Applying “Circular Thinking” to also eradicate Poverty
Social Businesses at the core of the next economy
This proposed concept was presented at the Social Business Academia Conference on November 10, 2016.
The link between Circular Economy and Social Business
While a subset of the European Union manufacturing sector could achieve net materials cost savings worth up to 550 billion EUR per year towards 2025, a Circular Economy (CE) in emerging markets might translate into smaller savings numbers but sizeable societal ripple effects going beyond expectations.
In the African continent for instance, a first estimate extracted from “Reimagining Africa’s Future”(1) from Accenture Strategy tells us that the potential opportunities of a Circular Economy could be in the area of 40 billion EUR, out of the 300 billion opportunity for sustainable business. A much smaller number compared to the European one, however, a number that could be hiding the bigger portion of the iceberg.
We often see Circular Economy as addressing the core issue of our environmental boundaries and economic challenges, which in itself are already huge ones to overcome. Circular Economy is definitely a very impact-full model that needs to be promoted, implemented and replicated wherever and whenever possible. Yet, how about reaching out to the last mile? How about defining a scheme that is fully inclusive of our people which is — I believe — what we are all intending to reach out for: well-being for all, right?
A Circular Economy today focuses — among others — on the notion of ‘Waste=Food’ from William McDonough & Michael Braungart, as well as of the Performance Economy from Walter Stahel where ‘the smaller the loops, the higher the resource efficiency and profit maximization’. Hence, our focus is on: numbers of material saved, filing the 2050 resource gap of 40 billion tons* (*best scenario from Accenture’s “Circular Advantage”(2) and attaining some of our CO2 emissions goals.
But where are the people in all these numbers? Would focusing on profit maximization be enough? Aren’t we not made to thrive and be bold about a positive common future? Output discussions lead over the larger notion of Outcomes i.e. achieving a well-being for all vision.
Should we plug in the seven Principles of Social Business together with the current ones of the Circular Economy one could create a hugely impact-full economic model that could possibly be the best path to achieve Professor Muhammad Yunus’ “Poverty Museum” objective. Today a so-called Linear Economy is not made to remove poverty off our economies, on the contrary. A new paradigm is required, the increased attention given to Circular Economy could help achieve this ultimate goal.
The potential wider impact of a Circular Economy
This paper is more of an invitation for a debate around whether we are designing Circular Economy on the best systemic foundations i.e. are we busy creating this amazing “Next Economy” that would also provide equal chances of success for all of us, or are we just aiming at some circular principles with the same actors, i.e. designing just “another economy”…?
The two aspects that I will focus on in the following lines are:
- Dealing with stakeholders/parties losing out in the circular economy e.g. the base of the pyramid markets;
- Social and monetary benefits that firms on the circular pathway can provide e.g. the potential “wider” impact of a circular economy should we think out-of-the-box before we design it wrongly, and, moving us away from the sole narrow-minded monetary benefits into value-based decision processes and value benefiting us all;
The thinking behind this paper is as follows:
a. We proclaim that Poverty = Waste (a very similar thought-provoking short-sentence like the famous Waste=Food of William McDonough & Michael Braungart) as we see poverty, very similarly as waste, an externality of our system that also needs to be designed out, the same way as we plan to design waste out, circularly;
b. We ensure the “People” are at the core of the next Circular economic model, because without understanding what the people want or need, we could build endless solutions for our environment, they will ensure that their long-term effects are neutralized if not worsen;
c. Move us away from the principle of “Success” as being the sole monetary focused aspect of it, into Success being a series of benefiting aspects that generate positive ripple effects to our complex ecosystem and where decisions are based on how much value(s) will be created (very similar to a tree providing countless “environmental functions” to the many species depending on them to thrive);
a. Poverty Is Like Waste
Let us go a further mile and proclaim that [Poverty=Waste]™! Why? Because both — poverty and waste — are externalities of our current linear system. As you know waste does not exist in our ecosystems, but you may say the same for poverty! Both are human creations from a system that has been designed with a one-way motivation: always more consumption.
For waste, we did not realize the depth of our damages until recently where it now makes financial sense to look at the residual and lost value. For poverty, it dates back to ancient times where there has always been groups of people dominating others by whichever means leading to inequalities.
Our linear system has created environmental externalities such as pollution, waste, toxicity, and overall climate change, but these externalities also exist at societal levels: inequality, unemployment, fictitious capital (debt) creating poverty so that wealth could be built for others, people living with disability seen as less “performing”, and so on.
b. People at the Core of the Economy
One cannot and will not solve global issues without putting the people at their core. Thanks to its virtuous loops, its collaborative-to-survive tactics and, its learning from Nature’s Principles strategy, a Circular Economy could be seen as the right system approach to address our long-term social patterns that could not be solved in a linear thinking world. Our mission today is about designing the right framework from the start so that future generations will benefit from it.
