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08.04.19

The future of the circular economy by Leo Johnson

In September 2018, Leo Johnson gave a talk on the circular economy at Hager Forum. We asked him to continue to share his thoughts via this article, in which you will find out what the circular economy consists of, a few current examples of companies that have applied it and have developed new profitable and sustainable business models, along with the opportunities and perspectives in economic terms.

The ultimately dysfunctional economic model

So here’s a thought experiment. Sit back, relax, and try to dream up the ultimately dysfunctional economic model. What would it look like? If you really wanted to cook up some bad economics, what would you bake in? Here are five design principles for starters:

• Principle one: Go for volume. Mass-produce a whole ton of stuff, completely independent of demand.
• Principle two: Manufacture demand to the max, persuading citizens, if necessary, to spend money they don’t have on some things they don’t need.
• Principle three: Don’t worry about waste in the production line; feel free to chuck a good 60% of the raw materials away.
• Principle four: Forget distance. Ship it anywhere. Don’t get all steamed up if 93% of the energy gets lost between the coal mine and the light bulb in your living room.
• Principle five: Build for obsolescence. Make sure the stuff goes bust fast and can’t be fixed. And if that’s hard to do, if you have got a durable good, make it a crime against fashion not to replace it.

What’s been delineated here? It’s an economic model build around mass production, distribution and consumption that turns our houses into pre-processing units for the landfill. And it’s the linear economic model that has dominated the last century, an ideology so integrated into our daily lives that it has become almost invisible. But it has taken its toll. The World Bank projects that global waste, driven by urbanisation and population growth, will jump from 2.01 billion tonnes to 3.40 billion tonnes a year, up 70% by 2050. On our current burn rate we are due to consume three earth’s worth of resources by 2050, passing 1.5 degrees of global average warming within the next 5 years.

What’s the circular economy about?

It’s about doing things a bit smarter, shifting to renewable energy and materials, promoting shared uses, building for durability, improving efficiency, closing the loops, and dematerialising. It’s about recognising, as the Economist Kenneth Boulding did in his essay on the coming “Spaceship Earth” that we don’t exist in a cowboy economy, with infinite new pastures available to plunder. It’s about recognising the biophysical limits of the planet, closing the loop and transforming the waste streams of the linear economy into wealth. What does this reimagined economy look like in action? There are already proven successes.

In fashion, with total greenhouse gas emissions from textiles production estimated at 1.2 billion tonnes annually, more than international flights and maritime shipping combined, Patagonia has drawn plaudits for reclaiming fleece from plastics.

In consumer electronics, with e-waste topping 50 million metric tonnes a year, and predicted to rise 500% over the next 10 years, Restart Parties have taken London by storm, with neighbours getting together not to buy Tupperware, but to fix mendable household appliances doomed for the dumpster. Fat Lama, meanwhile, a peer-to-peer sharing platform, lends out and insures the tools for repair work, creating resource efficiency by delivering access instead of high cash and resource-cost ownership.

And for those appliances, finally, that don’t get a new lease of life, GEM, the Chinese “urban mining” company that operates across sixteen industrial parks in China’s ten provinces, hunts for the cobalt, nickel and tungsten to be found in batteries and electronic waste, monetising waste streams that are richer dollar for dollar than the seams of conventional mines.

But if we fast-forward five to ten years, is there a next wave of innovation ahead for the circular economy?

In the short term the dominant opportunity is to mainstream proven innovations. These range from Vertical Farming, driven by ultra efficient LED lightings systems and closed loop hydroponics, to Internet of things innovations like Michelin’s IoT enabled energy-efficient tires, and the Finnish waste company Enevo, using sensors to detect when trash bins are full, optimising pick-up routes for trucks and reducing fuel and labour costs by 20 to 40%. This is picking up the five pound notes on the floor.
In the longer term, exponential technologies look poised to create breakthroughs that potentially change business models across industrial sectors, from Just Foods use of synthetic biology innovations to produce “eggless eggs”, to social plastics - soft drink producers using the blockchain to tag every plastic bottle they produce and allocate micro awards for the bottle gatherers, from Hyperloop-based Low Carbon travel, to Apple’s robot iPhone disassembly, and asteroid harvesting initiatives that open up the possibility of zero earth impact for rare metals.

How much value is there to be gained across industrial sectors?

With the global economy only an estimated 9% circular, the World Economic Forum estimates that the circular economy could contribute $1 trillion a year to the global economy through reduced material use by 2025. And it’s not just the cash, it’s jobs; In the UK alone, the government estimates a more circular UK economy could be worth £9- 29bn a year, and create 10,000-175,000 jobs across skills levels by 2030.

What does the circular economy of the future look like?

It looks, above all, like a system wide change of mind-set, a movement away from the linear logic of the production line, towards something that works better for business and society. It’s economics, as EF Schumacher, the author of “Small is Beautiful” would have put it, “as if people and planet mattered”.

Leo Johnson
Co-Presenter of Radio 4 “FutureProofing

In the longer term, exponential technologies look poised to create breakthroughs that potentially change business models across industrial sectors.

Leo Johnson

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The circular economy: an economic model for the future?


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Interview with Marc Halevy: adapt or disappear.


30.10.18

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On September 28, Leo Johnson, our guest expert on sustainable development, projected his audience into the future at Trend Session #7 using four different economic models - exponential technologies, linear, post-linear and circular. 

02.11.17

Trend Session #5: The Blockchain revolution

In her talk, Nell Watson highlighted Blockchain's transformation potential. This covers areas that are not limited to finance or smart contracts, such as the supply chain, energy, IoT or artificial intelligence.

06.02.19

Interview with Marc Halevy: adapt or disappear.

The world is changing and we need to understand why. What is happening to us and our planet, our societies, our businesses? 


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