A traditional linear economy follows a ‘take-make-dispose plan which consists of extracting raw materials, transforming them into goods or services, and disposing of the resulting waste. This model is unsustainable in the long run and hence the shift to a circular model is needed.
A circular economy is directed at eliminating waste and the continual use of resources. This approach is restorative and regenerative by design and it aims to dissociate growth from the consumption of finite resources. Strengthened by the transition to renewable energy sources, this model builds economic, social, and natural capital. It is mainly based on three principles:
- Design out waste and pollution.
- Keep products & materials in use.
- Regenerate natural systems.
Image source – Ellen MacArthur Foundation
Transitioning to a circular economy does not only amount to modifications targeted at reducing the negative impacts of the linear economy, but it represents a systemic shift that is meant to create long-term resilience, generate business opportunities while providing environmental and societal benefits. The above diagram displays a circular economy system. (Unknown, 2021)
The connection between circular economy and sustainability is often considered conditional relation, wherein the circular economy is one of the conditions for a sustainable system. Circular Economy can find applications in every industry sector that includes products, infrastructures, equipment, and services. It contains technical resources such as metals, minerals, fossil resources as well as biological resources such as food, timber, fiber, etc. (Rashid, 2013)
Although the concept is not new, having first appeared in 1966 in Kenneth Boulding’s book where he explained that we should be in a ‘cyclical’ production system, circular economy has recently gained popularity in the last few years. The climate and environmental challenges faced by the planet have pushed industries and businesses to find alternative ways for their production and consumption. A circular economy helps solve a part of these challenges and many industries have started adapting to this model.
Which countries have adopted the Circular economy model?
In 2002, China officially adopted the idea of a circular economy due to the environmental damage and resource depletion that was occurring as a result of its rapid industrialization progress. China later identified promoting circular economy as a national policy in 2006. Later EU countries started accepting this approach after a report titled ‘Towards the Circular Economy: Economic and Business Rationale for an Accelerated Transition’ was published in 2013 which was commissioned by Ellen MacArthur Foundation, a UK based charity that promotes Circular Economy; and developed by McKinsey & Company, a consulting firm. The report consisted of product case studies and industry analysis to showcase significant potential benefits across the EU. European leaders in terms of circular economy are designated mostly by their current efforts for a shift towards circular economy but also by their means and objectives implemented in this shift.
Circular Economy in Nordics
Nordic countries like Denmark and Sweden are at the forefront of nations working to transition towards a Circular Economy.
Sweden
Sweden introduced a National strategy for the transition to a circular economy with the vision to make, ‘A society in which resources are used efficiently in non-toxic circular flows, replacing virgin materials.’ Sweden, a small and export-dependent country identifies and welcomes the European and international context for a circular economy. The country is working for a global agreement on plastics to reduce and prevent marine emissions of plastic waste and microplastics, along with an ambitious global framework for chemicals and waste after 2020. Sweden, also known as an innovation nation, recognizes that the shift towards a fossil fuel and circular economy requires a change and revival of society that will be required for the country to reach its environmental & climate objectives and their Sustainable Development Goals in the 2030 Agenda. The country’s innovative spirit and its acceptance of new technology will be a crucial influence in its journey towards a circular economy. Sweden also focuses on encouraging Swedish companies to use digitalization to transform themselves into circular economies which is in alignment with the government’s digitalization strategy. To achieve this, four closely linked focus areas have been identified as below:
The Danish government considers enterprises as the primary driving force in the circular transition, and it is manifestly seen from the top of mentioned focus areas. (Denmark, 2018)
Overall, there are several examples from industries and businesses within the Nordic region that has shown triple-crown implementation of circular economy in their business model. These are industries from sectors like electric & electronic equipment (EEE), food, textile, furniture, packaging, and additional. The business models are such that they prevent waste generation like repair, reuse, recycle, waste management, product design, Service, function, and combination of those. (Norden, 2015)
Denmark
The Danish government’s ‘Strategy for Circular Economy’ has a clear aim on creating major potential benefits for the environment as well as potential opportunities of competitive advantage for Danish enterprises for supplying solutions contributing to sustainable management of natural resources and continuous economic growth. The government targets on promoting rethinking on how the nation produces and consumes. Denmark’s Utilities Strategy encourages competition between the municipality and private waste incineration plants to compete on equal terms for waste incineration and management of recyclable wastes. This is meant to ensure that all parties have equal access to waste and the enterprise that can generate/find value in recycling the waste may do so, whereas the waste that cannot be recycled, can be incinerated at the most efficient facility. Much like its neighbor country, Denmark has identified 6 areas of efforts as below:
The Danish government considers enterprises as the primary driving force in the circular transition, and it is seen from the top of mentioned focus areas. (Denmark, 2018)
Overall, there are several examples from industries and businesses within the Nordic region that has shown triple-crown implementation of circular economy in their business model. These are industries from sectors like electric & electronic equipment (EEE), food, textile, furniture, packaging, and additional. The business models are such that they prevent waste generation like repair, reuse, recycle, waste management, product design, Service, function, and combination of those. (Norden, 2015)
Circular Economy in India
Indian economy is the 6th largest economy in the world. With the rapid development and growing population, the country is set to become the 4th largest economy in the next decade. Despite these positive prospects, the country still faces challenges in rapid urbanization, resource scarcity, and higher levels of impoverishment.
