Circular economy and sustainability have the same vision of a society which balances economic, environmental and social needs, based on a caring attitude. Economy and ecology go hand in hand because waste prevention is also a prevention of economic and resource losses. By extending the service life of goods through reuse, repair, remanufacture and technological and fashion upgrading, the circular economy substitutes labour-intensive service activities for energy and material intensive manufacturing activities.
2.1 The shift to a modern circular industrial economy
In the eighteenth century, the industrial revolution driven by the iron and coal industry enabled society to break free from the limits of natural resources and overcome the scarcity of food, goods, shelter, energy and infrastructure, ending a circular society of scarcity as old as mankind; steam engines and later electric motors freed mankind from the limitations of animal and human labour. Industrialisation turned this circular society into a monetarised industrial economy; time increasingly mattered, taxes on labour were introduced and concepts of liability for manufactured goods emerged.
In the late nineteenth century, the discovery of oil opened the road to the use of combustion engines, and in the mid-twentieth century to a multitude of synthetic fibres and man-made materials. ‘Plastics’ slowly replaced wood and metals in manufacturing. The fact that these new materials do not exist in nature, and that nature’s circularity therefore could not ‘digest’ them, was of no concern.
In the short timespan between 1950 and today, industrial man filled space, the room around Earth within its gravity field, with millions of manufactured objects, and the oceans with an unimaginable amount of plastic objects, without any consideration of circularity, how to regain these objects at the end of their useful life.
In the late twentieth century, this problematique was amplified by a growing complexity of materials and industrial processes. Custom-made metal alloys have been increasingly used in producing many goods, just as rare earth elements: a smartphone today contains 70 elements of the 118 chemical elements of the periodic table, often in minute quantities. As end-of-pipe technologies do not allow recovering these atoms and molecules for reuse, most of the economic value of these material assets is lost after their first use (Material Economics 2018), despite general activities of recycling to recover material volumes.
Industrialised countries today have reached breaking point. After a long battle to overcome scarcities, the linear industrial economy has created a society of abundance with saturated markets for many goods; globalised production no longer increases wealth, but substitutes new for existing wealth. In addition, ever increasing waste volumes of synthetic materials and new material combinations push waste management costs ever higher. As these costs are borne by society at large, manufacturers have no economic incentive to control them.
The management of end-of-pipe waste is the final phase of the linear industrial economy, whereas waste prevention is one of the objectives of the circular industrial economy. At the point of sale, liability is transferred from the producer to the buyer-user (the consumer), who passes it on to the state. Consumer waste, as objects with no positive value or ultimate liable owner, become the liability of municipalities and nation states (Figure 2.1).
In a society of abundance, the circular industrial economy is nation states’ solution of last resort to reduce waste. But emphasis is currently put on rapidly reducing the waste volumes (through recycling, incineration), not on maintaining the highest value and utility through reuse and service-life extension for the longest period of time. The producers of the linear industrial economy are not involved in this process.
A modern circular industrial economy needs to emerge to overcome this legacy problem of a consumer society of abundance. This implies a triple shift:
• from the artisanal approach of a circular economy of necessity to the industrial approach of a circular industrial economy, both for manufactured objects and materials;
• closed loops for objects to enable the reuse of goods and components at a quality as good as new (the era of ‘R’, see Chapter 4);
• reversed material sciences to delink used materials in order to recover molecules and atoms for reuse at the same purity as virgin resources (the era of ‘D’, see Chapter 5);
• from the present producer liability for manufacturing quality to an Extended Producer Liability (EPL) also for end-of-service-life objects (closing the invisible liability loop, see Chapter 7);
• from a consumer attitude focused on fashion and newness of products to a user attitude focused on performance, function and sufficiency of solutions (achieving desired output from minimum input).
An intelligent management of stocks builds on ‘sustainability’ in the original meaning of the term, which comes from forestry and means maximising the interests from a stock or capital (forest) while conserving the capital itself.
2.2 Sustainability and the circular industrial economy
Sustainability has been at the heart of the circular industrial economy since it started. In 1713, Hans Carl von Carlowitz, responsible for the mining industry in Saxony (Sachsen), recognised the danger of a scarcity of timber for mining and metallurgy and concluded that only so many trees should be cut annually as could be regrown, maintaining the forest capital. He called this industrial resource policy Nachhaltigkeit, ‘sustainability’ (Carlowitz 1713).
