Building Blocks of Circular Economy

By Igor Taranic

Introduction

The concept of a Circular Economy is one based on sustainability and economics, aiming at reducing the extraction and use of natural resources and preventing the accompanying damage to the environment. The concept is one where natural resources are treated as restorative by design. And ‘intention’, which is becoming an important component of environmental and economic policies around the world, complements the more mature low carbon policies, which aim at addressing climate change. Some elements of the concept of the Circular Economy can be found in Japan, the United States, China and other nations. European Union’s Circular Economy Action Plan (2015) is probably the most ambitious program to address the challenge of resource depletion.

[su_pullquote align=”right”]The Circular Economy (CE) is a complex concept and might have different meanings and impacts for different types of economic actors.[/su_pullquote]

The Circular Economy (CE) is a complex concept and might have different meanings and impacts for different types of economic actors. For example, what does CE mean for the agricultural sector and how is it different from the CE for the automotive industry? What is the difference between Circular Economy practices in a city and the Circular Economy for a start-up or a corporation? Both policy makers, the business community and other economic actors need more clarity on how the Circular Economy is relevant for each type of economic activity.

Together with my colleagues Arno Behrens from the Centre for European Policy Studies in Brussels and Corrado Topi from the Stockholm Environment Institute, we tried to bring more clarity into the Circular Economy in our latest CEPS special report on the Circular Economy.

The CEPS Framework

In our paper we try to clarify the complexity of the Circular Economy by bringing a structured approach to the concept of the circular economy in European policy-making. In order to do so, we introduced the”Circular Economy Progress for Stakeholders” framework, shortened to the CEPS framework. Firstly, the framework breaks down the Circular Economy concept into eight building blocks. Secondly, it differentiates between three main types of economic actors, affected by and affecting the building blocks of the Circular Economy.

This simple structure makes it easier for economic actors to combine these blocks in different patterns or formations and develop circular economy business models to deploy in the real world.

Building Blocks

The eight Circular Economy building blocks are: 1) Industrial Symbiosis, 2) Material Resource Efficiency, 3) Product Life-Cycle Extension, 4) Biological Products, 5) Energy Efficiency and Renewable Energy, 6) the Performance Economy, 7) the Sharing Economy and 8) the Platform Economy.

The building blocks consist of both well-established European policies, such as energy and resource efficiency, and novel economic concepts, such as the Sharing-and Platform-Economy. The blocks are interconnected and all have a direct or an indirect impact on resource use. However, the list can be modified as the Circular Economy concept continues to develop.

Here is a short description of the building blocks with some examples, illustrating how these blocks can impact or be impacted by the variety of economic actors:

Industrial Symbiosis is physical exchange of material resources, water, energy and by-products between several industrial facilities; or the exchange of knowledge to foster economic-innovation through networks of actors. One of the most well-known examples of Industrial Symbiosis is the Kalundborg Symbiosis,[1] a cooperation among eight private and public enterprises from different industry sectors in Kalundborg, Denmark.

The concept of Material Resource Efficiency simply means doing more with lesser resources. For example, integrating the practice of re-manufacturing, and maintaining/upgrading our products instead of replacing them. It can be also achieved by the practice of Product Life Cycle Extension. For example, Fairphone 2.0 is the first modular smart phone inspired by the Circular Economy, designed for upgrade, ‘repairability’ and easy reuse and recycling at the end of the phone’s (extended) lifespan. Based on a similar approach, Google is developing its first modular phone “Ara” with replaceable modules, enabling its consumers to enjoy the latest smart phone technology without needing to replace their entire device each year.

Renewable Energy helps in reducing greenhouse gas emissions | Photo Courtesy: Darkhorse Winterwolf via Flickr

Renewable Energy and Energy Efficiency help reducing the consumption of fossil fuels and curb Greenhouse gas emissions.

[su_pullquote align=”right”]A reduction in the wastage of food and the replacement of mineral fertilisers with organic ones could foster a Circular Economy for biological products.[/su_pullquote]

A reduction in the wastage of food and the replacement of mineral fertilisers with organic ones could foster a Circular Economy for biological products. For example, Home Biogas, an Israeli start-up, has developed a small domestic system that converts food waste and animal manure into cooking gas and liquid fertilizers. And “Just Egg”, a British hard-boiled egg supplier based in Leicester, was paying about £30,000 a year to bury its by-product – 480 tonnes of eggshells – in landfills. Together with Leicester University, it has developed a technology to transform eggshells into powder that can be used in the production of plastics, i.e., making biological waste a resource for the plastics sector.

The Performance Economy and the Sharing Economy are B2B (Business-to-Business), B2C (Business-to-Consumer) and C2C (Consumer-to-Consumer)-emerging concepts of providing products as services, mainly via digital platforms (Platform Economy). The most well-known examples include Uber, Airbnb, Amazon market place, Zipcar, etc. Although environmental protection is usually not the main purpose of these concepts, in some cases the sharing of economy models helps achieve the aims of the Circular Economy. For example, one Zipcar (an American car-sharing company) takes 5-20 privately-owned vehicles off the road, potentially reducing both material consumption and CO₂ emissions.

Stakeholders

Based on our understanding of the building blocks, we have defined three main types of stakeholders in the Circular Economy – classic (mature) industries, emerging industries, and multi-sectoral corporal actors. These go beyond the existing work on the Circular Economy. They also fill the gap in the literature linking the building blocks of the Circular Economy and the stakeholders in one comprehensive model.

It needs to be mentioned, of course, that the differentiation between classic industries, emerging industries and multi-sectoral actors is made to theoretically simplify the complexity and further clarify the concept of the Circular Economy. As always, in many cases the reality might be more complex.

Classic (mature) industries consist of typical sectors of the industrial economy, such as chemicals, machinery, transportation, household durables and others.

Emerging industries represent the new markets of the Circular Economy, such as sharing platforms, refurbishment schemes and other new business models.

Multi–sectoral actors relate to the deployment of circular-economy models by specific types of actors that have multi-sectoral activities, such as regions and cities, SMEs and multi-sectoral corporations (which are active in different sectors, such as Siemens and Philips, for example).

The CEPS (Circular Economy Progress for Stakeholders) framework presents various interconnections of the eight Circular Economy building blocks with different types of stakeholders. We hope that this framework provides a simplification and clarification of the Circular Economy for both policy makers and business leaders.

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Igor Taranic works at the Centre for European Policy Studies (CEPS), a Brussels based leading European think tank. He is also a Member of the Executive Board of the College of Europe Alumni Association.

Featured Image Credits: Thom Sheridan via Flickr