The Circular Economy 2.0
Published on Published on Linked In on March 6, 2016
Amazing concept, wrong foundations
The concept of Circular Economy in itself is mind-blowing as it imitates natural cycles through feedback loops at several levels of our current extraction, production and consumption chains. Mind-blowing in the multidimensional benefits that could be hidden, where abundance could take the lead over scarcity of resources such as water, food, fossil fuels and other precious metals that one needs in our societies today. The main objective of such a framework being the decoupling of our resource intakes versus our thirst for constant economic growth — as returns always need to be higher than the original investment -. Through carefully designing our products and services, through focusing on nurturing and caring for all the elements that we have invented for the right functioning of our economy, and with the understanding that all these elements and sub-parts thereof have a specific role to play within it, this set of principles and concepts intend to regenerate our economy by a sound comprehension and alignment with environmental patterns — and not to limit ourselves to them, i.e. if we align ourselves well with these configurations, there is barely no limit to endless innovation! -.
According to Accenture — under an advanced scenario — we can close the expected resource gap of 40 billion tons (optimist forecast), which are needed by our economies to keep flourishing, by 2050. What does it really tells us? Well, it means that we have the opportunity to cautiously design the upcoming decade in such a way that, instead of diminishing the value of the assets which we depend on — with short-termism decisions — we could increase it by setting us up for an abundance of food, non-food nutrients and technical goods, to fulfill all our needs. This also means that, in the current economic framework, growing economies will not have enough resource access — or at a cheap enough costs — to expand as stagnating economies previously did. And we are talking here about the biggest part of the world population…
Aligning our economic world with natural cycles seems to be the right (and wise) thing to do, isn’t it? But are we ready to implement such new framework? Do we understand well-enough the in-depth changes — such as changing our ways to consume, to travel, to work, to earn a living to name a few — that we will have to provoke? Do we have the proper mindset to set this up? Are climate change and our consumption patterns just about changing business models or would we need to change other structural dimensions? Are we aiming in the same direction, i.e. a better life for all, or do we transpose our current model into a more circular one without genuine systemic changes? And, do we want it, this better life for all?
Let’s assume we do.
If so, to achieve this vision, we might have to think beyond just a circular economy as it is designed today: with the same corporate powerful actors, in the same financial paradigm, replicating current human interactions and power relation. In a sea of challenges, building a circular economy with “profit maximization” as — again — the same narrow-minded corporate objective and, without putting the people at its core first, might not deliver the intended gigantesque intentions that we say it will have on our planet and its inhabitants.
The missing two circular dimensions
When looking at natural cycles we see the optimization in the way elements interact between one another and how energies are used. We also see how flows are expanding and moving in a distributed manner. When we talk circularity today, we do not see much of a plan for transparent distributed power, and we are still in this three month decision-based short-termism with the same “how much is enough” monetary goals that has driven us into the 02008 (a zero placed before the year helps us project longer-term according to John Elkington) crisis.
Yet again we are missing the bigger picture. Yet again we believe we will be financially successful without laying down a plan for potential social risks — such as severe income disparity, chronic labour market imbalance, water supply crisis, among many others — of such “maximization” search. Have we transported us deep enough within the system thinking approach of this model? It is complex, it is multi-layered, but it could be worth to pause and lay the ground for the right foundations.
The question we ask today is whether a Circular Economy is ‘bold’ enough in its current form and content? Will it deliver on the vision — access to resources to keep our standards of living in a low carbon economy — without ensuring well-being for all of us, notwithstanding of cultures, geographies, ethnicity or standard of living? Can we carry on with the current paradigm, i.e. money-as-our-reference-for-success-only, without agreeing that decisions should be taken based on a much wider concept, in a system-based economy?
We currently see at least two missing dimensions in the way circular economy is designed today:
- optimization of all resources, including us humans — considered as endless renewable energy in an economy where we will have to maintain the value of goods* (Walter R. Stahel: “The Performance Economy”*) i.e. integrating the end of inequality, unemployment and financial exclusion as part of this next collaborative capitalism model to ensure that we see poverty-as-externality of our current linear model ;
- distributed powers, i.e. ensuring that ‘success’ encompasses all values that are created in a world of abundance where each decision has multiple ripple effects, thus, if rewarded well, that could be benefiting us all in symbiosis.
