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Circular Economy Towards The: Opportunities For The Consumer Goods Sector
Circular Economy Towards The: Opportunities For The Consumer Goods Sector
2
TOWARDS THE
CIRCULAR ECONOMY
Pre-print version
Founding
Partners of the
Ellen MacArthur
Foundation
Foreword
A new term has emerged in recent years to describe our modern era—the
Anthropocene. It rightly implies that in this age humans became the dominant
force shaping our physical environment. It is evident that an economy that extracts
resources at increasing rates without consideration for the environment in which it
operates, without consideration for our natural planetary boundaries, cannot continue
indefinitely. In a world of soon to be 9 billion consumers who are actively buying
manufactured goods, this approach will hamper companies and undermine economies.
We need a new way of doing business.
The concept of a circular economy promises a way out. Here products do not quickly
become waste, but are reused to extract their maximum value before safely and
productively returning to the biosphere. Most importantly for business leaders, such an
economy can deliver growth. Innovative product designers and business leaders are
already venturing into this space.
I don’t believe business can be a mere bystander in the system that gives it life. This is
why decoupling economic growth from environmental impact and increasing positive
social outcomes are two priority objectives that lie at the heart of my vision for corporate
strategy. Businesses need to reinvent themselves, and the circular economy framework
provides very promising perspectives, as outlined in the present report.
I welcome this important contribution to the debate regarding the nature of ‘economic
things to come’. In 2012, the Ellen MacArthur Foundation report ‘Towards the circular
economy’ contributed significantly to our understanding of the opportunity for
durable goods. This year’s report again takes the business point of view to explore the
opportunity of the circular economy for fast-moving consumer goods. Building on all
the academic work of recent years and a large base of industry examples, it establishes
needed thought structures, identifies the major levers available, and calls out the
economic opportunity.
I envision a 21st century where innovation, values, and sheer drive will help harness the
power of regenerative processes, and this new report inspires our thinking on how to
create prosperity that is not at the expense of tomorrow’s opportunities.
Sincerely,
Paul Polman
Chief Executive Officer, Unilever
02 | TOWARDS THE CIRCULAR ECONOMY
‘As a founding partner to the Ellen MacArthur Foundation, at Kingfisher and B&Q we
are already taking steps towards circularity. This is particularly relevant for us in timber,
where we are regenerating working woodlands and finding a second life for our waste
wood. This report identifies the massive opportunities of circularity for business.
Circularity supports our Net Positive approach to doing business—where we go beyond
minimising our negative impact and instead design ourselves to have a positive one.
We are very excited about the report’s findings and are looking forward to continuing
to work with the Foundation to understand how we unlock some of the commercial
opportunities it highlights.’
B&Q Ian Cheshire, Kingfisher Group, Chief Executive
‘We are working with key strategic suppliers to explore the commercial opportunities
of the circular economy, which we believe to be significant. We are also integrating the
principles of the circular economy into our product development process. As a founding
partner of the Ellen MacArthur Foundation, we are delighted to support this latest report,
which underlines the relevance and opportunities provided by the circular economy.’
BT Group Gavin Patterson, Chief Executive BT Retail
‘The Foundation’s latest report builds on work we have done internally, highlighting
the opportunities anaerobic digestion provides for producing renewable gas from
waste. It gives new impetus to the work National Grid is doing around the circular
economy with regards to the regeneration of major infrastructure assets, our ambition
to use the circular economy as a core focus for innovation and sustainability across
our organisation, and to the joint ambition National Grid and the Foundation have of
inspiring a generation through our work in education.’
National Grid Steve Holliday, Chief Executive
‘The EU’s recent European Resource Efficiency Platform manifesto highlights the
importance of decoupling future economic progress from resource constraints.
Renault has been pursuing this objective for some time and is working closely with
the Ellen MacArthur Foundation, applying circular processes, and shaping the future
of mobility with electric vehicles—initiatives that will safeguard our leading role in the
automotive sector. The new report brings added focus to this work, and we are
delighted to have had a role in its elaboration.’
Renault Carlos Tavares, Chief Operating Officer for Renault
TOWARDS THE CIRCULAR ECONOMY | 03
Contents
1 Foreword
4 Acknowledgements
5 Report synopsis
6 Executive summary
104 Appendix
Acknowledgements
Report synopsis
This year, the Foundation has turned its focus to ‘fast-moving’ consumer goods,
products that typically have a lower unit cost, are bought more often, and have
a much shorter service life than durable goods. Fast-moving consumer goods
currently account for 35 per cent of material inputs into the economy, a significant
part of total consumer spending on tangible goods, and 75 per cent of municipal
waste. Importantly, the consumer goods sector absorbs more than 90 per cent of
our agricultural output—possibly our most embattled resource in the future.
Chapter 1
Examining the success and limits of linear consumption and the power
of the circular economy concept to break through the linear ‘dead end’.
Chapter 2
Discussing how the principles of the circular economy apply to consumer
goods—within both the biological and the technical spheres.
Chapter 3
Investigating how circular businesses can extract more value than the l
inear economy in three parts of the consumer goods industry: making use
of food waste and food processing by-products, reducing the material impact
of apparel without reducing consumer choice, and getting to grips with
beverage packaging.
Chapter 4
Describing the potential economic payoff of a rapid scale-up of circular
business models in the consumer goods sector.
Chapter 5
Proposing concrete steps for participants in the consumer goods industry
and for the public sector to bring the circular economy into the mainstream.
06 | TOWARDS THE CIRCULAR ECONOMY
Executive summary
The last 150 years of industrial evolution • Household food waste. An income1 stream
have been dominated by a one-way of USD 1.5 billion1 could be generated annually
or linear model of production and for municipalities and investors by collecting
consumption in which goods are household food waste in the U.K. separately
manufactured from raw materials, sold, and processing it in line with circular
used, and then discarded as waste. This principles to generate biogas and return
model has been exceptionally successful nutrients to agricultural soils. If all countries in
in providing affordable products to the EU matched Italy’s high rates of separate
consumers and material prosperity to collection of household food waste for biogas
billions. In developed economies, it has and compost production, the resulting income
largely displaced a traditional economy stream would give towns and cities a new
that featured more reuse and regeneration source of revenue.
but required more labour and produced
lower returns on investment. • Industrial beverage processing waste. An
additional profit of USD 1.90 – 2.00 per
While there is still room for the linear hectolitre of beer produced could be created
model to expand geographically and in Brazil on top of the margin for beer by
realise even higher efficiencies, there selling the biggest waste product, brewer’s
are signs that the coming decades spent grains, to farmers in the fish farming
will require productivity gains and (specifically tilapia) and livestock sectors, thus
quality improvements at a new order of ‘cascading’ it to another industry as a feed
magnitude. As the global middle class supplement. Cascaded uses are relevant for
more than doubles in size to nearly many food processing by-products.
5 billion by 2030, consumption and
material intensity will rise accordingly, • Textiles. A revenue of USD 1,975 per tonne
driving up input costs and price volatility of clothing collected could be generated in
at a time when access to new resource the U.K. if the garments were sold at current
reserves is becoming more challenging prices, with the gross profit of USD 1,295
and expensive. Perhaps most troubling comfortably outweighing the cost of USD 680
is that this sudden surge in demand may required to collect and sort each tonne. Like
have adverse effects on the environment Italy in household food waste collection, the
that further constrain supply. Symptoms of U.K. sets a standard worth emulating, with
these constraints are currently most visible an average clothing collection rate of 65% of
in the food and water supply. Declines in clothes discarded.
soil fertility are already estimated to cost
around USD 40 billion globally. • Packaging. A cost reduction of 20 per cent
from USD 29 to USD 24 per hectolitre of beer
Modern circular and regenerative forms consumed would be possible in the U.K. by
of consumption—so far limited to a few shifting from disposable to reusable glass beer
high-end categories—represent a promising bottles, which would lower the cost incurred
alternative and are gaining ground. for packaging, processing, and distribution.
Powerful examples of their economic While durability would require a 34% increase
viability at scale exist today, from anaerobic in the amount of glass used per bottle, this
digestion of household waste to apparel increase in material would be dwarfed by the
recovery. While these examples are still savings that accrue from being able to reuse
limited in geographical scope, we estimate such bottles up to 30 times, as currently
the full potential of the circular economy achieved in Germany.
to be as much as USD 700 billion in global
consumer goods materials savings Over time, the market is likely to
alone. Our product- and country-level systematically reward companies with an
analyses covered examples in product edge in circular business practices and hence
categories that represent 80 per cent of dramatically lower resource requirements.
the total consumer goods market by value, With new technologies in hand, they can
namely food, beverages, textiles, and win by scaling up the concept of the circular
1 Includes revenue from feed- packaging. Highlights of opportunities for economy. There will also be rewards in rapidly
in-tariff in the U.K. and avoided
landfill fees profitable businesses include the following: urbanising countries where waste streams of
TOWARDS THE CIRCULAR ECONOMY | 07
Between 1900 and 2000, global GDP grew • The risks to food security and safety
twenty times and created hitherto unknown associated with long, ‘hyper-optimised’
levels of material prosperity. The availability global supply chains appear to be increasing.
of consumer goods of increasing quality and
reliability at ever-lower cost was supported For these reasons, alternative models for
by new production technologies, globalised production, distribution, and consumption
supply chains, fewer labour inputs, and based on reusing resources and
what we call a ‘linear’ industrial economy. regenerating natural capital have caught the
Within this linear model, resources are attention of businesses around the world.
extracted from the earth for production and ‘Circular’ sources of value appear more
consumption on a one-way track with no transformational and less incremental than
plans for reuse or active regeneration of the further efficiency improvements.
natural systems from which they have been
taken. In developed economies, the linear 2. Rediscovering a circular model
economy has largely displaced the traditional
‘lower productivity’ circular economy. For durables, the benefits of reuse have been
widely demonstrated. For consumer goods—
The linear economy is material and energy such as food and beverages or apparel and
intensive; it relies on economies of scale, and their packaging—which are short-lived and
typically builds on complex and international often transformed during use, the economic
supply chains. All these supply chains have benefits of a circular design are more
a common goal—the consumer. The goods complex in origin and harder to assess.
an OECD citizen buys for consumption
annually—800 kg of food and beverages, We estimate the total material value of
120 kg of packaging, and 20 kg of new fast-moving consumer goods at USD 3.2
clothing and shoes—are, for the most part, trillion. Currently, we recover an estimated
not returned for any further economic use. 20 per cent of this material, largely through
In the current ‘take-make-dispose’ system, decomposition (cascading of waste and
around 80 per cent of these materials will by-products through adjacent supply chains,
end up in incinerators, landfill or wastewater. returning nutrients to the soil, and recycling)
They come to a dead end. and partly through reuse. In the future, we
believe that a much higher share of consumer
There is still room to expand the linear goods materials could potentially be
economy model geographically to the recovered though reuse and decomposition.
developing world, where labour and capital Even in the near term, without the dramatic
are not yet organised around agricultural application of bio-based products and the
or processing value chains optimised for full redesign of supply chains, the value that
efficiency. At the same time, there are can be recovered could be increased to
growing signs that the power of the linear 50 per cent.
model is reaching a limit:
Recovering part of the USD 2.6 trillion
• In modern manufacturing processes, of material value lost today is a huge
opportunities to increase efficiency still opportunity for fast-moving consumer goods
exist, but the gains are largely incremental companies. However, they face significant
and insufficient to generate real competitive hurdles as they try to break out of the linear
advantage or differentiation. model. We need to build efficient collection
08 | TOWARDS THE CIRCULAR ECONOMY
Executive summary
Continued
innovative solutions are being developed unique landscapes. Higher land productivity,
in specific applications and could allow less waste in the food value chain, and the
the profitable evolution of biodegradable return of nutrients to the soil will enhance the
packaging. value of land and soil as assets. The circular
economy, by moving much more biological
Because they extract value from what are material through the anaerobic digestion or
otherwise wasted resources, these and other composting process and back into the soil,
examples of the modern circular economy will reduce the need for replenishment with
are inherently more productive than linear additional nutrients. This is the principle of
business models. Technologies and regulatory regeneration at work.
solutions already exist to support businesses
and investors in seizing such opportunities • Job creation potential. A circular economy
and changing consumption habits towards might bring greater local employment,
longer use and reuse. As Steve Sharp, especially in entry-level and semi-skilled jobs,
executive director of marketing at Marks & which would address a serious issue facing
Spencer, says: ‘Not many years ago people the economies of developed countries.
would have been incredulous at the idea of This total prize is just the beginning of a
routinely recycling bottles and plastic, yet much bigger set of transformative value-
this is now commonplace behaviour. We want creation plays as the world scales up the
to try to achieve that same shift of behaviour new circular technologies and business
with our Shwopping campaign and make models. We are likely to see a selective
recycling clothes a habit’. M&S CEO Mark ‘grafting’ of new circular business models and
Bolland adds: ‘We’re leading a change in the technologies during this period of transition.
way we all shop for clothing, forever.2’ Initially, these grafts may appear to be
modest in their impact and play into niche
4. Accounting for the business and markets (e.g., growing greenhouse tomatoes,
economic benefits hiring out high-end fashion items). But over
the next 15 years these new business models
The full value of these circular opportunities will likely gain an increasing competitive
for fast-moving consumer goods could be advantage, because they inherently create
as much as USD 700 billion per annum in much more value from each unit of resource.
material savings or a recurring 1.1 per cent In addition, they are likely to meet other
of 2010 GDP, all net of materials used in the market requirements, associated with
reverse-cycle processes (see Figure 20 in more secure supply, more convenience for
Chapter 4). Those materials savings would consumers, and lower environmental costs.
represent about 20 per cent of the materials
input costs incurred by the consumer goods In a world of 9 or 10 billion consumers with
industry. In addition, we expect the following fierce competition for resources, market
benefits: forces are likely to favour those models that
best combine specialised knowledge and
• Innovation. The aspiration to replace one- cross-sector collaboration to create the most
way products with goods that are ‘circular by value per unit of resource over those models
design’ and create reverse logistics networks that simply rely on ever more resource
and other systems to support the circular extraction and throughput. Natural selection
economy is a powerful spur to new ideas. will likely favour the agile hybrids—able to
The benefits of a more innovative economy quickly combine circularity with scale—that
include higher rates of technological are best adapted to a planet transformed
development; improved materials, labour, by humanity.