Prussian Junkers, landowner-foresters, then adopted the term ‘sustainable forestry’ to define their maxim of optimising the interests from their forests (animals, fruit, plants, topsoil) while maintaining and improving both quantity and quality of the stock (the forest and its trees, but also the water retention capacity of the soil). They were capitalists caring for nature because the forests – nature – were their main source of income and wealth.
Caring thus has been the attitude at the roots of sustainability and circular economy right from the beginning.
Caring implies a personal relationship, often over a long period of time, with a stock of goods (forests, animals), a person (in medicine or friendship) or an object (Zen and the art of motorcycle maintenance, Pirsig 1974); examples are natural parks, objects in museums and UNESCO World Heritage sites. By contrast, the term caring is absent in the vocabulary of the linear industrial economy.
In the late twentieth century, sustainability was adopted as a political concept, first in the 1972 UN Conference on the Human Environment in Stockholm, which was followed by the 1992 UN Conference on Environment and Development in Rio. The Rio Declaration reaffirmed and built upon the Stockholm Declaration, systematising and restating existing normative expectations regarding the environment, as well as boldly positing the legal and political underpinnings of sustainable development in a document called Agenda 20.
In a beginner’s way, sustainability and circular industrial economy can be regarded as two faces of a coin, as shown in Figure 2.2.
Figure 2.2 Sustainability and the circular industrial economy: two faces of the same coin
The key objective of a circular industrial economy is to keep the economic value and utility of stocks of manufactured objects and materials as high as possible for as long as possible. Use (or utilisation) value is the dividend we harvest without consuming the stocks themselves.1
Wealth in the circular industrial economy is measured as the sum of the quality and quantity of all stocks; growth is an increase in the sum of the quality and quantity of all stocks, not an increased throughput. Statistics measuring national wealth in this sense have only just started to be published (World Bank Group 2018).
Now production optimisation has always included in-house loops of reuse and recycling in order to minimise costs. Clean production waste has thus been sold back to material producers for reuse, from the goldsmiths’ famous table-pockets to plastic extruder process waste.
Robert Bosch, founder-owner of Bosch Company in Stuttgart, was known to pick up paper clips lying on office floors and tell employees ‘not to waste my money’:
Economy and ecology meet in sustainable business models because waste prevention is also a prevention of economic and resource losses!
Preventing a catastrophic loss, such as a fire in a major building, not only prevents the environmental damages caused by the fire itself, but also those caused by the fire brigade in its effort to contain the fire. Take the explosion followed by a fire in a chemical warehouse in Schweizerhalle, near Basel, in 1986. The runoff of the water sprayed by the fire brigade on the burning warehouse, to prevent the fire from spreading to other buildings, polluted the Rhine River, killing all animal life downstream from Basel.
The insurance premiums to cover the Environmental Liability for buildings can be up to 100 times the premium to cover the value of the building itself. Many fire brigades now allow a building on fire to burn down completely, focusing their efforts on preventing the fire from spreading to other buildings nearby, to limit total damages.
Industrial Symbiosis and Industrial Ecology have extended the strategy of cost reduction through a cascading use of resource flows, such as waste heat. This strategy has been perfected in the Kalundborg eco-industrial park, reducing both cost and preventing waste in industrial production that is before the point of sale (Chapter 6). But these strategies have no impact on the use phase of manufactured objects after the point of sale or on end-of-pipe waste issues, and thus greatly differ from the reuse and service-life extension loops of the circular industrial economy. In addition, they do not allow exploiting the opportunities of the Performance Economy, such as selling goods as a service. And Industrial Symbioses contains a catastrophe risk management issue: the German Democratic Republic (DDR) was a near-perfect attempt of an Industrial Symbioses on a national level; this contributed to the rapid collapse of its economy after German unification in 1989, due to a complete lack of resilience and redundancy.