Both are seeing value in human-as-a-service-and-as-a-resource, where we could maintain the value of goods and material at all-time high. While — on the other end — we would account for the many other values we produce — not only the monetary services, but also any activities considered as being regenerative of our economy, our environment or our social/societal challenges. They should all be rewarded at the same level as monetary transactions, in different shapes or forms (bartering, exchange of services, new currencies, etc.). And this, as long as the Golden Rule applies: the total value of our environment — i.e. the biosphere we depend on — is much higher than the total value of all human beings, where the latter would play a continuous role of growing the biosphere value so they can grow themselves. This rule is the basis of our future definition of success.
How about aiming at a Circular Economy 2.0* that also includes these two additional dimensions?
While designing Waste out is currently seen as making business sense, the other two axis of a potential Circular Economy 2.0 are not yet seen as business priorities, yet system externalities generate the same type of losses to a business (a person that we consider ‘poor’ remains trapped in the poverty cycle for too long, instead of joining the economy as potential customer) and, governments/NGOs have to address these social/societal externalities.
In 2013 The Economist magazine asked the question of poverty as being our common challenge as the “world’s next great leap forward”, i.e. ending it. And why not? But is the current linear economy helping us achieving this ambition? Aren’t we reaching the limits of a model that finds it hard to absorb the last 1 billion people living on $1.25 a day or less because it was not designed to do so? Where will the next growth engine be to improve people’s well-being?
“It is time to move on from the triple-bottom line thinking as we keep trying to separate these three notions from one another, while they are fully embedded. It’s the bottom-line, full stop.”
According to the United Nations Millennium Development Goals there have been many positive improvements on reducing extreme poverty, and improving education, access to basic needs as well as with the mortality ratio. Yet, one should not fool ourselves, as with a growing population, these issues are permanently challenged and the work to be done to close these gaps is huge. The United Nations just launched the Sustainability Development Goals with new promising goals, and for the first time, taking our planetary boundaries into considerations, i.e. linking social & societal goals with environmental and economic ones. It is time to move on from the triple-bottom line thinking as we keep trying to separate these three notions from one another, while they are fully embedded. It’s the bottom-line, full stop.
In the past three years, the concept of a Circular Economy, made visible by The Ellen MacArthur Foundation, helped us realize that waste should not and/or does not really exist. Due to our misunderstanding of system complexity, we did not set-up our industrial economy accurately. By designing waste out, we intend to fix our current patterns.
We are now seeing waste-as-unused-resources which is our recent “great leap forward” (in reference to The Economist). But how about taking this opportunity to also see poverty as the result of a wrongly designed system? How about claiming that — like waste — poverty is an externality of our current model? Like waste, shouldn’t it be designed out too?
In our linear system the waste cycle is based on the take-make-dispose model that has created environmental externalities such as air pollution, waste, toxicity, and overall climate change disruption. But these externalities also exist at societal levels in our unequal-unable-inaccessible model: 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.
“Designing Poverty out sounds less appealing than Waste. Yet, within a ‘bottom-line’ thinking it could generate business values”
The unequal-unable-inaccessible model is where most causes of poverty lies:
- Inequality of economic access where current barriers to entry to our global markets are very high: ownership of goods, obsolescence of products, price-as-sole-reference for the “TruValue” (in reference to the TruCost method) of anything we create, scarcity of prime resources, and so on, instead of seeing customers everywhere ;
- Inability of thriving in an economy where our financial system has been developed by the very few for the very few without seeing the bigger picture of the market potentials and abundance of other regenerative values to be accounted for ;
- Inaccessibility to human performance in an economy that has reduced the notion of labour to a very narrow and non-system thinking approach, where, as an alternative, manpower as a whole could be seen as the foundation of future ways to replenish our model ;
When looking at both cycles in parallel, the waste and poverty cycles, one could notice that they have similar patterns: they are based on a system misconception, they have perpetual movements, they both generate numerous externalities (pollution, toxicity, climate change to name a few in the so-called ‘waste cycle’, and scarcity of goods, despair, non-inclusive economic approaches among others in the ‘poverty cycle’). To solve — among other challenges — our environmental ones, we cannot decouple them from people’s primary needs.
You also might have asked yourself what is the true cost of a waste economy. How about also asking yourself, what is the true cost of an unequal one? Or is it that you don’t want to know: too complex, too inextricable, “not my problem, let the United Nations and governments sort this out”. Well, no. Not good enough. Should you claim to be this amazing innovative Chief Executive Officer (CEO), this is part of your Bottom-Line!