and energy efficiency, and more profit
opportunities for companies. By 2030, the prize could be much more
than USD 700 billion—and we expect to see
• Land productivity and soil health. Land circular business models accounting for a
degradation costs an estimated USD 40 large part of the global bio-value chains.
billion annually worldwide, without taking In that not-so-distant world, investors,
2 http://platform-online.
net/2012/10/ms-unveil-
into account the hidden costs of increased managers, and regulators will be talking
first-shwopping-garment/ fertiliser use, loss of biodiversity, and loss of about how companies get going and start
10 | TOWARDS THE CIRCULAR ECONOMY
Executive summary
Continued
learning how to hybridise their business redefine the way value chains work in
models—for markets that will be worth well distribution, waste recovery, and consumer
over USD 25 trillion. choice without increasing material impact
5. The shift has begun—mainstreaming the • New business models that improve control
circular economy over scarce resources and ‘assetise’ them
for reuse in value-maximising transfers
Why now? Our economy currently seems as feedstock to subsequent industrial or
locked into a system in which everything agricultural processes
from production economics and contracts
to regulation and the way people behave • A new model of collaborative consumerism
favours the linear model of production —in which consumers embrace services that
and consumption. However, this lock-in is enable them to access products on demand
weakening under the pressure of several rather than owning them—and collaborative
powerful disruptive trends. First, resource consumption models that provide more
scarcity and tighter environmental standards interaction between consumers, retailers,
are here to stay. Their effect will be to reward and manufacturers (e.g., performance-for-
circular businesses that extract value from pay models, rent or leasing schemes, return
wasted resources over take-make-dispose and reuse)
businesses. Second, information technology
is now so advanced that it can trace materials • New packaging technologies and systems
anywhere in the supply chain, identify that extend food life and minimise packaging
products and material fractions, and track waste.
product status during use. Third, we are in
the midst of a pervasive shift in consumer Companies are successfully building more
behaviour: a new generation of consumers circular business models in and for the
seems prepared to prefer access over consumer goods industry, and we see new
ownership. roles and vantage points emerging:
Capturing the new opportunities will • Volume aggregators: Markets for residues
require leading corporations and municipal and by-products are currently severely under
authorities to develop a new set of developed, creating arbitrage opportunities
‘circular’ muscles and capabilities along for volume aggregators who stand at the
their traditional supply chains. These new forefront of organising these markets. Asos,
capabilities will be reinforced by a set of an aspiring online ‘fashion destination’ that
fundamental developments in resource offers more than 850 brands of new clothes,
markets, technology and information has extended its scope to the reverse
systems, and consumer preferences: cycle by creating a parallel platform where
consumers can resell end-of-life clothing, and
• Urbanisation that centralises flows of small firms can market ‘vintage’ garments
consumer goods and waste streams and accessories as well as new ones. More
specialised companies offer sales platforms
• A set of new technologies (e.g., in the business-to-business environment, too,
anaerobic digestion) that enables dramatic such as the Waste Producer Exchange (WPE)
improvements in the way value is extracted in the U.K., which supports users in selling
from today’s biological waste streams as well waste products and materials.
as opportunities to combine multiple waste
streams (CO2, heat, wastewater, nutrients) • Technology pioneers: New technologies,
into advanced agro-manufacturing systems (such as PHA bioplastics production from
industrial wastewater) offer technology
• New IT capabilities that support more leaders a vast array of opportunities. A recent
precise management and tracking and rush of private equity capital into recycling
tracing of biological flows in the system and circular technology may signal the first
(e.g., RFID chips that provide detailed influx of semi-permanent settlers on this
information about product spoilage rates) frontier. Veolia has pioneered the production
• Emergence of online retail channels that of bioplastics from sludge. Wastewater
TOWARDS THE CIRCULAR ECONOMY | 11
treatment systems today often use bacteria Chicago, a vertical aquaponic farm growing
that eat sludge and neutralise it into carbon. tilapia and vegetables that also serves as
Using proprietary technology, Veolia an incubator for craft food businesses
achieved a breakthrough in converting this and operates an anaerobic digester and a
‘wastewater carbon’ into biomass rich in PHA, combined heat and power plant. Discarded
which has mechanical properties equivalent materials from one business are used as a
to polypropylene and is thus valuable in resource for another in an explicitly
making consumer plastics and chemicals. circular system.
Veolia produced the first biopolymers
from municipal waste in 2011, and is now • Product-to-service converters: In the textile
refining the process to meet end-customer industry, players like Patagonia—which
specifications at full-scale wastewater pioneered the ‘Common Threads Initiative’
treatment sites in Belgium and Sweden. to reduce the environmental footprint of its
garments—seek longer and more intimate
• Micro-marketeers: In the food and beverage customer relationships beyond the point
industry, large retailers such as Woolworths in of sale. Value-added offerings like repair,
Australia, WholeFoods in the U.S., and Migros amendment, return and leasing offer much
in Switzerland, as well as global food giants greater customer interaction at multiple
such as Unilever, Nestlé, Danone, and Kraft touchpoints. Some players are beginning
Foods, are preparing for markets with more to redefine themselves as fashion or style
local sourcing, distributed manufacturing, partners with superior customer insights and
increased customer interaction, diversified value opportunities along the life cycle and
customer demand, multi-channel purchasing across different categories.
(including home-delivery), and ultimately
more intimate customer relationships. At We do not know how the shift will come
the same time, low-cost same-day delivery about. It would come slowly or in a sudden
services allow local brick-and-mortar sweep, as a reaction to external shocks. It
companies to compete with national brands may be the outcome of stirring public stimuli
online, further propelled by the emergence (‘man on the moon’) or of a killer application,
of online ‘hyper-local’ advertising platforms as a silent manufacturing revolution. It
that allow people to find such businesses could even emerge as grassroots consumer
in their neighbourhood. Serving these activism, or as voluntary, inclusive industry
micro-markets at scale and developing commitment. History has seen all of these
an integrated ‘systems’ offering that links patterns lead to breakthroughs: we do not
products, ordering, delivery, and aftersales know which of them will tip consumption into
service could be the name of the game, and a more regenerative mode. We do expect,
could even feature ‘assisted’ self-production however, that the shift will play out between
by the consumer. In such a strategy, the pioneering industry leaders, discriminating,
circular economy could become a major well-informed consumers, and forward-
source of differentiation—if not an obligation. looking public constituencies.
Micro-marketeers could proactively offer
B2B service contracts, develop blueprints for
‘zero-waste’ plants, or establish food waste
reuse centres.
Executive summary
Continued
With around USD 12 trillion in annual sales3, As a result, consumer demand from emerging
the fast-moving consumer goods industry economies has the potential to exponentially
is a force to reckon with in the global increase the use of materials, bring about
economy. While expenditure levels for dramatic rises in input costs, and result in
such goods are vastly different across the hard-to- manage commodity volatility. In the
globe, they represent a significant share of face of unprecedented resource demands,
household budgets in both developed and radical resource efficiency will no longer suffice.
emerging markets4. The influence of the Efficiency can lower the amount of energy and
sector stretches beyond its financial impact: materials used per dollar of GDP, but fails to
it takes in approximately USD 3 trillion decouple the consumption and degradation of
worth of materials5 and is responsible for resources from economic growth. This calls for
the vast majority (75%) of municipal solid system level redesign. The circular economy
waste6. It also drives a large share of losses provides a model which, if implemented
in virgin forests due to the conversion of correctly, would go much further than
land for agricultural use, one of the key minimising waste. Effective cycling of the many
supply sectors for the packaged goods materials our society discards would enable us
industry7. If we are to move to a circular to rebuild our natural assets—soil and soil quality
economy, it is therefore critical for us to in particular—so crucial to continued prosperity.
address consumer products head on.
RICE FLOUR
SUPER
$ $$$
The consumer goods industry— time, or just a few times. This is obviously
locked in a linear paradigm? very different from the relatively expensive
durable consumer and business-to-business
A key insight in circular economy thinking is products, where use is measured in multiple
the division between biological and technical years, and where the case for reconditioning,
materials. Biological ‘nutrients’ (cf. Braungart repair or recovery of the value inherent in the
& McDonough) are designed to re-enter products is more obvious.
the biosphere safely for decomposition to
become valuable feedstock for a new cycle— • Packaging component. Consumer goods
i.e., ‘waste equals food’. These products generally contain two components: the
are designed by intention to literally be product itself, and its packaging (part of
consumed or metabolised by the economy which is usually discarded immediately the
and regenerate new resource value. Technical product is used). The impact of producing
‘nutrients’ are materials that either do not and discarding materials is significant for
degrade easily or cause contamination both product and packaging, so we need to
within the biological nutrient flow. These explore solutions for each.
durable materials and products are designed
by intention to retain embedded quality • Multi-staged value chain. Consumer
and energy. products are created, sourced and used
via a global value chain, starting with raw
At first glance, it might appear harder to agricultural and chemical inputs. These
adopt circular principles in the consumer go through a manufacturing process, a
industry than in the durable goods sector, complex distribution and retail chain, use
given some of its intrinsic characteristics. by consumers, and waste collection, before
Consumption in reality mostly means typically ending their lives in landfill, sewage
‘destruction’ and the loss of potentially or incineration. Importantly, manufacturers,
valuable products, components, and retailers and waste handlers are usually
materials—and their associated embedded separate parties (unlike in some durable
energy and restorative value. categories such as automotive), and
frequently have misaligned or competing
In addition to this, adoption of circular interests. This means that to create
approaches in the consumer goods industry successful new circular models, we need
is complicated by four factors: to assess their impact on profitability for
manufacturing, retail/distribution, and waste
• Large volumes in broad distribution. handling.
Fast-moving consumer goods (or ‘consumer
packaged goods’) are characterised by high Waste as part of the linear system results
throughput volumes, are bought frequently, in economic losses on all fronts
represent a large physical volume (in
developed countries, for example, consumers Declining real resource prices (especially
buy almost a tonne worth of consumer fossil fuels) have been the engine of
goods per year, including packaging),9 and economic growth in advanced economies
come at relatively low prices (i.e., each throughout most of the last century10. The
purchase is individually quite cheap). Large low level of resource prices relative to labour
quantities of packaged goods typically end costs has also created the current wasteful
9 EPA, Euromonitor 2012, US
Economic Research Service, up widely dispersed, rendering them more system of resource use. Reusing biological
IRI, Veronis Suhler Stevenson,
Winery and Distillery Waste difficult to recover economically, unlike and technical materials has not been a
Management, Bloomberg, SRI, mobile phones or cars. major economic priority given the ease of
RISI, Let’s Recycle, Knowaste, Eye
See Mission, ‘Waste: Uncovering obtaining new input materials and cheaply
the Global Food Scandal’, Press
• Product lifespan. Most fast-moving disposing of refuse. As Jamie Lawrence,
search
consumer goods have a short to very short Senior Sustainability Advisor Forest and
10 The low and steadily falling
level of resource prices, in real lifespan. Some product categories are Timber at Kingfisher, points out, access to
terms, over the 20th century— literally consumed, such as food, beverages, virgin wood and fibre has been so easy in
and its positive implications for
economic growth—are discussed cosmetics, and paper tissues, meaning they the past that reusing fibre was never on
in depth in the McKinsey Global
are no longer fit for use after first use. Other the industry’s agenda. In fact, the biggest
Institute’s November 2011 report
Resource Revolution, cited above categories are used for only a relatively short economic efficiency gains have resulted from
TOWARDS THE CIRCULAR ECONOMY | 17
FIGURE 2 Path to a circular economy—design and recover consumer goods for reuse or decomposition
% of FMCG products (by value)
Near-term4
Future5
1 Decomposition to allow materials to be recycled or biodegraded, depending on product/packaging material characteristics and end of life collection
2 Cannot be reused, recycled or biodegraded due to poor design and/or lack of end-of-life collection options
3 Reuse can include direct reuse for the same or different value streams or industries
3 Economic feasibility demonstrated in this report
4 Economic feasibility not yet proven
SOURCE: Euromonitor 2011, Expert interviews, Ellen MacArthur Foundation circular economy team
using more resources, especially energy, to • Value lost in agriculture. A large share of
reduce labour costs. Such a system had few inputs for the consumer goods production
difficulties delivering lower costs as long as system originates in the agricultural supply
the fiscal regimes and accounting rules that chain. Losses of such material occur at
govern it allowed many indirect costs to several different steps in the production of
remain unaccounted for—the externalities. crops and in animal husbandry : losses due
A systems analysis, however, reveals losses to mechanical damage or spillage during
throughout the value chain. harvest, animal death during breeding,
or discards during fishing (globally this
The picture is similar in the consumer goods amounts to 8% of catches).11 Crops sorted out
sector. Globally, only 20% of FMCG products post-harvest due to product specifications
are currently recovered at the end of their are another source of loss (especially true
useful life, largely through ‘decomposition’ in of fruits and vegetables in industrialised
its broadest sense—the cascading of waste countries), as well as spillage or degradation
and by-products through adjacent supply during transport and storage, exacerbated by
chains, recycling of used products and ever-longer global supply chains.
packaging, and the return of nutrients to the
soil (Figure 2). Very little reuse occurs today, • Value lost in processing. In the production
partly, of course, because of the one-off of consumer goods, significant volumes
nature of consumption, but also because of of materials are commonly lost during
the preponderance of single-use packaging. processing. The Food and Agriculture
The materials left unrecovered—landfilled, Organisation estimates that 8-12% of total
incinerated, or lost in waste water—can be food inputs are lost in the processing stage.12
11 FAO: Global Food Losses observed all along the value chain, from Such losses can either be due to the specific
and Food Waste—Extent,
causes and prevention, 2011 production to post-consumption. process (e.g., beer brewing inherently
12 FAO: Global Food Losses
and Food Waste—Extent,
causes and prevention, 2011
18 | TOWARDS THE CIRCULAR ECONOMY
generates waste volumes, with 15-20% of theoretical end of life at all because its use
input materials—including water—never does not match the intent of its design.
making it into the final product13), accidental
(process glitches and interruptions, for Throughout the value chain, it is worth
instance), or due to narrowly defined distinguishing between value losses that are
product specifications—where both incoming unavoidable (bones left on the plate after
materials and processed output may be consumption of meat or textile trimmings
unduly discarded. after cutting patterns have been optimised
for yield), losses that are avoidable (dairy
• Value lost in distribution. In low-income losses due to inadequate cold chains or
countries, fruit, vegetables, fish/seafood purchased but unconsumed foodstuffs), and
and dairy products suffer particularly heavy those that are likely avoidable. Examples of
losses during post-harvest handing and the latter include apparel discarded due to
distribution—often in the region of 10 - 20% natural variations in the fibre or vegetable
of the input material.14 Causes include food trimmings rejected during processing (or
sales not meeting the sell-by date, being even in the kitchen) that are the result of
stored under the wrong conditions, or failing overly strict specifications. While food loss
to meet tight retailer standards. statistics typically only take into account the
share of crops and products intended for
• Value lost in use. In medium- and high- human consumption, it is important that all
income countries, a large proportion of losses and waste are investigated for further
products are not put to the use for which useful applications.
they were purchased. This applies especially
to food (the average U.S. family throws Everyone loses out in the linear approach
away half the food they buy, worth USD
164 billion)15 as well as to other consumer The material losses that have been described
product categories. Cosmetics for example along the value chain impact the economy
are frequently left unfinished. Many clothes in very direct ways, as they are associated
are only worn a few times before being with real costs for both producers and
disposed of or forgotten. U.K. households for consumers. These financial effects will be
instance have around USD 50 billion worth of sustained and possibly exacerbated farther
clothing in their wardrobes that has not been out as our natural capital becomes eroded
worn for a year.16 and declines in performance over time.
