Part 1 of 2 of thinkstep-anz’s circular economy series

By Dr. Jim Goddin

 Circular products are built to last. The materials that make them up stay in use for as long as possible. When they can no longer be used in their original form, they contribute to other products. A circular economy is based on three principles: designing out waste, keeping products and materials in use, and regenerating natural systems.

Circular economy thinking is gaining traction in New Zealand and Australia but focuses predominantly on avoiding or minimising waste through recycling. In New Zealand, waste — especially single-use packaging and plastic waste — has enjoyed the spotlight as a high-priority environmental issue for quite some time.

In the latest Better Futures report by Colmar Brunton, two of the top ten concerns for New Zealanders were not enough waste being recycled and, overpackaging, non-recyclable packaging and the amount of waste going to landfill. Yet, waste remains a stubborn issue to tackle.

Waste avoidance through recycling is a prominent component of the circular economy and is, from a practical perspective, where most products will need to end up.

Recycling is, however, the outermost ‘loop’ in the circular economy model, with materials typically representing a tiny portion of the economic value of products. Recovering the more substantial value added to materials through manufacturing is a more significant portion of the prize at stake.

The inner loops of the circular economy model

Dig a little deeper into the circular economy model and you get to the inner ‘loops’ where the systems-level change happens. Strategies in the inner loops of the circular economy include product life extension, enhanced product utilisation (through leasing models for example), reuse, repair and remanufacturing.

The inner loops address the root causes of waste: overproduction and overconsumption. A key economic advantage of the inner loops is that they maintain and recover the manufacturing value that is otherwise lost when products are recycled.

We need to see a greater level of ambition in New Zealand — and the policies, standards, and funding to nurture that ambition. The Sustainable Business Network’s Going Full Circle report emphasises the business risk of not preparing for a circular future.

Extended Producer Responsibility schemes look set to become the norm in regions like the European Union and the UK, where taxes linked to recycled content targets already exist.

Further policies requiring circularity for imported products are rumoured to be in development. Initiatives like these will start to have trade implications for New Zealand by impacting the products and materials we import and those we produce for export.

A circular product looks beyond recycling

Avoiding or minimising waste is a given in a circular economy. To that end, actions like recycling and recovering materials are a great starting point, but they only scratch the surface of what a circular economy has to offer.

The World Economic Forum estimates the value of the circular economy at US$4.5Tn.  It’s largely this that’s attracted businesses and governments, alongside the opportunity for job creation.

However, only a tiny portion of this economic opportunity relates to material value recovered through recycling and avoiding waste.

As a stark example of this, the material value of an iPhone 6 is estimated to be a mere US$1.03.

Shifting our focus towards the inner loops of the circular economy enables us to retain the significant value added to materials through manufacturing.

In our next article, we will explore what it will require to gain the full benefits of a circular economy — reconsidering how we design products, supply chains and business models.

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