Article originally published in UNIDO's Making It magazine in October 2019

Our current linear “take, make, dispose” economic system depends on a permanent throughput of materials that are extracted, traded and processed into goods, then sold and used, and finally disposed of as waste or emissions.

According to the latest report of the International Resources Panel, between 1970 and 2017, the annual global extraction of materials tripled, growing from 27 billion tonnes to 92 billion tonnes.

The use of metal ores has grown on average by 2.7% per year since 1970, while the use of non-metallic minerals, mainly sand, gravel and clay, has increased from nine billion tonnes in 1970 to 44 billion tonnes in 2017.

It is the same story for fossil fuels: the use of coal, petroleum and natural gas increased from six billion tonnes in 1970 to 15 billion tonnes in 2017; and for water: from 1970 to 2010, the growth rate of water withdrawals grew from 2,500 km3 per year to 3,900 km3 per year; and for biomass (organic matter), with demand increasing from nine billion tonnes in 1970 to 24 billion tonnes in 2017.

According to the OECD’s Global Material Resources Outlook to 2060, in the absence of new policies, global materials use is projected to rise to 167 billion tonnes in 2060.

But it is not just a matter of the world eating into a finite supply of resources. The current pattern of resource use is having negative impacts on the environment and on human health. Resource extraction and the processing of these resources into biomass, fossil fuels, metals and non-metallic minerals make a massive contribution to the global greenhouse emissions that are over-heating our climate. They are also driving global biodiversity loss and water scarcity.

The OECD reports that reducing greenhouse gas emissions is strongly linked to materials use policies. Materials extraction and production, the OECD says, contribute to a significant share of total environmental impacts.

The extraction and processing of resources and the distribution and use of products all contribute considerably to environmental pollution and especially to air pollution. Soot, smoke, methane and carbon dioxide are a just few common air pollutants. The 2017 report of the Lancet Commission on health and pollution found that air, water and soil pollution is the largest environmental cause of disease and death in the world today, responsible for an estimated nine million premature deaths in the year 2015.

How to dispose of the ever-increasing amounts of used, broken or unwanted products is another seemingly insurmountable challenge for the linear economy. Municipal solid waste is reaching levels that traditional waste management approaches are struggling to deal with. The substantial challenges created for, in particular, waste management in Western countries by China’s recent decision to end imports of plastic and paper waste is one recent example of the magnitude of the world’s solid waste problem.

Looming resource scarcity and an overwhelming production of waste show that the current system is no longer working for businesses, for people or for the environment. The take-make-use-dispose economic system cannot go on.

To create a thriving economy that can benefit everyone within the limits of our planet, we need to transform the way we manage resources, the way we make and use products, and the way we deal with products when they break or wear out.

A circular economy

The Ellen MacArthur Foundation describes the circular economy as “an industrial system that is restorative or regenerative by intention and design. It replaces the ‘end-of-life’ concept with restoration, shifts towards the use of renewable energy, eliminates the use of toxic chemicals which impair reuse, and aims for the elimination of waste through the superior design of materials, products, systems and, within this, business models.”

Here, the circular economy is an ideal, not reached in the near future; however, moving towards this ideal creates substantial benefits in terms of resource availability, profitability, new economic activity and, last but not least, an improved environment.

One of the basic principles at the foundation of the circular economy is a focus on optimized design. For any product, decisions made at the design stage will influence what will happen to that product – how it is made, used and disposed of, and whether it will end up in an incinerator/land-fill/in the sea. The essential ideas here are to view waste and pollution as design flaws, to rethink product design and production processes, and to harness existing and new materials and new technology to ensure that waste and pollution are not created in the first place.

Design choices also come into play in determining whether a product can be repaired, recovered, remanufactured or composted. Such design choices include: the type of materials a product is made of; the application of a modular design approach; the way a product is assembled and the ease of disassembly, so that it can be maintained or so that its parts can be replaced and/or reused; and the capacity for a product to be upgraded or improved in the future.