Moreover, the entire economic system is
• Value lost at end of life. A large proportion starting to experience a whole new level of
of consumer goods are wasted at the end risk exposure. Nowhere does this play out
of their first use. Packaging, food waste more explicitly than in our agricultural supply
and discarded textiles often end up in chain, as the next section will explain.
landfill where they have zero value; in fact,
they attract additional costs for collection Cost burdens
and disposal. Current recycling rates are Recent spikes in input costs are an indication
significant for only a handful of waste that the industry may be reaching a limit
types—mostly those that occur in large, where demand starts to accelerate ahead of
fairly homogeneous volumes. Packaging is an ever more constrained supply. Most inputs
perhaps the most widely recognised source to consumer goods, both agricultural and
13 Expert interviews, Ellen of waste. technical in nature, have seen high prices and
MacArthur circular economy
team. Every litre of beer unprecedented levels of volatility in recent
produced generates between • Value lost in design. Durability of design years, creating pressure on companies’
150 and 200 grams of brew-
ers grains and durability required in use are often not profitability. Businesses are feeling squeezed
14 FAO: Global Food Losses
well matched. Packaging, if used only once, between rising and less predictable prices
and Food Waste—Extent, should be designed for ‘decomposition’ and in resource markets on the one hand
causes and prevention, 2011
subsequent regeneration, whether through and stagnating demand in many mature
15 FAO: Global Food Losses the biological sphere, or—if it can be isolated consumer markets on the other.
and Food Waste—Extent,
causes and prevention, 2011 and processed easily and at extremely high
16 WRAP, Valuing our
levels of recovery— the technical sphere. Rising commodity prices. Commodity
clothes, 2012 Clothing today frequently does not reach its prices fell by roughly half in real terms over
TOWARDS THE CIRCULAR ECONOMY | 19
the course of the 20th century. However, for instance, PepsiCo announced that they
the start of the new millennium marked a expected input costs for the fiscal year to rise
turning point when the real prices of natural by USD 1.4 – 1.6 billion, or between 8 and 9.5%
resources began to surge upwards. In a trend of total input costs, due to commodity price
separate from the financial and economic increases.20 PepsiCo also said they did not
crises, commodity prices in aggregate plan to fully offset these losses through price-
increased by nearly 150% from 2002 to hikes—highlighting another, parallel trend
2010, erasing the last century’s worth of in which firms face a profit squeeze due to
real price declines. Price increases have hit softer demand.21 Similarly, H&M, the clothing
not only metals, such as gold and copper, company, suffered from a significant drop in
but also direct inputs for consumer goods. profits in 2011 due to rising cotton prices that
In 2011, for example, cotton prices in the they did not pass on to customers through
US surged almost 40% in two months and higher prices or lower quality.22
remain at levels double the pre-2007 price of
cotton.17 Similarly, polyester prices increased Loss of energy. Another financial and
from USD 1.3/kg in 2010 to USD 2.1/kg in economic impact of note in the linear
2011. Meanwhile, average clothing prices economy is the associated energy lost
decreased from an average of USD 15.2 per whenever materials are discarded somewhere
garment in 2006 to USD 14.9 per garment in in the value chain. The consumption of energy
2011.18 The combination of higher input costs for biological inputs is significant. In the U.S.,
and lower retail prices is putting pressure on for example, food production and preparation
producers’ margins and forcing them to seek represents 17% of all energy demand.23 The
ways to control rising input costs. incineration of discarded process waste or
end-of-life products recoups only a small
Increasing price volatility. At the same share of this energy.
time, the last decade has seen higher
price volatility for metals, food and non- Erosion of natural capital
food agricultural output than in any single
17 Indexmundi, average decade in the 20th century.19 High prices are Natural capital and ecosystem services
spot price for a pound of
upland cotton
one issue; their volatility is another. Higher
volatility of resource prices can dampen Natural capital is the potential value
18 Price for 1.4/1.5 denier
staple fibre economic growth by increasing uncertainty, held in natural resources, which include
and this may discourage businesses from mineral assets but also extend to
19 Annual price volatility
calculated as the standard investing. Volatility-induced uncertainty biodiversity and ecosystems on which
deviation of McKinsey
also increases the costs of hedging against human activity and welfare depend.
commodity subindices
divided by the average of resource-related risks; in his book ‘Antifragile’ As defined by Robert Costanza at the
the subindex over the time
frame; Source: McKinsey Nassim Taleb states that the value at risk University of Maryland in a seminal article
Global Institute: Resource of black swan events like Hurricane Sandy published in Nature: ‘Ecosystem services
revolution: Meeting the
world’s energy, materials, cannot possibly be estimated—effectively consist of flows of materials, energy, and
food, and water needs,
rendering such future events uninsurable. information from natural capital stocks
November 2011
Both prices and volatility are likely to remain which combine with manufactured
20 ‘Pepsi faces steep input
high for a number of reasons. One is that and human capital services to produce
price inflation’, Financial
Times, 10 February 2011 populations are growing and urbanising, human welfare.’24 These services include
21 ‘Tata Steel Q2 net profit boosting demand. Resource extraction is also for example carbon sequestration, crop
plunges 89%’, Economic
moving to harder-to-reach, less fertile and/or pollination, or nutrient dispersal
Times, 11 November 2011
more politically unstable locations. Another and cycling.
22 ‘H&M hit by soaring
cotton prices’, Financial factor is that the depletion of natural capital
Times, March 2011 and the erosion of ecosystems services are
23 McKinsey Global continuing, with associated environmental
Institute: Resource
revolution: Meeting the
costs on the rise but still largely treated as
world’s energy, materials, externalities.
food, and water needs,
November 2011
Curbed economic growth. Together, high
24 Robert Costanza et al,
The value of the world’s and volatile commodity prices dampen the
ecosystem services and
natural capital, Nature Vol.
growth of global businesses—and ultimately
387, May 15, 1997 the economy at large. In February 2011,
20 | TOWARDS THE CIRCULAR ECONOMY
Disposal’s heavy toll. Regardless of the In other words, the global economy is
inherent lost value of discarded items, now reducing the Earth’s natural capital,
where these items end up is problematic and is unable to generate the necessary
in and of itself. From Greece to Indonesia surplus to rebuild the deficit.28,29 Take land
and Mali to Kazakhstan, large shares of degradation.‘Today’s agriculture does not
municipal solid waste end up in dumps or allow the soil to enrich itself, but depends
sub-standard landfills. If not conducted on chemical fertilisers that don’t replace the
25 CO2e stands for carbon properly, dumping or landfilling creates both wide variety of nutrients plants and humans
dioxide equivalent. This is a
measure used to compare short- and long-term risks for human health need’ says Dr Tim Lobstein, the U.K.’s Food
the emissions from various
greenhouse gases based
and the environment in the form of harmful Commission director.30 Land degradation
upon their global warming leachate, dust, odour, local traffic burden, costs an estimated USD 40 billion31 annually
potential. For example, the
global warming potential for
and powerful greenhouse gas emissions. worldwide, without taking into account
methane over 100 years is 21. Any biodegradable material, from kitchen the costs of increased fertiliser use, loss of
This means that emissions
of one million metric tons waste to paper and cardboard to wood and biodiversity, and loss of unique landscapes.
of methane is equivalent to
emissions of 21 million metric
natural textiles, generates landfill gas when it
tons of carbon dioxide decays under anaerobic conditions. Landfill Global scope of risk exposure
(http://stats.oecd.org/
glossary/detail.asp?ID=285).
gas consists of around 50% methane, which Concern over the economic costs of the
is a greenhouse gas over twenty times more linear economy has recently been joined by
26 U.K. Department of
Energy and Climate Change powerful than CO2. For each U.K. household, worries over the uncertain effects of climate
statistics, 2012
landfilled clothing results in 1.5 million tonnes change and geopolitical interconnectedness.
27 One compelling and of CO2e25 emissions per year—0.3% of total
often overlooked example
of such ecosystem
emissions.26 Even sanitary landfills can be Recent research has highlighted nine
services is healthcare: the problematic as they require substantial space interlinked ‘planetary boundaries’—
pharmaceutical industry
makes heavy use of close to centres of consumption where land thresholds that, if crossed, represent a
biodiversity. Of all the anti-
cancer drugs available today,
comes at a premium, and they are usually significant risk to the resilience of the world’s
42% are natural and 34% difficult to site due to community concerns, social and economic structures, especially
are semi-natural. Source:
Newman DJ, Cragg GM.
so all but a handful of areas are running out for the most vulnerable communities, and
Natural products as sources of space. Beijing will have no more landfill could potentially destabilise the wider
of new drugs over the last 25
years. J Nat Prod. 2007 space in 4 years’ time, Johannesburg in ecosystem.32 Examples of these thresholds
28 Ruth DeFries et al,
around 12 years, and the entire U.K. will run are greenhouse gas emissions that induce
Millennium Ecosystem out of landfill capacity by 2018 if it continues climate change, rates of biodiversity loss,
Assessment, Current State &
Trends Assessment, 2005
its current disposal practices. and interference with global phosphorus
and nitrogen cycles. A recent study by the
29 Will Steffen et al, The
Anthropocene: From Moreover, much consumer goods waste Economics of Climate Adaptation Working
Global Change to Planetary
Stewardship, 2011
never enters a waste collection system, Group that focused on the economic impact
instead ending up as litter, giving rise to a of current climate patterns and potential
30 www.guardian.
co.uk/uk/2006/feb/02/
familiar list of problems. Unmanaged waste climate change scenarios in 2030 found that
foodanddrink can lead to the injury and death of local some regions were at risk of losing 1 to 12%
31 Klaus Kellner et al, wildlife and end up offshore where it can of their GDP annually as a result of existing
Terminal Evaluation of
the UNEP/FAO/GEF
accumulate on beaches, in open waters (cf. climate patterns.
Project ‘Land Degradation the Pacific Garbage Patch) in fish, birds, and
Assessment in Drylands
(LADA)’, May 2011
other animals—and ultimately in our own Geopolitical risk. The destabilising effects
food chain. Because it is unsightly, litter can of such losses also translate into greater
32 Johan Rockström et
al, Planetary Boundaries: also impact the attractiveness of a location political risks. Recent history shows
Exploring the Safe Operating
Space for Humanity, Ecology
as a tourist destination or for business. the impact political events can have on
and Society 2009 commodity supply. Rising grain prices are
33 McKinsey Global Institute:
The erosion of ‘ecosystem services’. The loss considered a factor that contributed to
Resource revolution: Meeting of those benefits derived from ecosystems the ‘Arab Spring’ unrest (grain prices rose
the world’s energy, materials,
food, and water needs, that support and enhance human wellbeing by 37% in Egypt in 2007-2008).33,34 Some
November 2011
also deserves our full attention.27 The commodities are particularly vulnerable:
34 The Observer, 16 July 2011 Millennium Ecosystem Assessment examined nearly half the new projects to develop
35 Political risk as per the
24 ecosystems services, from direct services copper reserves are in countries with high
Economist Intelligence Unit’s such as food provision to more indirect political risk.35 Approximately 80% of all
Political Instability Index.
Countries scoring more services such as ecological control of pests available arable land on earth lies in areas
than 5.0 on ‘underlying
vulnerability’ are classified as
and diseases, and found that 15 of the 24 afflicted by political or infrastructural issues.
