Simple -> Complex
Equilibrum -> Disequilibrum
Linear -> Non-linear
Mechanistic -> Behavioral
Efficient -> Effective
Predictive -> Adaptive
Independent -> Interdependent
Individual ability -> Group diversity
Rational calculator -> Irrational approximator
Selfish -> Strongly reciprocal
Win-lose -> Win-win or Lose-lose
Competion -> Co-operation
In Natural Capitalism, Amory Lovins, Hunter Lovins and Paul Hawken explore how this abundance can be built by implementing four reinforcing shifts, not just one, but all four, to create a positive cycle.
Shift 1: implement resource efficiency – actually ‘radical resource efficiency’ not the few per cent kind from the picking of a few low-hanging fruits around the business. Resource efficiency is a big favourite, as we shall see: design to recover materials; design for disassembly; design for cleaner material flows and shared standards; and design for remanufacturing. They can all cut energy use, maintain product quality and cut waste.
Shift 2: move to biomimetic modes of production. Use the ‘everything is food’ notion to redesign, and design out waste.
Shift 3: move to providing services rather than goods. There are various elements to this – the performance economy, other product-service systems and more recently the explosion of interest in how information technology can furnish access to products and assets for short periods of time with low transaction costs. ZipCar, Lyft and AirBnB are examples.
Shift 4: reinvest in natural capital. To create additional flows of materials and energy from rebuilt or restored/maintained capital stocks over time. To support diversity and hence creativity and resilience (two vital functions). Others add ‘social capital,’ the ability of individuals and communities to add value in what they do for each other – this is an oft-cited feature of the so-called ‘sharing economy.’
Key ‘Cradle to Cradle’ principles include:
- All materials flow in one of two cycles: biological (can be safely decomposed through the biosphere) or technical (non biodegradable, kept at high quality and away from the biosphere in their own industrial cycle)
- Everything is food
- Shift towards clean energy, essentially renewable
- Celebrate diversity (since it is a source of both creativity and resilience in systems)
The prosperity principle is ‘we’re all better off when we are all better off,’ or, to use living systems insights, ‘healthy trees are found in healthy forests’.
A circular economy is one that is restorative by design, and which aims to keep products, components and materials at their highest utility and value, at all times.
- Energy in surplus is a precondition, eventually mostly renewables (using flows not stocks)
- Waste = food (everything is ‘food’). An upcycle, it (re)builds natural and social capital and maintains it
- Money as a medium of exchange (as credit, it leads the cycle)
- Markets work if prices act as messages and reflect the full costs
- Effective flows not just efficient (optimise thewhole not the part)
- Celebrates diversity for reasons of creativity and resilience (to keep a dynamic system ‘up’ but adaptive)
- Led by business for a profit but within rules set by an active citizenship in a flourishing democracy. Democracy requires relative abundance not scarcity in order to thrive.
Wages, now stagnated as a proportion of the economic pie and inflation-adjusted, have not risen significantly since. Profitability increased markedly across the board however, as productivity kept rising, as did inequality of income. Economic growth has largely become jobless growth backfilled with increasing numbers of part-time, short-contract and low-paid workers. These workers do not make confident consumers.
Sufficient wages overall, however, are needed to buy all the products being produced and if there are more goods but less spending power, even if cheaper goods arrive from abroad, it’s a problem. Mass production requires mass consumption, which in turn requires credit, both secured and unsecured, for producer and consumer.
Other social trends add to a worrying picture: increasingly ageing populations and rising unemployment – particularly among the under 25s – are calling on more public provision just as public funds are strained in the aftermath of rescuing the financial sector. The golden generations of those in adulthood in Europe between 1947 and 1979 and in the credit expansion phase 1979–2008 were enjoying a linear economy as good as it (ever) gets.
The circular economy refers to an industrial economy that is restorative by intention; aims to rely on renewable energy; minimises, tracks, and hopefully eliminates the use of toxic chemicals; and eradicates waste through careful design.
The term goes beyond the mechanics of production and consumption of goods and services, in the areas that it seeks to redefine (examples include rebuilding capital including social and natural, and the shift from consumer to user).
circular economy advocates the need for a ‘functional service’ model in which manufacturers or retailers increasingly retain the ownership of their products and, where possible, act as service providers – selling the use of products, not their one-way consumption.
This shift has direct implications for the development of efficient and effective take-back systems and the proliferation of product- and business model design practices that generate more durable products, facilitate disassembly and refurbishment and, where appropriate, consider product/service shifts.