Keeping products and materials in use is another of the basic principles of the circular economy. In terms of industrial production, if products are designed so that they can be reused, repaired or remanufactured, the amount of resources needed would be greatly reduced.

Remanufacturing

Remanufacturing is an industrial process involving the dismantling of a product that has already been used, restoring and replacing components, and then testing the individual parts and the whole product to ensure that it is within its original design specifications. Instead of destroying or land-filling products at the end of their life, remanufacturing gives them another one. Today, this is typically applied to high-value equipment or components, such as engines and motors, transmission assemblies and gearboxes, complex medical equipment, heavy transport equipment, etc.

Today’s digital technologies offer a way to expand the scale of remanufacturing by allowing remanufacturers to know much more about the way products are used, their location and the actual functioning of the product in terms of wear and tear. This information will enable them to maintain and upgrade products more easily.

Circular business models

Extending beyond the product itself, design decisions relating to the business model play a crucial role. The essential idea here is to shift from simply selling a product to providing a service. Customers access what they need, rather than owning things outright. The service provider or manufacturer will take care of maintenance and repairs because it’s in their interest to keep that item in circulation.

A great example of a circular business model in the industrial sphere is chemical leasing, which has been pioneered by the United Nations Industrial Development Organization (UNIDO) since 2005. Chemical leasing is a product-as-service business model that shifts the focus from increasing the sales volume of chemicals, towards a value-added approach. A producer sells the functions performed by the chemical, and functional units are the main basis for payment. The conventional approach is turned upside-down: economic success no longer depends on the volume of chemicals sold, but on the service that is linked with the chemicals.

UNIDO places great importance on applying innovative concepts to the real world through our mandate of inclusive and sustainable industrial development. To this end, we are working to introduce circular practices into production processes, guided by the conviction that systems can be regenerative and underpinned by design principles that view final disposal as the very last option after a long life of continued use and reuse of products, material and resources. These principles extend from the extraction of raw materials to production, distribution, use and end of first life, which are transformed – to the greatest extent possible – into a continuous, cyclical process.

The circular economy is not just about a few manufacturers changing some of their products. It requires all the interconnecting companies that form our infrastructure and economy to come together to rethink the way they collectively operate.

Circular economy for developing countries

The circular economy offers a promising alternative strategy for industrial development and job creation in developing countries. Keeping in mind that the circular economy is an ideal to move towards, developing countries can facilitate change by setting priorities in types of products, sectors or at different parts of the product life cycle, depending on their specific situation. The circular economy provides new opportunities for economic diversification, value creation and skills development.

Developing countries are in a good position to take advantage of these new economic opportunities. The strong tendency to value products and their components leads to a wider application of circular economy principles. The related capabilities, e.g. for repair or recycling, are often wider spread, and having products repaired and reusing them are more socially acceptable. Many developing countries have large informal sectors that already practice circular activities – for example, in areas such as electronic waste (e-waste) and refrigerator repairs – and they could improve their value generation and engage in higher-value circular economy supply chains; in the case of refrigerators, UNIDO already supports thousands of repair/refurbish technicians every year. With sufficient priority accorded to related investments, developing countries could ‘leapfrog’ developed countries in digital and materials innovation, and embed circular economy principles at the heart of their economies.

Success now in embedding circular principles in industrial development strategies can address the needs of growing, urban populations, while mitigating against a continued rise in primary resource use, and associated greenhouse gas emissions and environmental pollution.

We need to widen the global circular economy conversation to greatly increase the involvement of developing countries, and we need to invest political and financial capital in promoting the development of inclusive circular economy approaches globally.

Developed country governments have an important role to play in piloting approaches and facilitating a dialogue on how the international dynamics of circular economy policies can be managed better. Support from international agencies, in particular UNIDO, will be critical to the piloting of circular economy solutions among small and medium-sized enterprises in developing countries and along international value chains in order to demonstrate the viability of cross-border circular value chains at scale.

- Kai Bethke is Director of UNIDO’s Division of Member States and Funding Relations. Stephan Sicars is Director of UNIDO’s Division of Circular Economy and Environmental Protection.