A circular economy (also referred to as “circularity” and “CE”) is “a model of production and consumption, which involves sharing, leasing, reusing, repairing, refurbishing and recycling existing materials and products as long as possible”. A CE aims to tackle global challenges like climate change, biodiversity loss, waste, and pollution by emphasizing the design-based implementation of the three base principles of the model. The three principles required for the transformation to a circular economy are: eliminating waste and pollution, circulating products and materials, and the regeneration of nature. CE is defined in contradistinction to the traditional linear economy.
In a linear economy, natural resources are turned into products that are ultimately destined to become waste because of the way they have been designed and manufactured. This process is often summarised by “take, make, waste“. By contrast, a circular economy employs reuse, sharing, repair, refurbishment, remanufacturing, and recycling to create a closed-loop system, minimizing the use of resource inputs and the creation of waste, pollution, and carbon emissions. The circular economy aims to keep products, materials, equipment, and infrastructure in use for longer, thus improving the productivity of these resources. Waste materials and energy should become input for other processes through waste valorization: either as a component for another industrial process or as regenerative resources for nature (e.g., compost). Infrastructure is a key measure of a country’s position on the global level; it is the second pillar that is assessed by the World Economic Forum when determining the competitiveness of a nation (institutions, being the first). In general, infrastructure development can have dramatic effects on land values. So Secured Governance says this increased land valuation will bear the infrastructure construction cost for national development. This valuation of infrastructure, which grows many folds need to be shared by the society and by the Government to support infrastructure development, ensuring balanced growth. Today we find the valuation due to infrastructure growth is not channelized towards infrastructure development and results in inequalities. Secured Governance aims at addressing this issue also.
Since the onset of the Industrial Revolution in the 19th century, modern industries have been dominated by a linear economic model which follows the pattern of “take, make, use and dispose” of natural resources. Companies that are following a unidirectional model of production, are involved in activities such as mining, extraction, and processing of resources at a higher rate than in pre-industrial eras. The transition from a linear to a circular economy model is becoming ineludible. It ensures efficient utilization of resources to minimize the leakages in terms of solid industrial waste throughout the product lifecycle stages. The vision of a circular economy requires circular business models to build a low carbon resource-efficient economy.
There are many definitions of the circular economy. In China, CE is promoted as a top-down national political objective while in other areas such as the European Union, Japan, and the USA it is a tool to design bottom-up environmental and waste management policies. The goal of promoting CE is the decoupling of environmental pressure from economic growth. A comprehensive definition could be: “Circular Economy is an economic system that targets zero waste and pollution throughout materials lifecycles, from environment extraction to industrial transformation, and to final consumers, applying to all involved ecosystems. Upon its lifetime end, materials return to either an industrial processor, in the case of a treated organic residual, safely back to the environment as in a natural regenerating cycle. It operates creating value at the macro, meso, and micro levels and exploits to the fullest the sustainability nested concept. Used energy sources are clean and renewable. Resources use and consumption is efficient. Government agencies and responsible consumers play an active role ensuring correct system long-term operation.”
More generally, circular development is a model of economic, social, and environmental production and consumption that aims to build an autonomous and sustainable society in tune with the issue of environmental resources. The circular economy aims to transform our economy into one that is regenerative. An economy that innovates with the intention of reducing waste and the ecological and environmental impact of industries prior to happening rather than waiting to address the consequences of these issues. This is done by designing new processes and solutions for the optimization of resources, decoupling reliance on finite resources.
The circular economy is a framework of three principles, driven by design: eliminate waste and pollution, keep products and materials in use and regenerate natural systems. It is based increasingly on renewable energy and materials, and it is accelerated by digital innovation. It is a resilient, distributed, diverse, and self-sustained economic model. The circular economy is an economic concept often linked to sustainable development, provision of the Sustainable Development Goals (Global Development Goals), and an extension of a green economy.