The circular economy is based on a few simple principles:
DESIGN OUT WASTE
BUILD RESILIENCE THROUGH DIVERSITY
WORK TOWARDS USING ENERGY FROM RENEWABLE SOURCES
“Shifting taxation from labour to energy and material consumption would fast-track adoption of more circular business models; it would also make sure that we are putting the efficiency pressure on the true bottleneck of our resource-consuming society/economy – there is no shortage of labour and (renewable) energy in the long term.”
THINK IN ‘SYSTEMS’
Effectiveness is the sweet spot where resilience and efficiency interplay: efficiency (doing things right) is welcome, but in the service of effectiveness (doing the right thing), with the prime objective of ensuring the business fits the economy.
THINK IN CASCADES
- Externalize cost -> Internalise cost
- POS=point of sale -> POS=point of service
- Create waste -> Reduce waste
- Global scale -> Local scale
- Standardization for ease of consumption -> Standardization for ease of repair/reuse
- Fast consumption -> Slow consumption
- Private cost -> full cost of life cycle
- Tax on labour -> tax on non-renewable energy/waste
“Scientific problem solving is done by analysis, while designers problem solve through synthesis.”
The strongest trees are in the healthiest forest.
“Much of the learning we offer today is still grounded in the perceptions and practices of the bygone industrial age. In order to free education from the bondage of the past a major shift has to take place, not only in the way we perceive the role and function of education but also in the learning experiences we should offer”
“The goods of today are the resources of tomorrow at yesterday’s prices.” Walter R Stahel
A circular economy is about economics and profit maximization. From an economics view, maintaining value and performance of stock replaces value added of flow, and utilisation value replaces exchange value as the central notion of economic value. We know how much money governments spend on building schools and employing teachers, but we do not know if as a result the students are better prepared for life.
A circular economy is about material and resource sufficiency and efficiency. Two distinctively different types of resource efficiency govern the circular economy: loop 1 in the graphic opposite is about resource sufficiency in the reuse and service-life extension of manufactured capital, loop 2 is about material efficiency in recycling materials (molecules). The strategies of loop 1 are product specific – re-refining engine oil, solvents and other products with a catalytic function need a different approach from the service-life extension activities for buildings or mobile durable goods. The strategies of loop 2 are material specific – metals, ceramic materials and plastic use processes of physical and chemical recycling often derived from manufacturing processes, as well as new processes such as the depolymerisation of polymers. Higher resource efficiency also means reduced costs for material and energy procurement, as well as for waste disposal, waste water treatment and emissions.
A circular economy is about an intelligent use of human labour– job creation in a regional economy. Work is the most versatile and adaptable of all resources, with a strong but perishable qualitative edge: (a) it is the only resource capable of creativity and with the capacity to produce innovative solutions, and (b) human skills deteriorate if unused – continuity of work and continued learning are necessary to maintain skills and upgrade capabilities.
Retained ownership of goods and embodied material provides future resource security. Economic actors retaining material ownership over the full life of their products gain a future resource security but accept a liability for the performance of their goods. Such a performance economy is based on the triple objectives of more growth and more jobs in combination with substantially reduced resource consumption. This triple objective can be achieved through three new business models: producing performance, selling performance and maintaining performance over time.
Success is measured using two new metrics in the form of absolute decoupling indicators: value per weight (USD/kg) and labour-input per weight (man-hours/kg).
Selling performance differs according to the characteristics of products and is widely present in today’s economy: selling goods as services by operating private and public networks (railways, telecom, motorways, airports); chemical management services and rent-a-molecule; energy management and integrated crop management services; rental and operational leasing of real estate; selling custom-made indoor climate for energy companies; private finance initiatives (known as PFIs) as a strategy to sell the utilisation of infrastructure according to the ‘consumer pays principle’, such as the French and Italian toll motorways; facility management of real estate and industrial plants; textile leasing (professional attire, hotel and hospital linen). These are but a few examples of the business model of selling performance, which also include rent-a-wash and chemical leasing, as well as renting fashionable consumer goods (taking the waste out of fashion, see websites to rent ladies’ handbags).
Selling performance is the most profitable and most material-efficient business model of the circular economy, as it is built on exploiting the small loops. It focuses on utilisation optimisation and exploits resource efficiency as well as sufficiency and prevention options to gain financial advantages and higher competitiveness. And it can be applied to all types of goods.
