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27 January 2018

The Circulatory Gap

Tag(s): Sustainability
This week the great and the good and the hangers on descended on (or ascended to) Davos in the mountains of Switzerland for the annual World Economic Forum. The press, partly because so many of them attend, always get excited about this jamboree though there is rarely any significant outcome. This year they have been particularly feverish banging on about the number of heads of state in attendance among whom at least one well known newspaper mistakenly included Theresa May. If Her Majesty the Queen takes any notice of these shenanigans she might have been offended but I suspect she is more interested in the forthcoming marriages of two grandchildren and the births of two great grandchildren. These are the kind of events which most interest my wife and me these days.

But there was one announcement at Davos which should have grabbed headlines, though I certainly did not see any. An organisation called Circle Economy published a most interesting paper: The Circularity Gap Report. With contributions from the United Nations, companies like Philips and Accenture, and respected academics this tries to show how much of the resources we use are used again. This is not so much about recycling as attempting to stop extracting; stop wasting; optimise what we already have as well as cycling more and better. The gap is massive, of which more later.

It should be clear to everyone, including some of the numbskulls at Davos, that the world is in crisis. 2018 began with an alarming message from the new Secretary-General of the United Nations, António Guterres. In his “Red Alert for the World” he says it has gone into “reverse” in many ways in the past 12 months. He challenges us all to: “Narrow the gaps. Bridge the divides. Rebuild trust and bring people together around common goals!”

In some ways the world has made substantial progress in recent decades with millions, even billions, coming out of poverty, and despite a constant backdrop of regional conflict, and terrorist outrage, actually the world has seldom been so peaceful. But this progress has been achieved by following the linear economy. Tremendous living standards, wealth and comfortable lives have been delivered to many people, but at exceptionally high cost. That cost continues to be extracted from the earth, and many of the people on it, with neither the gain nor the pain distributed equally. In a world of inevitably limited resources with continued rapid population growth and widespread urbanisation, that flawed linear model is no longer fit-for-purpose.

Circle Economy believes in a future in which we do not have to compromise to achieve economic, social and environmental prosperity. It takes nature as its mentor and seeks to work alongside businesses, cities and governments to identify opportunities to make the transition to the circular economy, and provide a powerful combination of practical and scalable solutions to turn these opportunities into reality.

Before mankind arrived on the Earth it was already functioning in a fully circular manner. The cycle of life is a familiar concept even to young children. In the natural world, the infinite cycling of the ecosystem means there is no such thing as ‘waste’, which is essentially a human construct.  But with the Industrial Revolution, mankind has itself become a geological force for the first time in history. This has led to human-made climate change caused by the burning of fossil fuels, with consequences including rising sea levels, the prospect of the mass extinction of species due to ever–expanding urbanisation and non-sustainable agriculture.

Momentum is building towards adoption of circular economic models. Several countries such as Italy, Slovenia and others have adopted country-wide circular economy road maps. Central to these is the ambition to tackle two of the main negative effects of a linear model: waste and excessive extraction of primary resources. Circular thinking is also critical to aspirations around climate change.

This new thinking literally requires us to think in new ways. I know that sounds circular, but consider that by definition managing an economy is the art and science of how we run our global household[i]. An economy should be designed and run to the needs of the participants of the household, provide stability, keep societies together and the household going for future generations. This will not be easy. Change is tough, but a necessary choice, if we hope to bridge the circulatory gap and progress to a more sustainable, resilient and fulfilled society.

The Circularity Gap Reports aims to deliver the following contributions:
  1. Launch of a global circulatory metric that measures the state of the world economy.
  2. Provision of high level insights into the global metabolism.
  3. Identification of key levers for transitioning to circularity at a global level  by mid-21st century, as well as ‘inconvenient truths’ with potential to form system blockages.
  4. Formation of a global, cross-sector group of stakeholders from academia, businesses, NGOs and governments that will input and convene an authoritarian annual report on the circular state of the global economy and measure progress towards its implementation.
Material extraction has fuelled economic growth since the Industrial Revolution. Over the last four decades the global use of materials, excluding water, has almost tripled from 26.7 billion tonnes in 1970 to 84.4 billion in 2015. The International Resource Panel (IRP) forecasts that by 2050 material use will amount to between 170 and 184 billion tonnes. This is party driven by rising prosperity. Since that is desirable it is vital to separate growth from material extraction. Examples of progress in circularity can be found in some newer business practices such as the shift from selling products to the delivery of services, whereby the producer remains incentivised to cater and budget for repairability and end-of-use value.

