It’s Decision time: Reimagine or Kill the Circular Economy
These are not regular times. The multiple crises we face require us to challenge almost every assumption, idea, and practice we have. The circular economy is no different. Can a non-inclusive, growth-based strategy be a viable sustainability strategy for business in 2020?
Over the last couple of years, the circular economy became a key solution in the fight to fix the dysfunctional ‘take-make-waste’ linear model dominating our economy for a long time. Still, looking at the current challenges we deal with — COVID-19, racial injustice, massive unemployment, and of course climate change, one could not wonder if the circular economy is still the way forward, i.e. should it still be a leading sustainability strategy for companies?
According to the 2020 State of the Green Business report, “the idea of a circular economy is growing up fast,” moving quickly “into the boardrooms of Fortune 500 companies and the halls of parliament around the world.” It is often hailed as a clear win-win strategy, benefiting both companies and the environment, or in the words of Accenture, it is “the transformative model for competitiveness and sustainable prosperity”. However, my concern is that similarly to “creating shared value”, another big win-win promise, the circular economy will end up as an idea that is good, but just not good enough for this moment and the challenges we face.
I would like to focus on a couple of shortcomings of the circular economy that I hope will help make my concerns clearer:
1) The circular economy is not socially inclusive
The protests over police brutality and racial injustice in the last couple of months have led to a greater understanding of the strong connections between the fights over environmental and social injustice and the acknowledgment that this is actually the same fight. As marine biologist, Dr. Ayana Elizabeth Johnson wrote: “..our racial inequality crisis is intertwined with our climate crisis. If we don’t work on both, we will succeed at neither.”
The narrative of the fight over climate has been reframed as the fight for climate justice, focusing on those who suffer the most from the consequences of this crisis. Rhiana Gunn-Wright, one of the architects of the Green New Deal, explained it in a recent interview: “Climate justice is about recognizing that environment is not just nature, it is all of us. Whether we’re talking about physical environment as in the neighborhood you live in, and also the physical environment in terms of the climate and the natural world, it’s about saying that those two things are linked.”
We can argue if the circular economy fights climate change effectively (see the following two points), but one thing is pretty clear: It doesn’t fight climate change inclusively (which is the same thing, i.e. no inclusiveness = no effectiveness). To be blunt, the circular economy doesn’t seem to have an ounce of inclusiveness in it. Check for example how many times the word “justice” is mentioned in the Ellen MacArthur Foundation’s report “Completing the Picture: How the Circular Economy Tackles Climate Change”. You will find out that the answer is zero — there is not even one mention of or reference to the word ‘justice’ in this report. This is not the exception but the rule — other reports (see here and here for example) will show a similar picture.
One may wonder what “designing out waste and pollution, keeping products and materials in use, and regenerating natural systems” has to do with social justice or structural racism. The answer is everything. This is exactly the point Dr. Johnson and Gunn-Wright made — you can’t solve one problem and then start addressing the other. In any case, you make a choice — either you design out waste with local communities in mind or you do it with shareholders in mind. Repair cafés are an example of the former, while a Coca-Cola recycling campaign represents the latter.
The lack of a strong social element was always a weakness of the circular economy — Murray et al. pointed out, for example, that it is “virtually silent on the social dimension, concentrating on the redesign of manufacturing and service systems to benefit the biosphere.” In the past this deficiency could be dismissed with arguments like ‘the circular economy would improve air quality and reduce water contamination, therefore it has an implicit social value’, but not anymore. In 2020, implicit intentions are not enough anymore — if you believe in something you need to be explicit about it on every level, from design to execution. The circular economy is not there (yet?).
2) The circular economy is optimized for economic growth, not societal well-being
“A circular economy aims to decouple economic growth from the consumption of finite resources and build economic, natural, and social capital”. As this quote from the Ellen MacArthur Foundation’s 2019 report “Completing the Picture: How the Circular Economy Tackles Climate Change” suggests both growth and decoupling are at the heart of the circular economy. The implied logic here is that growth is a sign for a thriving society (or business) and circular models/practices can ensure we have continuous growth without excessive resource use that will lead to increasing environmental impacts, including rising emissions. This is exactly the win-win idea I mentioned earlier — more economic value, less negative environmental impact.
There are a number of interesting questions regarding this win-win approach, but the most fundamental one is whether a circular-economy based green growth can actually help fight climate change?
At its core, this question is about the effectiveness of green growth, which the OECD defines as “fostering economic growth and development, while ensuring that natural assets continue to provide the resources and environmental services on which our well-being relies”. There’s a long debate around green growth — some are skeptical about it and mostly suggest degrowth as an alternative, while others find it to be “an inherent part of sustainable development”. The second camp includes not only the corporate world but also important organizations such as the UN, OECD, the World Bank that support green growth and embed it in their policies.
In her book “Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist”, economist Kate Raworth provides two frameworks that could be useful for this discussion. The first one is more technical and the second is more philosophical.