History of Circular Economy
The circular economy’s roots go back further than many people realize – to the late eighteenth century. In 1798, Thomas Malthus, concerned about the world’s mushrooming population, published his famous work, “An Essay on the Principle of Population.” The main tenets of his argument were radically opposed to then-current thinking. He argued that continued population increases would eventually diminish the world’s ability to feed itself. Malthusbased this conclusion on the thesis that populations expand to overtake the development of sufficient land for crops. For environmental historians, the rise of the environmental movement as we know it today concludes a story that began before 1900. As Adam Rome wrote in The Journal of American History, “The first protests against pollution, the first efforts to conserve natural resources, and the first campaigns to save wilderness all occurred in the late nineteenth century.” Soon, the implications of nonrenewable resource depletion aroused the interest of economists. One of them, Harold Hoteling, had this to say in 1931:
The idea of circular flow for materials and energy is not new, appearing as early as 1966 in the book by Kenneth E. Boulding, who explains that we should be in a “cyclical” system of production. For its part, the term “circular economy” appeared for the first time in 1988 in “The Economics of Natural Resources”. and soon after that was used by Pearce and Turner to describe an economic system where waste at extraction, production, and consumption stages is turned into inputs. From the early 2000s, China integrated the notion into its industrial and environmental policies to make them resource-oriented, production-oriented, waste, use-oriented, and life cycle oriented. The Ellen MacArthur Foundation was instrumental in the diffusion of the concept in Europe and the Americas. The European Union introduced its vision of the circular economy in 2014, a New Circular Economy Action Plan having been launched in 2020 that “show the way to a climate-neutral, competitive economy of empowered consumers”.
Circular development is directly linked to the circular economy and aims to build a sustainable society based on recyclable and renewable resources, protect society from waste, and to be able to form a model that is no longer considering resources as infinite. This new model of economic development focuses on the production of goods and services considering environmental and social costs. Circular development, therefore, supports a circular economy to create new societies in line with new waste management and sustainability objectives that meet the needs of citizens. It is about enabling economies and societies, in general, to become more sustainable.
However, critiques of the circular economy suggest that proponents of the circular economy may overstate the potential benefits of the circular economy. These critiques put forwards that the circular economy has too multiple definitions to be delimited, making it an umbrella concept that, although exciting and appealing, is hard to understand and assess. Critiques mean that the literature ignores much-established knowledge. It neglects the thermodynamic principle that one can neither create nor destroy matter. Therefore, a future where waste no longer exists, where material loops are closed, and products are recycled indefinitely is, in any practical sense, impossible. They point at a lack of inclusion of indigenous discourses from the Global South means that the conversation is less ecocentric than it depicts itself. That there is a lack of clarity as to whether the circular economy is more sustainable than the linear economy, and what its social benefits might be, due to diffuse contours. It may thus not be the panacea many had hoped for.
Intuitively, the circular economy would appear to be more sustainable than the current linear economic system. Reducing the resources used, and the waste and leakage created, conserves resources and helps to reduce environmental pollution. However, it is argued by some that these assumptions are simplistic; that they disregard the complexity of existing systems and their potential trade-offs. For example, the social dimension of sustainability seems to be only marginally addressed in many publications on the circular economy. There are cases that might require different or additional strategies, like purchasing new, more energy-efficient equipment.
The circular economy can cover a broad scope. Researchers have focused on different areas such as industrial applications with both product-oriented, natural resources and services, practice and policies to better understand the limitations that the CE currently faces, strategic management for details of the circular economy, and different outcomes such as potential re-use applications and waste management.
The circular economy includes products, infrastructure, equipment, and services, and applies to every industry sector. It includes ‘technical’ resources (metals, minerals, fossil resources) and ‘biological’ resources (food, fibers, timber, etc.).Most schools of thought advocate a shift from fossil fuels to the use of renewable energy and emphasize the role of diversity as a characteristic of resilient and sustainable systems. The circular economy includes a discussion of the role of money and finance as part of the wider debate, and some of its pioneers have called for a revamp of economic performance measurement tools. One study points out how modularisation could become a cornerstone to enable a circular economy and enhance the sustainability of energy infrastructure. One example of a circular economy model is the implementation of renting models in traditional ownership areas (e.g. electronics, clothes, furniture, transportation). Through renting the same product to several clients, manufacturers can increase revenues per unit, thus decreasing the need to produce more to increase revenues. Recycling initiatives are often described as circular economies and are likely to be the most widespread models.