Circularity is not the same as ‘closed-loop’ as there is always loss of material quality or quantity in the process of recycling. Nor are small incremental improvements sufficient. We need to do fundamentally better, not fractionally less bad. For example, policy efforts on automotive transportation have focussed a lot on reducing emissions per kilometre. These policies led to lightweighting of vehicles, plus cleaner and more efficient engines. But most cars stand still 95% of the time.[ii] Moving to different modes of transportation such as car sharing represents fundamental redesign operations.

Circle Economy has mapped seven elements of the Circular Economy in an attempt to propose a common language:
  1. Prioritise Regenerative Resources: Ensure renewable, reusable, non-toxic resources are utilised as materials and energy in an efficient way.
  2. Preserve and Extend What’s Already Made: Maintain, repair and upgrade resources in use to maximise their lifetime and give them a second life through take-back strategies, where applicable.
  3. Use Waste as a Resource: Utilise waste streams as a source of secondary resources and recover waste for reuse and recycling.
  4. Rethink the Business Model: Consider opportunities to create greater value and align incentives through business models that build on the interaction between products and services.
  5. Design For the Future: Adopt a systemic perspective during the design process, to employ the right materials for appropriate lifetime and extended future use.
  6. Incorporate Digital Technology: Track and optimise resource use and strengthen connections between supply-chain actors through digital, on-line platforms and technologies.
  7. Collaborate to Create Joint Value: Work together throughout the supply-chain, internally within organisations and with the public sector to increase transparency and create shared value.
One major challenge is to enable developing nations to gain prosperity while not exacerbating the Circulatory Gap. But at least they have the opportunity not to adopt the linear models followed by the developed nations. The latter have the greater challenge of fixing an inherently, broken, linear, system while sitting on vast accumulated stocks, poorly insulated buildings with no possibilities for significant reuse of building materials, a waste processing system focussed on landfill or incineration and a dominance of privately owned vehicles for urban transportation, mostly dormant in resource wasteful garages, or causing obstructions on public roads. Here are the key societal needs and consumables that represent the largest material footprint globally:
  1. Housing and Infrastructure: 42.4 billion tonnes required annually for construction and maintenance of houses, offices, roads and other infrastructure, especially in the developing world.
  2. Nutrition: Agricultural products such as crops and livestock require 21.8 billion tonnes. Food products have short life cycles, being consumed quickly after production.
  3. Mobility: The materials to build vehicles like cars, trains and aeroplanes plus the predominantly fossil fuels burned to power them add up to 12 billion tonnes.
  4. Consumables: 9.1 billion tonnes ranging from mobile phones to televisions; cleaning products to refrigerators; clothing and grooming products to paints generally have short to medium lifetimes. Textiles including clothing also consume many different kinds of resources, both natural and synthetic materials, dye pigments and chemicals.
  5. Services: The delivery of services to society ranges from education and public services to commercial services like banking and insurance. The material footprint for professional equipment, office furniture, computers and other infrastructure is comparatively modest at 4.4 billion tonnes.
  6. Healthcare: Healthcare services are increasing owing to an expanding, aging and on average, more prosperous population as well as progress in what drugs and other treatments are available. Resources include capital equipment like scanners; pharmaceuticals and disposables; hospital fittings and home care equipment. These total 2.3 billion tonnes.
  7. Communication: Communication and connectivity is provided by a mix of equipment and technology ranging from personal devices to data centres. Intelligent use of such technology may aid the circular economy but there is a regrettable tendency to overlook the considerable footprint of the internet itself. It is not a virtual system in the sky but a massively growing fleet of servers and cables burning mainly fossil fuels. Circle Economy assesses this as 1.7 billion tonnes but I think they underestimate it for this reason.
It is then possible to track how resources are extracted, processed, produced and provided to be used and consumed. 36 billion tonnes are added to stock. At the end of use 51.9 billion tonnes of the total footprint of 92.8 billion tonnes are dispersed or emitted. 13 are wasted and a further 14.5 wasted from stock. Only 8.4 billion tonnes are cycled through water treatment, land applications, biogasification, recycling and composting. Thus just 9.1% of the total material footprint is fully cycled. [iii]

