Business and industry have customarily followed an economic model built on the premise of ‘take, make, consume and dispose’.
When goods wear out or are no longer desired, they are often discarded as waste. Such linear models assume that raw materials and resources are abundant, available and cheap to dispose of. However, reputable scientists are envisaging that reserves of some of the key elements and minerals will be depleted within the next century or so.
Arable land continues to disappear. Plastic waste dumped into our seas kills millions of fish, seabirds and sea mammals. And global warming – only one of the effects of carbon emissions from fossil fuels – is causing serious problems.
Inevitably, the world’s growing populations and their increased wealth is leading to greater demands for limited and scarce resources.
Boulding’s famous 1966 paper, The economics of the coming spaceship Earth, anticipated that man would need to find his place in a cyclical ecological system capable of continuous reproduction of material. He went on to suggest that at the other end, the effluents of the system are passed out into non-economic reservoirs, including the atmosphere and the oceans.
It may appear that there is a perennial conflict between economic development and environmental protection. Today’s society and its economic models still rely too heavily on resource extraction and depletion.
But there is scope for using resources more efficiently: there could be better eco-designs, waste prevention and reuse of materials. Studies have revealed that environmental responsibility can often result in net savings to businesses, while reducing emissions.
The World Economic Forum (2014) indicated that a shift towards a circular economy (CE) could generate over $500 million in material cost savings, 100,000 new jobs and prevent 100 million tons of waste globally, within just five years. There is clearly a business case for CE as significant resource efficiencies could bring a new wave of smart, sustainable growth and competitiveness.
Arguably, what used to be regarded as ‘waste’ could be turned into a valuable resource for business and industry
The basis of the CE approach lies in extracting the embedded costs of resources, through reusing, repairing, refurbishing, recycling and restoring materials and products throughout their life cycle. Arguably, what used to be regarded as ‘waste’ could be turned into a valuable resource for business and industry.
The CE concept could also be a response to the aspiration for sustainable growth in the context of increased regulatory pressures to have controlled operations management and environmentally-responsible practices. Coherent policy frameworks and appropriate legislation could help to raise the bar for more responsible behaviour among public and private organisations.
Initially, the CE approach was being championed in western countries by a number of environmental NGOs. However, the European Commission recently encouraged businesses to reuse, recycle and reduce resources to prevent the loss of valuable materials. It explained that, “new business models, better eco-designs and industrial symbiosis can move the community towards zero-waste; reduce greenhouse emissions and environmental impacts”.
Europe has already started to lay the ground work toward this transition. In fact, ‘Resource Efficient Europe’ was one of the EU2020’s flagship ideas. This initiative involved the coordination of cross-national action plans and policies on the formulation of sustainable growth. The EU’s CE proposition was intended to bring positive environmental impacts, real cost savings, and greater profits. The EU (2014) also indicated that improvements could translate to net savings of €600 billion, or eight per cent of annual turnover (for EU businesses), while reducing total annual greenhouse gas emissions by two to four per cent. This EU communication anticipated that the market for eco-industrial products would double between 2010 and 2020. It also posited that internationally, resource-efficiency improvements are in demand across a range of sectors.
Although the circular economy is a relatively new notion, there could be potential pitfalls in its policy formulation and application. Businesses and industries would probably resent changes imposed on their established behaviours. It is very likely that they would opt to retain the status quo, where they are ‘locked-in’ to their traditional linear models. The terms that are actually being used to describe both linear and circular economies are potentially misleading, as both combinations already exist, but in very different contexts. The CE approaches may still be perceived as novel, risky and complex. Moreover, macro-environmental factors, including political, economic, social and technological issues could also impact on CE behaviours.
Future research should begin to incorporate the latest ecological knowledge into our understanding of economic models and systems, without silencing the social and human dimension.
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