Circular Economy: Main Drivers and Challenges
Circular Economy: Main Drivers and Challenges
In today’s world, it is obvious that the global economic system, including various industrial and service sectors, relies primarily on the business model of “linear economy”. Linear economy as a business model involves the process of extracting virgin raw materials from their original places before using them as primary inputs in different manufacturing processes.
By using technology, these raw materials are processed until they are ultimately transformed into products that meet a certain need for various customer segments. These products are then consumed during their life cycle until they are replaced by new ones, or even replaced once a newer model is available with better features.
Often, spent or old products find their way to landfills or are even burned, which causes severe damage to the environment, not only through the release of pollutants but also by creating a need to extract new virgin raw materials and start the process all over again.
This model (linear economy) has many problems, such as the depletion of natural resources, in addition to increasing the burden on many ecosystems, whether during the extraction of raw materials or during the processes of transporting and processing them until they find their place in the hands of the end user.
Lucky for us, we are experiencing a major global interest in the issue of climate change, which led to the emergence of terms such as “sustainable development”, and the realization that we are being trapped by this linear system, as it meets all the needs of development in current times.
However, the destructive effect of such a system has drawn the attention to the need for a new system of production and consumption in order to shift away from linearity and achieve sustainable development goals.
But the question remains: how can we create an economic system that achieves the increasing development requirements while enabling us to achieve sustainability and preserve the environment? The short answer is “circular economy”.
The main idea behind the circular economy (CE) is to reshape the linear economy into a cycle where the waste we produce is used again in the production process as an alternative input for virgin raw materials, thus achieving our development aspirations while preserving the environment and its resources at the same time.
The great potential of the circular economy has made the concept of circularity more and more popular in academic as well as investment circles. And for this reason, we chose to discuss, in detail, the circular economy as the featured article in the December issue of Earth Guards Magazine.
History of the circular economy
According to the Egyptian Center for Strategic Studies (ECSS), the term circular economy appeared more than three decades ago, specifically in the year 1989, with the launch of the book “The Economics of Natural Resources and the Environment,” published by Johns Hopkins University, by the authors David W. Pearce and R. Kerry Turner.
The book explained the relationship between the economy, natural resources, and environmental systems while showing the nature of integration between the economic and environmental aspects. The book also reviewed the linear economy, highlighting the most important disadvantages of this economic system and what should be changed.
But what about before 1989? We can say that before this date, the circular economy was already present, whether in the corridors of universities or in industrial facilities, but under other terms, most notably recycling. It is even possible to trace the circular economy back to the Bronze Age, when bronze was recycled and used again.
The circular economy may be a contemporary term, but circular practices have long been part of human history. In this regard, we can consider the Bronze Age to be the first practical example of a circular economy, as bronze was the main material in this period, and its recycling was the focus of the economy at that time.
When we realize the above, we will begin to correct our understanding of the circular economy as an emerging approach. The truth is that circularity has been the foundation and an inherent part of human history, while linearity is actually the newcomer.
Drivers of circular economy
The transition to a circular economy will not happen just because it is better for the planet, as it requires a set of drivers to make it happen and to ensure its real adoption, whether by society, companies, or individuals. In the following, we discuss the main drivers of circular economy.
1- Drivers for society:
The fundamental objective of the circular economy is to reduce demand for resources. So, on the social level, we focus on highlighting the positive effects of a circular system on the environment and eco-systems:
First – Resource efficiency: the increasing demand for resources, especially non-renewable ones, leads to their depletion over time, and here the circular economy comes with solutions that reduce the demand for various materials while continuing to meet the requirements of growth.
Second – Reducing emissions: some of our readers may be surprised to know that about 50% of global carbon dioxide emissions can be attributed to the production of various materials, so by reducing the demand for those materials, emissions can be sharply reduced.
