Unlocking The Sustainability Potential Of Circular Processes By Applying Systems Thinking

Within the last decade, the circular economy concept has become a central pillar in many governments and corporate sustainability strategies. Circular economy as a part of a sustainable business model has been adopted in Japan and Germany as early as in the 1990’s and in China since 2002, as a part of official state policies. China’s National Development and Reform Commission recently released its 14th Five-Year Plan period (2021-25), reinforcing circular economy as a national priority. The corporate world jumped onboard in 2013, as a result of the establishment of Ellen MacArthur Foundation’s global network of 100 companies joining the “Circular Economy 100.”  Two years later, the European Commission published its ambitious Circular Economy Action Plan. Today, portions of the circular economy concept are embedded into common business models, such as car- and accommodation sharing services, deposit systems and the zero waste-movement. The scope, understanding, and interpretation of the framework varies greatly throughout the world with several definitions and applications. However, the overall goal of circularity is to create narrower and closed energy and material loops through circular and regenerative supplies, reengineering materials, resource recovery, sharing platforms, product as a service schemes, and product life extension via remanufacture, reuse, resell, repair and refurbishing.

The circular economy should be viewed as one possible approach for progressing the sustainability agenda rather than an end in itself. Sustainable, or even better, regenerative systems should, however, be a fundamental principle of the circular economy. Circular processes are not necessarily sustainable by default but have the potential to be if the global net sustainability of the system is improved. There are many examples of presumably circular processes where the overall life cycle improvement of the social, ecological and economic sustainability is debatable, such as global plastic waste trade of low quality, low marketable polymers with the intent of recycling that ultimately leads to a host of negative externalities. Approximately half of all plastic waste is exported globally, one fifth of which has no market value and is therefore inappropriately disposed in the importing country, creating social and environmental justice consequences for vulnerable and marginalized populations in the importing nations. Although the act of recycling may be viewed as a circular business model, from a systems perspective, it may challenge the notion of circularity.

A sustainable, circular economy cannot be founded on a restrictive linear system that discounts the opportunities a circular system unlocks—new investment opportunities, novel business models, innovative products and technologies, reduced extraction of primary resources, greater resiliency, avoided risk, and improved social benefits such as quality of life and job creation. A fundamental change is needed to achieve this.

There is no silver bullet to achieve the urgently needed system change. On a planet with finite physical limitations, infinite economic growth is impossible, and no single technological solution can alter this equation. Both the appeal and the paradox of the circular economy concept is that it provides a pathway to overcome resource scarcity and overuse, while allowing for economic growth. Development of regenerative business models and economies, based on circulating resources and properly scoped life cycle assessments, can be good for the triple bottom line and allows us the opportunity to ease back from ecological tipping points. A recent report estimates the total annual market opportunity of replacing existing materials with those derived from captured CO2 (thus being regenerative) at US$5.91 trillion globally, with the top three global markets fuels ($3.82 trillion), building materials ($1.37 trillion), and plastics ($0.41 trillion). Taking this one step further into the realm of circularity would be to design CO2-based materials that are reusable and recyclable with balanced systems-sustainability profiles. There are socioeconomic value and business opportunities in reforming the linear model to a more regenerative, sustainable and resilient one. The detachment of the business world from path-dependency and technological lock-ins of the current, linear value chains requires progressive policies that reduce inertia and increase the pace of economic transformation.

The urgency for systems-level thinking is highlighted by the increasing waste accumulating in the ecosystem, as well as the criticality and scarcity of raw materials for production. The demand for several materials will sharply increase in the coming decades, especially in the energy sector that will tap into new alternative technologies. World Bank Group estimates that in the transition to a low carbon future, by 2050, the production of minerals will increase by nearly 500 percent to meet the demand for electronics and clean energy technologies such as wind turbines, solar panels and electric vehicles and battery storage. The increase in demand has driven up the cost of many rare-earth minerals, bolstering the business case for alternate resource extraction methods, e.g., deep sea-bed mining.  The repair, recycling and reuse of products should be explored as well as enhancing product design using alternative materials that will help reduce the demand for raw materials. Recently, Closed Loop Partners and ERI entered into a strategic partnership to strengthen innovative circular economy supply chains for improved recycling of electronic waste (e-waste), one of the fastest growing waste streams globally.

There is an urgency for all actors across the value chain to conduct due diligence that addresses the ethical and environmental issues associated with the development of innovative technologies, products, and processes and to integrate systems-level principles that assess life cycle impacts for a true perspective of sustainability. For instance, the potential impacts driven by at-scale solar installations remain largely unexplored. This includes, as examples, increased land competition that intensifies biodiversity loss, water use, or indirect land use change emissions and the absence of end-of-life options for panels that currently are exported, landfilled or incinerated. Despite the lack of consensus on what defines a circular economy, application of circularity principles in products, processes, practices, and operations has the potential to incrementally guide society towards a more sustainable future, so we can work towards achieving positive global net sustainability over time.

This article originally appeared in the Forbes blog on August 9, 2021.