This is an extended version of an opinion piece written by Dr Rob Hales for the November edition of the Queensland Business Monthly magazine, in The Courier Mail.
What is an economy? Not many people ask this question. Most people just go about their lives buying things or paying for experiences and exist inside an economy defined by where it is and how many things and experiences are exchanged.
If the economy was a person the continual increased exchanges of good and services may indicate increasing financial wealth but has nothing to do with the health of that person. When we ask a person how they are we don’t expect to hear the person give us a number indicating the amount of financial exchanges they have had. We expect a type of answer about the quality of their life at that moment.
Increasingly there is a growing number of people (consumers and producers) who want to know about the quality of their economy. They want to know more about where the stuff comes from. They want to know how to maximise the social benefits to other people both locally and far away. They want to know how to minimise impact on their environment. The take-make-use-waste linear model of production and consumption is being challenged. Enter the idea of the circular economy.
The circular economy is a practice based concept developed by industry and environmental leaders. The circular economy is an economy constructed to maximise the materials and energy benefits of economic exchange through adopting cyclical materials flows using renewable energy sources and cascading1-type energy flows. A more circular economy limits the linear throughput of materials and energy and thus more closely links economic cycles to ecological cycles. In other words an economy more like nature.
Most people think of recycling when the circular economy term is used. But recycling is only one part of the system and it’s the last resort in keeping materials (stuff) in the circular system of production and consumption.
The scientific community has been talking about a more ecologically based economics for some time now and have used different concepts to promote thinking around different ways to construct and economy that is less linear. Some of the terms for it are industrial ecology, industrial ecosystems, industrial symbioses, cleaner production, closed loop production, circular manufacturing systems, product-service systems, eco-efficiency, cradle-to-cradle design, biomimicry, resilience of social-ecological systems, the performance economy, natural capitalism, industrial ecosystem and the concept of zero emissions.
So what are the economic benefits of a circular economy? If things are used many times before they are reused, shared, repurposed and eventually recycled there is an economic benefit as more people gain from each exchange.
So the value of the thing is increased. Increasing the number of times things are used has economic benefits. There is reduced costs for raw materials extraction and less energy costs. Jobs are created through reuse, sharing, repurposing and recycling
There is a reduction in waste costs. Carbon emissions are reduced. The circular economy can help reduce the cost of climate change as there is considerable energy used in the linear system. With growing green consumer sentiment there are new markets for green products.
Circular approach to business activity from a firm’s point of view is a smart business strategy. It can save money.
The most economic benefit in the circular economy circles come from the inner circles. These are the product reuse, sharing, manufacturing and refurbishment. These activities demand less resources and energy than recycling.
More advanced practices of circular business models recognise society needs to regenerate in all dimensions of sustainability: economic, social and environmental. So business who embrace more advanced circular economy models aim to have a net positive impact in the world. Many global and local indicators point towards the need to adopt a more regenerative sustainability.
If the circular economy is a much better way of doing business for the people and the planet why is this type of economic activity more common? It’s difficult for an individual company to be an economy so groups of businesses along supply chains and groups of local businesses need to collaborate to create more circular systems. Government incentives and policies can facilitate more collaborative businesses.
Leadership for a circular economy needs a collective approach.
Dr Rob Hales is the Director of the Griffith Centre for Sustainable Enterprise
Transformative Circular Economy course
The Griffith Centre for Sustainable Enterprise and Coreo has developed an innovative leadership program which addresses the problem of collaborative leadership for the circular economy.
The executive education course for Transformative Circular Economy provides practical tools for business leaders to assist the shift towards circular business models. The next course is in January 2020.