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What is the circular economy and where is it headed?: QuickTake

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Take, make, use, discard. This has been the standard approach to production and consumption for decades. Companies take raw materials and turn them into products that are bought by consumers who eventually throw them away, creating waste that ends up in landfills and oceans. Concerned about climate change and environmental degradation, people are questioning the sustainability of this linear model and pushing for a so-called circular economy of take, make, use, reuse, and reuse.

1. What’s wrong with linear economics?

This often results in a system that is inefficient, costly and depletes natural resources. Mining for anything from gold to coal can corrupt ecosystems and disrupt communities. Producing steel from ore requires a large amount of energy, producing earth-warming carbon dioxide. A by-product of the linear model is material waste, which takes up space and may contain pollutants that threaten biodiversity. Garbage ends up in unwanted places: Scientists reported this year that they have found microplastics in human blood for the first time, and the public health dangers remain unknown.

2. Is circular economy the same as recycling?

The two ideas are related, but a circular economy is more systemic and ambitious. Most recyclable products in the linear economy can only be shut down, meaning they degrade for each new life cycle and ultimately become waste. A true circular economy would require no new material input at all, reducing emissions, waste and ultimately costs. Some sectors are already approaching this – a car, for example, can be almost completely taken back. Other industries like fashion have a long way to go: every second the equivalent of a truckload of clothes is buried in a landfill or incinerated. Beyond improving recycling systems, a circular economy would educate people about their consumption habits. This is not a new idea. The slogan “Make do and flick” became popular during World War II to encourage as little waste as possible.

3. Is there reason for skepticism?

A lot. Making a production cycle completely self-sufficient is practically impossible. Some new input will always be necessary; some waste will always arise. Critics say it’s difficult to measure the environmental impact of a circular economy because the concept can mean anything from improving recycling systems to using technology to streamline the sharing economy. Building a circular economy also requires high upfront costs as companies invest in more technology and in training employees and consumers to adapt to new habits. There is concern that companies are only developing circular systems in parts of their operations, making it difficult to achieve long-term sustainability. Some say the circular economy will only delay the negative environmental impacts of the linear economy.

Investing in more circular supply chains. This can mean switching to recycled materials, extending a product’s lifecycle and improving end-of-life recovery. Companies like SC Johnson & Son Inc. and Unilever Plc are developing refillable packaging for cleaning products and laundry detergents. Siemens Gamesa installs the first wind turbines with recyclable blades in Germany. BlackRock Inc. operates a Circular Economy Fund that allows investors to help companies transition to the new model. As of August, the fund had nearly $2 billion in assets under management. Consumers are largely responsible for encouraging companies to move towards the circular economy. For example, more and more consumers are buying second-hand clothing and furniture as vintage and antiques have made a comeback in recent years.

5. What are governments doing?

They make cross-border commitments and develop action plans to encourage consumers and producers to move towards a more circular economy. In March, 175 nations began talks on a binding pact to end plastic pollution. Countries like Canada are banning single-use plastics, including cash bags, cutlery and straws, and are urging shops and restaurants to invest in green solutions. In March 2020, the European Commission adopted a new circular economy action plan. At a regional level, Amsterdam’s Sharing Economy Action Plan has supported the creation of start-ups like LENA, a ‘fashion library’ where consumers pay a monthly subscription to borrow high-end vintage clothing.

• The Ellen MacArthur Foundation’s Circular Economy website.

• Oil research by BloombergNEF on global plastic consumption.

• An article on the challenges of making fashion circular.

• A Bloomberg panel of experts decodes circular economy and other ESG buzzwords.

For more stories like this, visit bloomberg.com

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