The circular economy is built on a feedback-rich systems perspective and that perspective came fully into focus after World War Two. The new technology of computing allowed us to really begin to show what happens in feedback-rich systems e.g. in the weather, in ecosystems, in the economy when the dreary manual calculation of what happens when the output of equations is fed back in as new input time and time again is automated. We already had the non-linear equations, just not the means to iterate them hundreds and thousands of times. The first modelling of real world systems which hadn’t been reduced to some oversimplified clockwork or pipework emerged, and that was remarkable. It was not only a new way of seeing the world but became a new way of acting within it.

A whole new landscape appeared, and by the late 1970s, so did a whole new language too: of tipping points, fractals, attractors, topographies and the butterfly effect. Already, this new way of seeing the world had brought the first big picture take on the world of material resources, energy population and economic growth, the Limits to Growth 1972. Like the image of the earth coming back from the moon, this report was mind-changing for many. And how expensive an exercise it was then – this model was not revised for 30 years! Computing and what was increasingly called the information and communications technology (ICT) revolution soon got cheaper of course, but it was still about feedback and what feedback does.

Right: Charles and Ray Eames’ film ‘An Introduction to Feedback’, created for IBM. The film focuses on the cycle by which performance is measured, evaluated against desired results, and corrected for future performance. The film draws analogies between the function of the feedback principle in everyday situations and the way it works in the modern electronic computer.

 

The ‘circular’ in circular economy is a cipher for feedback, for closing the loop, but revealed in the light of the economy being part of an open system – bathed in the energy from the sun – and where decay and disorder are every bit a reality as regeneration and restoration. Its order and its ability to endure are understood in that dynamic way; as an interplay between positive and balancing feedbacks. It is not seen as an equilibrium which is disturbed and will come back if it is allowed to, but as something which requires a systems wide appreciation and sensitivity. This contrasts well with the linear resources economy – a description of a system without much feedback if ever there was one! – relieved only by mechanistic models of the circular flow of income and expenditure which are very much about equilibrium and are very partial; focussing so often only on the monetised flows.

ICT and the circular economy have a very deep relationship quite apart from this big picture/different system orientation. The very means through which we can imagine prosperity in a circular economy is through ICT. Equally, prosperity delivered by ICT is not a given. During this era of rapid innovation, the circular economy offers a framework for thinking about how technology can be used to move to an economy that is regenerative and restorative by design.

The circular economy is an unfoldment of a digitally enabled prosperity, just the next step from a process started after the end of World War Two. The additional ‘feedback loops’ illustrated so often in the circular economy butterfly diagram are no more than a reflection of the possibilities emerging from this digital revolution. It’s in the feedback, stupid.

Its all taken a while to reach maturity. Just look at the following graphics from the 2015 Growth Within report, including a small number of the many businesses born out of or embracing a tech-enabled, circular approach:

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The impetus behind the circular economy largely exists because of the new business models which come through the application of information technology. ICT has transformed existing ideas like products of service, or access to assets like cars (ZipCar) or bicycles (urban cycle hire) and buildings (AirBnB). The internet and has seen the rise of platforms, for instance of buyers and sellers (like eBay), and the mobile web and pervasive GPS technology has made mobility platforms commonplace (Lyft, Uber). The falling cost of tagging and monitoring technology has opened up new possibilities in stock maintenance, reverse supply chains and the tracking of products and materials and their performance.

Information technology is accelerating trends in decentralisation in pillars of the economy, like devolved, digital manufacturing and devolved renewables energy production and storage. New complementary currencies assist in making markets for resources which would otherwise be used marginally or not at all because they do not have relevance in current pricing patterns. ICT can substitute the sharing of designs and applications for the clumsy and expensive shipment of product. It can transform the relationship between big and small scale production by making the consumer into a ‘prosumer’ and by giving the advantage in turbulent times to firms avoiding large fixed costs but able to be flexible (see Chen and Galbraith). It sinks the marginal cost of almost everything based on digital and maps systems and system optimisation possibilities.

These changes are all opening up the potential for different relationships between resources, producers and consumers/users. They are not all magically about ‘doing the right thing’, some of it plays to wastefulness or to older conceptions of eco-efficiency of ‘using less and less’ but part of that systems perspective is enamoured of creating effective systems, and notions of ‘closing the loop’, thinking ‘cradle to cradle’ for products, and rebuilding and regenerating capital are definitely in the mix. Here the circular economy can offer the ‘rules of the game’ – if we set system conditions the right way, we can develop a system which can bring out additional value while relatively decoupling from resource use.

What’s new or special about the circular economy, apart from it being about an economy that works long term, led by business and making the economic case, is that it is about how this case emerged. It is about the information technology revolution circa 2010 onwards and how it added more feedback to make our production, consumption and use of resources significantly smarter. Systems without feedback are dumb after all. Feedback is how we learn.

At the same time this ‘systems thinking’ takes our understanding of how the world works to the next level. It has evolved to bring us closer to a realistic interpretation: from the world of order given by God in the 14th century and before, to a mechanistic science of machinery and pumps in the 18th and 19th century to one where we model complex adaptive (feedback rich systems) in the 21st century. A circular economy is part of the new normal, so we better get on with it.

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Ken Webster

Ken Webster

Ken Webster is Head of Innovation at the Ellen MacArthur Foundation and he is a major contributor to the development and communication of ideas in this field.