What is the circular economy and where is it headed?


Take, make, use, throw away. For decades this has been the standard approach to production and consumption. Businesses source raw materials and transform them into products that are purchased by consumers. Consumers end up throwing them away, ultimately creating waste in landfills and oceans. Concerned about climate change and environmental degradation, people are challenging the sustainability of this linear model and calling for a so-called circular economy.

1. What’s wrong with the linear economy?

It often leads to systems that are inefficient, costly and deplete natural resources. Mining for commodities from gold to coal can ruin ecosystems and disrupt communities. Making steel from ore requires a lot of energy and produces carbon dioxide that contributes to global warming. A by-product of linear models is material waste, which takes up space, can contain contaminants, and threatens biodiversity. Trash ends up in unwanted places: Scientists this year reported the first discovery of microplastics in human blood, but their dangers to public health remain unknown.

2. Is the circular economy the same as recycling?

The two ideas are related, but the circular economy is more systematic and ambitious. Most recyclable products in a linear economy can only be downcycled. This means that each new life cycle degrades quality and eventually becomes waste. A true circular economy requires no new material input, reducing emissions, waste and ultimately costs. Some industries are already approaching this. For example, almost any car can be salvaged. Other industries, such as fashion, are still a long way off. Every second, the equivalent of trucks full of clothes are buried in landfills or burned. A circular economy not only improves the recycling system, but also educates people about consumer habits. This is not a new idea. During World War II, the slogan “make do and rend” became popular to encourage leaning as much as possible.

3. Do you have reason to be skeptical?

many. It is virtually impossible to make the production cycle completely self-sufficient. It always requires some new input. Some waste is always created. Critics say the environmental impact of the circular economy is difficult to measure. The concept of a circular economy can mean anything from improving recycling systems to using technology to streamline the sharing economy. Building a circular economy also requires high initial costs as organizations invest in more technology and educate their employees and consumers to adapt to new habits. There are concerns that long-term sustainability is becoming more difficult to achieve as companies develop circular systems in only part of their operations. Some say the circular economy will only delay the negative environmental impacts of the linear economy.

Investing in a more circular supply chain. This means switching to recycled materials, extending product lifecycles and improving recovery at the end of product life. Companies such as SC Johnson & Son Inc. and Unilever Plc are developing refillable packaging for detergents and laundry detergents. Siemens Gamesa is installing the first wind turbine with recyclable blades in Germany. BlackRock Inc. operates a circular economy fund that allows investors to support companies transitioning to the new model. As of August, the fund manages approximately $2 billion in assets. Consumers have a primary responsibility for helping organizations transition to a circular economy. In recent years, with the resurgence of vintage and antiques, more and more consumers are recycling their clothing and furniture.

5. What does the government do?

They are making cross-border commitments and developing action plans to encourage consumers and producers to move towards a more circular economy. In March, 175 countries began negotiating a binding agreement to end plastic pollution. Countries such as Canada have banned single-use plastics such as plastic bags, cutlery and straws, encouraging stores and restaurants to invest in eco-friendly solutions. The European Commission adopted a new circular economy action plan in March 2020. At the regional level, Amsterdam’s Sharing Economy Action Plan has helped create startups such as his LENA, a ‘fashion library’ where consumers rent luxury goods for a monthly subscription fee. old clothes.

• The Ellen MacArthur Foundation website on the circular economy.

• Bloomberg NEF Oil Survey on Global Consumption of Plastics.

• Articles on the challenges of circulating fashion.

• Bloomberg expert panel deciphers circular economy and other ESG buzzwords.

More articles like this are available at bloomberg.com.

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