The Need to Transition The Current Economic System into a Circular Economy

This paper will discuss the current economic system which represents a linear model, and how it can be replaced by a circular economy which produces considerably less waste. As the world population increases and technology advances exponentially, the matter to wisely use finite resources is become alarmingly pertinent. This paper will stress the need to move to more sustainable economic practices by exploring the effects the transition will have on households, economies and the environment as well as highlight the efforts countries are already making in this regard. It is vital to recognize that the planet cannot sustain the current “take-make-waste” approach infinitely and given the rapid growth of the world’s population and the increasing need for goods and services, it is not surprising that mankind may soon deplete unrenewable resources. It has been suggested that ecosystems are now showing signs of being worn down, with fifteen of the twenty-four known ecosystem services being used in an unsustainable manner.

Planet Earth will eventually be unable to keep up with man’s insatiable appetite, the strain of which can already be seen through South Africa’s water crisis where the land is not able to provide for all the people living there. And so, the question then becomes, not if the linear model can be replaced, but when the circular model will replace it out of sheer necessity. It seems as if manufacturers are realizing the need to work towards a less wasteful production line, with major companies such as Nike, H&M, Zara and Adidas introducing initiatives to reuse and recycle waste material. The fashion industry can be considered as one of the biggest contributors to the consumer mentality through the seasonal release of new garments and the constantly changing trends. H&M head of sustainability Anna Gedde claims H&M would like to use only recycled or sustainably sourced materials by 2030. This suggests that production industries are understanding the risks and impacts of unchecked resource use and are considering switching to methods to reduce their waste output. On a more global scale, the European Union is targeting a switch from a linear to a less wasteful economic system as part of its EUROPE 2020 plan announced in 2010. The foundation of this plan includes prioritizing smart, sustainable and inclusive growth to develop a more knowledgeable, innovative, greener and more competitive economy.

This goal was developed due to a realization that the move to a more circular economy which would bring several benefits; this includes reduced carbon dioxide emissions, reduced primary material consumption, and increased development when compared to the current economic development path. The commission introduced to oversee this plan left to national governments to look into implementing stipulations to reach the same goal. Additionally, several countries have also expressed an interest in moving to a more circular economy. In September 2016, the Dutch government announced their goal to develop a circular economy in the Netherlands by 2050. Their efforts are concentrated across 5 economic sectors; biomass and food, plastics, manufacturing industry, construction sector and consumer goods. Programs such as From Waste to Resource (VANG), Green Growth and Biobased Economy have been implemented across the country to work on producing less waste.

This indicates that governments are realizing that a stable future lies in having a circular economy and are working hard to implement this. However, a major problem lies in the lack of credible business models that support the circular economy, making several governments and industries reluctant to make the switch. An existing model known as Product-Service System or PSS can be defined as a system which fulfils a consumer’s needs by collectively providing products and services and supporting infrastrture and necessary networks as well as have a smaller environmental impact.

A literature review conducted suggests that while PSS is a viable option, it needs to be implemented with great care as it lacks transferability and cannot support every kind of company to design a circular business model. Further research conducted on the matter identified the principles of the circular economy and how they apply to a popular business model framework, giving a circular business model canvas which can be tweaked to suit whichever company uses it. Even though further work is necessary to cement this as a credible model, the fact that economists are actively working to support the circular economy indicates there is a strong possibility of it replacing the linear model in the near future.