Where is innovation heading in the 21st Century? For every new technology poised to reinvent the way we live, work and interact, there seem to be many more incremental or even superficial improvements, rolled out by businesses wrestling for customer dollars. Enter the circular economy: a rich and largely untapped seam of innovation that not only works for businesses, citizens and governments, but can also support the switch to a positive development path for the global economy.

This comes at a time when the linear ‘take-make-dispose’ model that worked so well for so many is starting to reveal its limitations. A loud chorus, dispersed across countries and industries, is calling for a new model, one that embraces feedback, encourages regeneration and facilitates access and abundance. The digital revolution holds a lot of promise for this circular economy, and there’s good reason to be optimistic about the future. Emergent trends in technology and computing are enabling us to move to a model that understands and harnesses flows of resources, energy and information, creating the conditions for a new 21st century prosperity.

Digital / Growth within
Click to read ‘Growth Within: a circular economy vision for a competitive Europe’

In the past six years, this has gone beyond theory alone. In the 2015 study Growth Within: a circular economy vision for a competitive Europe, the Ellen MacArthur Foundation, McKinsey and SUN estimated that the circular economy could be worth €1.8 trillion to Europe by 2030. That’s just over USD 2 trillion, or roughly the GDP of India.

What’s more, Growth Within suggested that the lion’s share of the economic opportunity highlighted in the report is directly linked to technological advances. Tracking systems and mobile apps, whether as a key driver or a convenience factor, allow for a considerable jump in asset utilisation rates as well as material flows optimisation, the benefits of which add up to EUR 1.2 trillion – two thirds of the overall potential. So these new tools and techniques are helping businesses take practical steps to support the transition to a circular economy, but the connection is even more profound. As Samuel Arbesmn stresses in his recent book Overcomplicated, the more we understand digital networks, the more we realise that it’s not enough to make isolated tweaks and expect improvement or a quick fix. That means that if we really want to tackle the difficult economic, social and environmental problems of today and tomorrow, then systems thinking skills, in conjunction with the technology to understand systems, will be essential to build resilience and thrive in an uncertain future.

William McDonough has stressed how businesses should first identify their values and principles before setting targets or objectives, and this philosophy should also be applied to the digital revolution. While the pace of innovation around areas like the internet of things, automation, cloud computing, deep learning and digital fabrication is undoubtedly rapid, without an overarching set of principles, we’ll remain on a primarily linear development path. This would only scratch the surface of the potential benefits found when the digital revolution unfolds in concert with the circular economy. The following principles could provide much needed vision for current disruptive trends:

  • Preserve and enhance natural capital – by managing finite stocks and balancing renewable resource flows.
  • Optimise resource yields – by circulating products, components, and materials at the highest utility and value at all times in both technical and biological cycles.
  • Foster system effectiveness
 – by revealing and designing out negative externalities.

What does this mean in practice?

This could mean more access to services and at the same time less material consumption. One car benefiting five users, through a sharing platform, is the obvious example. It’s not so much how much stuff you manage to sell, it’s how you manage the assets to make the most of them and generate revenue through service provision. Some pioneers are already thinking this way – just take a look at Elon Musk’s latest Tesla strategy, which covers renewable energy, accessible mobility and “enabling your car to make money for you when you aren’t using it.”

Digital / Source: Tesla
Source: Tesla

Rather than consuming materials and extracting value from selling assets, we can foresee a regenerative model which maintains and builds capital. This includes natural capital; applying technology not just to increase efficiency and ‘do less bad’, but to monitor land degradation, localised and specialised management of nutrient loops, and biodiversity.

At the heart of the circular economy lie designs for product life extension through restorative activities like repair and remanufacturing, or for the recovery of material value. This becomes possible when IT is powerful and pervasive enough to enable those loops; when smart and connected objects can not only perform tasks, but can also give information regarding what they’re made of, where they are, and how they can be upgraded or repaired. In a way, you could say that in the pre-digital world we used to work for materials, and now materials work for us.

The first Industrial Revolution was about steam, water mills and the first age of machines. The second one introduced electricity, which during the second half of the 20th century morphed into electronics, ICT and automation, or the third revolution.

The deep transformation we’re experiencing now is sometimes called the fourth Industrial Revolution, and its digital backbone has the potential to profoundly transform our relationship with the material world. Guided by the circular economy framework, it can put us on a positive path to a regenerative economy.


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The Author

Joe Iles

Joe Iles

I'm Editor in Chief of Circulate and Digital Architect at the Ellen MacArthur Foundation.

When I'm not discussing the circular economy, I also love talking about digital media and online trends, memes, music, bad films and good beer.

You can find me on twitter @joeiles or email joe[at]circulatenews.org

1 Comment

  1. September 26, 2016 at 1:45 pm — Reply

    While I wholeheartedly support the shift to a circular economy because of the environmental benefits, the transition will be a challenge due to the following reasons:

    1) Very few products that are manufactured today can be easily disassembled for repurposing. Before the industrial revolution, there were very few “composite” products – materials stayed separate, or were joined using crude fasteners often made from animal gut. So if you broke a ceramic pot, you collected the pieces and made a new one.Try doing that with a toothbrush, let alone an iPad – in short, we have not designed things for the circular economy. So the first step will be a radical re-design to ensure easy disassembly or degradation

    2) Every conversion step of a product takes energy/human labor. Unless we find a way to use entirely renewable energy, the more we repurpose, the more CO2 we emit. Granted that it will be better than digging up new materials from under the ground, but the option to simply not use that product is also available. Rather than talk about 5 people sharing a car, why not talk about 5 people walking/cycling and not making the car in the first place? Similar to Amory Lovins’ concept of the “negawatt” which is electricity that was never generated, we will need to shift the dialogue to products that are not made.

    3) As far as using humans in the circular economy – that is already happening in developing countries, where labor is cheap. You can take your home appliance or electronic gadget to get repaired at a corner shop for a fraction of what it cost you to buy it. In the developed world, average labor rates for trades people are often multiples of the price of what they repair. So either goods will need to start getting way more expensive to account for the end of life repurpose charge, or labor rates will need to come down, or we will need to find a way to repurpose without using humans

    Lastly, the circular economy is not something that will last 10 or 20 years – in principle, it will be designed to last FOREVER. That means till humans are still on this planet, we will continue to move things around and find new ways to extract value from them. This is in no way unprecedented – till the industrial revolution, we were all part of a circular economy, we just didn’t realize it then. But having drunk from the well of excessive consumption for so long, it will take a lot of effort to shift us onto a slower track – and it will need to be a slower track to avoid the economy and society from going off the rails


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