The Circular Economy is coming

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The Circular Economy is coming

“In nature, nothing is wasted. Everything is food for something else”

7 minute read.

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The starting point for the Circular Economy is a basic insight: “In nature, nothing is wasted. Everything is food for something else”. This statement refers to, intentionally or unintentionally, Lavoisier’s Law of Conservation of mass, which says: “Nothing is created, nothing is destroyed, everything transforms.”

Ultimately, in nature, those transformations come together in ecological cycles, which is why we speak about Circularity. The easiest way to understand this is by looking at the water cycle: water is taken through rivers into seas, brought up into the air where it condensates into clouds, and is subsequently poured back down to earth. Other elements follow similar cycles, with Carbon being the one most closely looked at by society these days.

The point of this scientific introduction is that, as human beings, in an attempt to make our life easier and more enjoyable, we have altered most ecological cycles through our economic activities. This has ultimately had consequences that many species and ecosystems (which we depend on) are not equipped to cope with. Most scientists, many politicians, consumers and businesses have already acknowledged this and are working towards achieving the goals that most countries have signed up for through the Paris Agreement.

The Circular Economy is an approach that aims to reverse the economic activities that are putting the planet and its cycles out of balance.

The Circular Economy is an approach that aims to reverse the economic activities that are putting the planet and its cycles out of balance. The main goal is not “doing less harm” (approach that has underpinned industrial sustainability to date) but “doing as much good as possible”. To do so, businesses have to design out waste and pollution from the very start of their activities, but also keep the materials they use within the economy. The ultimate goal would be to restore the ecological cycles and enable their self-regeneration throughout time.

The UK is committing more and more to Circularity. The Government added the Resources and Waste strategy in 2018’s “25 years Environment Plan” which has been complemented by 2020’s legislative framework called “Circular Economy Package”. As we move towards 2030, businesses should be in the outlook and ready for more policies and standards in the next couple of years.

On top of the stated environmental benefits, the Circular Economy presents a large economic opportunity. The European Parliament expects that the adoption of the circular economy will create 700 000 jobs in Europe alone. On top of that, usage of resources would be maximised: new revenue will be created out of products and materials that would have otherwise gone into the ‘bin’ of the linear economy.

But the statement that has truly captured everyone’s attention around the new opportunities brought by the Circular Economy paradigm, is the promise that it will decouple economic growth from resource consumption. Arguably, this means that the Circular Economy is the next evolution of the service economy. The argument to back this up is simple: if new sources of revenue will be generated by the management of the materials that are already present in the economy, new or improved services are going to be the main way in which we can capture these new streams.

Services that collect e-waste, the rare metals present in our tech appliances, generate new revenue without more digging.

Photo of an old flip mobile phone broken in half.

Despite the good premise, it’s easier to talk about the benefits of the Circular Economy than to achieve the outcomes attached to them. To change policies, people’s behaviours and business structures isn’t an easy job and there are many barriers.

EY Seren’s research has shown that, despite their intentions, people tend to struggle when it comes to changing their behaviours: affordability and convenience are still big drivers of consumers’ purchase patterns. On top of that, today’s fast-paced lifestyle and disposable culture makes it difficult for consumers to shift towards the more sustainable actions that usually require a higher level of effort.

Affordability and convenience are still big drivers of consumers’ purchase patterns.

At the same time, businesses seem to be struggling to meet the rising standards and requirements set by policies, due to a lack of present infrastructure that supports circularity, a lack of availability of financial investment and uncertain ROI. These limitations seem to be reinforcing consumer behaviours, because the market presents an ambivalent set of offerings where the right choice is often the most difficult to make.

On the other hand, as we get closer and closer to 2030, relevant policies are expected to increase and become more clear in their scope and indications. It is arguable that this implementation will give a decisive boost in driving a change in current economic markets: implementing offerings which can support consumers to carry on their life sustainably would be the best thing to do, even from a business perspective.

In such a scenario, two approaches, amongst others, will play a major role:

  • “Innovation” will be a key element to make sure that old-school business practices are turned upside down.
  • “Human-centricity” will create service structures in a way that will be adopted by the highest number of people as seamlessly as possible.

Both of these approaches have become very popular in the business scene in recent years: the growth possibilities that were (and still are) brought by the digitization of society has greatly increased the appreciation of design.

Ultimately, design can be a way to effectively ideate and implement circular propositions. Although, it is fundamental to take step back: a long-lasting and total decoupling of economic growth from raw materials consumption at scale may not be possible in practice.

Unlimited growth is unachievable in a limited world.

While the Circular Economy is a promising business opportunity in terms of money, we can’t afford to make the mistake of looking at it in its mere economic benefits, by only using the same growth-led approaches that brought us to where we are. Recycling in itself is energy intense and may not stop raw material extraction. Technology is a key enabler, but we can’t think that it will save us from ourselves: it has its own limits. For example, computing power is about to hit the physical limits represented by the size of the micro-chips that are required to do the calculations.

The most important thing that we should embrace from the Circular Economy’s principles is its final aim of restoring ecological systems. This, alongside providing for everyone’s legitimate needs, represents a change in mindset that must drive our future actions. To do so, we need to innovate – business propositions, lifestyles, communities and societies – so that we consume less by default.

“Society is currently experiencing limits to growth because it is locked into defining growth in terms of economic activities and material consumption.” (“Growth without economic growth”, 2021, European Environment Agency). We have to go beyond this original conception of growth.

A mindset shift like this can cause permanent change in society. Overlaying design-driven innovation and human-centricity to a mindset that has the care of the planet as its first objective may represent the boost that is needed for the success of the Circular Economy. If the skillsets of psychologists, anthropologists and sociologists have become important when recruiting user researchers, scientists have to become much more important when hiring researchers and teams that will do design research for circular economy related business transformations.

Concluding thoughts…

EY Seren is a leader in design applied to business needs. From FSO to the public sector, the breadth of our client work demonstrates the impact that design research, service design and experience delivery have when ideating and deploying new solutions and complying to new needs.

Climate change and the Sustainable Development Goals are going to be key drivers of the economy. EY Seren helps clients stay at pace in everchanging contexts and do better than they are doing today.

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