Viewpoints

The seven pillars of the circular economy

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We can only define a circular economy if we look to the end state that we want to achieve. In response to the shortcomings of other current descriptions, here Metabolic’s Founder and CEO Eva Gladek presents “Seven pillars of a circular economy.”

Before I outline the seven pillars themselves, let me tell you how we got there… The circular economy is a term that has gained a great deal of popularity among both businesses and governments over the last few years. As with other popular terms, with its growth in usage, the number of ways in which the term is defined have proliferated. There is no single group with the undisputed authority to define what the circular economy means exactly. While some consensus is developing among the different players working in the field, there can still be a lack of clarity about what “circular” actually means in practice.

Many groups define the circular economy in terms of the types of activities and concepts associated with it: The use of new business models, like leasing, collaboration across supply chains, using waste as a resource, etc. However, these types of characterisations ultimately don’t tell us what the circular economy actually is, because they don’t describe its end state: What will the world actually look like when it is “circular”?

Without answering this fundamental question, we lack a common understanding of what we’re actually trying to achieve, which makes it impossible to measure progress in any meaningful way. If we’re designing a product, for example, and have only limited resources, which we can either invest in more expensive, certified, renewable materials or in the up-front costs needed to set up a product leasing scheme, which will produce the more “circular” result? If we take the activity-based definitions of a circular economy, which suggest that making use of any of these practices makes something circular, then we don’t get much insight on what choice to make. And in fact we know that simply choosing for renewable materials does not always result in less environmental impact or greater value delivery—nor does adopting a leasing scheme.

Defining the circular economy

Over the last five years of advisory and development work in the field of the circular economy, we at Metabolic would frequently run into the issue of needing to handle trade-offs in circular design and decision-making, or needing to quantify progress towards a “circular” goal. For this reason, it became essential for us to define what the performance characteristics of a fully circular economy would be.

A great deal of focus in the circular economy field is on the management of materials and ensuring that resource cycles are closed, in a similar way that occurs in natural systems (in the context of an ecosystem, water and nutrients are continuously cycled among different uses). So we began by taking this principle to its ultimate conclusion: In a circular economy, all materials should be used in such a way that they can be cycled indefinitely (just as they theoretically can in nature).

This statement, however, implies some additional complexities: We don’t just want these materials to be theoretically possible to recover—it has to happen on a time-scale that’s relevant to people (so, if we create wastes that need thousands of years for recovery, potentially in the case of nuclear wastes, that doesn’t exactly address our original goals or criteria). Aside from this time-scale issue, there’s an important recurring principle within discussions of the circular economy, and that is around the preservation of value and complexity: We want to ensure that materials can be cycled at the highest value possible, preferably as whole products, then as components, and finally recycled back down to basic raw materials (which is extremely costly in terms of energy). Even this cascade is oversimplified here, and can look quite different depending on the context. For example, if you have a very inefficient energy-using-product like an old refrigerator, it may actually be systemically better in terms of energy impact to just scrap it and replace it with a newer model than extend the life of the whole product. But the general principle of preserving complexity is clear.

Thinking through how materials should ideally be handled in a circular economy leads to all kinds of further conclusions regarding material toxicity, the scarcity of certain materials, the persistence of certain materials in the environment, and many other parameters. On this basis, we have developed a set of circularity factors that provide guidelines for the optimal use of materials for different functions. These are metrics that we use to define a material based on its properties such as recyclability, scarcity, toxicity, etc. Using these factors, we have developed shorthand recommendations for how certain materials should be used to uphold circular economy objectives.