There has been decent research done on business benefits of circular economy in high-income countries (specifically in Europe) but not enough work to point out the impact in countries like India with high economic growth and rapid societal changes. In 2016, Ellen MacArthur Foundation published a report considering the opportunities of circular economy in India. The report focuses on 3 areas of opportunities: cities and construction, food and agriculture, and transportation. (Foundation, 2016)These are summarised below:
- Liveable cities with buildings and infrastructure that meet the future needs of India’s population.
- A regenerative and restorative agricultural system that combines modern technology with traditional practices to meet India’s growing food demand.
- A convenient, multimodal transport system enabled by digital technology, for resource-optimized and efficient mobility.
Capturing the benefits of a circular economy in India will require actions by varied stakeholders, like government, businesses, and academic establishments. Indian businesses are well equipped to lead the transition in the country and should start building circular economy knowledge and capacity, integrate principles of the circular economy into their strategies and processes and collaborate with other businesses and policymakers.
These could be read in detail here – https://www.ellenmacarthurfoundation.org/assets/downloads/publications/Circular-economy-in-India_5-Dec_2016.pdf
Circular economic advances can improve the resilience of urban and agricultural economies whereas conjointly delivering benefits like climate mitigation, food, and water security, enhanced biodiversity, employment creation, and empowerment of underprivileged communities. These benefits of circular economy in India much like in any other country require businesses to lead the way with the government and policymakers setting the direction to this transition by creating the right enabling conditions. (Joseph Fiksel, 2020)
Barriers to implementing Circular Model
- Economic decisions are often made by privileging financial market signals instead of prioritizing society and the environment.
- Circular economy models are harder to develop in practice than in theory which can make a case for its slow growth regardless of the popularity.
- The current economic system is geared towards the demand of the linear economy, and circular economic models may not be prepared to handle high demands.
- Lack of regulations and policies from governing bodies slows down the transition as industries do not seem to be pushed/directed towards a Circular Economy.
- Long-term circular economy models require direct investments that act as barriers to several industries.
- Lack of knowledge about sustainability issues.
References
Denmark, G., 2018. Strategy for Circular Economy. [Online]
Available at: https://circulareconomy.europa.eu/platform/sites/default/files/eng_mfvm_cirkulaer_oekonomi_as5_uk_final_web.pdf
Foundation, E. M., 2016. Circular Economy in India. [Online]
Available at: https://www.ellenmacarthurfoundation.org/assets/downloads/publications/Circular-economy-in-India_5-Dec_2016.pdf
Joseph Fiksel, P. S. &. K. R., 2020. Steps toward a resilient circular economy in India. Springer Link, pp. 203-218.
Norden, 2015. Moving towards a Circular Economy. [Online]
Available at: https://norden.diva-portal.org/smash/get/diva2:852029/FULLTEXT01.pdf
Rashid, A., 2013. KTH Publikationsdatabas DiVA. [Online]
Available at: http://kth.diva-portal.org/smash/record.jsf?pid=diva2%3A664400&dswid=9459
Sweden, G., 2020. Cirular Economy Strategy for the transition in Sweden. [Online]
Available at: https://www.government.se/4ad42c/contentassets/d5ab250cf59a47b38feb8239eca1f6ab/circular-economy–strategy-for-the-transition-in-sweden
Unknown, 2020. Circular Economy: Definition, Principles, Benefits and Barriers. [Online]
Available at: https://youmatter.world/en/definition/definitions-circular-economy-meaning-definition-benefits-barriers/
Unknown, 2021. Ellen MacArthur Foundation. [Online]
Available at: https://www.ellenmacarthurfoundation.org/circular-economy/concept
