In the Circular Economy, Products Are Designed to Be Recycled

(Bloomberg) -- Take, make, use, dispose. For decades, this has been the standard approach to production and consumption. Companies take raw materials and transform them into products, which are purchased by consumers, who ultimately toss them out, creating waste. But as warnings about climate change and environmental degradation grow ever louder, people are starting to challenge the sustainability of this model. Many business leaders and governments — including China, Japan and the U.K. — argue that we should ditch this linear system in favor of a so-called circular economy of take, make, use, reuse and reuse again and again.

1. What’s wrong with the linear economy?

It often leads to a system that is inefficient, costly and depletes natural resources. The mining of commodities from gold to coal can spoil ecosystems and disrupt nearby communities. Making steel from ore requires a large amount of energy, which produces Earth-warming carbon dioxide. A byproduct of the linear model is material waste, which takes up space and may include contaminants. Trash ends up in undesirable places. The so-called Great Pacific Garbage Patch is only the most well-known example of global-scale plastic pollution. Yet products like steel and plastic can be reused, refurbished and recycled to capture untapped value. A totally circular economy — with no waste and no new materials at all — is likely impossible to achieve, but squeezing the maximum waste out of the system could curtail use of new resources.

2. Sounds like recycling. How’s it different?

The two ideas are connected, but they’re not the same. The phrase “circular economy” pops up in the work of a few resource economists dating back at least to the 1980s. Its use in recent years has come to connote an approach that’s more systemic and ambitious than recycling. For example, to maintain quality, plastic bottle makers need to blend recycled plastic with virgin material. Instead, a truly circular economy would involve no new material inputs at all, reducing emissions, waste and eventually costs. Some industries are already coming close to this — almost all of a car can be reclaimed, for example. But some have far to go — 97% of the materials used to make clothing are brand new, and 73% of these products are incinerated or put into a landfill. This isn’t a totally new idea — the slogan “make do and mend” was popularized during World War II to encourage as little waste as possible.

3. Is anyone skeptical?

Yes. Making a production cycle fully self-sufficient is virtually impossible. Some new input will always be necessary, and some waste will always be created. Recycling paper over and over, for example, produces paper of increasingly low quality. Also, building a circular economy can entail high upfront costs, requiring investment to redesign products and switch to recycled materials. The U.K. estimates the cost of shifting to a circular economy to be about 3% of gross domestic product. The expense can feed concerns that companies will go for quick fixes rather longer-term sustainable practices.

4. What is feasible?

A more circular supply chain. This can mean changing to recycled materials, extending the life-cycle of a product and improving recovery at the end of its life. New Jersey-based TerraCycle Inc. has launched the “Loop” initiative, a collaboration with household names such as Nestle SA to provide common products — ice-cream for example — in packaging that can be returned and refilled. There is a multinational push by General Motors, BMW, and Toyota to create an aftermarket for used electric car batteries, which can be used for chilling beer at 7-Eleven convenience stores in Japan or banking solar energy in Cameroon. And New York startup Rent the Runway Inc. offers designer dress hire for events like weddings and galas, allowing clients to dodge one-wear purchases, while earning the company a $1 billion valuation.

5. What are governments doing?

They’re trying to push consumers and producers toward a more circular economy. The German government offers grants to design products that have a lower environmental impact or are cheap to repair. In Chile, the government said it will aim to make all plastic reusable. The Netherlands is investing $40 million in a special fund that will start financing deforestation-free agriculture, to be matched by a donation from Rabobank Group. The European Commission has a circular economy action plan, which includes transforming the way plastic products are produced and recycled. It’s also part of China’s five-year plan.

The Reference Shelf

• A Bloomberg panel of experts decodes the circular economy, along with other ESG buzzwords.
• A QuickTake on sustainable fashion and another on the challenges of recycling.
• The European Union’s circular economy action plan.
• The Ellen MacArthur Foundation’s website on the circular economy.
• Reports by the World Economic Forum and McKinsey on the circular economy.
• An academic article on the limits of the circular economy.

--With assistance from Emily Chasan.

To contact the reporter on this story: Emma Vickers in New York at evickers4@bloomberg.net

To contact the editors responsible for this story: Leah Harrison Singer at lharrison@bloomberg.net, Melissa Pozsgay, Reed Landberg

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