On the technical level, she provides a quantifiable context for green growth — planetary boundaries. Raworth suggests that “If GDP is to continue growing in high-income countries, its associated resource use must fall not just relatively or absolutely but sufficiently absolutely to move back within planetary boundaries.” What is sufficient absolute decoupling in terms of climate change? Raworth writes: “Some leading climate scientists calculate that high-income countries’ emissions now need to be falling at a rate of at least 8–10 percent per year in order to help bring the global economy back within planetary boundaries. But in reality they have been falling at most by 1–2 percent per year.” A 2019 UNEP report provided a somewhat similar assessment about the needed annual CO2 reductions: “unless global greenhouse gas emissions fall by 7.6 percent each year between 2020 and 2030, the world will miss the opportunity to get on track towards the 1.5°C temperature goal of the Paris Agreement.”
Not all of the necessary reduction would come from the circular economy — according to the Ellen MacArthur Foundation the circular economy can address about 45% of all emissions, which comes from producing the cars, clothes, food, and other products we use every day” (the rest is mostly related directly to energy resources). The Foundation’s report suggests that “the circular economy is underpinned by a transition to renewable energy and so provides a more complete picture of what is required to respond to climate change.”
This sounds good in theory, but can this vision be realized? According to the 2020 Circularity Gap Report, only 8.6% of the world is circular and we actually see a negative trend (two years ago it was 9.1%). The report suggests that “the negative trend overall can be explained by
three related, underlying trends: high rates of extraction; ongoing stock build-up; plus, low levels of end-of-use processing and cycling.” One more reference point for consideration — the necessary annual reductions (which we need to see every year) is similar to what the IEA expects to see in 2020 due to the impacts of COVID-19.
Will the trend of circular economy implementation change? Maybe, but I doubt if it can get anywhere close to what is needed. The reason goes to the second framework Raworth offers (the more philosophical one) — the idea that we should optimize for well-being and be agnostic to growth: “ We need an economy that makes us thrive, whether or not it grows”. My sense is that the circular economy is inherently more committed to ‘growth’ than to meaningful CO2 reduction, or in other words, it is subjected to the current paradigm of “an economy that needs to grow, whether or not it makes us thrive”.
Kate Fletcher and Mathilda Tham articulated the circular economy’s tendency towards growth in their visionary “Earth Logic: Visionary Fashion Action research Plan”:
“The circular economy has gained traction and substantial interest perhaps because it aligns with existing commercial practices, suggesting that business-(almost)-as-usual is possible. Indeed, circularity is treated as a lifeline by industry reliant on a model of over-production and over-consumption of goods, an effective endorsement of contemporary economic and political practices. While the circular economy brings the promise of useful contributions to a more resource efficient industry (providing, that is, that the many challenges associated with technology, workers, scale, logistics, communities and entropy are overcome) yet, in terms of affecting change of the scale and to a timeframe made necessary by the climate imperative, it has serious limitations. Perhaps most significantly, the circular economy is limited by being situated within the logic of economics and specifically growth economics. The circular economy is optimised to grow the circulation of materials, irrespective of whether this goal supports total systems improvement and the ecological reality of genuine biophysical limits.” (pp. 20–21).
If the circular economy is indeed more grounded in the current paradigm I believe there is very little chance it can achieve the level of change required to fight climate change effectively.
3) The circular economy doesn’t have a holistic, human-based core needed for meaningful change in business
The problems with being neither inclusive (point 1) nor optimized for well-being (or thriveability) seem to be more evident in companies, where circular economy finds itself been adjusted in many cases to meet profitability and growth expectations. In the absence of holistic, human-based overarching frameworks for businesses like the ones we can find on state or city levels, the circular economy may prove to support business-as-usual (or sustainability-as-usual) rather than challenging it.
Looking at the circular economy at this moment I find it to resemble more of what Adam Werbach called a “green strategy” in his book “Strategy for Sustainability: A Business Manifesto”, i.e. it’s limited in scope and is not holistic as sustainability strategy should be. It seems that at its core the circular economy is subjected to a hierarchy, where economic considerations come first, followed by environmental considerations, and then social considerations. This hierarchical structure limits the ability of the circular economy to generate meaningful structural changes, which is what we need right now.
Let me be clear — I like the circular economy and its principles and I believe it can offer important benefits to companies. At the same time, this moment is an opportunity to challenge prior assumptions we had, including about the circular economy. It seems that the circular economy tried to build a middle way that would be not too radical for companies, i.e. challenging the principles of value creation, but not the tenets of neoliberal economics. However, this thinking is quickly becoming dated as it doesn’t meet societal needs. Looking at the recommendations of McKinsey, Deloitte, BCG, and others on how companies need to respond to Covid-19, which includes no to little reference to circularity, it seems that the circular economy doesn’t manage to meet business needs as well.
Thus, it is the time for circular economy advocates to decide, especially in the context of business: Either you reimagine the circular economy (what does it look like with holistic, human-based core?) or just kill it and keep seeking for a better alternative.
Raz Godelnik is an Assistant Professor of Strategic Design and Management at Parsons School of Design — The New School in New York. He is currently working on a new book focusing on redefining sustainability in business in the era of climate crisis. Feel free to connect on Twitter and LinkedIn.