Towards the Circular Economy

The Ellen MacArthur Foundation launches “Towards the Circular Economy: Economic and business rationale for an accelerated transition”, a new report, featuring analysis from McKinsey, that makes the case for a faster adoption of the circular economy, quantifies the economic benefits of circular business models and lays out pathways for action.

Using product case studies and economy-wide analysis, the report details the potential for significant benefits across the EU. It argues that a subset of the EU manufacturing sector could realise net materials cost savings worth up to $ 630 billion p.a. towards 2025—stimulating economic activity in the areas of product development, remanufacturing and refurbishment.

These numbers are indicative as they only cover “sweet spot” sectors that represent a little less than half of GDP contribution of EU manufacturing sectors. They also assume the addition of only one product cycle with today’s technologies. Yet many cycles would be possible and technological innovation would likely lead to rapid improvements and additional cost savings.

The report focuses particularly on the business opportunity. It examines five product case studies, including one example of cascading material usage, in depth. All cases show a chance for value creation by preserving the embedded labor, energy and material costs in finished products. In mobile phones, for example, 50% of material input costs could be saved by the effective use of remanufacturing.

Considerable environmental savings are also at stake. For instance, the UK economy could save up to $ 1.1 billion (€ 850 million, € 850 million) annually—and could reduce yearly greenhouse gas emissions by up to 7.4 million tonnes—by keeping food waste out of British landfills.

The resource intensity of the current industrial model presents economic and environmental risks. Many companies and governments are actively exploring the opportunities of efficiency and new forms of energy, but less thought has been given to systematically designing out material leakage and disposal in the first place. This, the report says, is where the case for a circular economy begins.

Over the past several decades, the concept of a circular economy that emulates natural systems has attracted the attention of thought leaders in fields from material science to industrial ecology. At its core, a circular economy aims to ‘design out’ waste. Products are designed for disassembly and reuse— in their entirety, or on a material/component level – whilst being supported by a shift towards licensing ‘performance’ over selling ‘products’.

Though circular business models have been explored in niche markets, the report argues that market conditions and tighter environmental standards are now combining to give the framework its full, large- scale potential.

To seize the technical and financial opportunity, both the corporate sector and government must drive change and create an environment more conducive to circular product offerings. The report was created to trigger debate. It concludes by summarising the steps forward it sees for businesses, governments, and researchers eager to help push the circular economy into the mainstream.

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