2015

A Circular Economy

Ntarangwi, Fridah (140155)

Senawidjaya, Nelvilia (140924)
Sahin, Cigdem (140499)
Zeng, Sida (140942)
4. How a circular economy may look like

Introductory

Europe is
getting
sustainable

In the past years the circular economy has become a hot item.
Organizations, companies, governments and unions are aiming to
make a change from a linear model of production towards a circular
model. This is achievable by applying circular business models that
encompass key principles throughout a products life from resource
extraction to consumption and in the end recycling of reusable
products. For instance, the European Commission adopted a
programme to promote the acceleration towards a circular
economy. The Commission First
Vice-President, Frans
Timmermans, has the mandate to deliver a more effective
regulation concerning the circular economy and announced to
introduce a full circle package which will improve waste package
proposal from which he withdrew earlier.1
According to the European Commission, the circular economy
package attempts to create a more sustainable Europe by:

Boosting recycling and preventing the loss of valuable

materials;
Creating jobs and economic growth;
Showing how new business models, eco-design and
industrial symbiosis can move us towards zero-waste; and
Reducing greenhouse emissions and environmental
impacts.2

Defining the Circular Economy

A
clear
definition of
the circular
economy is
not set

The Ellen MacArthur Foundation defines it as an economy

(characterized as non-linear) which is targeting renewables where
it, among others attempts to minimize tracks and to eliminate the
use of toxic chemicals.3
A clear definition of the circular economy is not set. The European
Commissions definition refers to a systemic restructuring where
the development strategy provides i) economic growth without
increasing the use of materials, ii) transformation of production
1

The waste proposal is part of the circular economy package where its details is to be found in a
separate
proposal,
see
http://ec.europa.eu/environment/circular-economy/
&
http://ec.europa.eu/environment/waste/target_review.htm.
2
http://ec.europa.eu/environment/circular-economy/.
3
Ellen Macarthur Foundation, The circular model an overview. To be find at
http://www.ellenmacarthurfoundation.org/circular-economy/circular-economy/thecircular-model-an- overview.pdf

4. How a circular economy may look like

chains & consumption behaviour and iii) restructuring of

industries.4 The commission refers illustrates the circular economy
model as shown in Figure I.
Figure 1 Circular Economy

* The phases in this model are interlinked aiming for the optimal use of resources.

The U.K. Government describes it as moving from a make-usedispose economy towards one where products (and materials) are
valued differently which leads to a more robust economy.5
In Principles

There
are
six
principles to
adhere to

For an economy to become circular, the process from resource

extraction to consumption through recovery involves a step by step
process that is - as much as possible - compliant with six (6)
principles:
1. Materials: recycling redundant and used materials.
This refers to minimizing the inputs of natural resources into the
cycle and substituting it with other artificial products. In a
circular economy, recycling of materials, also involves recovering
4

COM(2014) 398 final/2 Annex I.

House of Commons Environmental Audit Committee, Growing a circular economy: Ending the
throwaway
society.
To
be
find
at
http://www.publications.parliament.uk/pa/cm201415/cmselect/cmenvaud/214/214.pdf.
5

4. How a circular economy may look like

of used material and feeding it into a process to produce the

same product or another different product to enhance
sustainability.
2. Energy: all sources of energy should be derived using the
renewable and sustainable sources for the creation of energy.
Alternative forms of energy should be considered, such as solar
energy, wind energy, biomass and biogas. Solar and wind energy
are forms where energy creation depends on nature conditions.
Biomass is a forms of energy production from wasted products
which is processed to electricity and/or other forms of energy.
Biogas is produced by breaking down organic matters in the
absence of fuel to produce bio fuel. Also, recovery methods such
as conversion of non- recyclable waste material into heat,
electricity or fuel will lead to a circular economy.
3. Ecosystem: doing activities as well as negligence that cause
harm to the ecosystem are avoided and actions undertaken to
restore damages.
The coexistent of different components of the economy, such as
the human kind including all other living creatures (plants,
animals and organisms) in a given area interacting with each
other as well as the non-living things in their environment
(weather, earth, soil, climate, atmosphere, water) should be
maintained without harming each other. In a circular economy,
human activities should support ecosystems and the rebuilding
of natural capital.
4. Value: materials, products, activities & negligence need to
generate value either in form of financial gain or otherwise.6
Exploitation of resources is geared towards creating value.
Humans and businesses want to have value or financial gain in
return. However, the problem arises when processes create value
without taking the future generations into consideration. In a
circular economy, individuals and businesses should thrive to
maximize value in the most possible efficient and sustainable
way.

This section is inspired by the principles set http://circle-economy.com/circular-economy/. We

extended the limit of some of them, where we also took into consideration that doing nothing could
cause harm and an active action should be undertaken to restore damages.