Retaining ownership of their goods and embodied resources over the full life of their products gives corporations in times of rising resource prices a high future resource security and resource price guarantee as well as a competitive cost advantage against throughput-based competitors, along the lines of: “The goods of today are the resources of tomorrow at yesterday’s prices”.
Buying performance is the demand-side strategy equivalent to selling performance. Buying goods as services creates the same resource efficiency advantages and can be regarded as a new green public procurement policy.
Policy for material efficiency: the role of sustainable taxation and sustainable framework conditions. Sustainable politics should build on simple and convincing principles, such as: do not tax what you want to foster, punish unwanted effects instead. Also, it should promote sustainable solutions. Ideally, sustainable solutions create self-reinforcing virtuous circles, which guarantee their longevity.
Not taxing renewable resources, including work, and taxing non-renewable ones instead, creates virtuous self-reinforcing circles, by creating incentives to work more (no penalty for higher income) and by creating more wealth from less new resource input (increasing caring in resource use, including long-term resource ownership).
Sustainable taxation should reward desired developments and discourage unwanted effects of activities.
In a sustainable economy, taxes on renewable resources, including work – human labour – are counterproductive and should be abandoned. The resulting loss of state revenue could be compensated by taxing the consumption of non-renewable resources in the form of materials and energies, and of undesired wastes and emissions. Such a shift in taxation would promote and reward a circular economy with its local low-carbon and low-resource solutions. Taxes on non-renewable resources could be charged in a similar way to today’s Value Added Tax (VAT), and also applied to imported goods.
A sustainable tax policy of not taxing renewable resources, including work, constitutes a very powerful lever to accelerate, boost and generalise the circular economy and its positive impacts on resource security and regional job creation, while simultaneously reducing GHG emissions.
If prices are messages between buyers and sellers, public and private, then ideally they should reveal the full costs of resources if they, and the markets of which they are an expression, are to be effective. Two problem areas particularly stand out. Firstly, the effect of taxes on wages and salaries acting as a disincentive to using labour. Walter Stahel claims that a shift in taxation to non-renewables and waste is one of the key drivers for change. Taxes could focus on the non-renewable, on unearned income and on waste streams.
A second problem is so-called perverse subsidies. This is where non-renewables and stocks of natural capital (soils, fisheries, groundwater, forests) are exploited at prices which are below market levels and which probably already inadequately reflect the true value of the resources.
BUSINESS-TO-BUSINESS COMPLEMENTARY CURRENCY
Imagine grain is sold in the normal way to a brewery. It makes use of the grain but 80% of the physical material is still existent at the end of the brewing process, but this has a low value conventionally speaking. Introduce a brewery feedstock waste currency. The brewery now has a product for sale in, let’s call it, ‘Points’. A mushroom grower buys the spent grains with Points and knows that the bio-substrate left after mushroom growing on it can also be sold, in ‘Points’ (the mushrooms are sold conventionally). Then the substrate is used by another farmer as a soil improver to fertilise and rebuild soils. The burying of such bio-substrate in excess of what this other farmer needs to produce a crop like last year (the capital formation) can be offset against taxes. All along the chain, taxes can be paid in Points to some degree so that the creation of the ‘Points’ is extinguished ready for another cycle. Thus a business-to-business complementary currency eases and encourages these material flows, and its circulation is ensuring that the soils are rebuilt – rebuilding natural capital.
A circular economy is not primarily about technical materials and recycling/recovering them while moving to renewables. It is a different way to see the economy which includes the material but is not limited by it.
Civilisation is based, after all, on the word ‘civis’ or citizen, but set in a collective context of other citizens. We create civilisation by participating and routinely contrast it with anarchy (no order) or tyranny (no freedom). Civilisation is a form of ordered complexity. It is what we value the most and yet find so easy to destroy.
‘do good’, rather than ‘ do less harm’.
Beinhocker and Hanauer put it like this: “We… develop a view of the economy as an evolutionary system of cooperative problem solving (…). We define prosperity as ‘solutions to human problems’ and argue that cooperation is the key to solving more and more complex problems thus increasing prosperity.
here is a short summary from the Ellen MacArthur Foundation’s contribution to an Aldersgate Group report which reflected on the kinds of skills needed for the future. The chapter is Leadership for a Circular Economy:
“Below we lay out our future vision as to what skills development will look like as we move towards a circular economy, to ensure the leaders of the future are skilled appropriately. We need to support the learners of today to become:
- Systems thinkers – At present much learning and training is specialist. Whilst specialist knowledge and technical skills will always be important it is essential to see the wood for the trees. Systems thinking at all levels enables people to take a broad, holistic view thus enabling them to make connections and see possibilities, to adapt in response to feedback.