Beyond materials

But of course, in doing this exercise, we also immediately realised that once you are developing goals for how materials should ideally be managed, you also run into many adjacent issues. Materials are just one type of resource in our economy, where all flows are ultimately connected and influence one another. In a world with infinite and free energy, it’s very easy to design and develop systems that will fully recover all materials through extremely costly and energy-intensive recycling processes (which is how we currently recover metals from electronic waste, for example). However, because energy is also a constraint in our current system (even renewable energy is generated by devices that are made of scarce materials) and often comes with high levels of environmental impact (for instance, Greenhouse Gas emissions), we also need to treat it as a scarce resource that should ideally be conserved. Ultimately, in a circular economy, all energy should be supplied from renewable or otherwise sustainable forms (like geothermal, which is not technically renewable, but we consider it a sustainable resource). To achieve this, the efficiency of our energy use also needs to increase significantly. Even though we know the total amount of energy available on the planet is not a constraint (the sun produces more than enough for everything we need), collecting that energy in usable form does require the use of scarce materials, which are a constraint themselves.

As you continue to explore the implications of striving for a fully closed, circular material cycle as a cornerstone of the economy, you ultimately find many other connections throughout the economic system that need to be arranged in a way that uphold broader human ideals. In the end, this exercise resulted in a set of seven characteristics, which are properties that describe the end state of the circular economy once it has been genuinely achieved. These are idealised features that may never be possible to achieve, but they provide a specific set of targets we can aim for. Furthermore, each one can be characterised in greater, quantitative detail, forming the basis for Circularity Indicators, or KPIs, in many different contexts…

Prioritisation and weighting

An important note on these seven characteristics is that in making decisions not all of these outcomes should be equally prioritised. When we consider the state of the global system, there are some areas that are under extreme threat and close to key systemic “tipping points.” Though climate change is one of these areas, there are some that are even more severely impacted, like biodiversity loss. According to the WWF, we have lost 58 per cent of global biodiversity in the last 40 years, and are at risk of reaching irreversible tipping points in this area (as reported in WWF’s latest Living Planet Report). For this reason, we suggest prioritizing certain types of impacts (and therefore indicators) over others, which is something we also recommend in indicator selection processes.

Some of the impacts that need to be prioritized over others include:

  • Long-term, irreversible impacts
  • Impacts which undermine the ability of the earth to provide a safe operating space for humans
  • Impacts for which the outcomes for people or environment have a high degree of uncertainty

Taking all of these emerging insights together, we have formulated our own working definition of the circular economy:

The circular economy is a new economic model for addressing human needs and fairly distributing resources without undermining the functioning of the biosphere or crossing any planetary boundaries.

Using the seven pillars

You’ll find the pillars below. Once you have these clear performance outcomes in mind, then the process of natural selection, so to speak, will support the evolution of economic rules and incentive structures that actually fulfill these end results. Technologies and business models that ultimately support not just one, but all seven of these goals, will be the ones that rise to the top as the most successful. So, we don’t arbitrarily support “product-as-a-service” models because they have been associated with the circular economy, but we actually look at where, and under which conditions, these models actually result in better circular performance across the board.

For us at Metabolic, these seven characteristics of the circular economy are an essential tool. With it, we are able to make sure that we’re approaching problems in a systemic manner. Whenever we recommend a course of action as part of a circular strategy, we make sure to evaluate whether or not our proposed solution for one area of impact will not be causing a problem or externality in one of the other target areas of performance. This problem, called “burden shifting,” occurs commonly when you’re focused exclusively on one problem (for example: Making light bulbs more energy efficient), without noticing that your solution could have negative, unintended consequences (for example: Your newly efficient light bulbs require the use of toxic and hazardous materials).

Perhaps even more importantly, as we have refined these seven pillars over the years, we have been able to translate them into quantitative tools—metrics and indicators—that we can use for evaluating the circularity of products, projects, businesses, and investment portfolios. For instance, we are currently developing a set of indicators for the Municipality of Amsterdam in order to assess the circularity of new building projects. Using this tool, City officials will be able to determine which of the proposed projects during a tender process should be selected for development, thus keeping Amsterdam’s urban development on a circular path.

Refining and collaborating

We’ve developed this set of characteristics that define the circular economy through a trial and error process over the course of around two hundred projects. For us, they offer clear signposts for how to make genuine strides towards a circular economy. We invite everyone working in the circular economy field to make use of this framework and the tools we have developed around it. We see it as a complementary resource to the lists of business models and circular economy approaches that are already more broadly in use.