While deliberating about issues around sustainability, experts stressed the need for businesses to rapidly adopt industry best practices from across the globe. Forward-looking firms will leverage the idea of sustainability and circular economy. Globally, customers are increasingly making their buying decision based on whether the raw materials in the product have been sourced sustainably or not. Being part of a circular value chain gives an added USP to products, say, industry observers. The growing trend is leading to a big demand for products made by firms employing sustainability-driven practices.
Traditionally, we have taken natural resources to manufacture products and at the end of the products lifecycle, we send them to landfills or burn them. Some refer to it as the take make waste linear model. But the world has realized this is simply not sustainable – it’s destroying our planet. We need a circular economy one that regenerates the resources we take from the planet one that keeps materials in circulation. This challenges you to design differently and keep products and materials in use as long as possible and design its end of life.
The pandemic has exposed gaps in the notion of development across global markets. India now needs to rely on a circular economy, by laying emphasis on people, the planet, and profits. It has been a year since the global outbreak of the pandemic. During this period, the world fought valiantly and collectively to survive this challenge; however, the battle is far from over.
While the pandemic impacted the global economy, it also exposed gaps in the notion of development across global markets. It further emphasized the need to build for the future through collective actions including self-reliance, technology, and digital investments across industries, equitable growth, rectifying the mismatch in demand and supply, and correcting the climate imbalance.
Despite its damaging effect on the world, the pandemic-induced crisis urged us to pause, reflect, and re-energize to leverage the opportunities that lie beyond the challenges. Now is the time for us to build a sustainable economy governed by mindful growth—one that is not built at the cost of the welfare of its stakeholders. Transitioning from a linear to a circular economy—a restorative or regenerative economy that lays equal emphasis on people, the planet, and profits—is perhaps the only viable solution that can ensure this. It underscores the need to shift towards the use of renewable resources and aims at the elimination of waste through the superior design of materials, products, systems, and business models.
Building a Circular Economy through Collaboration
The opportunity to build a resilient and low-carbon economic recovery requires close collaboration between government, industries, and people to take critical actions that focus on safeguarding national economies. Italy, one of the leading countries in Europe with a circular economy, is a fine example of close stakeholder collaboration to promote innovative projects in sustainability, economy, tourism, decarburization, and climate change mitigation. Based on the SMART city/country strategies, many structural changes have been incorporated to facilitate the transition to a green economy. According to analysts, the circular economy development path in India could create an annual value of INR. 14 lakh crore ($218 billion) in 2030 and INR. 40 lakh crore ($624 billion) in 2050 in comparison to the current development scenario. India is deploying SMART policies and strategies across its cities to maximize resource use, decrease pollution, and create countless business opportunities.
Building a Circular Economy through distributed growth
The world is a global village, much like an extended central nervous system connected by the Internet and telecommunication. Therefore, the focus should be on distributed growth across all industries—be it manufacturing, agriculture, telecommunications, information technology, or health. In India, the reliance on agriculture needs to be balanced by the increased focus on digital, education, healthcare, and new-age technologies. It seems that the spirit of entrepreneurship guides us, and we can boost our economy by supporting local entrepreneurs and business ventures. We also need to manage talent in developing countries by creating ample employment opportunities to ensure rounded growth.
Building a Circular Economy by Leveraging Technology
To develop a sustainable growth model, we must leverage technology as a key enabler to facilitate business and operations. We need to embrace the transformative capabilities of digital technologies for supply chain resilience: big data analytics to streamline supplier selection processes; cloud computing to facilitate and manage supplier relationships; and the Internet of Things for enhancing logistics and shipping processes.
Technology is the catalyst that can bridge the gap between Bharat and India, and we must leverage it. Direct benefits/money transfer to citizens through digitization of banks as part of the Jan Dhan scheme of the government is a great example of this. Similarly, the emergence of fintech and increased smartphone and Internet penetration has led to better connections between the government, industries, and citizens.
