Circular economy: Driving innovation, competitiveness and health and wellbeing

If goodness had a brand, Google executive chairman Eric Schmidt said recently at a summit in London, then it would look something like Cradle to Cradle® – the green concept embracing recycling, healthy materials, renewable energy, social fairness and water stewardship.

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Photo: Droid Life

The industrial revolution has delivered many obvious benefits to parts of the world but it had one design flaw which continues to bedevil us. It is linear. Instead of designing goods for closed loops, we have been drawing on the earth’s natural reserves for 150 years and making products that end up being dumped, as if the world’s minerals and metals were infinite. Currently, the linear model leads to excessive waste of finite natural resources.

Globally the middle classes are set to increase to 5 billion people purchasing ever greater amounts of consumer goods and services. This is entirely a good thing from the business point of view as well as the social aspect, lifting millions more out of poverty. But at the same time, it puts even greater pressure on an old linear economic model, a legacy of the second industrial revolution, where “resources are extracted from the earth for production and consumption on a one-way track”. (Source: Ellen MacArthur Foundation).

We all face a potentially game-changing moment in history in which we start to make the transition from the old linear model to the circular one. There are four global crises the circular economy will also help us tackle:

1. CLIMATE: Not only is the ultimate goal of the circular goal to move over to renewable energy to power the next industrial revolution leading to lower carbon emissions, but the very fact that the recycling and reuse of materials is much less energy intensive than the current linear system will also reduce emissions.

2. TOXICITY: We consume chemicals from manufactured goods all the time. We may not think about it but given that we spend 90% of our time indoors, this is a major issue to consider. Plastics, paints, textiles and so on can give off gases (Volatile Organic Compounds) that may contain toxins as well as other substances such as fine dust particles; the latter can lead to vascular and lung diseases including the scourge of asthma.

The Cradle to Cradle® philosophy calls for smarter design, so that the materials are analysed for any potentially risky chemicals from the start. They are also designed for disassembly. The central idea is to design healthy, circular material flows – either biological or technical. In this process it is crucial to know what is in your materials, a process that relies also on knowing what your suppliers are using. As the world urbanises and more and more buildings are created we need to ensure that the goods that go inside are made with human health and the environment in mind. It is also important to know that the materials are non-toxic for the recycling process, so that the materials can be recycled and reused in a healthy process.

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As a supplier of flooring solutions, we want to create products that positively contribute to people’s health and wellbeing, which includes finding ways to improve indoor air quality. Therefore, we strive to use only pure materials in our products and this is where Cradle to Cradle® supports our overall vision. At its core, Cradle to Cradle® is about assessing that every chemical ingredient in the materials you use is healthy for the environment and for people. It drives our innovation process along with functionality and creativity and aided the development, for example, of our patented DESSO AirMaster® carpet which is eight times better than hard floors at retaining the fine dust that can be damaging to people’s health1.

Rise of Cities and the Need for Healthy Materials
Soon, over half of the world’s population will live in cities, driven in part by the emergence of a billion new consumers in emerging economies. Clearly, this offers new business opportunities.

Indeed, in its study of cities of the future, the management consultants, McKinsey estimates that by 2030, five billion people (60% of the world’s population) will live in cities, compared with 3.6 billion today. In another study, Urban World, they forecasted that just 600 cities would drive as much as 65% of global growth, equivalent to $30 trillion from 2010 to 2025.

This gives rise to a growing interest in developing sustainable or green cities where the focus is often on reducing carbon emissions. However, the issue of healthy materials in the context of the built environment also matters a great deal. After all, we spend 90% of our time indoors. Can we be sure that everything we buy is free of toxins? What about the problem of fine dust indoors that can lead to asthma and other respiratory diseases as well as heart conditions?

The World Health Organisation, for example, has estimated that more than two million people die every year from breathing in small dust particles present in the indoor and outdoor air. In China, indoor air pollution has reportedly contributed to a 40% increase in incidences of asthma over the past five years, according to Atlantic magazine. More recently, the UK newspaper, The Guardian reported on a medical study published in the medical journal, The Lancet, that demonstrated a strong association between exposure to air pollution and cases of heart failure or death from heart failure. In Europe, a recent report based on Flemish data linked air pollution caused by diesel fumes to low birth weight in babies.

In this light, it is encouraging that recently the US Green Building Council voted to include Cradle to Cradle® certification in the latest version of LEED (Leadership in Energy and Environmental Design, V4), a standard for measuring a building’s sustainability.

3. RESOURCE SCARCITY: For a century, between 1900 and 2000, global GDP grew 20 times which clearly raised prosperity levels for some of the world’s population. But this linear system was one where “resources are extracted from the earth for production and consumption on a one way track with no plans for reuse or active regeneration of the natural systems from which they have been taken” (Ellen MacArthur Foundation, Volume II). We simply don’t have an endless supply of raw materials in the earth – copper, phosphates, zinc, oil, and more – to continue on this basis.

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At present, about 80% of the waste from consumer goods (e.g. food, beverages, packaging, clothes, shoes, etc) ends up in incinerators, landfill and wastewater (Ellen MacArthur Foundation, Volume II). As the Ellen MacArthur Foundation/McKinsey Report has shown, there is commercial value to be gained from finding recycling and reuse business models in the fast moving consumer goods sector which could amount to $700 billion in materials savings every year. In the long run, we will need to change to these models in order to generate sustainable economic growth on a resource constrained planet. But in the short run, companies with circular models will also benefit as resource scarcity intensifies and environmental standards tighten.

4. ENERGY: The US author Jeremy Rifkin2 describes the dilemma of relying on oil to continue to power the world economy. The fact that it is finite and is in many cases harder to extract leads to scarcity and price hikes, thereby destabilising the economy. This goes, he says, in four year cycles as an economy starts to recover from a crash – partly induced by an increase in the price of oil and its knock on effect on other commodity prices – and again the oil price starts to shoot up.

“When fuel costs rise, all the other prices across the supply chain go through the roof, because everything’s made out of fossil fuels: fertilisers, pesticides, pharmaceuticals, construction materials, synthetic fibres, power, transport, heat and light.” (Greenwisebusiness, 2012).

Rifkin argues that a far more stable energy system for what he calls the third industrial revolution would be based on a new, technologically enabled power grid supplying renewable energy to homes, offices and plants. He is also critical of nuclear power, which post-Chernobyl poses too great a risk to human health; at the same time, Rifkin added, the building of new nuclear power plants is highly costly and the energy source uses vast quantities of water, also a precious resource.

The circular economy, with its long term focus on the use of renewable energy sources and its less energy intensive model provides a great structure for developing the new economy in the way Rifkin proposes.

1 Based on tests performed by the independent German test institute GUI with DESSO AirMaster® versus standard PVC hardfloor and versus standard structured loop pile carpet. Desso AirMaster® 4307
Jeremy Rifkin is the bestselling author of nineteen books on the impact of scientific and technological changes on the economy, the workforce, society, and the environment.