‘low political stability’ are being degraded or used unsustainably. Some 37% of the world’s proven oil reserves
TOWARDS THE CIRCULAR ECONOMY | 21
and 19% of proven gas reserves are in industrial areas, with knock-on effects in the
countries with a high level of political risk. global automotive and computer industries:
Political motives also drive cartels, subsidies, a quarter of the world’s computer hard disks
and trade barriers, all of which can trigger or are made in Thailand.38
worsen resource scarcity and push up prices
and volatility levels. The end of agriculture
as we know it
Greater interconnectedness of resources is
a related issue. Commodity prices now show The agricultural supply chain is the most
significant correlation with oil prices—and important supply chain for the consumer
this holds true not only for metals and mining goods industry. Agricultural demand,
products, but for food categories such as which has seen strong growth in the past,
maize, wheat, and rice as well as beef. These is expected to keep expanding as both
links increase the risk that shortages and populations and incomes rise. By 2030,
price changes in one resource can rapidly demand for the top four agricultural
spread to others. products—rice, wheat, soy and maize—is
expected to rise 40 - 50% above 2010
The swift integration of financial markets levels.39,40 It is therefore worth contemplating
and the increasing ease of transporting how the material losses, financial effects and
resources globally also mean that regional especially systems implications play out in
price shocks can quickly become global. As this sector.
the World Bank’s ‘Turn Down the Heat’ report
notes, specialisation in production systems Historically, the application of technology
is continuing its unstoppable evolution and and products, particularly the combination of
has gone international: our dependence on irrigation, mineral fertilisers, and pesticides
infrastructure to deliver produced goods is used in the ‘Green Revolution’, have
therefore growing—and with it, our economic generated impressive results, allowing supply
exposure to events across the world. to keep pace with the increase in demand
Natural catastrophes with ripple effects are (Figure 3). There are, however, signs that the
numerous in recent history: Hurricane Sandy agricultural system as we know it is reaching
(with costs estimated at USD 100 billion) its limits. The growth of grain yields has
on the U.S. East Coast just last October, slowed to below population growth rates in
and Typhoon Bopha in the Philippines in most regions—a sign that natural limits have
December 2012 (which according to early been reached. Overall, worldwide cereal
estimates caused a GDP loss of 0.3%).36 productivity growth has slowed over time
from 2.7% in the 1970s to 1.3% in the 2000s.41
This trend is likely to continue and become As U.S. investor Jeremy Grantham remarked
more acute as emerging markets integrate in his July 2012 newsletter:42 ‘Quite probably,
more thoroughly into global value chains the most efficient grain producers are
and financial systems. Many up-and-coming approaching a ‘glass ceiling’ where further
economic centres in Asia, such as Kolkata increases in productivity per acre approach
36 The Economist
(Calcutta), Ho Chi Minh City, or Ningbo, zero at the grain species’ limit (just as race
Intelligence Unit are situated on the coast and are not only horses do not run materially faster now than
37 Too big to flood, The accumulating assets at breakneck pace but in the 1920s).’ Several factors are expected
Guardian, 17 December 2012 also house growing numbers of immigrants to further exacerbate the stagnation of yield
38 Too big to flood, The in low-lying, flood-prone areas.37 Because improvements, including a decrease in public
Guardian, 17 December 2012
of their role in regional and global markets, spending on agricultural R&D, increased
39 USDA, FAO, expert severe damage to any of these cities by a soil degradation, greater water scarcity, and
interviews
This includes demand from storm affects nearby and far-away regions climate change.
energy and feed applications alike. The cost associated with such events is
40 Food and Agriculture no longer simply that of local repairs and has
Organization of the United
Nations Statistical Division
considerable social consequences. Large-
(FAOSTAT) scale business interruption represents a very
41 GMO Quarterly Newsletter, real setback in regional and potentially global
‘Welcome to Dystopia’ July economic growth. 2011’s record flooding in
2012, available at www.gmo.
com and around Bangkok disabled several of its
22 | TOWARDS THE CIRCULAR ECONOMY
FIGURE 3 Application of technology and products have generated impressive results over the last 50 years
0 0
1961 1984 2008 1961 1971 1981 1991 2001 2009
1 Includes cereals, citrus fruit, course grain, primary fibre crops, fruit, primary oil crops, pulses, roots and tubers, tree nuts, vegetables
2 Weighted average of the above agricultural products
Since the invention of the Haber-Bosch to fend off pests, and more prone to erosion.
process in 1909, which allowed production Loss of soil carbon is problematic given the
of nitrogen fertiliser on an industrial scale, role of this carbon in several developing and
cheap fossil fuels have enabled mineral maintaining factors that are critical to plant
fertilisers to unlock agricultural yield growth, such as soil texture, water retention
improvement in many regions. As farming and nutrient delivery to the roots of plants.
expands to feed the world’s increasing In Europe, around 45% of soils have low or
population and its changing diets, rising very low organic matter content, 45% have
demand is likely to cause fertiliser prices medium content.45
to rise and become more volatile. Demand
43 McKinsey Phosphorus for phosphorus, for example, is projected Another very important form of degradation
Demand Model, Cordell, to grow by 3% a year through to 2020.43 is nutrient depletion. There are indications
D. phosphorus research
studies, 2009; Ellen Fertiliser prices have already entered a new that intensive agriculture—scientists and
MacArthur circular
economy team
phase of volatility since around 2005, with agricultural engineers have been very
price fly-ups of a magnitude not seen since successful at multiplying the amount of
44 International Soil
Reference and Information the 1970s, when the Green Revolution and biomass we can grow on a single hectare—
Centre, Oregon State use of fertiliser dramatically increased world takes out more nutrients from the soil than
University, Resource
Conversation and Food food production. are returned, leading to both macro- and
Security
micronutrient deficiencies.
45 Low or very low Soil degradation is estimated to extend to
organic matter content
means 0 - 2% organic some 25 - 35% of the 1.5 billion hectares of Macronutrients are those key nutrients
carbon, medium content land under cultivation,44 meaning that it is responsible for healthy plant growth that
means 2 - 6% organic
carbon less fertile, less able to retain water, less able are required in fairly large amounts. It takes
TOWARDS THE CIRCULAR ECONOMY | 23
centuries to build up the nitrogen stocks oxygen levels in inland waterways and
46 Allen, R.C. 2008. The
in the soil through natural processes.46 coastal areas, creating ‘dead zones’ where
nitrogen hypothesis and The global consumption of NPK fertilisers fish cannot survive. The number of these has
the English agricultural
revolution: A biological (Nitrogen (N), Phosphorus (P), Potassium approximately doubled each decade since
analysis. The Journal of
Economic History, 68:
(K)) increased by 435% from 1961 to 2009 the 1960s, now covering part of the ocean
182-210 (from 31 million tons to 167 million tons)47, as large as the U.K.53
47 Food and Agriculture
but many soils now suffer from a negative
Organization of the United nutrient balance, where nutrient removal is Furthermore, a recent study has linked
Nations Statistical Division
(FAOSTAT) greater than the input.48 Negative nutrient industrial farming in the U.S. Midwest to
48 Globally, soil nutrient
balance is not just an issue in developing increased insect pest occurrence and
deficits were estimated countries like India and Africa: much of the insecticide usage.54 Conversion to intensive
at an average rate (kg
ha-1 yr-1) of 18.7 N, 5.1 P,
U.S. Corn Belt has a negative P balance, and monocultures increases pest populations
and 38.8 K, accounting the entire western half of the country has a as natural habitats for pest predators are
for 59%, 85%, and 90%
of harvested area in the highly negative K balance.49 removed and dense cover crops (as used
year 2000, respectively.
The annual total nutrient
in crop rotation) are no longer available to
deficit was 5.5 million Intensive agricultural practices have also suppress weeds. This intensifies the use of
tonnes N, 2.3 million tonnes
P, and million 12.2 tonnes
resulted in micronutrient depletion in several pesticides and herbicides, induces the loss
K, coupled with a total parts of the world. Micronutrients are not of biodiversity, and can give rise to adverse
potential global production
loss of 1,136 tonnes yr-1. less critical to plant health but are required human health effects.
Source: Z. X. Tan, R. Lal &
K. D. Weibe (2005): Global
in relatively small amounts. Depletion is
Soil Nutrient Depletion and not just the result of a negative removal- The circular vision
Yield Reduction, Journal
of Sustainable Agriculture,
vs.-input balance but also of several other
26:1, 123-146 factors such as high N, P and K application, Upcoming growth in demand could strain
49 IPNI. 2012. A Nutrient low manure applications and excessive the linear economy to breaking point. Taken
Use Information System
(NuGIS) for the U.S.
irrigation. Zinc deficiency appears to be the together, the dynamics described in this
Norcross, GA. January 12, most widespread and frequent micronutrient chapter present a major challenge for the
2012. Available online www.
ipni.net/nugis
deficiency problem in crop and pasture current ‘take-make-dispose’ system. While
plants worldwide, resulting in severe losses this system will respond to price signals,
50 B. J. Alloway: Zinc in
Soils and Crop Nutrition, in yield and nutritional quality, especially in these signals are incomplete and distorted.
published by IZA and IFA
Brussels, Belgium and Paris,
cereal production. It is estimated that nearly USD 1.1 trillion is spent annually on resource
France, 2008 half the soils on which cereals are grown subsidies (agriculture, fishing, energy and
51 S. Yadav et al: Soil-plant-
have levels of available zinc so low as to water), for example.55 We therefore believe
animal relationship of zinc cause zinc deficiency.50 A typical example of that the market will not overcome the lock-
in milk buffaloes of Jind
district in Haryana, 2000, nutrient-deficient food is a study in Haryana, in effect of existing production economics,
Indian Journal of Animal
Sciences 70: 965-967
India, where low levels of zinc in buffalo milk regulations and mindsets in a business-as-
were directly linked to low zinc levels in local usual scenario, and will not address the large
52 Examples include 79%
less iron in cucumbers, 63%
soils, and in fodder produced on these soils.51 and continued imbalances described here
less vitamin B2 in lettuce, quickly and extensively enough to be able
and 55% less calcium in
tomatoes. Source: DR Davis According to a U.S. Department of to keep meeting future demand. If this is the
et al, Changes in USDA food
composition data for 43
Agriculture study in 2004 that followed 14 case, the resulting upward price shifts could,
garden crops, 1950 to 1999, key nutrients in a range of vegetable crops, if not stall, then at least severely hamper
Journal of the American
College of Nutrition,
the nutrient content of 12 had declined from further growth in the decades to come.
December 2004; USDA 1950 to 1999.52 While not necessarily an
53 Diaz & Rosenberg, 2008; immediate result of nutrient imbalances in In this report, we investigate how ‘circular’
http://sailorsforthesea.
org/Sailing-and-The-
the soil, this is linked to the same industrial business models could provide new
Environment/Ocean-Watch/ approach to agriculture that leads to soil opportunities for resilient growth despite a
Ocean-Watch-Essays/
Ocean-Dead-Zones.aspx
nutrient deficits, as these deficiencies are challenging global outlook. With a focus on
usually the result of changes in cultivated optimising production/consumption systems
54 Timothy Meehan et al,
Agricultural landscape varieties, where there may be trade-offs comprehensively rather than maximising
simplification and
insecticide use in the
between higher yield, size and appearance the performance of individual elements,
Midwestern United States, at the expense of lower nutrient content. the term ‘circular economy’ denotes an
PNAS June 2011
industrial economy that is restorative by
55 McKinsey Global Mineral fertilisers also generate negative intention and design. In addition to meeting
Institute: Resource
revolution: Meeting the externalities beyond the agricultural current demand/consumption needs, a
world’s energy, materials,
food, and water needs,
production system, as agricultural fertiliser circular economy also actively invests in
November 2011 run-offs are the main contributor to reduced improving resource systems and increasing
24 | TOWARDS THE CIRCULAR ECONOMY
53 McKinsey Global
Institute: Resource
revolution: Meeting the
world’s energy, materials,
food, and water needs,
November 2011
2
TOWARDS THE CIRCULAR ECONOMY | 04
1
Some 37% of the world’s proven oil reserves
and 19% of proven gas reserves are in
countries with a high level of political risk.
Political motives also drive cartels, subsidies,
and trade barriers, all of which can trigger or
worsen resource scarcity and push up prices
and volatility levels.
Greater interconnectedness of resources is a
related issue. Commodity prices now show
significant correlation with oil prices—and
this holds true not only for metals and mining
products, but for food categories such as
maize, wheat, and rice as well as beef. These
links increase the risk that shortages and
price changes in one resource can rapidly
spread to others.
The swift integration of financial markets
and the increasing ease of transporting
resources globally also mean that regional
price shocks can quickly become global. As
the World Bank’s ‘Turn Down the Heat’ report
notes, specialisation in production systems
is continuing its unstoppable evolution and
has gone international: our dependence on
infrastructure to deliver produced goods is
therefore growing—and with it, our economic
exposure to events across the world.
Natural catastrophes with ripple effects are
numerous in recent history: Hurricane Sandy
(with costs estimated at USD 100 billion)
on the U.S. East Coast just last October,
and Typhoon Bopha in the Philippines in
December 2012 (which according to early
estimates caused a GDP loss of 0.3%). This
trend is likely to continue and become more
acute as emerging markets integrate more
thoroughly into global value chains and
financial systems. Many up-and-coming
economic centres in Asia, such as Kolkata
26 | TOWARDS THE CIRCULAR ECONOMY
The linear ‘take-make-dispose’ economic the same use afterwards. In a linear system,
model relies on large quantities of easily this irreversibility of consumption is also the
accessible resources and energy. Much of fate of the many technical materials—tied
our existing efforts to decouple the global up in one-way packaging, fast fashion, or
economy from resource constraints focus on semi-durables. A circular economy, however,
driving ‘linear’ efficiencies—i.e., a reduction advocates the increasing use of a ‘functional
of resources and fossil energy consumed per service’ model for technical materials, in
unit of manufacturing output. Proponents of which manufacturers or retailers retain
the circular economy argue that focussing ownership of their products (or have an
on efficiency alone will not alter the finite effective take-back arrangement) and, where
nature of resource stocks, and—at best— possible, act as service providers, selling the
simply delays the inevitable. A change of use or performance of products, not their
the entire operating system is necessary. consumption. This shift has direct implications
for the development of business models that
The concept of the circular create value in novel ways. Innovator and
economy industrial analyst Walter Stahel explains: ‘The
linear model turned services into products
The circular economy refers to an industrial that can be sold, but this throughput
economy that is restorative by intention. It approach is a wasteful one. [...] In the past,
aims to enable effective flows of materials, reuse and service-life extension were often
energy, labour and information so that natural strategies in situations of scarcity or poverty
and social capital can be rebuilt. It seeks to and led to products of inferior quality. Today,
reduce energy use per unit of output and they are signs of good resource husbandry
accelerate the shift to renewable energy by and smart management’.57
design, treating everything in the economy
as a valuable resource. The idea goes beyond Based on natural principles
the requirements of the production and
consumption of goods and services. The The circular economy takes its insights
concept of the circular economy is grounded from living systems as these have proved
in the study of real-world, non-linear, adaptable and resilient, and model the ‘waste
feedback-rich systems, particularly living is food’ relationship very well. They also bring
systems. A major outcome of taking insights insights around the cascading of materials as
from living systems and applying them to a way of recognising and capturing value as
the economy is the notion of optimising entropy (disorder) increases.
systems rather than components. Context
is everything, so the rebuilding of capital Design out waste. Waste does not exist when
stocks to provide productive and long-lasting the biological and technical components of
flows is an integral part of this ‘design to fit’ a product are designed by intention to fit
approach. The circular economy requires within a biological or technical materials cycle
careful management of material flows, which designed for remarketing, remanufacture,
are of two types. These are characterised disassembly or repurposing. The biological
by McDonough and Braungart in Cradle to materials are non-toxic and can easily
Cradle: Remaking the Way We Make Things be returned to the soil by composting or
as biological nutrients—materials designed anaerobic digestion, and may also yield
to re-enter the biosphere safely and rebuild higher-value substances before decomposing.
natural capital, and technical nutrients, Technical materials—polymers, alloys, and
designed to circulate at high quality without other man-made materials—are designed
56 William McDonough and
entering the biosphere.56 to be recovered, refreshed and upgraded,
Michael Braungart, Cradle to
Cradle: Remaking the Way We minimising the energy input required and
Make Things, New York: North
Point Press, 2002.