“If you think that tackling poverty is not an appealing business priority, think again!”
When you first heard of waste being non-existent in nature, it might have taken you some time to understand what this really means. The same reasoning should apply with poverty: why should it exist when there is no such concept elsewhere?
Today, we have understood that waste is in fact endlessly reusable nutrients. Where waste are now nutrients, all of us could be seen as decent humans and appealing customers including the less fortunate, why not?
“The main objective being to design poverty out together with waste by using the same circular logic!”
While a ‘waste economy’ is no longer affordable, poverty is the highest social license risk many companies face across the globe in a world of seven billion inhabitants. Investing in people’s issues might also lead to sound business decisions securing corporate resilience over the long-term.
To break the cycle, we should use the same circular logic as we do for waste eradication: by turning upside-down our current take-make-dispose model, we are now innovating around the “don’t take anymore, re-make, and won’t dispose of”, so to say. So how about moving from the current poverty cycle of the three “in’s”: inequality, inability, and inaccessibility into a virtuous circle that would seek to include the rest of our customers with the aim of also lowering the barriers to entry?
- How about claiming that “equity makes business sense”?
- How about saying that “developing tailored financial capacity is a priority”?
- How about ensuring that “granting access to new forms of manpower is innovative”?
Addressing the issue of poverty is no longer the matter of public and international organisations. It is everybody’s business!
The eradication of poverty has to be embedded when re-designing products and services, in such a way that we accelerate its disappearance. The late C.K. Prahalad told us very clearly that businesses have so far missed the largest market of all: the Base Of the Pyramid (BOP) where four billion potential customers, with a purchasing power parity (PPP) of $1 to $1.5 trillion dollars, have not been targeted yet. Prahalad’s thinking was in a product-based linear economy of lowering production costs to grant access. Imagine the same potential in a versatile service-based model? If you compare the BOP market potential to the other two, the 80 million living with a PPP above $20,000, and the other group of 1.5 billion people living with a PPP in-between the precedent two groups, the BOP market could become, by far, the most attractive one in an ecosystem thinking approach…
Collaborating to Survive, as businesses, as individuals
There is a last factor to consider when talking about poverty in a linear economy. At a macro level, we live in cyclical periods where changes occur over centuries and more. We are currently moving into the so-called “Conservation Phase” where resources are more difficult to access, being locked-up, and where things will change slowly. Humans will either fight for them, or develop an advanced collaborative way of accessing them. This new form of “Collaborativism” might be preferred for our survival. It also means that we might become more careful of one another, not so much out of care, but rather in our common interest of balancing a very interdependent survival system balanced. It will no longer be a question of “the haves” versus “the have not’s” but rather, about creating an economy of the ‘being’ away from materialistic goals and individualistic behavior.
People at its Core is Critical for Impact
If we want a Circular Economy designed to address the needs of all of us, we should ensure that services are accessible, affordable and generating bottom-line benefits. Hence, we, the people need to be at its circular core, not at its periphery.
Additional principles to the current model might be added to ensure a genuine impact of this promising model:
- “Equity makes business sense” — where economic barriers to entry can be lowered thanks to services designed to address the needs of all via a fairer and more equal access to market. Corporate and/or government added-circular-value would be measured according to the numbers of years they have managed to integrate new customers into our economies, i.e. ensuring that customers and citizens — who find it hard to enter our current product-owned system — be kept the longest time possible in our economy and grow with it over the long haul. This new definition of loyalty or satisfaction would really be based on the customers’, not corporate satisfaction as it is the case today. This new paradigm would make sense in a service economy where profits are made over the long-term. A service economy would also be much more versatile with the aim of nurturing to fulfill needs. This is clearly a new business approach that could benefit us all since it will be made to reduce life shocks. A customer- and citizen-driven model will have a positive impact on designing inequality to entry out;
