The risks of the current Circular Economy conceptions

Currently the Circular Economy is very often presented as “a pragmatic win-win solution for everyone” to “solve the problem of climate change, resource depletion, and waste”.

Without a doubt, the Circular Economy and the ideas behind it could make a big difference towards an ecologically sustainable future — but its current widespread approaches also introduces several risks.

The biggest risk might be that it is a band-aid solution that keeps us from realizing that truly solving environmental problems requires a much more comprehensive and holistic transformation of our political, economic, and social systems.

A recent study by Zing and Geyer (2017) concluded that there are, without a doubt, “circular economy rebound” effects. The main drivers for businesses to join the Circular Economy are not just to do good for the planet, but rather to reduce their waste and make processes more efficient, thus lowering costs.
This can ideally be a win-win situation, but in reality it might lead to a rebound effect in which more efficient operating procedures might lead to lower per-unit production costs and therefore higher demand for the products and price wars in the markets. As Holemans sums it up ” In fact, even if you use fewer resources to produce one consumption unit but you keep on increasing the production volume, the absolute impact on natural resources will continue to increase. While this might sound simple or intuitive, its implications are essential. Closing the loop without questioning the unlimited growth paradigm does not bring us any closer to a better use of natural resources! Doing less bad is not good enough.”

The currently widespread conceptions to Circular Economy promise a new economy in which innovative technical engineering leads to more and “greener” growth for businesses. We have to acknowledge the fact that complex problems do not have easy solutions and that companies don’t act green just for the good of the planet. There is a very high risk that the overall environmental benefits will be largely offset by economic growth. 

Narberhaus and von Mitschke-Collande highlight that “corporate interests are served by the Circular Economy in other ways too. Take one of its most widely hailed features: the business trend towards offering services rather than selling ownership. Sharing underused items, like children’s shoes or DIY tools, may save money and materials. But a “sharing economy” put in place and dominated by large corporations also increases corporate power and can exacerbate inequalities and dependencies”.
Two ubiquitous examples of this are the business models of Uber and Airbnb, which are largely built on precarious working conditions, evading regulations, and breaking laws. In their greed for growth, profit and dominance they have often acted ruthless, causing harm to many other people and businesses.

The current widespread conceptions of the Circular Economy “ignores the fact that, on a finite planet, endless economic growth is not an option“. It doesn’t address the issue, that “today, the management and distribution of the majority of resources and services, such as energy, water, food, education, and health, is controlled by a few large corporations who exploit it for their own profit. Besides creating a division between providers and consumers this concentration of power contributes to an unsustainable economy that drives overexploitation of resources”. And it fails to see that solving our ecological crisis means “diluting the power of global corporations – not propping them up. This Circular Economy model “does not consider the enormous inequality inherent to financial capitalism nor the continuous democratic erosion we are experiencing as a result of the market society that we have become”.

Geissdoerfer et al. (2017) sums it up very well: “many conceptualisations of the Circular Economy … appear to exclude large parts of the social dimension, emphasise economic benefits, and simplify the environmental perspective, the concept might be more attractive for policy makers and private business than competing approaches. This can be problematic for the transition to a more sustainable economic system because attention and resources are diverted from more comprehensive and holistic approaches.” 

Without a doubt, the Circular Economy and the ideas behind it could make a big difference towards an ecologically sustainable future — but its current widespread approaches also introduces several risks.

The biggest risk might be that it is a band-aid solution that keeps us from realizing that truly solving environmental problems requires a much more comprehensive and holistic transformation of our political, economic, and social systems.

A recent study by Zing and Geyer (2017) concluded that there are, without a doubt, “circular economy rebound” effects. The main drivers for businesses to join the Circular Economy are not just to do good for the planet, but rather to reduce their waste and make processes more efficient, thus lowering costs.
This can ideally be a win-win situation, but in reality it might lead to a rebound effect in which more efficient operating procedures might lead to lower per-unit production costs and therefore higher demand for the products and price wars in the markets. As Holemans sums it up ” In fact, even if you use fewer resources to produce one consumption unit but you keep on increasing the production volume, the absolute impact on natural resources will continue to increase. While this might sound simple or intuitive, its implications are essential. Closing the loop without questioning the unlimited growth paradigm does not bring us any closer to a better use of natural resources! Doing less bad is not good enough.”

The currently widespread conceptions to Circular Economy promise a new economy in which innovative technical engineering leads to more and “greener” growth for businesses. We have to acknowledge the fact that complex problems do not have easy solutions and that companies don’t act green just for the good of the planet. There is a very high risk that the overall environmental benefits will be largely offset by economic growth. 

Narberhaus and von Mitschke-Collande highlight that “corporate interests are served by the Circular Economy in other ways too. Take one of its most widely hailed features: the business trend towards offering services rather than selling ownership. Sharing underused items, like children’s shoes or DIY tools, may save money and materials. But a “sharing economy” put in place and dominated by large corporations also increases corporate power and can exacerbate inequalities and dependencies”.
Two ubiquitous examples of this are the business models of Uber and Airbnb, which are largely built on precarious working conditions, evading regulations, and breaking laws. In their greed for growth, profit and dominance they have often acted ruthless, causing harm to many other people and businesses.

The current widespread conceptions of the Circular Economy “ignores the fact that, on a finite planet, endless economic growth is not an option“. It doesn’t address the issue, that “today, the management and distribution of the majority of resources and services, such as energy, water, food, education, and health, is controlled by a few large corporations who exploit it for their own profit. Besides creating a division between providers and consumers this concentration of power contributes to an unsustainable economy that drives overexploitation of resources”. And it fails to see that solving our ecological crisis means “diluting the power of global corporations – not propping them up. This Circular Economy model “does not consider the enormous inequality inherent to financial capitalism nor the continuous democratic erosion we are experiencing as a result of the market society that we have become”.

Geissdoerfer et al. (2017) sums it up very well: “many conceptualisations of the Circular Economy … appear to exclude large parts of the social dimension, emphasise economic benefits, and simplify the environmental perspective, the concept might be more attractive for policy makers and private business than competing approaches. This can be problematic for the transition to a more sustainable economic system because attention and resources are diverted from more comprehensive and holistic approaches.” 

This was Part III of the Rethink Circular Economy series , read on Part IV: A better approach to a circular economy.

By Stefan Simon for Collective Green

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