-renewable resources shortages and corresponding price volatility. For example, a study by the Ellen McArthur Foundation and McKinsey noted that certain precious metals have only a few decades remaining of supply at current consumption rates. In addition to the obvious impacts of shortages, such stressed reserves lead to wide swings in price volatility, adversely impacting prices and markets.

Still not convinced? There is another driver towards the circular economy, and it comes from the fortuitous timing alignment with the Paris climate agreement. We know that even before the airplanes carrying the negotiators landed back in their home countries after COP21, there was stress about which countries would ratify the agreement. But as we learned from the Kyoto Protocol experience, ratifying and legislating the agreement does not guarantee goals would be met; and conversely, not ratifying does not doom a country to failure. Some countries who signed Kyoto were late or never met their goals. The United States did not sign the Kyoto agreement and we actually met our goals! How can that be and why is this point relevant to the Circular Economy?

The Circular Economy demonstrates that sustainable solutions are those that integrate environmental and economic factors. More efficient use of materials and more use of renewable energy are not only lower in carbon footprint than the fossil fuel-only, “take-make-use-dispose” economic model, but also can be linked to underlying economic drivers.

And that is the wonderful epiphany of the Circular Economy. It will help us deal with environmental and resource issues, temper market volatility, and contribute towards COP21 goals, regardless of what happens with agreement ratification. And that is a pretty good outcome!

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