As a result, the circular economy draws a maximising the retention of value (in terms
sharp distinction between the consumption of both economics and resources). This is
57 Unless explicitly stated
otherwise, all quotations in this and use of materials. Consumption is the a vital difference versus recycling within a
document are from interviews
inevitable fate of materials like food and linear economy, which takes products never
conducted in the period from
October 2012 through January drink that are irreversibly altered during designed for regeneration by intention and
2013 (a list of experts consulted
for the analysis and reporting is
their useful life, and can no longer be put to often results in a rapid degradation of value.
given in the appendix).
TOWARDS THE CIRCULAR ECONOMY | 27
58 http://theblueeconomy.org/
blue/Case_3_files/Case%203%20
Coffee.pdf
TOWARDS THE CIRCULAR ECONOMY | 29
Mining/materials manufacturing
Farming/collection1
Materials/parts manufacturer
Technical materials
Biological materials
Biochemical
Product manufacturer
feedstock
Soil Recycle
restoration Biosphere
Retail/service provider
Refurbish/
remanufacture
Reuse/redistribute
Biogas Maintain
Cascades
6 2803 0006 9
Consumer User
Anaerobic
digestion/ Collection Collection
composting2
Extraction of
biochemical Energy recovery
feedstock2
Leakage—to be minimised
Landfill
63 www.biomimicryinstitute.
org
TOWARDS THE CIRCULAR ECONOMY | 31
$ $ $
• Fully circular systems would also capture of the circles. Unlike pure wool, which can
the value of human and animal waste as an be re-spun with hardly any loss of quality,
agricultural input that helps replenish both fabric blends are still difficult to separate for
macro- and micronutrients. recycling without degradation in value.
1
38 | TOWARDS THE CIRCULAR ECONOMY
Agriculture 9 9
91 91
Processing 17 9
73 82
Retail 5 4
68 78
6 2803 0006 9
3 12
Consumer
SOURCE: FAO ‘Global Food Losses and Food Waste – Extent, causes and prevention’, Rome 2011;
Ellen MacArthur Foundation circular economy team
TOWARDS THE CIRCULAR ECONOMY | 39
FIGURE 6 In clothing, waste occurs mainly at the end of life — UK clothing example
Focus of deep dive
Material waste
Per cent of total production
Processing 23
77
Manufacturing 11
65
64
6 2803 0006 9
64
Consumer
Packaging. Given its central role in the comprises a wide range of distribution
consumer goods industry, we also conducted models, packaging types, and materials
a deep-dive analysis of packaging to better (Figure 7).
understand the potential alternatives to
‘one-way’ packaging. The question here was These categories represent about 80% of
whether circular packaging models could the world’s total expenditure on fast-moving
be profitable for manufacturers, allow for consumer goods64.
a better consumer experience, and deliver
significant material savings. For each of the three areas, we first outline
whether more circularity is desirable and
To draw a meaningful comparison, we chose then discuss the evidence for 1) the viability
to study beverage packaging as it is a major of business models, 2) examples of circular
product segment (beverages account for business models already in operation today,
sales of USD 2.4 trillion annually), a large and 3) what needs to happen for larger-scale
amount of packaging material is wasted adoption of the circular business model.
(especially at the consumption stage), and
FIGURE 7 In packaging, waste occurs mainly at the end of life — Plastic bottle example
Focus of deep dive
Material waste
Per cent of total production
Manufacturing 1
99
1
Retail 3
96
2
6 2803 0006 9
96
Consumer
1 Assuming the retail beverage food waste is 60% of the overall food waste
2 This includes all packaging at end of life that will then either be recycled, incinerated or landfilled
SOURCE: FAO ‘Global Food Losses and Food Waste – Extent, causes and prevention’ Rome 2011,
Ellen MacArthur Foundation circular economy team
64 Euromonitor 2012
TOWARDS THE CIRCULAR ECONOMY | 41
FIGURE 8 Food and beverage – retail, household, and production material flows
Digestate
back to soil
Farmer
Case: Food
processing
Animal feed waste
Product
manufacturer
Energy
Retailer
Consumer
Landfill and
Chemical extraction incineration
65 Complete food and SOURCE: Ellen MacArthur Foundation circular economy team
beverages lifecycle is
understood to include
agriculture, manufacture,
packaging, distribution,
retail, transport, storage
and preparation, and waste
treatment and disposal. The
focus is on households but
extends to retailers and the
hospitality sector.
Why is food waste important? that have considerable value. Take beer. The
saying that ‘beer is liquid bread’ holds a grain
While daily amounts of ‘post-consumer’ of truth: beer is typically made from cereals
waste are small, unconsumed food and drinks with a high nutrient content. Though beer does
add up to a yearly average of USD 770 per retain some nutritional value, much is filtered
U.K. household, or USD 19 billion in annual out during brewing and remains in a solid
spending in the U.K. on food and drinks that by-product known as ‘brewer’s spent grain’
could have been consumed but are instead or BSG. While BSG is relatively high in protein
discarded. In the retail segment, the average and fibre—and thus a good a feed supplement
value of a tonne of food discarded in the U.K. for animals—it also has a high moisture
due to spoilage, leakage, etc. is estimated to content and typically rots within a month.
be USD 2,700 in forgone sales value. This adds Some brewers offer BSG to local farmers, but
up to an estimated value of USD 970 million anywhere from 10 to 50% ends up in landfill.
for U.K. retailers67.
MYTH
This lost value, recently in the spotlight Collecting food waste from
as a result of a form of activism known as households isn’t worth the trouble
‘dumpster diving’, is only part of the story.
In the U.K., as in other developed countries,
Reality: With anaerobic digestion (AD)
most of the 8 million tonnes of annual waste
technology, a business can extract
from households plus the 4 million tonnes
benefits that far outweigh the costs
from supermarkets and restaurants go
into landfill, incurring ~USD 1,230 million in
Food waste is valuable! With anaerobic
disposal costs. Beyond the disposal charges
processing, it turns into energy and
incurred by households and businesses, many
fertiliser which can generate a value of
of the world’s cities and densely populated
~ USD 60 per tonne (see example for
areas face the risk of running out of safe
U.K. below). Separate collection can be
opportunities for landfill disposal. At the
implemented at little additional cost, as
current rates of accumulation, referred to
the overall waste volumes don’t change.
as ‘arisings’, of food and other waste, the
Diverting food waste to the AD process
U.K.’s designated landfills will be full by 2018.
has many additional indirect benefits,
Furthermore, when landfilled, food waste
such as avoiding GHG emissions in
67 Business benefits does not decompose benignly but incurs
of resource efficiency, landfill, increasing the value of the
Department for environmental costs by emitting methane.
residual (non-food) waste stream in
Environment, Food & Rural Decaying food waste emits an estimated 130
Affairs, U.K., 2007, in: Waste incineration, and returning nutrients to
arisings in the supply of food million tonnes of CO2e68 globally, about 0.35%
and drink to households, the soil. (For more information, see the
WRAP, 2011
of total global GHG emissions—small but
sidebar on anaerobic digestion.)
entirely preventable. In landfill, food waste
68 WRAP, Waste arisings in
the supply of food and drink also contributes to the formation of leachate,
to U.K. households, 2011, a cocktail of liquids that seeps from solid waste
Ellen MacArthur Circular
Economy Team Analysis and can pollute surface and ground water. MYTH
69 The hierarchy used in the
Households cannot be
U.K. has five levels: reduce Analysing the landfill fraction that is food convinced to separate food
the amount of material used,
prepare for reuse, recycle, waste at a molecular level would reveal
recover other value, and, as the presence of the valuable soil nutrients Reality: Italy has achieved high
a last resort, dispose
nitrogen (N), phosphorus (P), and potassium collection rates for years; most people
70 WRAP; Case studies,
Courtauld Commitment 2,
(K) that are the three most widely applied respond favourably
2012 fertilisers. Locked up in the landfill, these
71 www.save-food.org. nutrients are practically useless, while using In southern Italy, some municipal
Article title ‘EU-FUSIONS them as a part replacement for mineral collection programs for household food
project examines the entire
food chain’ fertiliser, their value would have amounted to waste were already achieving capture
72 SealedAir, Enhancing
~USD 67 million each year in the U.K. alone. rates close to 80% back in 2002. Once
Sustainability by Preventing
Waste
systems are in place, public opinion is
Despite the efficiency imperative, many food generally favourable.
73 Ministry of Agriculture, and beverage manufacturers’ production
Forestry and Fisheries,
Japan, 2010 processes generate biological by-products
TOWARDS THE CIRCULAR ECONOMY | 43
Avoiding food losses increased the shelf life of nearly years by grocery auctions in
and food waste 1,600 chilled products by an selling packaged food products
average of one day.70 In Norway, past their best-by date at a
Avoiding food waste should be a For-Mat is a collaborative effort by deep discount. In 2012, the
priority. Prevention has also been the government and Norwegian European Parliament called on
enshrined as the most valuable grocers aimed at establishing the European Commission to
strategy for waste in the ‘waste better data on retail-level encourage the discounted sale of
hierarchy’ (Lansink’s ladder), which food waste so as to lay a solid food close to its expiry date. In
was included in the European foundation for effective waste some geographies and situations,
Waste Framework Directive in prevention measures. On a larger however, retailers have indicated
2008, and enacted into law in the scale, the EU project FUSIONS71 that consumer acceptance
U.K. in 2011.69 It is also advocated also aims to bring together all for such products is low. An
by the U.S. Environmental contributors along the food chain alternative avenue with goodwill
Protection Agency and government to collect data and start concerted benefits has developed amongst
agencies in many other countries, efforts to avoid food waste. retailers, hospitality businesses,
from Australia to Oman. and food service companies in
Another set of methods for the form of donations to food
Current management practice increasing shelf life is ‘active and banks and pantries such as
to reduce food waste is a logical intelligent packaging’, including, Second Harvest and Die Tafel.
extension of lean production for example, packaging food in a
systems, which aim to eliminate protective atmosphere.8 Working A further solution—albeit of
all product or service features with poultry supplier Moy Park, lower value—is to process food
that do not create value that ASDA adopted new packaging waste for animal feed. In Asia,
consumers are willing to pay for. that increased shelf life from 8 to processing food waste into
In food retailing, the main source 10 days. Similarly, a new packaging animal feed is promoted to
of preventable waste is the fresh film for potatoes enabled ASDA avoid landfilling and decrease
produce department, which is to slash potato waste by 50%. dependence on imported food.
therefore the focus of constant A study by Sealed Air found that The Japanese government
efforts to stock the precise changing the supply chain for promotes the ‘Ecofeed’ initiative
quantities demanded and maximise minced meat from traditional to convert more food waste to
shelf life. Both solutions typically in-store meat grinding and animal feed as part of a move to
require optimisation of the supply packaging to grinding and increase overall self-sufficiency in
chain back to the manufacturer pre-packaging in a protective animal feed. Recycled food costs
and growers. While median atmosphere in a central facility around 50% less than regular
losses through spoilage in fresh could extend shelf life from feed.73 However, some markets,
produce are 6 – 8%, best-practice 1 to 3 days to 7 to 21 days, such as the U.K., prevent the use
retailers have pared this figure to reducing retail losses from of food waste for animal feed as
3 – 5%. Data tracking and analysis 7 – 8% to 2 – 3%.72 a precaution against the spread
play a critical role in achieving of disease. Such restrictions
results that are twice as good as Packaged fresh food that is still apply mostly to food waste
competitors’ performance. As the perfectly fit for consumption from households, supermarkets,
‘last mile’ before the consumer, often becomes harder to sell and the hospitality industry,
retailers typically have access to as the best-by date gets closer, which may contain meat, but
extensive shopping data, which especially since consumer do not apply to food processing
leading firms are using to improve confusion may exist over best- companies that can guarantee
waste avoidance. Shopping data by versus sell-by dates. In most that food waste streams are free
helps amongst other things to markets some form of active of animal by-products.
improve demand forecasts, which discounting moves these products
benefits all of the participants in off the shelf before the best-by
a given food supply chain. With date expires. In the U.S., salvage
this approach, U.K. grocery retailer grocery and dollar stores have
ASDA’s ‘Faster Fresh’ initiative been joined in the past few
44 | TOWARDS THE CIRCULAR ECONOMY
FIGURE 9 Shifting to a circular system for food waste could create profits of $172 per tonne of food waste
Assumptions
• Large-scale AD rollout will reap 172
benefits from bulk orders and
operational efficiency gains Could be
USD 1.5 bn/year
in the UK
• New bacteria strains will increase
64
throughput
6 102
44
43
top of the margin for the beer itself which Brewer’s spent grains (BSG): A valuable
ranges from USD 10 to USD 40 per hectolitre brewing by-product for cascading. Every
of production. The following overview of litre of beer produced generates roughly
opportunities for cascaded uses, primarily a small teacup of brewer’s grains (0.14 to
animal feed, and returning nutrients to the 0.2 kg), accounting for more than 90% (dry
soil is relevant to most food processing weight) of the solid waste arising during the
by-products. brewing process. This currently adds up to
39 million tonnes globally. BSG contains a
Water use can be reduced and grey water relatively high proportion of nutrients and is
used to make biogas. Depending on the available in relatively large quantities. These
method and the brewery’s efficiency, characteristics give BSG an economic value
breweries typically use 4 to 10 litres of that is worth extracting in a cascade to
water to produce a litre of beer. In Brazil, another industry, primarily as animal feed or
this adds up to an estimated total of 69 fish food.
