Potentials and Challenges of the Circular Economy
The circular economy profits from the currently unused resources, which are called waste. This economic potential is estimated by the Ellen-Mac-Arthur Foundation to be roughly 380 billion USD per year in Europe alone. 1 Additionally, jobs with low academic requirements are created by the infrastructure needed, including collection, disassembly and repair of goods. 2
Circular approaches reduce the risk in supply and therefore increase the independence of resource prices and its fluctuations. Furthermore, energy and resources are saved by avoiding the new production of products, components and materials. 3
Reducing the environmental impact helps businesses to adhere to governmental regulations and to create a green image. Companies, which focus on the implementations of circular approaches early on, will adjust quicker to upcoming stricter regulations regarding landfill and greenhouse gases and use these new requirements as a chance for innovation and economic growth. 4
Van der Laan defines the potential of a circular economy as follows:
Reducing costs by gaining a broader customer market, cheaper resources and a decreased risk. 5
Adhering to governmental regulations and ‘green’ marketing. 4
Increased customer satisfaction and bonding due to increased quality of products and service. 4
Availability of data regarding quality, lifetime, user behaviour and customer satisfaction. 6
A circular business model requires a fundamental change in the linear thought processes of a company. The awareness and understanding of holistic systems and the way processes and components influence each other has to be strengthened. Systems are usually not linear, but complex and with various feedback loops which result in unexpected reactions. Flexibility and adaptability are therefore necessary for dealing with such systems. 1
Hiring and renting business models shift the ownership from the consumer towards the producer and reward quality and durability. This is especially important because traditional business models create an incentive to decrease the life time of products to increase sales. This is called planned obsolescence and results in designs, which actively inhibit durability, standardizing and easy disassembly and repair. This is prevented by shifting the ownership to the producer. 7
An additional challenge is the small price difference in between new and used products and resources. Reducing the costs of the infrastructure needed for return, quality control and recycling could increase this gap and therefore the incentive to implement circular approaches. Modular design, which facilitates repair, upgrades and exposure of components could reduce the cost for processing and reusing while standardizing parts would enable their reuse in new applications. 3
To implement each of these approaches a smooth communication between the stakeholders in the products life cycle is necessary. Designers, producers, distribution businesses, customers, repair, reuse and recycle companies have to talk to each other and provide information to optimize the use of the material. 8
Furthermore, the compliance of waste and trade agreements has to be considered. To prevent illegal export and deposit of waste, the Organisation for Economic Co-operation and Development (OECD) stated, that cross-border transports of waste have to be notified, identified and controlled. The United Nations Environment Programme (UNEP) enforced this with the basel convention, an international environmental agreement on wastes. 9 In the EU transboundary waste shipment are governed by Regulation (EC) No. 1013/2006 on shipments of waste (VVA), which subdivides it in green, yellow and illegal waste. 10
These regulations are definitely a positive development, but it also classifies used products and materials as waste, which restricts their freedom of trade and transport. Clear definitions for reused products, components and resources are therefore vital to facilitate transboundary trade. The CE-labelling, which enforces the compliance of quality- and security standards in the European Community, is a step in the right direction. 11
The lack of definitions for products and approaches of the circular economy results in ambiguities governmental, business and academic environments. This can be exploited e.g for marketing reasons when substituting words like ‘reuse’ for ‘recycling’. 2
The previously outlined potentials, challenges and requirements are summarised in the following graphic.
References
1 Ellen MacArthur Foundation: Towards the Circular Economy 1 - Economic and business rationale for an accelerated transition. Cowes, UK: Ellen MacArthur Foundation, 2013
2 Parkinson, H.J.; Thompson, G.: Analysis and taxonomy of remanufacturing industry practice in: Proceedings of the Institution of Mechanical Engineers, Part E: Journal of Process Mechanical Engineering. Manchester, UK: University of Manchester, 2003
3 Reith, Sören: Einfluss der direkten Zweitnutzung energieintensiver Materialien auf die Energiewirtschaft - Masterthesis am Institut für Industriebetriebslehre und Industrielle Produktion Karlsruhe. Karlsruhe: KIT, 2011
4 van der Laan, Erwin Dr.: Environmental and customer value - Environmental and Customer Value in: Online-Portal: Youtube. URL: https://www.youtube.com/watch?v=Hr23VdW9mNQ (besucht am 07.07.2016). Archived by WebCite® http://www.webcitation.org/6ioqEW90x. Rotterdam: Erasmus University of Rotterdam, 2015
5 van der Laan, Erwin Dr.: What it takes to close loops - CircularX_2015_2_1_Key_Erwin OLD in: Online-Portal: Youtube. URL: https://www.youtube.com/watch?v=C1SnosZ-lJI#t=61 (besucht am 07.07.2016). Archived by WebCite® at http://www.webcitation.org/6ioouus3t. Rotterdam: Erasmus University Rotterdam, 2015
6 van der Laan, Erwin Dr.: Informational Value - CircularX_2015_2_4_in_Erwin_3 OLD in: Online-Portal: Youtube. URL: https://www.youtube.com/watch?v=BFYk-nuSzU8 (besucht am 07.07.2016). Archived by WebCite® http://www.webcitation.org/6ioqVZegn. Rotterdam, Netherlands: Erasmus University of Rotterdam, 2015
7 Circular Advantage - Innovative Business Models and Technologies to Create Value in a World without Limits to Growth. Dublin: Accenture, 2014
8 Deutsches Ressourceneffizienzprogramm (ProgRess) - Programm zur nachhaltigen Nutzung und zum Schutz der natürlichen Ressourcen. Bundesministerium für Umwelt, Naturschutz, Bau und Reaktorsicherheit (BMU), Berlin: 2012
9 Grenzüberschreitende Abfallverbringung. In: http://www.umweltbundesamt.de/themen/abfall-ressourcen/grenzueberschreitende-abfallverbringung#. (Abruf: 19.07.2016) Archived by WebCite® at http://www.webcitation.org/6j7BzT72r. Dessau-Roßlau: Umweltbundesamt, 2016
10 Verordnung (EG) Nr. 1013/2006. Brüssel: Rat der Europäischen Union, 2006
11 Steps taken to eliminate barriers to the circular economy. Brüssel : European Commission, 2016. URL: in: https://ec.europa.eu/environment/ecoap/about-eco-innovation/policies-matters/steps-taken-eliminate-barriers-circular-economy_en. (Abruf: 15.11.2013) (Archived by WebCite® at http://www.webcitation.org/6ifecDKka)
