What is a Circular Economy?

The term circular economy (CE) has both a linguistic and descriptive meaning. Linguistically it is an antonym of a linear economy. A linear economy is one defined as converting natural resources into waste, via production. Such production of waste leads to the deterioration of the environment in two ways: by the removal of natural capital from the environment (through mining/unsustainable harvesting) and by the reduction of the value of natural capital caused by pollution from waste. And the word circular has a second, inferred, descriptive meaning, which relates to the concept of the cycle. There are two cycles of particular importance here: the biogeochemical cycles and the idea of recycling of products. By circular, an economy is envisaged as having no net effect on the environment; rather it restores any damage done in resource acquisition while ensuring little waste is generated throughout the production process and in the life history of the product. Recycling has been a significant part of sustainable practice for many years, and it is fundamental to the Circular Economy.

linear vs circular economy

The industries are consuming natural resources on a very high scale, and this is leading us to the depletion of natural resources on a very high degree. Most of the economies are still working on a linear economy method which means that they just use the natural resources and are not contributing anything back to the environment which needs to be changed because soon there no natural resources to be consumed. Natural resources cannot be grown in a year or two, they need decades to recover and with this speed of utilization, we are not giving natural resources a chance to recover. The circular economy does not provide that much of time to recover, but with the help of a circular economy, consumption of natural resources can be declined, and we can shift more towards recycling and reusing the product. The circular economy is focused on maximizing what already is in use. All in all, the challenge ahead towards a preventative and regenerative eco-industrial development is not a “more of the same” approach, calling for increased implementation of “green” technologies, but instead requires a broader and much more comprehensive look at the design of radically alternative solutions, over the entire life cycle of any process as well as at the interaction between the process and the environment and the economy in which it is embedded, so that the regeneration is not only material or energy recovery but instead becomes an improvement of the entire living and economic model compared to previous business-as-usual economy and resource management.

In industrial ecology, it is implied that a circular economy will be beneficial to society and the economy as a whole. Benefits will be obtained, not only by minimizing the use of the environment as a sink for residuals but – perhaps more importantly – by minimizing the use of virgin materials for economic activity. Intuitively, the potential benefits seem straightforward, but it is important to stress that the perspective prevailing within the circular economy approach is, in fact, based on physical rather than economic observations. Many adherents of the circular economy approach are strong proponents, on environmental and ethical premises, of material reuse and recycling. However, in a market economy (and in some planned economies as well), the prices of materials and natural resources will be too low and will mainly reflect the costs associated with mining and short-term values, but not with depletion nor the environmental costs. In such cases, only a limited range of circular options will make sense from the perspective of company managers. It can be argued that if companies are rational and profit-seeking, the recycling and reuse options should already have been realized. In a conventional capitalist economy, recycling will be undertaken only where it is desirable from a private economic viewpoint. Circular Economy is aiming at a closed loop, eliminating all resource inputs and waste and emission leakages of the system, the goals of sustainability are open-ended and different authors address a considerable multitude of goals, which also shifts depending on the considered agents and their interests.

There is a notion of maximizing environmental benefits by strict control of industrial businesses. On the contrary, manufacturing companies possess potential awareness about the environmental impacts of their industrial activities. However, due to competitive pressure environmental impacts will most likely remain unconsidered as the primary focus is put on economic benefits and growth. Given the scenario that industrial businesses do not see (economic) advantages of circular economy will result in reluctance when it comes to pursuing circular economy-initiatives. This scenario makes a concurrent process obligatory to converge and compromise interests of public institutions (top) and multiple industrials actors (bottom) to avoid the prioritization of environmental benefits at the expense of economic growth and vice versa.

The circular economy must not be a necessity now but with depletion of natural resources at a high rate, soon economies will have no choice other than to start working in a circular economy. We are living on the same planet; we share resources and we share fate. As the circular economy’s objective is to decouple growth and production from a dependence on natural resources, the circular economy model requires us to implement new paradigms into today’s systems on a collaborative scale to make a real impact. The industrial revolution and our resulting linear economy may have forever changed the Earth’s ecology and our relationship with the environment, but what is changed can continue to change, this time for the better.

Case Study: Nike

The American multinational corporation, Nike, Inc. is a worldwide renowned brand for sports apparel, footwear, equipment and accessories. Since the last 20 years, Nike is committed to provide athletes around the world with most superior product innovations. Nike believes that sustainability efforts are a crucial factor for company’s growth and success and that no forward thinking company can survive without sustainability efforts. Nike creates products in which Innovation is embedded right from the very beginning into their design and development process and addresses the use of environmentally friendly products, minimization of waste and elimination of toxics. Since the release of its environmentally conscious Flyknit technology in 2012, the sportswear giant has since turn its image around remodeling many of its core business components including design, production, workforce, etc. Every year, Nike revises its Sustainable Business Report and explains in details the company’s vision to improve its environmental performance by sustainable use of resources such as energy, materials and water. Moreover, Nike is determined to invest in disruptive innovation focusing on transforming waste, using low impact materials, renewable energy and creating new business models in order to maintain the 2°C climate stability by 2050 as set by annual Conference of Parties (COP21) in Paris, France in 2015. As mentioned in Nike’s Sustainable Business Report 2016/17, the company refurbishes its commitment to environmental and social goals, while foreseeing to double its business and have half its environmental impact by 2020. Some of the interesting key points from this report are as follows:

  1. Since 2012, the waste reduction due to Flyknit technology accounts to approximately 1.6 million Kgs.
  2. Nike’sColorDrytechnology using waterless techniques to dye fabrics has led to more than 20 million liters of water savings.
  3. Since 2010, around 3 billion plastic bottles have been shifted from the landfills for conversion into recycled polyester for Nike performance products. Additionally, the energy consumption in manufacturing reduced by 30% as compared with manufacturing virgin polyester.
  4. The Reuse-A-Shoe program by Nike has recycled around 30 million pairs of shoes.
  5. By the year 2020, Nike is targeting to reduce the environmental footprint of its shoes by 10%
  6. By 2025, the company plans to use 100% renewable energy in all of its owned and operated facilities and some of its largest facilities have already implemented on-site renewable energy generation.

The revolutionary innovation has enabled Nike to embed sustainability into their performance products. The Nike Grind series of products transform the received sneakers and plastic bottles from one state to complete new condition and is used to manufacture wide range of products. The shoes received from the company’s Reuse-A-Shoe program are cut into 3 parts to extract the main materials and are processed further using ‘slice and grind’ technique to be fed as input material for new products. In 2010, Nike designed superior performance Football World Cup Jerseys utilizing recycled PET plastic bottles. From melting the discarded plastic bottles to produce new yarn, Nike is expanding the use of this seminal technology. By consuming an average of thirteen plastic bottles to manufacture a shirt with minimum 96% recycled polyester, Nike’s revolutionary recycling process is taking a spin on consumers and environment. Furthermore, the leftover waste in manufacturing of shoes at the Nike factories are reborn as tennis courts, athletic tracks and new shoes.

With a goal to achieve maximum sustainability, Nike is making efforts towards “circular economy” concept focusing mainly on re-use and green management across the entire product lifecycle. From managing the reputation in response to the criticism in the early 1990s to shifting its sustainability strategy to create an environment of industry collaboration, partnership and transparency; Nike has fundamentally grown and shifted its sustainability strategy to prove one of the most sustainable brands in the world.

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