Third – Nutrition efficiency: linear thinking in food production systems leads to the degradation of agricultural lands and the pollution of oceans and lakes with huge quantities of waste. Here, circular agriculture solves this problem by reusing the waste generated by agricultural and food production.
Fourth – Biodiversity health: reducing raw material extraction leads to a decrease in demand for land, which is certainly a good thing for biodiversity, as it constantly suffers from the deformation of its ecosystems for the sake of extracting raw materials.
2- Companies drivers:
From an investment perspective, companies view the circular economy (and other systems) in terms of profit and loss. Without the economic feasibility of adopting the circular economy, companies will refrain from making any effort or investing any money to transform their industrial and service activities. Here are three drivers that may attract companies to adopt the circular economy:
First – The shift in customer demand: The growing awareness of a wide segment of consumers about climate and sustainability has created an increasing demand in various markets for green products, which means that product sustainability has become a determining factor in the buying decisions of a growing segment of people.
Second – Long-term revenue: Many circular business models require a radical change in any organization adopting them, a process that can be expensive at the beginning but eventually leads to long-term economic benefits, such as shifting away from fossil fuels and reducing the cost of extracting virgin materials.
Third – Compliance with legislation: Due to the capitalist nature that dominates business sectors worldwide, local governments impose legislation that mandates companies to reduce their environmental footprint and switch to sustainable alternatives, so adopting the circular economy from now on will ensure that companies are prepared for various future legislation, which may reduce the costs of a sudden transformation.
3- Drivers for individuals:
Some may think that the circular economy’s main benefits are preserving the environment or improving corporate wealth management, but the matter extends to individuals. At the individual level, the circular economy can contribute to improving a number of important things, including:
First – Creating job opportunities: The process of recycling and reusing materials requires many new facilities and more developed production lines, which means creating more job opportunities, thus reducing unemployment and poverty.
Second – Health: Human health in developing countries suffers as a result of poor management of waste and toxins resulting from various activities, so improving waste treatment and increasing recycling will lead to reducing the spread of diseases and improving water and air quality at the local level.
Third – Sharing the environmental bill: In a circular society, consumers do not alone bear the bill for purchasing different products and switching them from time to time; the responsibility is also placed on the entire supply chain, from the factory to the retailer.
Circular economy practices
The previous drivers will have a major role in influencing a society into circularity, but one might ask: What are the actual practices that need to be carried out? Below, we discuss the main circular economy practices:
1- Circular legislation:
Legislative practices are particularly important to encourage any society to transition to a circular economy. Without these legislation, there will be no real tool that obligates or enables companies and individuals to do what is necessary for the transition. The role of circular legislation can be summarized as follows:
First – Setting standards: All institutions, without exception, need standards and metrics through which they can evaluate the progress of their implementation of the circular economy. Societies and governments also need these standards and metrics to impose what is necessary on companies.
Second – Updating current laws: There is no doubt that there are many laws and regulations that make the transition to circular solutions difficult for many companies at the present time, so states must take into account updating these laws to keep pace with advancing new technologies.
Third – Creating economic incentives for companies: Many local legislation currently lack articles that stipulate the existence of economic incentives for companies that truly adopt the circular economy. Since a circular economy initially costs more compared to a linear economy, economic incentives will play an important role in encouraging companies to switch.
Fourth – Raising consumer awareness: Individuals as well as companies might lack the information and incentives necessary to transition to sustainability and circularity, but when awareness is raised, companies and individuals will be encouraged to transition to a circular economy.
2- Companies practices:
Stakeholders must realize that sustainability is inevitably coming to them, whether through consumer demand or the obligations of local and global legislation. Therefore, decision-makers in various companies must adopt the following practices:
First – Investing in knowledge: Before any organization begins implementing new business models, it is initially important to understand the opportunities and challenges faced by their respective market and to ensure the availability of necessary resources for shifting to a circular economy.
Second – Be open to revolutionary innovations: To achieve success using circular business models, radical organizational change in the company may sometimes be extremely important, so decision-makers must have an open mind to new and revolutionary solutions and try to understand the extent of their impact on their activities.