To summarise, the circular industrial economy:
- is sustainable because it maintains existing resource investments to fulfil market needs instead of relying on new material and energy resources;
- manages manufactured stocks (physical capital), such as forests, cities, fleets of vehicles and equipment, by balancing the use of human, manufactured, natural and financial assets;
- allows a decoupling of wealth and welfare creation from resource consumption and is best done locally, where its clients are;
- promotes service-life extension activities, which are part of a trend of intelligent decentralisation, like 3D print, AI-led robotised manufacturing, micro-breweries and bakeries as well as urban farming.
Where objects are expected to be lost into the environment, preference should be given to biodegradable materials, which nature’s circularity can digest, or to alternative technical reuse solutions, such as ‘propulsive rocket landing’. For example, the Falcon 9 rocket developed by Space X is the first reusable rocket, able to land on its launch pad after a mission and not turning into space waste or crashing into the sea.
2.3 Labour in the circular industrial economy
In manufacturing, three quarters of energy is used in the production of basic materials such as cement and steel, only one quarter in producing goods such as buildings or cars: for labour input, the relation is reverse, three quarters being used in producing the goods.
(Stahel and Reday-Mulvey 1976)
By extending the service life of goods through reuse, repair, remanufacture and technological and fashion upgrading, the circular industrial economy employs labour-intensive activities of a nature similar to producing goods, to the detriment of energy and material intensive ones of producing basic materials.
The circular industrial economy, replacing the production of new goods, thus substitutes manpower for energy, and local workshops for centralised factories, enabling local job creation and the reindustrialisation of regions. Taxes on labour versus taxes on resources become a key policy issue in the shift towards a circular industrial policy (Stahel 2013).
This is of importance because labour is of a special nature, unlike the other factors of production.
Human capital is unique because it is not only a renewable resource—like trees—but also the only resource with a qualitative edge; its quality can be improved through education and training but will deteriorate rapidly if unused. People, human capital, are a key—but often forgotten or underexploited—capital in any economy.
(Stahel 2013)
Schumacher had highlighted the role of labour in Small is beautiful, the original title of which was Economics as if people mattered (Schumacher 1973).
Innovation and human capital are Siamese twins; the sources of innovative ideas are therefore not limited to R&D centres and academia. Some manufacturers have successfully understood the innovation potential of their shop floor workers in HSE (Health, Safety and Environment) topics, such as DuPont de Nemours’ Sustainability Awards, and the German Railways’ Vorschlagswesen, motivating and rewarding workers for proposing improvements to their daily work activity and environment. Another approach to maintain the highest manufacturing quality is used in Toyota’s car factories, where every employee who discovers a fault can stop the production line; the fault is then immediately corrected by experts rushing to the scene. When opening the original factory to produce the first generation of RAV4 vehicles, the president of Toyota explained the fact that only few robots were present in the factory with Toyota’s quest for permanent improvements – which only workers were able to fulfil.
Learning by doing is also an integral part of the circular economy of craftsmen and of SMEs. Spreading this knowledge – technical and economic – to class- and boardrooms, to academia and technical training institutions, and to new ‘R’ professions is a major challenge in speeding up the transition to a circular industrial economy.
References
Carlowitz, Hans Carl von (1713) Sylvicultura economica.
Material Economics (2018) Ett värdebeständigt svenskt materialsystem (Retaining value in the Swedish materials system). Economic value measured in billion Swedish Kroner versus material measured in tonnes. Research study, unpublished.
Pirsig, Robert (1974) Zen and the art of motorcycle maintenance. William Morris and Company, London.
Schumacher, Fritz (1973) Small is beautiful: Economics as if people mattered. Harper & Collins, New York.
Stahel, Walter (2013) Policy for material efficiency: Sustainable taxation as a departure from the throwaway society. Philosophical Transactions A of the Royal Society, vol. 371, pp. 1–19.
Stahel, Walter R. and Reday-Mulvey, Genevieve (1976) The potential for substituting manpower for energy. Report to the Commission of the European Communities, Brussels. Published in 1981 as Jobs for tomorrow, the potential for substituting manpower for energy. Vantage Press, New York.
World Bank Group (2018) The changing wealth of nations report 2018. https://openknowledge.worldbank.org/bitstream/handle/10986/29001/9781464810466.pdf, accessed 15 January 2019.