The global market is moving towards the next leap where technologies such as 5G, artificial intelligence, blockchain, machine to machine, and robotics could be applied to any services in any sector. In other words, we are taking the leap by making technology the common denominator. In this scenario, businesses need to place the tech-bets and nurture a growth mindset guided by sustainable goals like combating climate change, adopting renewable energy solutions, and using digital platforms.
Building a Circular Economy by going Vocal for Local
Circular and local models have proven to be more resilient and efficient in addressing the needs of the masses and catalyzing the recovery of businesses. We must hence encourage local alternatives to enable local supply chains. During the early stages of the pandemic in India, we were in dire need of PPE (personal protective equipment) kits and masks for our frontline line workers. However, within a few weeks of the lockdown, our country managed to manufacture these kits indigenously in huge numbers. This provided employment opportunities to many and together, we were able to turn the situation around successfully.
According to the Circularity Gap Report 2020, the global economy is only 8.6% circular. This means that over 90% of the resources that enter the economy—100 billion tonnes per year—are wasted. The Netherlands is one of the leading countries that work with a circular economy. It has an ambitious project to become a country 100% based on a circular economy by 2050 and is already working on strategies to manage raw materials, products, and services more efficiently. While it is important to go vocal for local, there is a need to foster global collaboration to provide the necessary infrastructure to collectively develop and sustain a circular economy.
The practice of adopting a circular economy at the macro, meso, and micro-level is required to achieve sustainable development goals. At the macro-level, several policies, development programs and regulations influence the actions of the economic actors involved at meso (business networks) and micro (individual firm) levels to uphold progress towards the circular economy. The national and regional policies develop the closed-loop through optimized utilization of waste, followed by renewable energy use, minimizing pollution generated during the manufacturing process, and infrastructure-related initiatives such as the “development of smart cities and communities to prosper economic growth and development”. Atmeso-level, circular practices are related to business networks and thus, industrial symbiosis takes place. Industrial symbiosis allows multiple firms with aligned interests to collaborate amongst themselves to achieve a competitive advantage over others. At the micro-level, circular economy practices are related to a single company. Each company has its own specific set of business models to achieve circularity in its business operations.
The imperative of rapid scaling up of the infrastructure capacity – in the Government and private sector (developers, contractors, consultants, financial intermediaries, and investors) – entails developing and implementing projects of the required scale and within the tight time frames envisaged. The recent initiatives of “100 smart cities” on the part of the Government have begun to turn around the project as far as private participation is concerned through project execution and planning new investments.
Lastly, to implement an ambitious roadmap for this project, improved standards of secured governance and concerted action would be required to take these targets and goals from inspirational statements to actual development. We need a system to integrate economic interdependence in today’s modern societies which not only decreases uncertainty regarding where risks begin and end but also helps in judicious planning and development of new empowered, transparent and interdependent Governance systems with a higher degree of social participation in nation-building Process. Secured Governance is an ideal strategy that equips to create adequate and coordinated measures to ensure the provision of financial, human, technical, information, and other capacity-building resources. A circular economy is not a new concept. From a very young age, we are taught about the importance of using our resources and money wisely, with an eye on the future. We must continue this practice in our lives to invest in initiatives that positively impact our future generations by becoming more environmentally conscious and responsible. The idea of a closed economy has been picking up consideration all around the globe. The objective of a circular economy is to guarantee proficient utilization of resources to avoid or ultimately minimize industrial waste. The move towards a circular economy is a step to achieving the Sustainable Development Goals(SDGs) to bring harmonization among the economy, society, and the climate. The natural resource management reflected in the SDGs 12ensures responsible production and consumption. In India, the growing middle-class population, rapid economic growth, rise in average income, an expansion in manufacturing and service-related activities and urbanization is affecting the production and consumption patterns and thus, causing socioeconomic and environmental risks. Indeed, even Indian companies have also started making a conscious decision towards the adoption of a circular economy in the manufacturing and service sectors. The government of India has taken several policies across all the phases of the product life cycle to make resource proficiency a reality.
Dr. P. Sekhar, Chairman,
Unleashing India Global Smart City Panel & MTGF
Global Expert on Circular Economy MD ICCE