Third – Cooperation with other companies: To ensure that circular material flows continue in a safe and high-quality manner, there is a need for transparency along the supply chains, so cooperation and trust are often referred to as critical elements of the circular economy.
Fourth – Preparing for digital transformation: The digital transformation of the circular economy will make this business model more sustainable and comprehensive by improving the flow of resources, enabling consumers to make the right decisions, and helping companies implement transformation strategies more effectively.
3- Living practices:
For individuals, the circular economy has the potential to make life easier while being more environmentally friendly, but how can we participate at the individual level in implementing the circular economy? We summarize this in the following points:
First – Responsible consumption: The most effective way to reduce the demand for resources is to simply not consume them or at least reduce the demand to minimum levels. Therefore, before making a purchase decision, we should ask this question: Do I need this thing or do I want it? If it’s not something you need, it’s probably best to postpone the purchasing decision for a bit.
Second – Reuse: Here we mean the broader concept of reuse, which includes buying used items. We know that buying used items may be complicated sometimes, but if the opportunity arises to meet a need by buying used, do so without hesitation.
Third – Increasing awareness: The issue of transitioning to sustainability in general and the circular economy in particular is essentially an issue of awareness, especially at the individual level. By shaping the awareness of the individuals (the consumers), their decisions will encourage the transition to sustainability.
Fourth – Circular voting: The transition to a circular economy requires providing the necessary investments in the right places, and politicians certainly have an important role to play in directing this money in the right direction, which puts the responsibility on individuals to choose members of parliament who understand and embrace the circular economy.
Challenges of circular economy
The transition to sustainability and adopting a circular economy seems self-evident, which is what prompts many companies and institutions to adopt strategies for sustainable transformation, but the missing link here is that most of the time, the actual impact of these strategies is not really studied enough, and from here some challenges arise.
The most prominent challenge facing transition to circularity is the reverse effect, which occurs when a process is converted to circularity not for the sake of circularity but for purely economic considerations, which also means that money is saved along the supply chain with no regard to sustainability, in addition to exploiting this surplus in other non-sustainable projects.
Another challenge is burden shifting, and this is most apparent when assessing the environmental impact of an activity, as it is naturally very difficult to cut all the negative effects of any industry of service, so we find ourselves accepting some of those effects within a regulatory framework. This may not pose any threats in the short term, but in the long term, the possibilities remain open.
Wrong solutions are also one of the difficult challenges on the way to a circular economy. Under legislative and societal pressures, a company or even an entire sector may shift their processes to less harmful methods, but at the same time, some of these new methods might still carry considerable harm to the environment. For example, many countries around the world have switched from coal to natural gas, which is certainly a step in the right direction, but at the same time, it is a transition from one fossil fuel to another.
In addition to the above, many of the current manufacturing and service delivery systems are products of decades of development and experimentation, which means that they are high-efficiency systems, and switching from them to new, more sustainable systems that are still in the process of development and improvement is a risk that many are afraid to take.
Circular economy and sustainable development
At first glance, some may think that the transition to a circular economy is a process whose sole purpose is to conserve resources and preserve the environment, but the matter goes beyond this, as transitioning to circularity directly affects achieving sustainable development goals.
Research shows a close link between the circular economy and several Sustainable Development Goals, including SDG 6 (clean water and sanitation), SDG 7 (affordable and clean energy), SDG 8 (decent work and economic growth), SDG 12 (responsible production and consumption), and SDG 15 (life on land).
In addition to the above, the circular economy can be linked to a number of other goals that are more relevant to society, such as SDG 1 (no poverty), SDG 2 (zero hunger), SDG 3 (good health and well-being), and SDG 17 (partnerships for the goals).
In the following lines, we discuss the direct impact of the circular economy on achieving some of the previously mentioned sustainable development goals in order to gain a more comprehensive understanding of the role expected from adopting circularity.