- Pro-active, independent enquirers – Small children are naturally inquisitive. As they progress through formal education and training this curiosity is burnished and encouraged. Learners and their teachers are rewarded for taking risks, for exploring issues from different perspectives, for making reasoned judgements.
- Self-managers – Learners organise their own time, establish their own priorities and are able and willing to change in the light of feedback. They look actively for fresh opportunities, and manage their own learning to be able to rise to new challenges.
- Creative innovators – No one has the monopoly of wisdom. As we explore the era post cheap oil and materials with its new and challenging predicaments, education and training aim to develop creative people who can reframe the way we think, come up with novel ways of optimising systems and creating multiple benefits for a wide range of stakeholders including those as yet unborn.
- Team workers, effective participators and empathetic colleagues – People are social beings and formal education empowers learners to be empathetic, to respect the views of others and to contribute their own views, knowledge and skills clearly and with confidence. For this they need mastery of language and mathematics. They are able to work collaboratively and resolve disputes in which they are themselves a party.
- Reflective practitioners committed to lifelong learning – Systems without feedback are stupid, by definition, so feedback loops are essential to all meaningful learning. Learners develop the habits of self-monitoring and reflection, listening to and offering constructive criticism, and making changes. This never stops and formal education feeds into the greater project: lifelong learning.”
Rebalancing the skill matrix:
- Problem solving -> Problem appreciation and reframing
- Analysis -> Synthesis
- Reductionism -> Whole system emphasis
- Closed and immediate cause and effect -> Multiple influences through time and space
- Individual learning -> Team or group learning
- Being competitive -> Competitive and collaborative
- Emphasis on teacher transmitting predetermined knowledge to students -> Learning thru enquiry with appropriate mentoring
- Rooted in subjects or diciplines -> Meta-learning
“Prosperity in human societies can’t be properly understood by just looking at monetary measures of income or wealth. Prosperity in a society is the accumulation of solutions to human problems.
A REGENERATIVE CIRCULAR ECONOMY
can be seen as the effective flow of materials, energy and information in relation to maintenance or increase of stocks of capital: ECONOMIC, SOCIAL, HUMAN AND NATURAL.
- It uses insights from the functioning of non-linear systems – feedback-rich systems, and especially living systems – as a framework for thinking.
- Its study is likely to have in mind nested systems (fractal scale, diverse periodicities) with histories and entrainment but also emergent properties and the possibility of evolution.
- Characterisation: the bigger picture, the longer term and by intention (design).
- The circular economy can be explored through a number of identities and one related shift. In a circular (feedback-rich) system the endless transformation means that one side of the equation has an intimate relationship with the other if it is to ‘work’ optimally as a system.
- Using the three categories of materials, energy and information and informed by systems thinking, the four identities fall into place.
WASTE = FOOD
Materials flows are ideally in either biological or technical cycles
WASTE = FOOD BIOLOGICAL
This is a consumer pathway Biological materials cascade Value is extracted in stages towards the final decomposition and reuse in the system. Eliminate toxics.
WASTE = FOOD TECHNICAL
This is a user pathway. Technical materials can cascade Value is related to maintenance of quality and embedded energy for defined use periods. Upcycling (adding quality or upgrading) is possible with sufficient surplus energy
SHIFT > RENEWABLES
A progressive shift towards renewables over time, Assisted by lowered energy thresholds via the impacts of better design and remarketing, reuse, refurbishment, repair and remanufacturing and the continuing fall in price for renewables. Use of current solar income not stored (i.e. fossil fuels)
PRICES = FULL COSTS
MONEY = MEDIUM OF EXCHANGE
DIVERSITY = STRENGTH
Markets are effective arbiters of resource allocation when rational decision-making is possible. Prices are messages and therefore need to accurately reflect all costs.
MONEY = MEDIUM OF EXCHANGE
Materials and service flows require appropriate and sufficient medium of exchange to be effective - includes complementary currencies.
DIVERSITY = STRENGTH
A dynamic relationship between efficiency and resilience. The role of diversity in feedback–rich systems is to provide both resilience and innovation (creativity and its application) in response to change.