Back to the future
The circular economy is happening. Again.
It’s finally happening; 2021 will be a great year for circular businesses. The green policy framework of the EU is impressively redesigning incentives and regulations. The new president of the USA has sustainability high on the agenda. Change the incentives and metrics, and the business strategies will follow. As a part of the WasteIQ team, I have been working a lot with the digital transformation of business models in waste management. I clearly see the industry discussions maturing. Leading players in Europe are now seriously transforming their value chains and business models, and forming new networks like the Nordic Circular Hotspot. The circular economy is no longer a theory; it is a set of specific business practices within a renewed policy framework. We have, at last, acknowledged that value creation happens in physical reality. The numbers in spreadsheets-as-we-used-to-know-them are biased simulations. They mirror a logic where we got the costs and rewards all wrong.
Rewind is the new Fast Forward.
In the discussions about sustainability, we sometimes tend to frame scarcity and limitation as concepts recently discovered by humankind. Many use “circular economy” as an ideological buzz-term describing a future utopia created by a sudden and groundbreaking system shift.
Gentle reminder: The loop is already invented. The concepts of reuse, repair, and recycle have been around since the dawn of humanity. During the first wave of industrialization, the ideal for the booming cities was actually closed-loop resource management systems. “In industry, there must not be any actual scrap, and everything must be used either for the industry itself or agriculture,” the hygienist Henri Napias summarized in 1882. The indigenous people of The Amazonas invented biochar, a process now being turned into an industry. Composting and the use of food waste as fodder have always been associated with human settlements. Access instead of ownership, the so-called collaborative consumption, has been around since we were gatherers and hunters.
Much important knowledge got lost in the brave new world of fossil hydrocarbons, chemical engineering, bytes, and electrons. Being a circular entrepreneur should not primarily be associated with developing new and shiny tech. The primary challenge is related to rethinking business models and rediscovering, modernizing, and scaling existing processes. Many of the techniques, materials, or services are known and readily available. In the linear economy, secondary resources usage hasn’t been rewarded. This market failure is now finally addressed.
A contemporary problem
Our book “Industry 4.0 and Circular Economic”, published this fall, shows how the extraction mindset is a modern cultural construction. The industrial processes, the abundance of minerals, and fossil fuels created a collective illusion of mass. Sustained economic growth without regard for resources and ecosystems is a straightforward stupid idea that guided us for around 120 years. During this period, our exploitation capacity increased exponentially, with the curve steepening dramatically for the last 50 years.
To put the contemporary nature of the challenge in perspective: My daughter was born in 2006. She is 14 years old. In her lifetime, we produced more than half of the plastic ever made. We also created thousands of tons of new complex composite materials with no end of life strategy. We depleted the readily available ores of many rare earth minerals and changed large portions of the earth’s surface by turning vast areas of diverse, bio-productive ecosystems into monocultures.
The exponentially growing capability of destruction makes the ongoing shift urgent. Many of us are born into a mindset shaped by path dependency and ignorance, and we forget that the linear discourse is a new thing. In future history books, the unrestricted and unregulated consumer capitalism of the 20th century will be considered an anomaly. The economists will study the linear business models and value chains; they will discover the lack of regulations and wonder, “what the hell were they thinking?”. Hopefully, they will also identify the pioneers in business and politics, which challenged the paradigm and rewired the incentives.
Bending the tracks
The circular economy has become a much-needed tagline for the renaissance of sanity. We are finally, again, realizing that the economy is not the art of accelerating exploitation but of getting the most out of available input factors. The term is a signpost directing the way to a new school of economic thinking. This slogan can mobilize consumers and serve as a strategic compass heading towards an economy that is more compliant with planet Earth's physics.
What led us astray was a series of breakthroughs: The mechanization of extraction, the scientific insights of geology, the discovery of petroleum resources, the invention and industrial scaling of the combustion engine, electricity, communications technology. Mass media marketing and the concept of planned obsolescence, introduced after the stock market crash in 1929, made consumption a more critical growth driver than efficiency.
The challenge now is to embrace the opportunities like industrialists before us, bend the tracks by building better alternatives. Business models and technology are mere tools that can help reestablish efficient resource management to be the primary measure for development. Building a better future is hard, practical work. For the circular value chains to thrive, we need to drive down marginal costs, boost scalability and challenge the regulatory framework. Step by step, sector by sector, we need to make sustainability a primary differentiator. Circularity is gained by a series of big and small changes, and over time this development will create the tipping points needed to shift the system. Over the coming years, this new framework will affect millions of businesses and, more importantly, the intersection between them.
Collaboration is key
The challenge of a circular economy is almost identical to the challenge of creating industry 4.0 ecosystems. We need collaborative strategies to integrate value chains and generate transparency across multiple stakeholders. There is no room for predatory zero-sum logic in the networked and mutually dependent circular systems. The Nordic countries share a collaborative mindset, and it is uplifting to see how industry leaders in our region now pave the way. The people laying out the new tracks are not conventional economists but people working hands-on with business development. They are biologists, chemists, designers, process engineers, business developers, industrial ecologists, retailers. Like the geeky programmers of the nineties demonstrated the potential of the world wide web, the people concerned with the possibility of specific materials and products are right now prototyping the solutions that will hopefully shape our future.
