CEPS report: How the circular economy applies to different EU industries
The circular economy has recently become one of the EU’s main policy priorities. In addition to the environmental pressures brought by the traditional linear economy, the main economic reasons to mainstream the concept of the circular economy have been high and volatile commodity prices and potential multi-billion euro economic benefits from new market opportunities. These have been highlighted in numerous reports and activities, most notably by the Ellen MacArthur Foundation and the World Economic Forum.
In December 2015, the European Commission published the Circular Economy Action Plan, putting the circular economy at the core of the EU’s sustainable development policy. The European Commission’s Plan calls for rethinking our economy by changing the five stages of the lifecycle of products and services, through re-use, re-manufacture, re-cycle, waste reduction and other practices.
While in theory, circular economy promises both environmental and economic benefits and should be the model of choice to rapidly replace the linear economy, in practice the linear model still dominates the economy.
One of the reasons is that while there is a variety of definitions, circular economy might have different meanings and impacts for different industry sectors and other economic actors. For example, what does circular economy mean for the construction industry and how is it different from circular economy for car producers? What is the difference between circular economy for a city and for a multi-sectoral corporation or a start-up? Decision-makers in private enterprises and policy-makers at radically different scales, ranging from the city to the national level and macro-regional scale, need more clarity on how circular economy is relevant for each type of economic actor and sector of economic activities.
A recent Special Report by CEPS, a Brussels-based think tank, tries to address this challenge by clarifying the concept of the circular economy in EU policy-making and putting forward a structured framework for conceptualising the concept. Called the “Circular Economy Progress for Stakeholders”, abbreviated to CEPS framework, this analytical device breaks down the overall theoretical concept of the circular economy into a collection of eight building blocks and three types of economic actors. This simple structure allows stakeholders to combine these blocks in different patterns or formations to develop circular economy business models to deploy in the real world.
The eight building blocks consist of both well-established European policies, such as energy efficiency and renewables, and novel economic concepts, such as the sharing and platform economies. The blocks are interconnected and each has a direct or indirect impact on resource use. However, the list can be modified as the circular economy concept continues to develop.
A brief description of each of the building blocks is given below along with some examples, illustrating how these blocks can impact or be impacted by the variety of economic actors.
Industrial Symbiosis involves the physical exchange of material resources, water, energy and by-products between several industrial facilities; or the exchange of knowledge to foster eco-innovation through networks of actors. One of the best-known examples of industrial symbiosis is the Kalundborg Symbiosis, a cooperative initiative among eight private and public enterprises from different industry sectors in Kalundborg, Denmark.
Material Resource Efficiency, expressed in its simplest form, means doing more with less. For example, we can integrate the practices of remanufacturing, maintenance and upgrading into our products, instead of simply replacing them. It can also be achieved by product life-cycle extension. An example is Fairphone 2.0, the first modular smart phone inspired by the circular economy, which is designed for upgrade and reparability, then easy reuse and recycling at the end of the phone’s (extended) lifespan.
Renewable energy and energy efficiency help reduce the consumption of fossil fuels and curb greenhouse gas emissions.
Reduction of food waste and replacement of mineral fertilisers with organic ones could foster the Circular Economy for biological products. For example, HomeBiogas, an Israeli start-up, has developed a small domestic system that converts food waste and animal manure into cooking gas and liquid fertilisers. And “Just Egg”, a British hard-boiled egg supplier based in Leicester, was paying about £30,000 a year to bury its by-product – 480 tonnes of eggshells – in landfill. Together with Leicester University, it has developed a technology to transform eggshells into powder that can be used in the production of plastics, i.e. making biological waste a resource for the plastics industry.
Performance economy and sharing economy are emerging concepts involving the provision of products as services, mainly via digital platforms (platform economy). They can be found in several contexts, notably B2B (business-to-business), B2C (business-to–consumer) and C2C (consumer-to consumer). The best-known examples include Uber, Airbnb, Amazon market place and Zipcar. Although environmental protection is usually not the main purpose of these concepts, in some cases, sharing economy models help achieve the aims of the Circular Economy. For example, it has been estimated that one Zipcar (an American car-sharing company) can take between five and twenty privately-owned vehicles off the road, potentially reducing both material consumption and CO2 emissions.
Based on our understanding of the building blocks, the CEPS report defines three main types of stakeholders in the circular economy: classic (mature) industries, emerging industries and multi-sectoral actors. Of course, this differentiation is at times arbitrary, but it is necessary to further clarify the concept of the circular economy. In many cases, the reality may be more complex.
Classic (mature) industries consist of typical sectors of the industrial economy, such as chemicals, machinery, transportation, household durables and others.
Emerging industries represent the new markets of the circular economy, such as sharing platforms, refurbishment schemes and other new business models.
Multi-sectoral actors relate to the deployment of circular-economy models by specific types of actors that conduct multi-sectoral activities, such as regions and cities, SMEs and multi-sectoral corporations (which are active in many different sectors, such as Siemens and Philips, for example).
The authors of the CEPS Special Report hope that this framework supports the transition towards the circular economy by simplifying and clarifying the concept of the circular economy for both policy-makers and business leaders.