million cubic meters (m3) of water per
year; the global total is nearly 1,200 million Feed and food production (e.g., livestock
m3. Current industry estimates indicate feed, fish farming feed). BSG is valuable
that using best practices in production for its relatively high protein content (25%
can reduce this volume by up to 15%. For on a dry matter basis), which among the
example, the Jaguariuna brewery in São commonly used feed is second only to soy
Paulo, Brazil, implemented a programme beans (38% on a dry matter basis). It also has
to optimise utilisation of water across all high starch content and is a source of fibre
steps of the production process, resulting and other nutrients. BSG is a readily available
in a 9% reduction in water use from 2007 and cheap source of proteins for farmers
to 2009.100 Breweries use water in two main who generally pick up brewer’s grains in wet
ways: to wash bottles, which results in form directly at the breweries. Anna-Maria
wash water that contains almost no organic Smet, Director of Regulatory Affairs at The
components, and to make beer, i.e., water Brewers of Europe, an industry association
used as part of the filtering, screening, and representing more than 80% of the brewery
pressing steps. This process water contains sector, says ‘there will always be some
nitrogen, potassium, and phosphorus from farmers knocking at the door of breweries to
the grain and hops feedstocks. This means feed their animals with these grains’.
that, in addition to changing the way water
is used from the start, brewers can send the In addition to dairy cattle and hogs, a new
unavoidable process water to an anaerobic animal feed cascade for BSG could be
digestion plant, rather than simply treating opening up in commercial fish farming. The
and releasing it as treated effluent. In an AD largest of these operations by sales are in
plant, the biological materials in the waste Asia and actively searching for plant-based
water can be collected and used to generate substitutes for animal protein in the food
heat and electricity from methane, either for that they feed their fish. BSG is a suitable
internal use, hence reducing the brewer’s supplement for a number of such fish, e.g.,
energy bill, or sold to a third party. tilapia, catfish, trout, and carp. Arjen Roem,
Senior Project Manager at Nutreco, estimates
Oberon FMR—a private Colorado-based that BSG could account for 2 – 5% of the
early-stage company—has developed a fish food mix by replacing a blend of corn,
technology that converts nutrients in the wheat, and soya.101 A majority of the BSG
waste-water streams of food and beverage produced in Asia could be used locally when
plants into high-quality protein meal (60% products are targeted more towards fish
protein and only 2% fibre content on a dry feed applications. Arjen Roem sees potential
matter basis) for the animal nutrition market. particularly in tilapia and catfish, which are
The innovation is said to cut the costs of projected to be the fastest growers in the fish
dewatering and disposal, as well as reduce farm industry, in Asia but also Latin America
the electric power bill typical at food and and Africa. The farming of these species is
100 Report on
environment and utilities drinks companies for aerating waste water, forecasted to have a global compound annual
sustainability, Worldwide
brewing alliance ((2008-
which is full of organic matter. growth rate of 9 and 12% respectively from
2009)) 2010 to 2020.
TOWARDS THE CIRCULAR ECONOMY | 51
For both types of animal feed cascades, Director of Corporate Affairs at SABMiller.
participants of that value chain in Brazil could But as is described below, there are a number
earn an estimated additional profit of USD of further generic prerequisites for a faster
1.90 – 2.00 per tonne of BSG on top of their uptake of circular models in the food and
margin for the beer itself. beverage sector. Industry associations as well
as government agriculture extension services
Energy and fertiliser/compost production and industry regulatory bodies could play an
through anaerobic digestion. Although these important role in creating these conditions.
applications have a lower value than animal
feed, BSG is well suited to producing energy • Awareness building. Many solutions in
because of its relatively high carbohydrate use today already reflect circular principles,
content and high methane productivity. BSG but further awareness building would
produces 0.4 m3 of methane per kilo of dry certainly enlarge the room for action. In
matter whereas cattle manure produces only the view of SABMiller’s Dave Johnstone,
0.2 to 0.3 m3 per kilo of dry matter. BSG also while price differences across regions and
has relatively high values for NPK (nitrogen, seasons are massive—he cites the highest
phosphorous, and potassium) that are not prices at 15 times the typical minimum— the
altered during the anaerobic digestion price of BSG ‘will go up in a sophisticated
process and can therefore be returned to the agricultural environment’. This is because, as
soil as a fertiliser. The additional profit from Johnstone puts it, ‘a lot of BSG value resides
these applications is estimated to be USD in the ability of brewers to understand their
0.10 per tonne—this profit does not include environment and what the real market value
renewable energy subsidies.102 of BSG is’—value driven by both globally
traded feed grains, energy sources and other
How can we expand these local circumstances. In some markets (e.g.,
cascades/circular solutions? Europe, India), players already recognise
BSG’s value. According to Johnstone, with
The food and beverage industry can some knowledge of BSG value and the local
capture the value of production losses and dynamics, some breweries have managed
by-products by harnessing the power of to step change the value generated from
cascades, seeking out the most valuable these streams. Awareness building could
applications in each case. Part of the be reinforced by landfill disincentives that
potential for cascading BSG before sending discourage outright waste or, preferably, by
it to anaerobic digestion is already being incentives to encourage alternative uses.
exploited. Even though the market is
fragmented and not uniformly documented, • Innovation. Finding new technologies and
research indicates that large brewers already applications for wastes and by-products of
sell 50 – 95% of their BSG to third parties the food and beverage industries is a key
(farmers or brokers) who then use or sell enabler in the value capture process, as
it as feed for livestock. Amongst small and illustrated by the potential value of Professor
micro-breweries, the practice appears to be Clark’s microwave process that dramatically
less common. Indeed, the situation is highly improves the extraction of essential oils from
dependent on local factors. While Andy orange peel (see sidebar on the bio-refinery).
Wood, Chief Executive of Adnams brewery
in the U.K., says that ‘giving BSG to animal • Collaboration among companies within
101 Nutreco is a publically
traded Dutch company farms is a standard practice’, Dave Johnstone, the value chain. New partnerships among
producing fish feed for the
fish farming industry. Nutreco
Sustainable Development Manager at businesses may be needed in order to
has 100 production facilities SABMiller says that in some countries, manage currently wasted resources and use
and 8 research centres in
more than 30 countries) although BSG is not usually wasted, often them in a valuable way. For example, several
only a small share of its potential value food and beverage production sites could
102 There are no subsidies for
anaerobic digestion in Brazil, is captured. form a cooperative partnership to share
only the facilitation of access
to credit. In other countries,
transport costs to bring food-based materials
such as the U.K., subsidies for In some parts of the world ‘an improvement to farmers or, in the case of BSG, sharing
anaerobic digestion can be
up to USD 3.2 per hectolitre of the situation would require better the costs of a service or infrastructure to
of beer produced due to the infrastructures’ (e.g., availability of trucks, dry the grains for shipment to fish feed
feed-in tariff on the energy
produced good roads) explains Gabor Garamszegi, manufacturers. Valorising waste usually
52 | TOWARDS THE CIRCULAR ECONOMY
FIGURE 10 Clothing: Current collection and sorting practices prove a profitable circular business model
Revenue from end-of-life clothing Percent in Net operating profit from clothing and
USD per tonne of end-of-life a standard processing end-of-life clothing
clothing collected collection USD per tonne of end-of-life clothing
collected, UK
Wipers 135 8
Shreds 20 14
1 Includes all reuse within the system (e.g. those collected by charity shops, sold through eBay and other second hand stores, given informally
to friends and relatives), not only the clothing collected by processors which is reused in the UK
2 5% of collected clothes and up in landfill
3 Includes the cost of cutting cloth into wipers but excludes shredding costs (shreds are assumed to be sold as fibre to a cutting mill). Also includes,
baling cost for all material and disposing costs for material which is sent to landfill
SOURCE: WRAP ‘Valuing Our Clothes’ 2012, WRAP ‘Textile Flow and Market Development Opportunities’ 2012,
Expert Interviews; Ellen MacArthur Foundation circular economy team
FIGURE 11 Clothing: Further increasing circularity through greater collection and closed-loop recycling, both mechanical and chemical
End-of-life material flows for Europe and North America Percentage of total end-of-life clothing weight
Mechanical
recycling3
Chemical
recycling2
Consumer Consumer
Stuffing,
insulation,
wipers
15 56
Reuse1
6 2803 0006 9 6 2803 0006 9
Consumer Consumer
20 75
4 15
80 25
Note: All fibres treated as technical materials since most dyes and coatings used today mean that even natural fibres cannot be returned to the soil
1 Includes both domestic reuse within the UK and reuse exported abroad
2 Describes process to depolymerise and repolymerise fibres to create new fibres of similar quality to virgin production. Minimal chemical recycling
currently of polyester (Teijin) in Japan and nylon (e.g., Aquafil)
3 Describes process to shred and card fibres, then make new yarns and clothing (e.g., Marks & Spencer ‘shwopped coat’)
SOURCE: WRAP ‘Valuing our clothes’ 2012; WRAP ‘Textile Flow and Market Development Opportunities 2012,
Ellen MacArthur Foundation circular economy team
term for unravelled or chopped textiles, U.K collection rates are relatively high
which are then used to create new yarn compared to the rest of Europe and North
through mechanical recycling, stuffing for America, and the first step should be to
furniture and mattresses, and as insulation in dramatically increase the collection and
homes and cars. These flows represent the reuse of clothing across those regions. Lifting
destinations of all clothing which reaches the collection rates in North America and Europe
end of its use with a consumer in the U.K., to same level as in the U.K. would generate
including items collected through charity a total of 14 million tonnes of end-of-use
shops, textile banks, resold online, informally clothing annually or a global profit pool of
traded amongst friends or relatives. USD 26 billion. It must be noted that the
acquisition cost for textiles is often zero as
If sold at current prices across the four people donate clothes. However, this could
usage streams, a tonne of collected and change in the future as we have seen in other
sorted clothing can generate revenues of industries where end-of-life products become
close to USD 2,000. After subtraction of the valuable as more options emerge to re-apply
costs of commercial collection and sorting them (Figure 11).
of USD 680, the profit potential is around
USD 1, 300 per tonne115,116 (Figure 10). Critically, this shift will also dramatically
reduce the use of virgin material in the
The potential revenue pool in the U.K. with clothing industry as well as the cascaded-
a current collection rate of 65% is USD 1.4 use industries, thereby relieving pressure
billion. Making such reuse and reprocessing a on agricultural inputs, such as cotton, and
115 WRAP, Valuing Our Clothes, mainstream part of the clothing value chain fossilised carbon inputs, such as petroleum,
2012; WRAP, Textile Flows
and Market Development translates into less expensive material inputs which is a key input for polyester. A collection
Opportunities in the U.K.,
2012; Expert interviews
for retailers and manufacturers, and (assuming rate of 65% in the U.K. currently generates
that competition will result in a certain pass- USD 3 billion in material savings annually.
116 Operating profit does not
include capital costs and only through of the savings to shoppers) less Moving collection rates in Europe and North
the variable costs associated expensive clothing for consumers. America to match the U.K. at 65% adds up to
with collecting, sorting and
cutting textiles
56 | TOWARDS THE CIRCULAR ECONOMY
FIGURE 12 Clothing: In the ideal state, biological and technical materials should
be kept separate or separated at end of life using new technologies
End-of-life material pathways for biological and technical products
Compost
Soil/material Soil/material Soil/material
extraction extraction extraction
Cascade
Distribution Distribution Distribution
and sales and sales and sales
Maintain separation throughout use: Maintain separation throughout use: End-of-life separation: Blended
Natural fibres (e.g. cotton) are kept pure Polyester is kept pure and, through fibres are processed at the end of life
in each cycle including ensuring dyes and the chemical process, is returned to to separate polyester and cotton to
coatings used in cascades are non-toxic the same quality as virgin polyester produce new polyester and cellulose
and can be reurned to the earth for use in new production (e.g, Teijin used in the production of viscose
(e.g. Climatex Lifecycle) technology) (e.g, Worn Again technology)
and recycle. Biodegradability is not included • Formal wear rentals, particularly men’s
to make sure that products can be used in wedding attire, have a long history and have
their original form as long as possible. Nellie been joined by other new-clothing rental
Cohen of Common Threads at Patagonia models, mainly for one-off hire and expensive
explains: ‘If you own one jacket that lasts, items. In the U.K., ‘Girl Meets Dress’ provides
that’s better than three that don’t. I think we’d one-off rental of formal wear and clothing
have concerns about the potential sacrifices in for socialising; one counterpart in the U.S. is
quality in designing for biodegradability’. ‘Rent the Runway’, which offers designer-label
garments. For handbags, there is ‘Fashion
Radically new models for Hire’ in the U.K. and ‘Bag, Borrow or Steal’ in
collaborative consumption. the U.S. The basic business model is also well
established for other infrequently used items:
In addition to greater collection, we have also ski hire has always been available at the slopes,
explored new models that aim to productively skates at the ice or roller rink, bowling and golf
utilise the in-use surplus lurking in many shoes, and so on. Unsurprisingly, rental models
wardrobes in what investment analyst Mary for maternity wear have also joined this line-up,
Meeker calls an ‘asset-heavy world’.120 This e.g., ‘Love Your Bump’.
idea has already reached clothing and can be
extended with a radical new business model New models are emerging online that
to offer everyday clothing for hire , allowing demonstrate the lack of apparent stigma and
consumers to easily ‘swap’ clothing whenever willingness to exchange used clothing, much
they desire variety, need a different size, as many consumers have done informally
wear out a garment, or for any other reason amongst friends and family. One example is
that previously would have led to clothing ASOS Marketplace, an extension of the new-
being discarded or left unworn at home. clothing lines of U.K.-based retail and ‘fashion
The rent-a-garment approach not only has destination’ ASOS. The Marketplace operates
potential to be a profitable business, it also internationally and provides a channel for
offers more benefits to a certain segment of consumers to resell their used clothing as well
consumers by giving them access to a much as for small new fashion businesses to reach
wider range of clothing and the ability to ASOS’s large consumer audience.122
eradicate their ‘mistaken’ choices quickly and
conveniently. While this example might seem Other established sites selling used everyday
very innovative, it serves as stimulus to think and dress-up clothing are mainly focused
creatively. Consumer research would of course on the U.S. and include Twice, Poshmark,
be needed to better understand consumers’ Threadflip (planning to expand to international
acceptance. sales), which target mainly women’s clothing,
and ThredUP, which target mainly children’s
Precedents for everyday clothing-for-hire. clothing.
