Circular economy: what went wrong?

by: Marieke van der Werf

In the beginning of June, the World Circular Economic Forum took place in Helsinki for the fourth time. Around two thousand participants, including me, were able to choose from various meetings, campfires, lunch meetings and side sessions. Europe, with the Netherlands leading the way, has clearly embraced the circular economy. The forum was well organized, presented enthusiastic speakers, and offered fine catering. So far so good.

However, some things are not heading in the right direction, in my opinion. The mood surrounding the circular economy is starting to become heavy with concern. It is the same atmosphere that used to be around the environment and sustainability and nowadays around climate change. It is a mood of: we want to, but how do we manage it? With the same frowning speakers, a similar appeal to moral responsibility, the well-known issues in the field of technology, regulation and financing and, also in Helsinki, children with banners on the stage and a pervasive call to save the world.

Well-intentioned and genuine: no doubt about that! But how is it possible that an economically promising principle ended up in this corner? Where did it go wrong?

The “circular economy” phenomenon has been put into the spotlight in Europe by the Ellen MacArthur Foundation. McKinsey calculated in 2010 that, as a result of a linear take-make-waste system, 680 billion euros worth of value is lost across the EU because of dumping or incinerating materials. As a member of parliament at that time,  I arranged for this to be calculated for the Netherlands as well. TNO came up with an amount of 7.3 billion euros, after which the circular economy became a political theme. Later studies also show this market potential. A recent study by my agency Dr2 New Economy and Metabolic for the Metropolitan Region of Amsterdam shows that 688 million euros in construction and demolition and 144 million euros in e-waste, 50% is lost due to low-value processing techniques each year.

Thus, the initial approach to the circular economy was from the perspective of its potential value but now we end up talking about the costs.

Is it because of our Calvinistic national character? Do we like problematizing? A possible explanation is that in most cases the circular economy is assigned to the people who were already working on sustainability and the environment. Driven experts, but they are too distant from their colleagues that have economy in their portfolios . We see this in the Dutch national government where the Ministry of Infrastructure and Water management manages the circular economy, with a fraction of the Ministry of Economic Affairs’ budget. The same goes for municipalities and provinces where – with a few exceptions – the circular economy falls under sustainability directors. In companies too, the circular economy has ended up at the offices of the environmental department.

Circular business models are built on value retention instead of cost reduction. This leads to a profitable business case and a sustainable economy. Organizing cycles in which materials can be used in new products, provides Europe and the Netherlands with a structural growth path, which simultaneously leads to less geopolitical dependence. It is a missed opportunity that also in the EU, this win-win concept falls under DG “Environment” instead of “Economy”.

As Dr2 New Economy, we strongly adhere to the economic perspective of a circular economy. Economy and ecology go hand-in-hand, which invariably leads to profitable and long-lasting business cases. In this way we make products (chains), companies and regions fit for the future.

And this is an extremely cheerful and optimistic affair!