First – Circularity and no poverty: Given the agricultural methods we currently follow, there are a set of circular principles that can be applied in all parts of the food value chain, which can help promote soil conservation and increase the resilience of different agricultural systems. Examples of these principles include the use of biochar, biogas, and compost, in addition to circular agriculture, a concept that can make a great contribution to achieving no poverty.
Second – Clean water and sanitation: The circular economy can help achieve comprehensive and equitable access to safe and affordable clean water services, and this is through developing technologies and systems such as small-scale water purification techniques, water desalination, and wastewater treatment to reduce its discharge into clean water streams.
Third – Affordable and clean energy: Efforts to address climate change have focused on the transition to renewable energy sources, which is certainly very important because it is consistent with the circular economy, but despite this, the transition to renewable energy sources will only reduce about 55% of emissions, as the remaining percentage comes from the production processes of sectors such as cars, fashion, food industries, etc., and here comes the role of the circular economy, which will have the ability to transform these production processes to be more efficient and less resource-intensive.
Fourth – Decent work and economic growth: The linear economy is a system that is wasteful in consuming resources and a large producer of waste, but in the circular economy, production processes are thought about differently so that products can be utilized at the end of their life cycle, which is possible through redesign, reuse, and recycling, all of which are processes that require more manpower and will provide adequate income for many families while contributing to preserving the environment and growing local economies.
Fifth – Responsible production and consumption: Many circular practices are of great importance for achieving this goal of sustainable development, for example, water management, smart waste management, shifting to renewable energy, smart design, and sustainable supply chains, as all of them are practices that can reduce industrial pollution of water and soil.
Sixth – Life on land: Circular economy practices such as circular agriculture, agricultural waste management, agricultural soil restoration, and forest planting all serve the interests of enhancing various ecosystems and preserving biodiversity on land; they also have a direct impact on combating climate change. Thus preserving this diversity beyond life on land.
Seventh – Partnerships for the goals: The transition to a circular economy requires a systematic and radical change in many systems, regulations, and legislation, which by its nature requires cooperation on a large scale. Local governments alone will not be able to achieve this, nor will we be able to achieve the desired global goals without cooperation at all levels, which means that the circular economy will represent a new link of cooperation, whether at the national or international level.
Circular economy and the Industry 4.0
In recent decades, the circular economy has become increasingly viewed as the manufacturing model of choice for achieving sustainable development, but despite this, there are still many technological, financial, regulatory, social, and cultural barriers that hinder the transition from linear to circular production systems.
To overcome the above, there is almost general agreement that the advanced digital technologies collectively known as the Fourth Industrial Revolution (4IR) work as catalysts to enable the circular economy, allowing it to overcome many of the aforementioned barriers. The technologies of 4IR also work to compensate for any lack of information and knowledge.
For example, when dealing with a certain type of waste to integrate it into the circular economy, the lack of information about this waste, such as places of generation, quantities generated, and physical and chemical properties, represents a bottleneck in utilizing this waste; here comes the role of Fourth Industrial Revolution technologies.
Industry 4.0 is also characterized by the integration of a number of emerging technologies, such as nanotechnology, biotechnology, and advanced digital production (ADP), all of which are essential for the transition to a circular economy.
The Fourth Industrial Revolution also depends on collecting, analyzing, and learning from data to a large extent, using artificial intelligence and big data, which contributes to enhancing a group of other technologies such as remote sensing and monitoring smart production processes, thus giving us the ability to interact in real time with production lines to spot any inefficiencies and improve them.
Advanced digital production allows the digitization of information and its integration into value chains. It also allows the digitization of the process of supplying products and services and the development of revolutionary business models, which in turn will lead to improved consumer interaction with products and services while facilitating the process of accessing them through the exchange of information.