4. How a circular economy may look like

5. Health: no activities and/or negligence should compromise

human health being.
Even as value maximization gains momentum around the world,
all human activities should support human health and happiness
in a circular economy.
6. Society: current activities need to support the present as well as
future generations.
In a circular economy, businesses should have responsibility to
the society and all other stakeholders (any person) who affects or
is affected by the achievement of an organizations objectives).
This may include, but is not limited to, owners, (financial)
community, customers, suppliers, competitors, government,
politicians, activists, trade associations, employees unions and
customer advocate groups. Human and business activities
should support a healthy and cohesive society and culture.
Figure 2
Principles

Circular Business Models

Five different
circular
business
models

The real application of the concept of the circular economy in a

business and industry world is realized through the following
several business models (Lacy, P. et. al, 2014).
1 . Production supply model
In the circular economy, a company which uses in its production
finite material will change its source of materials and supplies to
renewable, recyclable, and biodegradable materials. This enables

4. How a circular economy may look like

the company to cut resources costs, increase efficiency and

minimize waste. For instance, Nissan Motor Corporation is a
vehicle manufacturing company which uses recycled aluminum
wheel and plastic bottle for suspension parts and bumper of its
vehicle product. The costs of using recyclable materials is lower
than using raw aluminum extracted from natural resources.7
2 . Resource recovery model
This model entails the process of regaining or separating the
useful values or materials of products at the end of its life-cycle
in order to reuse, regenerate or transform it into new and/or
different product(s), or new energy resources. This new product
or energy resources could be used like raw materials or as new
ready-made product itself. Thus, this model also involves
reprocessing or redesigning of disposed products into new ones.
Further, it improves the efficiency of raw materials and
minimizes production costs. Take for example, Puma, which is a
sportswear company, has created products (jackets, t-shirt
sneakers and bags) called the In-Cycle Collection which used
biodegradable and recyclable material from the disposed
clothes, t-shirt, sneakers and jeans. It also launched the Puma
bring back bin project, where disposed clothes and apparels will
be recycled and regenerated. It aims to generate the use of
recyclable material as raw materials.
3 . Consumption behaviour & the prolong life cycle Model
Here, a company sustains the function of components and/or
materials of products through repairing, upgrading,
manufacturing or remarketing the products to make the product
useful for a longer period (Lacy, P. et. al, 2014). Instead of
disposing (whole) products, the company repairs or replaces the
broken part inside of the product. For instance, Samsung creates
Smart Evolution Kit for Evolution TV, which allows consumers
to get the latest upgrade of Samsungs software and hardware
technologies for their Samsung TV which allows them to continue
using such television instead of buying a new one.
4 . Product as a service model
In this model, a company sells the utility of its product while
7

http://www.nissan-global.com/EN/ENVIRONMENT/CAR/RECYCLE/

4. How a circular economy may look like

retaining the ownership of its product. Here, the company sells a

service instead of product itself. Customers pay rent for the
product by having a payment arrangement. For example, Philips
sells light services instead of bulbs. The National Union of
Student in London uses this light service from Philips for its
office building. The payment for this service is made available on
a pay-per-lux base which refers to the energy consumption by
NUS.
5 . Sharing economy model
Technology has made it possible to support the sharing economy
or collaborative consumption or peer-to-peer economy model
which enables people to reduce costs by renting or leasing
products from others.6 A consumer who owns a product which is
underutilized and costly, could rent it out to others who are
willing to use such a product but are unable to purchase it,
because it is too expensive. The benefit of this model is the
reduction of transaction costs, reducing disposed products and
generating income for the service and/or product providers. For
instance, AirBnb which gives people an opportunity t to rent out
their house/room at a fee in exchange. Also, ber provides a
shared vehicle to people who are in need of transportation.
In practice
The question arises as to what all of this entails for the
manufacturers as well as for customers.

All the inputs

are derived
from
renewable or
sustainable
sources

For manufacturers, the circular economy means that all the inputs
are derived from renewable or sustainable sources. The raw
materials, such as metals and plastics, are derived from recycled
sources. The power consumed in production is derived from green
power. For example, the electricity is produced from solar, wind,
geothermal, biogas, and biomass. The production waste does not
exist because all the original materials could be reused or shipped to
other sectors. The transportation vehicles use renewable fuels.
For consumers, the circular economy involves using products
according to the product instructions and preserving any reuseable. Products could also be sold in the second-hand market to
prolong their lifetime. There are various sustainable ways for

4. How a circular economy may look like

consumers to use products and to get their utility applied in

different circular business models which support the circular
economy.