Based on this analysis four fundamental dynamics of a circular economy can be identified – the first two describe the objectives while the latter two are the means to progress.

Objective 1: Resource extraction from the lithosphere is minimised and biomass production and extraction is regenerative.
Objective 2. The dispersion and loss of materials is minimised meaning all technical materials have high recovery opportunities, ideally without degradation and quality loss; and with emissions to air and dispersion to water or land prevented.
Strategy 1: Utilisation of stocks is optimised which means current stocks-in-use such as buildings and machinery are employed to their full potential with most material in active use, limiting the stocks temporarily not in use (hibernating), or mobilising materials to reenter the economy (urban mining); plus
Strategy 2: Material cycling for reuse is optimised requiring improved collection infrastructure and wide-scale adoption of best-available technologies for (re)processing of resources.

The value of 9.1% for the circularity metric suggests a significant circularity gap of more than 90%. This analysis is no doubt simplistic and the chains analysed highly complex. But it is helpful to at least understand the size of the problem. It’s also clear that while achieving a fully circular economy should be possible, under current global economic trends and available technology this is true only in the long run. There are three primary reasons for this:
  1. We are still building up our stock of rare materials, mostly rare earth materials, required for the more innovative and sophisticated products we use.
  2. Emerging and developing economies are still accumulating their stock of built-environment assets and infrastructure, and should be enabled to continue doing so.[iv]
  3. Our technical capabilities are insufficient to fully close the loop and in many recycling processes there are still losses in material quality and quantity.
Finally, the report proposes four steps to take in bridging the circularity gap though leadership and action:
  1. Build a global coalition for action, comprised of front-running businesses, governments, NGOs and academics that will input and convene an authoritative annual report on the circular state of the global economy and measure progress towards its implementation.
  2. Develop a global target and action agenda by working with all relevant stakeholders to agree clear goal-setting and alignment with the United Nations Sustainable Development Goals and emission-reduction targets.
  3. Translate global targets into local pathways for circular change taking big-picture directions and interpreting these for nation states, individual sectors, supply chains, regions and cities to embed strategies in their specific context and align with incentives and mandates.
  4. Improve our understanding of how different levers for circular change affect aspects such as material saving value retention and climate mitigation. Also consider fully the dynamics of international trade and employment, plus implications for education, training and future skills, both for young people today and the next generations of tomorrow.
While, as I said, I have not seen newspaper headlines in the press about this report I have seen some useful commentary. One comment that particularly caught my eye was the following:

“The twentieth century was ruled by the metric of money, which demanded endless growth. This century calls for new metrics – natural and social – that enable humanity to thrive within the means of the planet. This fascinating report presents just the kind of powerful numbers needed to start making that new economy real.”

Kate Raworth, Senior Visiting Research Associate at Oxford University’s Environmental Change Institute and Senior Associate at the Cambridge Institute for Sustainability Leadership.

[i] The etymological derivation of the English word ‘economy’ is two words in Ancient Greek: ‘oikos’ meaning house and ‘nomos’ meaning law, hence economy = the laws of the household.
[ii] This suggests that the average car is used just over an hour per day. I calculate that on average mine is only used for about a third of that.
[iii] Flow numbers are from 2015. Material stocks represent accumulated stocks between 1900 and 2011.  
[iv] I suspect the Report states this for political reasons as it had previously suggested that developing countries have the opportunity to jump to a circular system without following the linear route. An example of this is in many developing countries mobile phone installations have been prioritised over fixed wire networks with their huge infrastructure implications.
Source: The Global Circularity Gap Report

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