- “Developing tailored financial capacity is a priority” — where one can access more with less as even with a low income, a decent life can still be possible in a versatile pay-as-you-grow service model away from the current pay-prior-to-own product-based one we have today. In a collaborative- and service-based framework where systems externalities are embedded attracting new breed of customers and keeping them the longest way possible as loyal clients becomes a priority. Diversified means of exchanges are preferred and would unleash huge self-potential for financial abundance: finance-as-you-access, bartering-as-you-need or alternative means of exchange that will flourish away from a standardized monetary format. The higher the diversity of exchange options the better for multiplying opportunities. This would create less dependency on financial credit since we would access-services-as-we-need-them. In “need” we understand benefits as in not putting a customer at risk of being trapped in a debt cycle. Corporate and governmental circular value creation could therefore be measured as a financial ratio that would calculate people’s “ability-to-benefit-from-the-economy” i.e. ability to financially access our economy, stay within it and grow in beneficial ways within it — instead of the current linear approach of driving people into a life at credit with an “inability-to-pay” mind-set. By designing services according from people’s pecuniary affordability, this could help us designing financial exclusion out;
- “Granting access to new forms of manpower (or re-manpower) is innovative”- where today’s work becomes tomorrow’s “activity-for-purpose” i.e. new forms of manpower aiming at creating new types of abundance (water, food replenished soil, CO2 integration, etc.) will appear and be rewarded given their regenerative and beneficial nature. In an economy where maintaining our many stocks of resources is of urgency, manpower — according to Professor Walter R. Stahel — is considered a renewable energy and therefore not be taxed since it becomes a desired resource. We, Humans, are now an endless source of energy that will help us maintain our biological and technical nutrients at their highest value at all times. Innovations would therefore come from a number of diverse activities and new forms of work that companies will create. Manpower could flourish exponentially (the re-manpower effect) by decoupling itself since it would be tax free and rewarded based on a stock replenishment ratio. Rewarded purposeful activities could become the norm since replenishment and circular value optimization would be preferred over the current ones that generate and externalize a number of environmental, social and economic issues in an exponential way.
“An economy based on a human-instead-of-machine approach, on caring-instead-of-having, and on-collaborating-instead-of-hiding could well benefit poorer countries.”
People’s issues cannot be decoupled from environmental issues that cannot be decoupled from economic ones. By looking at the bigger picture, one could generate a highly beneficial return on all investments and choices we will make in the coming years. Today we have the opportunity to re-design our economy addressing all layers of our social and societal needs. Services are versatile and can address all of them in endless ways.
Let us be bold and truly innovate into a Circular Economy 2.0* that is designed for all of us with forward-thinking benefiting ideas!
*Also called a Valued Circular Economy where [Poverty=Waste] as both poverty and waste are considered externalities of our linear economy, both have to be eradicated by circular thinking.
Follow [Poverty=Waste]™: @ValuedCircEcon
What experts say about it:
@Janez Potočnik, former EU Environment Commissioner (1st CE Package): “I never forget to mention that angle in my presentations, but you went further and it is worth exploiting this logic.”
@Kristian Skanberg, Club of Rome: “[…] it is tougher to “design sustainable circular poverty-minimizing social systems”, but we could and should try […]”
@Peter Lacy, leader in Circular Economy, Accenture: “Well done Alex, I agree pretty much with all.”
@Circular Economy (The Ellen MacArthur Foundation): “Bang On!”
@Walter R. Stahel, The Product Life Institute, Author of The Performance Economy: “Thank you Alex, well written!”
@James Greyson, expert in Circular Economy, Founder of BlindSpot: “Brilliant to widen the conversation beyond circular resource flow outcomes.”
@Mike Barry, Head of Sustainability, Marks & Spencer:”Great insights on need for social dimension to be added much more strongly to Circular Economic thinking.”
@Andy Ridley, CEO Circle Economy Amsterdam: “Great article Alex […] it becomes clearer everyday that we are not dealing with the greater underlying opportunity and challenge around re-balancing society.”
@Chris Hoskin, CMO at Innoverne, leader in Circular Economy: “Hat tip to @AlexLemille for this Huffpost Business blog about Circular Economy 2.0!”
@Brendon Rowen, Director at Cradle-to-Cradle Marketplace: “What an AWESOME read Alex. Well Done. Ground breaking & inspiring.”
@Kevin Dooley, Sustainability Professor, Arizona State University: “Great thoughts on broader goals for a Circular Economy!”
@Antonis Mavropoulos, Scientist & Futurist: “Great post! Social innovation is the key to utilize Circular Economy.”
@Kenneth Hald Jensen, CEO, Green Network Denmark: “A must read for anyone interested in the circular economy.”
Thanks to his Circular Economy 2.0 concept and his advocacy work in the circular economy field, Alexandre received the “Highly Commended in Circular Economy Leadership” recognition at “The Circulars 2016”, the premier circular economy award ceremony organised by the World Economic Forum.