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The Fundamentals Of a Circular Economy

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Currently we are living in a linear “take-make-use-dispose” economy, which essence lies in creating economic growth through the exploitation of resources and raw materials from earth in order to manufacture products that are subsequently used and then discarded. Although, this economy has been successful in creating a better life for a part of the globes population, this industrial system was and partially still is based on the misconception of an infinite amount of available resources.

This erroneous belief dates back to the industrial revolution, where humans started to interpret the world as a comprehensible, foreseeable and controllable machine. This microscopic view, where a machine can be analyzed and explained by its different individual parts and small details, fails to consider systemic impacts of complex systems, whereas a multitude and high variety of elements interact with each other. According to KPMG International, this has resulted to at least 10 heavily interlinked Megatrends and externalities; wealth, food security, ecosystem decline, deforestation, climate change, energy & fuel, material resource scarcity, water scarcity and urbanization. These trends are partially due to negative social and environmental impacts (externalities) that were not considered by the microscopic, machine view of our linear economy.

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Systems thinking on the other hand, emphasizes the macroscopic perspective, and rejoices the complexity of our world. In contrast to the industrial perspective, it considers the world as unforeseeable and to a certain extent incomprehensible and controllable, where it is not possible to precisely predict or influence consequences of actions. This is due to interconnectedness of the wide variety of elements, where each impact on one of the elements will subsequently lead to changes in each one of the other elements even if they are not directly connected. In consequence, manipulating one element in a system will lead to unintended and unforeseeable consequence in other elements. Hence, the role of the individual elements is not clearly defined.

It is important to understand that earth is not just one system in itself but is composed of a multitude of open systems that are just elements of other bigger systems that again are just part of a multitude of other systems and so on. One of the keys to understand complexity is to grasp this concept of open systems. Homer-Dixon (2011) reasons that complex systems are open systems that are interconnected with other systems and do not stand alone.

Circular economy is built on the concept that our world is a highly complex system with open boundaries. While the linear economy focuses on maximizing economic output partially through mass-production, without considering externalities positive or negative, the circular economy emphasizes the importance of optimizing the whole complex system.

The Ellen MacArthur Foundation and McKinsey & Company presented their circular economy butterfly diagram first in 2012, whereas it combined a multitude of different schools of thoughts considering complex systems in order to create this visual depiction of a new economic system. The two value circles, the biological and technical circles, are influence by Braungart’s cradle to cradle concept, where all materials in the economy are understood as nutrients. This is very important to understand one of the key principles of the circular economy, namely that waste equals food. All materials are to be reused at the end of the products life-cycle, is it through biodegradation, remanufacturing or recycling.

In order for waste to be good, the product has to be designed with circularity in mind. This means that even during the conception and design phase of a product, the idea of circularity has to be the key nutrient. A product has to be technically designed for easy maintenance, longevity, easy refurbishment and remanufacturing, as well as recycling when flowing through the technical cycle.


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