A socially inclusive Circular Economy could have these three main people-centered pillars:
Pillar 1: People’s Inclusiveness: — where one can access goods for all — since ‘accessing goods’ no longer require owning them, this would free up financial means for other services and thus leading towards poverty eradication;
Pillar 2: People’s Value Creation: — where one can access more with less — since even with low income a decent life can still be possible, this would create less dependency on financial credit, thus generating less indebtedness;
Pillar 3: People’s Wellbeing: — where one can access secured income — since a Circular Economy would lead to jobs, micro-jobs and micro-tasks creation that do not exist yet, with the adapted tax shift* (*Walter Stahel), labor becomes this endless renewable resource, thus driving unemployment downwards.
Adding these three pillars might come as a natural pattern, especially in emerging markets where a sharing economy has always existed for people to survive. The concept of pay-as-you-go comes from Africa and is part of its people’s DNA. They are ahead of western cultures from this point of view. Besides it would be unwise to shift millions of inhabitants from collectivism to individualism thinking while the world is looking at new collaborative forms. One could learn from Africa here!
Internalizing poverty together with waste should be our ‘1-Earth-Economy’* (*first coined by John Elkington) bold vision! One can decouple resource use from growth, but one cannot decouple societal from environmental needs. A beneficial-for-all lateral growth is achievable as long as we redefine the notion of ‘success’ and ‘ownership’ away from monetary objectives as our sole reference. And that’s where not many of us are prepared to jump in…
One of the reason being that numbers of “wealthier” humans will increase, thus more consumption, thus more pressure on our ecosystems. By looking at how permaculture and biomimicry augment our ecosystems potentials based on optimization of functions, forms and processes, our main worry should not be how many of us can the ‘system’ supports, but whether we would move away fast enough from individualism to true humanism i.e. away from greed.
c. Moving away from “Success” as being solely monetary based
We live today in a wealth-centered linear business world where success is about the revenues and the profits that are made by businesses, in a linear economy.
Most businesses are wealth-focused and linear. Is ‘Circularity’ alone going to be enough — besides CSR (Corporate Social Responsibility) and CSV (Creating Shared Value) — to address the many upcoming challenges in our current monetary system?
Circular Economy as it is defined today is still based with profit maximization as the ultimate target for success, hence most of the multinationals are jumping in the back wagon. But do we seriously want to reproduce a system that has led us to all the natural destruction, resource scarcity and wealth concentrated to the top (the best example being the recent Oxfam survey confirming that half of the world wealth is in 62 pairs of hands, most probably all old male, and most probably all westerners). Profit maximization has done enough damage and should be forgotten. The norms as they are currently are completely upside down: economic norms took over both societal ones and environmental ones. Our system of exchange is solely based on money as the reference of exchange of goods. This led us to systems inadequacies: the economic took the lead over the societal and environmental ones. We are currently in an unstable state where the value of ephemeral societies is much higher than the value of our biosphere and environmental services.
What about value creation instead? CE is about economics & profit maximization.
Is profit maximization right? How about value creation as the main goal? System issues are mainly social.
Obviously what we are asking for here is gigantesque, but the challenges that we are and will be facing are of the same level: incredibility complex and beyond what humans have ever faced before. Continuing in our narrow-minded monetary system — even in a ‘full circular economy scenario’ will solve some issues — filling up the resource gap, create more jobs, maintain or laterally expand currently emerged economies, granting some space for expanding economies to flourish, and so on — but will not solve our relation with the biosphere at all. The path at which we destroys it will continue (58% of world species lost from the last WWF report) until such time our exchange or value system includes the potentially positive or negative impact of our business and governmental decisions in an embedded value that takes everything into account and lead to decisions that will classify humans from invasive and destructive species to a replenishing and regenerative one.
To achieve this, our monetary system based on the United States of America dollar should either be questioned completely, or societal and environmental values embedded in the cost and replicating costs of our decisions. “Trucosting(3)” of products that include most of the externalities that product will generate is one step in that direction, deciding on the value of our decision include a “Trucosted(3)” product but also takes into account one of the circular economy principle: thinking in system. One would therefore be able to compare the monetized value of one decision option compare to another one that could replenish even more our biosphere and societies on top of making economic sense. In this case, corporate, governmental and personal successes would have evolved from just the ‘I have made so much money in my life, look how successful I have been’, into ‘I have generated so much value to our world, look how successful I have been and I have left our world in a better state than the one I first found’. Exactly following the ants or the cherry tree model of replenishment.
This work is relevant for thought-leaders, academics, and practitioners in social business to help them design a circular economy that will have a positive impact on our societies for real and for good. With social businesses at the core of such a new economic model based on service and experience, one could endlessly design products-of-services addressing all needs given that services are highly versatile.
Presenting “Applying Circular Thinking to also eradicate Poverty*” at the Social Business Academia (HEC Paris) on November 10th 2016.
*The Circular Economy 2.0
In reference to www.Trucost.com the data consultancy that helps companies, investors, governments, academics and thought leaders to understand the economic consequences of natural capital dependency.
The World’s Next Great Leap Forward — The Economist — www.economist.com/news/leaders/21578665-nearly-1-billion-people-have-been-taken-out-of-extreme-poverty-20-years-world-should-aim
Implementing a Circular Economy could make Paris Targets Achievable