But as practitioners, we continuously refine our ideas as we run into new situations and are faced with new trade-offs. We will continue to build on the seven pillars and we welcome other circular economy experts and advisers to join us in this process. If you have thoughts or comments that immediately spring to mind—or other ideas for how to make use of this framework—please reach out to us. We’d love to start a conversation.

seven-pillars

The seven pillars of the circular economy

1. Materials are incorporated into the economy in such a way that they can be cycled at continuous high value. A priority is placed on preserving material complexity (the “power of the inner circle”), by cascading materials in their most complex form for as long as possible (e.g., as products rather than components, and as components rather than materials). Material cycles should be designed to be of lengths that are relevant on a human time scale and appropriate to the natural cycles to which they’re connected. The length of materials cycles is matched to material scarcity: Scarce materials are preferentially cycled at shorter intervals so they can be recovered sooner for reuse. Material cycles are designed to be as geographically short as possible, which varies depending on the ubiquity of the material. Materials should not be mixed in ways that they can no longer be separated and purely recovered, unless they can continue to cycle infinitely at high value in their mixed form (and even then, this is preferentially not done because it limits choice). Materials should be used only when necessary: There is an inherent preference for dematerialisation of products and services.

2. All energy is based on renewable sources. The materials required for energy generation and storage technologies are designed for recovery into the system. Energy is intelligently preserved (waste is avoided), and cascaded when lower values of energy are available for use (e.g., heat cascading). Density of energy consumption should ideally be matched to density of local energy availability to avoid structural energetic losses in transport. Conversion between energy types should be avoided. Avoid transport of energy. The system should be designed for maximum energy efficiency without compromising performance and service output of the system.

3. Biodiversity is structurally supported and enhanced through all human activities. As one of the core principles of acting within a circular economy is to preserve complexity, the value of preserving biodiversity is one of the highest values within the circular economy. Habitats, especially rare habitats, should not be encroached upon or structurally damaged through human activities. Preservation of ecological diversity is one of the core sources of resilience for the biosphere. Material and energetic losses are tolerated for the sake of preservation of biodiversity; it is a much higher priority.

4. Human society and culture are preserved. As another form of complexity and diversity (and therefore resilience), human cultures and social cohesion are important to maintain. Processes and organizations should make use of appropriate governance and management models and reflect the needs of affected stakeholders. Activities that structurally undermine the well-being or existence of unique human cultures should be avoided at high cost.

5. The health and wellbeing of humans and other species are  structurally supported. Toxic and hazardous substances should ultimately be eliminated, and in the transition phases towards this economy, minimized and kept in highly controlled cycles. Economic activities should never threaten human health or well-being in a circular economy. For example, successfully recycling e-waste by having people burn it over open fires is not considered a “circular” activity despite the fact that it results in material recovery.

6. Human activities generate value in measures beyond just financial. Materials and energy are not currently available in infinite measure, so their use should be intentional and meaningful contribution to the creation of societal value. Forms of value beyond financial include: Aesthetic, emotional, ecological, etc. These cannot be brought down to a common measure without making gross approximations or imposing subjective value judgements; they should, therefore, be recognized as value categories in their own right. The choice to use resources should maximize value generation across as many categories as possible rather than simply maximizing financial returns.

7. The economic system is inherently adaptable and resilient. The economic system should have the governance systems, incentives, and mechanisms in place that allow it to respond to systemic shocks and crises. This refers to the distribution of power, the structure of information networks, and ensuring that back-ups exist in the case of failure of parts of the system. The same principles of resilience apply on small as well as large scales.

This article originally appeared on Metabolic’s website.

Join Eva Gladek on 30 October at Climate-KIC’s Climate Innovation Summit in Milan. She’ll be speaking on a panel: “Strategies and opportunities for the circular economy” from 13:30-15:00. Register now! #CKCIS17

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