A wide-scale rental model for clothing
builds on current market trends towards Online retail has increased rapidly across
‘collaborative’ living and consumer insights: multiple categories, accompanied by huge
investments in front-end systems and logistics.
• Rental models in general are clearly on the It is now easy for consumers to review and
120 Mary Meeker, 2012
Internet Trends (Update), rise. Perhaps the best-known example today choose the right products, and for products
2012
is Zipcar in North America, which gives users to be delivered to their homes, nearby stores
121 Forbes, Zipcar Revs access to short-term hourly car rentals. Zipcar or other collection/drop-off locations—and in
Up Membership Growth,
Stock Cruising to $27, membership grew from 200,000 to 500,000 some cases— the handling of returns. These
2011
in only three months in 2011, and is expected service enhancements are rapidly changing the
122 According to ASOS, to increase to 2 million by 2020.121 entire retail landscape in developed markets.
80% of sellers are
individuals using the site
as a way to monetise
their wardrobes, while
20% are vintage or new
fashion businesses.
Source: econsultancy.
com (http://econsultancy.
com/uk/blog/8558-asos-
rketplace-sales-grow-
690-over-the-past-year#)
60 | TOWARDS THE CIRCULAR ECONOMY
FIGURE 13 Clothing: New ‘Netflix for clothes’ is an example model that delivers more choice
and more style for consumers by providing ‘fast fashion’ shared amongst a community of users
FIGURE 14 Clothing: Online rental archives cost savings in COGS and delivery partially offset by increased
cleaning costs
Comparison of online retail and online rental profit USD operating profit per rental customer
1,010 353
424
Conventional
retail
0 0 50 182
1,010 216
131
145
153
Online rental
model
151
213
1 Revenue assumed to be the same in the retail and rental scenario (i.e., consumers spend the same amount of money to gain access to clothing
through rental as they would to buy new pieces of clothing each year)
2 Savings on cost of goods sold (COGS) driven by decrease in clothing production from 29 garments/year under an ownership model to 16
garments/year for rental
3 Small delivery cost compared to current online retail model from moving to a centralised ‘locker’ delivery system (similar to Deutsche Post’s
packstation system)
4 Rental clothing is washed after each return by the consumer
SOURCE: Euromonitor, Expert interviews, WRAP ‘Valuing Our Clothes’ 2012, Ellen MacArthur Foundation circular economy team
What could the profit potential yield greater benefits in the future as rental
look like? providers have an incentive to increase the
durability of their clothing inventories and
This model presents a real economic reduce the energy requirements for laundry.
opportunity of ~USD 200 in operating In moving towards this kind of collaborative
profit per renter123 and is sensitive to the consumption model, we would shift from
assumptions for delivery costs, laundry, and a situation in which each individual or
the average service life of the garments124 household has a small incentive to buy
(Figure 14). durable clothing (either to be able to wear the
123 clothing longer or to be re-sell it at a higher
1 Revenue assumed to be the
same in the retail and rental
In addition, it results in 14 fewer garments price reflecting its residual value) to one in
scenario (i.e., consumers spend being produced and reaching their end- which one or several companies have a large
the same amount of money to
gain access to clothing through of-use annually per renter. If we assume 6 incentive to increase durability as a critical
rental as they would to buy new million subscribers in the U.K. (approximately driver of business profitability. In a similar
pieces of clothing each year)
equivalent to the share of the U.S. population vein, WRAP reports that U.K. households that
2 COGS savings driven by a
decrease in the production of
that subscribes to Netflix),125 this adds up change their laundry habits towards lower
clothing from 29 garments/year to a material savings of USD 236 million. energy intensity (washing less often, washing
under an ownership model to 16
garments/year for rental Considering the full system, a scenario that at lower temperatures, reducing the use of
includes rental and achieves 75% collection tumble dryers, and washing with fuller loads)
3 Small delivery cost compared
to current online retail model of all end-of-use clothing results in a material could save USD 16 per year. By contrast, with
from moving to a centralised
‘locker’ delivery system (similar
savings of USD 3.8 billion for the U.K. 6 million renters, clothing rental companies
to Deutsche Post’s packstation Projected to North America and Europe, the would be looking at a savings ‘pie’ worth
system).
savings rise to USD 44 billion. approximately USD 100 million a year.
4 Rental clothing is washed
every time the consumer returns
an item In the rental model, the total amount of For clothing, the potential impact of switching
laundry increases as more cleaning is required from the individual linear consumption model
124 Delivery cost for an 11kg box between uses; however, the overall effect of to a circular wardrobe rental business is
to a centralised locker is assumed
to be USD 8 compared USD 16 reduced production, increased laundry, and already visible today. Elis, a USD 1.3 billion
for at home delivery comparable increased transport is a net water savings European company that rents industrial
to timed grocery drop-offs.
Average service life of clothing is (37 m3 per renter annually), net material clothing and textiles (uniforms, safety
assumed to be 75 washes. Using
less intensive laundry practices,
savings (USD 38 per renter annually), and garments, table linens, bed linens, etc.) and
laundry costs are reduced to USD a small net carbon savings (11 kg CO2e per serves 290,000 customers, are continually
0.07 per item
renter annually). working to increase the durability of their
125 Associated Press, By the
Numbers: Netflix Subscribers,
offering, which has benefits for both their
2012 In addition, the model may be expected to consumers and their business.
62 | TOWARDS THE CIRCULAR ECONOMY
H&M, and Patagonia to increase in-store presence and efforts of the U.K.’s 6,000+
collections are one very important step and charity shops, and offers this opinion: ‘I think
help make donations ‘cool’ and at the same in the U.K., there is a greater culture of charity
time routine, a regular part of weekly errands. shops, which likely leads to higher collection
Noting the successful mindset change in rates. There is more of a “waste not, want
the U.K. over the previous decade regarding not” culture’. In other countries, the model
plastic and glass bottle returns, Cyndi may be more focused around in-store or
Rhoades, CEO of Worn Again, says: ‘People municipal collections but it is critical to make
know that plastic and glass can be reused these collections more accessible and part of
again. That’s why it’s quite exciting that big common practice.
retailers are moving in the direction of closed
loop and starting to educate their consumers Design for end-of-life re-use. As a key
on that.’ element in the circular economy, greater
consideration of end-of-life processing is
• Via municipal waste collection. Clothing needed in the design phase of clothing
stores are one obvious new place to locate the production (e.g., ease of repair, sorting,
start of the reverse cycle for clothing. Another disassembling, and recycling). At Patagonia,
is the municipal waste collection process itself. for example, all clothing is designed both to
In many locations, the municipal government be recycled and with durability in mind.
provides space for a private textile collection
company to set up its collection bins, thereby Further innovation. In addition, new recycling
creating a new revenue stream for the technologies (chemical recycling) are required
municipality. In a further development, LMB in closing the loop (with separate reverse
and WRAP are currently trialling a ‘survival streams for biological and technical fabrics).
bag’ solution that would allow the collection As we have mentioned, textile innovators such
of clothing alongside but—importantly— as Worn Againare developing processes to
separated from household trash, keeping the recapture polyester and cellulose from cotton
clothing undamaged while greatly increasing which can be reintroduced into the polyester
convenience for consumers. Ross Barry, LMB and viscose supply chains. It is expected that
CEO in the third generation of the family’s up to 99.9% of the polyester and available
‘360-degree recycling’ business, is optimistic cellulose will be recaptured and returned as
about the results of the trials: ‘The survival resources into these supply chains.
bag is so convenient for people. People don’t
see that there’s a recycling option so they’re 3. Packaging
just throwing clothing in the bin. With the
survival bag, we could collect clothing along An integral part of most consumer goods,
with regular household waste. The bag then packaging is typically a technical component
just needs to be pulled off the belt in the that is discarded at the time of consumption.
sorting process’. It plays a major functional role in protecting
and dispensing the product, representing a
• In other retail or recycling settings. Other significant proportion—usually 10 – 25%—
new collection systems are appearing as well, of the total product costs.127 Packaging is
such as i:co, which installs collection boxes also used as a vehicle for communicating
in retail shops. Consumers add their items to differentiation and brand benefits to
the box, which then weighs the donation and consumers at the shelf and in use.
rewards the giver with an in-store voucher/
coupon, the value of which reflects the weight Why does packaging waste matter?
of the items.
Packaging represents a large proportion of
127 Analyst reports,
More collection is urgently required, consumers’ use of materials and accounts
McKinsey Purchasing and however—particularly in other countries. for nearly 20% of household waste.128 The
Supply Management practice
While the average collection rate in the U.K. is frequency of purchases and high volumes
128 Packaging in Perspective, already 65%, the average across the EU is only associated with consumer products mean that
Advisory Committee on
Packaging, 2008 25%, and for the U.S. only 15%. Alan Wheeler consumers buy large amounts of packaging—
129 US EPA 2010,
of the Textile Recycling Association ascribes an estimated 207 million tonnes globally129
Euromonitor 2012 part of the U.K.’s higher collection rate to the
64 | TOWARDS THE CIRCULAR ECONOMY
with a value of USD 384 billion each year. A key factor in unlocking the commercial
Although certain packaging types in some opportunities of the circular economy is to
markets have moderate levels of recycling design with the intention of creating distinct
(notably aluminium cans and glass bottles material flows. When biological materials are
in Europe), a large proportion still ends up in combined with technical ones, this can create a
landfill—around 50% in the U.S., for example.130 particularly complex challenge if resource value
is to be retained. The effect of this ‘hybrid’ waste
Packaging is often made of materials that are product is to constrain or prevent the biological
combined in a way that constrain recycling nutrients from undergoing regenerative
or prevent the restoration of biological decomposition in landfills and complicate the
nutrients to the soil. Superior packaging harvesting of technical materials like polymers
performance, especially for films and foils, is and metals. One example is non-degradable
frequently obtained by combining different food packaging. The ‘clamshell’ packaging
types of materials. Since these materials used for fast foods traps the food’s biological
are often chemically bonded they render materials within the non-degradable technical
recycling impossible or at best economically packaging material. Clearly, designing packaging
unattractive. from the outset for reverse circles requires
close attention to multiple factors (Figure 15).
Building more circular business are recycled. This is true for the various
models in packaging forms of ownership of the collection and
recycling services, many of which are run by
Shifting the consumer goods packaging a municipal authority as well as some run by
industry to circular models will result in the private sector. For example, DS Smith
significant material savings and reduce Recycling, a private company working with
pollution, and represents a positive economic many public and private sector customers—
opportunity for manufacturers, retailers, and the largest paper and cardboard recycler
consumers, and municipal authorities. in Europe—has delivered steady revenue and
profit growth across its operations. While
There are three key circular levers for fast- current technological challenges often limit
moving consumer goods packaging that will post-consumer recycled material content
help close the loop: in packaging, the lower prices of recycled
materials encourage manufacturers to
• Improving the ‘BAU’ situation: Recycling— maximise their use.
recycling provides an intermediate solution
‘for a business as usual’ situation where Some consumer goods manufacturers have
reuse infrastructure is not feasible. Although also made their use of recycled materials
significant material savings can be made by a feature of their brands. Recent research
collecting and recycling used packaging, a suggests 75% consumers said they are
short lifecycle ensures that losses rapidly willing to pay a 5 – 10% premium for green
compound even at high collection rates packaging.131 However, it is unclear whether
actual purchasing behaviour will always
• Designing for circularity – by intention: match stated intentions.
– Biodegradable packaging—packaging is
designed for biological regeneration. Single- What opportunities exist to
use packaging facilitates the return of bio- quickly scale up recycling?
based materials to regenerate food/farming
systems, or where collection systems are not Steps required to increase recycling and
established. quickly capture more value include
improving sorting technology and,
– Technical/durable packaging—packaging is importantly, designing packaging to be
designed by intention to facilitate reuse with conducive to circular/reverse processing.
existing labour, energy and resource input. Some examples include:
Infrastructure exists to harvest materials for
the next cycle. For waste management companies:
Straightforward investments in existing,
A virtuous cycle mature technology to separate current plastic
packaging into more distinct fractions will
Recycling packaging has economic benefits result in large material savings. For example,
for both the recycler who gains a new by using near-infrared sorting equipment,
revenue stream and for the packaging some material recovery facilities (MRFs) in
manufacturer who gets access to (generally) the U.S. are able to sort out the five main
lower raw material prices than for virgin plastics, PET, PP, PS, HDPE and LDPE. Our
stock. As part of the transition to fully analysis shows that a full scale-up to all MRFs
circular solutions, better design and more in the U.S. would deliver an estimated annual
extensive collection, sorting and recycling materials saving of USD 7.3 billion and a profit
can deliver significant material savings. of USD 2.4 billion—approximately USD 200
per tonne of plastic collected—even after
What is the recycling profit taking into account capital investment
potential? required for new sorting equipment
131 The growing demand (Figure 16).132
for green, McKinsey Recycling is profitable on a global scale.