The current
systemic
structure of
industries is
trapped in a
linear lock-in

Challenges
The acceleration towards a circular economy will have some
challenges to overcome. In our opinion the most important one is
that the current systemic structure of industries is trapped in a
linear lock-in which is powered by i) incoherent incentives, ii) subscale markets, iii) limited capacities & infrastructure and iv) trendsetters.8 Other challenges may be the geographic dispersion,
material complexity & development.9
Nevertheless, more organizations and stakeholders continue to
embrace sustainability which therefore we move into the future with
a forward looking sustainable economy.

Ellen Macarthur Foundation & World Economic Forum, Towards the Circular Economy:
Accelerating
the
scale-up
across
global
supply
chains.
To
be
find
at
http://www3.weforum.org/docs/WEF_ENV_TowardsCircularEconomy_Report_2014.pdf.
9
Ibid.

4. How a circular economy may look like

References
COM (2014) 398 final/2 Annex I.
COM (2014) 398 final/2 http://ec.europa.eu/environment/circulareconomy/
http://en.wikipedia.org/wiki/Circular_economy http://www.circle-economy.com/circulareconomy/
http://www.theguardian.com/sustainable-business/2015/feb/03/architect-europe-circulareconomy- strategy-lambasts-successors
https://www.youtube.com/watch?v=zCRKvDyyHmI
https://www.youtube.com/watch?v=65Vt-mTYfW4 http://www.thecirculars.org/
http://www.euractiv.com/sections/sustainable-dev/let-me-prove-you-wrong-circulareconomy- timmermans-tells-greens-311846
http://ec.europa.eu/environment/waste/target_review.htm
http://www3.weforum.org/docs/WEF_ENV_TowardsCircularEconomy_Report_2014.pdf.
http://www.publications.parliament.uk/pa/cm201415/cmselect/cmenvaud/214/214.pdf.
http://www.ellenmacarthurfoundation.org/circular-economy/circular-economy/the-circularmodel-an- overview.pdf.
Dervojeda, K., et. al., September 2013. The Sharing Economy Accessibility Based Business
Models for Peer-to-Peer Markets Business Innovation Observatory Contract No
190/PP/ENT/CIP/12/C/N03C0, European Commission Business Innovation Observatory
(http://ec.europa.eu/enterprise/policies/innovation/policy/business-innovationobservatory/files/case- studies/12-she-accessibility-based-business-models-for-peer-to-peermarkets_en.pdf)
Editorial Team, The Circular model - an overview, Ellen Arthur Foundation, uploaded 8 July
2013 (http://www.ellenmacarthurfoundation.org/circular-economy/circular-economy/thecircular-model-an- overview).
Ellen MacArthur Foundation and McKinsey & Company, 2014. Towards the Circular
Economy: Accelerating the scale-up across global supply chains. (World Economic Forum). p.
15.
Lacy, P., et. al., 2014. Circular Advantage Innovative Business Models and Technologies to
Create Value in a World without Limits to Growth, (Accenture Strategy).

4. How a circular economy may look like

Lacy, P., et. al., 5 Business Models That Are Driving The Circular Economy, uploaded 24
April 2013 (http://www.fastcoexist.com/1681904/5-business-models-that-are-driving-thecircular-economy)
Ringel, M., B. Miles, PUMA Introduces C2C-Certified, Recyclable Track Jacket, Backpack
as Part of InCycle Collection, Sustainable brands, uploaded 12 February 2013
(http://www.sustainablebrands.com/news_and_views/waste_not/puma-introduces-c2ccertified- recyclable-track-jacket-backpack-part-incycle).
Webster, K., C. Johnson, 2008. Sense & Sustainability Educating for a circular economy
(Ellen MacArthur Foundation).
Webster, K., Services not goods, Ellen Arthur Foundation, uploaded 20 August 2010
(http://www.ellenmacarthurfoundation.org/circular-economy/circular-economy/servicesnot-goods).
Activity for close-loop recycling, (http://www.nissanglobal.com/EN/ENVIRONMENT/CAR/RECYCLE/)
Case Study National Union of Students, uploaded January 2014
(http://www.lighting.philips.com/pwc_li/gb_en/projects/Assets/CaseStudy_NUS_UK.pdf)
Product Life Cycle Extension
(http://www.samsung.com/us/aboutsamsung/sustainability/environment/eco_products/eco
_design.html
).
Sharing Economy, http://www.investopedia.com/terms/s/sharing-economy.asp
Shea, B., Puma Launches Bring Me Back Product-Recycling Program in Germany
uploaded 5 April 2012 (http://www.ecouterre.com/puma-launches-bring-me-back-productrecycling-program-in- germany/)

4. How a circular economy may look like