Circular economy, the sequel

In my latest blog I elaborated some insights on the Circular Economy, let’s say some of it’s principles. This brought on the next question by Helene Finidori in the ongoing discussion on ‘revolutionary thinking on economics’ (linkedIn Group: Systems Thinking World):

“Douwe, thanks your blog. How do you see the circular aspect of finance? And the governance of “resources [as] a common good. So a “fee for use” can be introduced. This brings interesting options for financing.” I think that if we manage to express the circular economy (with its idea of replenishment if this idea does exist in your perspective, you do not mention it in your article) in a way that encompasses the finance and commons aspect of it, we will have progressed a bit… In other words, how can you describe the circular economy in a way that it fits the transition?”

This, and some other comments, made me think on these issues: how does the valuechain get it’s fundaments? Also the question on how to percieve the notions of Good and Bad came forward.

Since my focus is that  the circular economy must be seen from a systems perspective, I would suggest to skip the notion of ‘good’ and ‘bad’. These are used far to often in the sustainability debates , making it to a ‘moral’ issue. Nature and systems do not know the concept of morality, we, humans, tend to overcompensate this: we do know these morality-concepts and exagerate the use of them. Still it are notions that help ‘us’ to see what is better or worse. So a few elaborations on these issues:

Let’s start to look again to the feedbackloops in the Circular Economy and the fundamental changes they bring:

- change of ownership from consumer to producer gives a short feedbackloop. The products with poisones materials come back in their own system, products not fit for disassembly come back and bring loss of valuable resources: so innovation is to be preferred because of selfinterest for the producers;

- agreements based on product-service combinations (=performance) show the producer directly where they can anhance the quality of performance, the benefit is there immediately (as Philips saw at our office and they changed/re-arranged the lightconcept: 60% efficiency in use of electricity was achieved without loss of performance: Philips benefits, because they have less costs on electricity);

- resources keep their economic value based on the day-value of achievement: when the producers is able to use them fit for re-use, the value is kept. This is a direct value for the producer and a strong feedbackloop.

There must be more examples. But I hope that I made my point: the circular economy has more systems characteristics than the ‘old’ linear economy. That is why discussions on the linear economy focus on achieving efficiency (making things a bit better) and become very difficult. The circular economy is based on a systemsperspective, is a fundamental change (transition) and has hughe incentives for as well the producers as for the users (former: consumers).

Bad: non-efficient and non-effective, as Michael Braungart of Cradle to Cradle characterizes it. This is where we need laws and regulations, to safeguard a healthy life for all. This is not different in a linear or circular economy. This is the role of governments, our common guardian: though in many places around the world they seem to have another agenda…

good: not just efficient (because efficient is ‘less bad’), but we need to strive for effectiveness. This fits to the general definition of ‘good’: “any benefit, increase in resources, possibilities and outcomes that do not generate an externalized bad or harm”. I would say even stronger: outcomes that are benificial for healt of all people and ecology.

The externalized costs should be part of the responsability that producers have, maybe just a new meaning of the ‘polluter pays’ principle. That could be a change in governance: taxes on declining of value.

Perpetual growth? Yes, we will see growth, at least in quality of life and performance of products. The question is whether it will take more, more and more virgin resources/materials. Products have an increasing shorter lifetime of use: the old telephone worked for 40 years or more, nowadays we strive for the newest phone as soon as it is marketed with new gadgets/apps. Is this a bad thing? Yes, as long as the producers don’t care about design for disassembly and even don’t have an interest in your ‘old’ phone: why does Apple not use a TurnToo way of trading? see www.turntoo.com. If they would, it will just be energy and labour as basics for the new product: both no problem. No problem? No, energy is around in overwhelming amounts, thanks to the Sun and we like to see people have labour.  So, growth will be there in terms of quality at least for the western markets and partly for the emerging markets in the BRIC-countries. The real developing economies will tend to ‘classical‘ growth, I assume. This brings the question: can we stop growth? or Do we want to stop growth? I would say that, just like in nature, mankind will keep striving for more diversity and quality of life. Are we able to adjust this proces from quantity-oriented to quality-oriented? As we know from natural processes growth will mean quantity before quality (diversity/resilience) comes in.

Does this give an answer to the stated issues? No, not really, because we (or maybe just me) are just starting to grasp what the transition to a circular economy really means. Let’s keep the discussions going!! We need to learn much, much more!

for some background publications, see:
www.circulareconomy.com

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