Disadvantages of circular economy
As usual when discussing the featured article, we also highlight the negative aspects that are usually forgotten, especially when discussing a green technology or a sustainable concept, where the great benefits are widely focused on, which in turn prevents us from obtaining a comprehensive understanding of the matter. In the following lines, we discuss some of the disadvantages of the circular economy.
First – The complexity of implementation: The transition from a linear economy to a circular economy comes with many challenges, the most important of which is the complexity of implementing circular practices due to the costs associated with them and the need to reshape the supply chain, as well as modifying product design.
Second – Limited scope: Circular economy strategies currently operate on a limited scale, as large-scale applications face a group of various obstacles represented by out-of-date regulatory frameworks that do not adopt the circular economy, which makes some companies unable to balance different legislation and laws. In addition, scaling up the circular economy is connected with market demand for circular products and services.
Third – Technological and design limitations: Some products and some materials present technical challenges to circular solutions. For example, complex electronic products may contain components that are difficult to recycle or reuse, and certain materials used in some industries may present challenges in terms of separation and recycling.
Fourth – Lack of availability: While the concept of the circular economy has gained momentum in recent years, we find that the availability of circular products and services is still limited, which can pose a challenge for consumers and companies.
Fifth – Relying on consumer awareness: The transition to a circular economy requires a shift in consumer behavior, to move from a culture of waste disposal towards a culture of repair, reuse, and recycling, so educating and engaging consumers to adopt circular practices, make sustainable choices, and support circular businesses is crucial, but the preferences of consumers will always stand in the way of a circular economy.
By adopting circular practices, such as resource conservation, environmental conservation, and promoting economic opportunities, we can address the issues of resource scarcity and waste generation. However, the complexity of implementation, limited availability of circular solutions, barriers to scale, various technological limitations, and the need for a shift in consumer behavior all represent disadvantages in the circular economy.
The above can be summarized in that even if various companies and institutions truly embrace the circular economy, this alone is not enough to achieve it, given the circular economy’s dependence on a set of variables whose outcomes are difficult to control or predict.
Conclusion of the featured article
The climate challenges we are witnessing in our contemporary world are enough reason to give great attention to every idea or approach that aims to confront these challenges. Perhaps the circular economy, with its comprehensive methodology aimed at supporting development and ensuring sustainability, is the reason for the strong momentum and general acceptance of this economic model.
When pushing institutions to adopt the circular economy, we must be aware of its shortcomings and challenges so that expectations are reasonable, as well as regulatory obligations on companies and individuals. Otherwise, the concept of the circular economy will turn into a fairytale.
In general, the economic and social aspects must be integrated with the environmental aspects to ensure the feasibility of transitioning to a circular economy, and this is in order to achieve the short- and long-term goals of this promising economic model.
From this point of view, we must be aware that adopting a circular economy is not a magic solution to our climate problems, as this adoption must have achievements on the ground while integrating it with other climate solutions within the framework of a comprehensive strategy.
In this regard, we will not forget to mention Egypt as one of the first countries in which the circular economy emerged, and this was in the form of tens of facilities that were established in the 1960s to work in the field of recycling, and now there are more than 6,000 facilities operating in this promising sector.
For a developing country like Egypt with a huge population, the huge amount of waste generated represents a rich and important source for supporting the national circular economy and achieving a number of other social goals.
The bottom line is that the circular economy paves the way to preserve the resources of our ecosystems for future generations, in addition to being a promising model of consumption and production that takes care of recycling and reusing.
Certainly, the circular economy will contribute to achieving the goals of the national agenda, “Egypt Vision 2030”, by creating a positive climate that preserves the environment and achieves sustainable development, which will ensure that Egypt maintains its position as a unique development model in Africa and the Middle East.
In conclusion, we emphasize the importance of spreading awareness, and in this regard, Earth Guards Magazine makes a tremendous effort to shift the collective behavior of society towards sustainability, all for the purpose of protecting our planet and ensuring a bright future for the coming generations.