Quarterly, April 2012
In OECD countries, there is already an
132 The Ellen MacArthur
Foundation circular
economic case to increase the volume
economy team analysis and number of different materials that
66 | TOWARDS THE CIRCULAR ECONOMY
FIGURE 16 Packaging: Moving to better sorting of all plastic packaging collected in the U.S. ONLY
U.S. generates a profit of USD 200 per tonne1, approximately USD 2.4 bn each year
592
526
196
130
66
FIGURE 17 Beer packaging shows potential for far greater circularity in many markets
Consumer Consumer
0-5%
40-48%3
Recycling 0-5%
Packaging
collected
Landfill/incineration3 Landfill/incineration3, 4 from standard
recycling
scheme
1 Example: PET resin, glass cullet, aluminium blocks
2 Recycling - Plastic bottles 52%, aluminium cans 60%, glass bottles 61%
3 Incineration (‘waste to energy’) of PET bottles, if done cleanly, is preferable to landfilling
4 Additional glass in municipal waste streams may be sorted in mixed-waste material recovery facility (MRF),
but unlikely to be back into food-grade glass bottles due to regulations
SOURCE: WRAP, press searches, expert interviews, Ellen MacArthur Foundation circular economy team
47
Single-use 34
glass bottle
8 5
0 0
38 22
2
Reusable
7
glass 2
5
bottles
1 30 uses for recycable bottles, 95% return rate, 34% weight increase for reusable vs. one-way
2 300 km average road miles from brewery to store, £1.73/km transport costs
3 Filling costs equal for single and reuse bottles, washing/sterilising operating costs USD 0.8 cent for reusable bottles
4 Handling fee paid to retailers of USD 0.8 cent per reusable bottle
5 Reusable bottle float requires 1.14 reusable bottles to every single-use bottle; in-store collection infrastructure GBP 3,800 per store; brewer washing
equipment USD 0.19 per hectolitre (depreciated over 10 years)
SOURCE: Expert interviews, WRAP, Ellen MacArthur Foundation circular economy team
shopping).148 Retailers are already routinely Other significant steps towards a fully
using returnable transit packaging in place of circular system in consumer goods
cardboard boxes in their distribution network, packaging are likely to include alternative
but more work around ‘retail-ready’ or ‘shelf- models to the traditional bottle return and
ready’ packaging could still be done to reduce refilling systems. Greater adoption of in-
the amount of single-use cardboard. store and in-home refilling systems would
deliver significant material savings, as well
In Canada, approximately two-thirds of beer as opportunities to provide consumers
is sold in reusable bottles—and the majority with a greater product choice and usage
of brewers in Canada, large and small, use experience. Recent success stories include
a common standard bottle, the industry Sodastream in-home carbonation systems,
148 Movement Shopper
Watch, Sweden, 2002 Standard Mould Bottle (SMB). This, together with strong year-on-year revenue and
with a return rate of approximately 97%, profits growth since 2007.151 Method, a U.S.
149 Economic analysis not
carried out on bulk refilling reduces costs versus one-way containers. The business recently acquired by Ecover, has
of wine, but as suggested
by Nicola Jenkin of Best
Canadian government initiated a shift of the grown quickly on the back of concentrated
Foot Forward, formerly packaging industry to adhere to an Extended and refillable detergents. In-store refilling
of WRAP, ‘bulk refilling of
wine is surely the biggest Producer Responsibility (EPR) programme. has not yet taken off widely in the food and
packaging opportunity This means that industry takes full beverage sector due to the technical and
in beverages that we
can solve’. Globally, the responsibility (including costs) for disposing food safety challenges that would need to
roughly 17.5 billion bottles
of wine consumed annually
of packaging and other materials. be overcome. In other sectors, however,
account for 8.75 billion successful examples, such as paint mixing
tonnes of glass—more
packaging than any other Beverage refilling opportunities also exist in the home improvement sector, have
product in the food or beyond beer and soft drinks. For imported been in operation for many years. In the
drink sector, http://www.
wrap.org.uk/content/retail- goods, it will rarely make economic sense hospitality and food services sector, the
drinks-category-wine
to return used packaging to the place of success of Coca-Cola Freestyle machines—
150 WRAP website ; manufacture, but where volumes are high, which provide over 100 different options
section on retail drinks
category http://www.wrap. both the economics and environmental and approximately the same footprint as
org.uk/content/retail- considerations are likely to be favourable to an existing six- or eight-valve fountain
drinks-category-wine
bulk refilling—such as bulk imported wine dispenser152—demonstrates that innovative
151 Financial Times
Market Data : Sodastream
that could be filled in returnable bottles.149 solutions can give both producers and
International Ltd http:// Delhaize, a leading Belgian retailer, ships wine retailers the opportunity to differentiate their
markets.ft.com/research/
Markets/Tearsheets/ in bulk from various regions in France for offering, and deliver choice to consumers.
Financials?s=SODA:NSQ filling into bottles in Brussels. A similar model
152 Coca-Cola Freestyle has been suggested for the U.K., the biggest
facebook profile https://
www.facebook.com/
importer of wine globally at approximately
cocacolafreestyle/info 1.2 billion bottles per year.150
70 | TOWARDS THE CIRCULAR ECONOMY
MYTH
Biodegradable packaging could solve our problems with overflowing landfills and litter
FIGURE 19
Building blocks of a circular economy—what’s needed to win
6 2803 0006 9
B Collection
Collection
D
A B C D
Skills in circular product New business models Skills in building Enablers to improve
design and production cascades/ reverse cross-cycle and cross-sector
cycle performance
• At the production level • Acceptance and adoption • Reverse logistics 1. Develop and reinforce
• At the process level by end-consumer • Technology cross-value chain collaboration,
• Incorporation of new joint product development
players within and across and infrastructure management
the value chains through
• Information and visibility
• Development of cross-value
chain business models
• Develop visibility of
material flow
• Industry standards
Match-maker mechanisms
2. Rethink incentives
Align economic incentives
3. Provide a suitable
international set of
environmental rules
• Adapted certification programs
• More extended producer
responsibility regulation
5. Access to financing
• Development of private investors
• Access to financing
SOURCE: Ellen MacArthur Foundation circular economy team facilitated for circular initiatives
74 | TOWARDS THE CIRCULAR ECONOMY
But new players and ‘outsiders’ will also be 3. Skills in building cascades / reverse cycles
needed in order to benefit from the injection
of new inventions (e.g., Oberon’s innovative New and more skills will be needed for
filtering and conversion equipment to make cascades and the final return to the soil
fish meal directly from the waste water of or back into the industrial production
food and beverage plants). They might either system. They will certainly include delivery
capture value directly by taking circular chain logistics, sorting, warehousing, risk
initiative or will facilitate the launch of new management, power generation, and even
business model as a side-line to their core molecular biology and polymer chemistry.
business, hence capturing part of the value With cost-efficient, better-quality collection
that to date has been left on the table. and treatment systems and effective
segmentation of end-of-life products, the
Information and visibility. To operate leakage of materials out of the system will
efficiently, the managers of most circular decrease, supporting the economics of
business models will need to maintain visibility circular design.
of the full value chain—for example, of the
by-products from different production stages. Reverse logistics chains to cascade materials
For this, working with an intermediary may to other applications will need to be optimised
help to enlarge the company’s range of vision. from beginning to end. It is therefore critical
Other business models will require quick to build up the capabilities and infrastructure
access to information and good visibility of to move towards more circularity. Collection
the material flow through the value chain. For systems must be user-friendly, located in
example, an entrepreneur willing to broker areas accessible to customers and end-of-
the reuse of highly perishable brewer’s spent life specialists, and capable of maintaining
grains will have to coordinate both with the the quality of the materials so they can
breweries and with farmers to extract the cascade through diverse applications. The
grains value in time. ‘downstream’ applications should cascade
in ways that optimise nutrients and value
Capturing value is accelerated when a recovery, before finally returning nutrients to
systems approach is applied to analysing the soil.
opportunities. An example of this is the U.K.’s
National Industrial Symbiosis Programme Private companies can drive the development
(NISP). NISP works to provide a brokerage of regional solutions. A prominent and
service for businesses wishing to turn waste award-winning industrial scale valorisation
into by-products. NISP also plays a role business in France is currently run by
in addressing technology and processing Veolia Environmental Services (VES). As a
barriers to maximise economic benefits. Since biowaste solutions provider to the FMCG
its launch in 2000, NISP claims credit for sector—specifically the food industry—it turns
bringing about cost savings of GBP 1 billion, biowaste into certified composts and organic
additional sales revenue of GBP 993 million, amendments, renewable energy, and liquid
and the creation of over 10,000 jobs in the fuel. Partnerships with the farm business
U.K. economy. allow for stable and long-term markets for the
compost.
On the consumer side, a new data driven
application could be developed to focus on Municipalities can (gently) foster the build-
the collection of consumer data that would up of reverse infrastructure, with information
allow for many more commercial and non- events and suitable nudges in the form of
commercial initiatives around collaborative city ordinances. This can go beyond allowing
consumption and other alternative business a company to set up textile collection banks
models to spring up. As James Moody, author up near a central traffic intersection. In
of ‘The Sixth Wave’, puts it: ‘While market Pune, India, cities have bylaws that all new
signals are slowly aligning and technology buildings must be equipped with recycling
factors are coming into place, the development infrastructure such as recycling rooms on each
of successful closed loop business models is floor and sufficient space in the basement for
still hampered by the lack of really good data separate containers.
on consumption behaviour’.
76 | TOWARDS THE CIRCULAR ECONOMY
Technology will allow optimisation of reverse between different interests but there needs to
logistics (e.g., textile sorting and tracking using be a substantial willingness to share.’
RFID tags) and also innovative applications
for reuse of materials (e.g., using BSG to A critical element in cross-sector collaboration
produce ethanol). There will likely be demand at scale is insight into how material flows
for biochemists and molecular biologists of two entirely different value chains may
able to recognise how the properties of a set be of relevance to each other. This starts
of biological and technical nutrients in one with sufficient information on what waste or
industry can be successfully cycled through by-product streams are available. It may be
another industry value chain. company-internal teams that then go and find
an application for these volumes, as is the case
4. Enablers to improve cross-cycle and with Procter and Gamble’s GARP team157, or
cross-sector performance this matching up may be performed by a third-
party service, such as a waste operator that
For widespread reuse of materials and has moved beyond the commodity business of
higher resource productivity to become waste haulage.
commonplace, market mechanisms will have
to play a dominant role, but they will benefit Rethinking incentives. ‘Rules of the game’
from the support of policy makers, in the form of better-aligned economic
educational institutions and popular incentives from tax authorities and regulators
opinion leaders. on issues such as cost of landfill and labour
costs could potentially speed up adoption of
Expand and reinforce cross-cycle more circular business models. For example,
collaboration. Consumer goods companies in most developed economies, taxation today
that want to design products and services largely relies on labour income. Resource
that are well-tailored to circular models, adopt and labour market economists have long
new business models, and build effective argued that labour—as a ‘renewable factor
and efficient reverse supply chains, cannot input’—is currently penalised over material
do this in isolation. They require new forms and non-renewable inputs. Instead, they
of collaboration with many other parties in advocate shifting the tax burden away from
their supply chain, sometimes of an entirely labour/income and towards non-renewable
different size or nature. At times this can resources. According to Walter Stahel: ‘Taxing
shake up the existing relationships and a new the consumption of non-renewable materials
balance needs to be found. As Jean-Philippe instead of labour will promote the local
Hermine, VP Strategic Environmental Planning reuse of goods, components and molecules
at Renault, recounts: ‘When we got involved and thus reinforce the competitiveness of
in our suppliers’ sourcing practices because the value-preserving business models of a
we wanted them to use certain secondary circular economy.’158
raw materials, we basically interfered with
an important source of how our they create There is some evidence though that this idea is
margins. As a consequence the supply taking hold at long last. In its December 2012
chain collectively needed to assess the new ‘Manifesto for a resource-efficient Europe’, the
profit pools and learn to capture a different Members of the European Resource Efficiency
competitive advantage.’ Platform advocated such a tax shift (among
other points):
Develop cross-value-chain collaboration.
A successful circular economy requires ‘Abolishing environmentally harmful subsidies
companies to look outside their own value and tax-breaks that waste public money on
157 GARP stands for Global
Asset Recovery Purchases chain and build collaborations across value obsolete practices, taking care to address
158 From Walter Stahel’s
chains; bringing together companies (and affordability for people whose incomes are
address to the World individuals) that are not used to working hardest-pressed. Shifting the tax burden away
Resource Forum in Davos,
Switzerland, September 2011 together. Jean-Philippe Hermine at Renault from jobs to encourage resource-efficiency, and
notes: ‘For reverse supply chains like the one using taxes and charges to stimulate innovation
159 European Commission:
‘Manifesto for a resource- in our ValTex textile recycling effort to work, a and development of a job-rich, socially
efficient Europe’ http://
europa.eu/rapid/press-
large group of very diverse players needs to cohesive, resource-efficient and climate-
release_MEMO-12-989_en.htm be able to work together. There are synergies resilient economy.’159
TOWARDS THE CIRCULAR ECONOMY | 77
What will also help to quickly reach scale One example is in phosphorus markets, where
is regulation in the areas of consumer a few governments have started actively trying
and corporate responsibility, accounting, to help businesses extract value from sewage
certification, and standardisation. sludge. In Germany, the Federal Environmental
Office recently announced a goal of retrieving
Providing a suitable set of international phosphorus from sewage, and Sweden set
environmental rules. Government and public up an action plan in 2002 aimed at recycling
sector entities can help to foster cross-chain 60% of phosphorus, mainly by making sewage
collaboration by establishing standards and available for reuse. There may also be a role for
guidelines. Governments should re-examine intermediate, ‘convener’ institutions in some
certification programmes to enable new ways countries (e.g., WRAP in the U.K.).
of confirming the viability or safety of circular
products. As one example, limited certification Access to financing. All players across
guidelines currently exist for the use of the value chains need access to financing and
digestate from the anaerobic digestion process risk management tools to support capital
as a fertiliser. In a related vein, public authorities investment and R&D. These points are closely
can also encouraging the shift from consumable linked to the above-mentioned ‘rules of the
to durable, for example, by making reusable game’: a stable regulatory environment is a focal
beverage cups mandatory at music festivals point for investors. Governments can create
and other large-scale events, all of which must further funding stimuli by underwriting some of
currently obtain local permits to be held. the risks associated with innovative businesses.
Regulation could push producers to be more In Brazil, the Ministry of Agriculture, through the
responsible for the end of life of their products.ABC program, gives access to preferred credit
This would provide greater incentives for conditions to companies taking innovative
deeper circular design of their business model. initiatives.160 Private investors are already
investing in circularity and are doing so for
One area that could greatly benefit from deeper profit. Another example is Climate Change
government involvement is the preservation Capital (CCC), a London-based investment
of soil fertility. A few governments have manager and advisory group specialised in
already started responding to the need for carbon finance. The fund is one of the largest in
constant soil replenishment and a healthy the sector with over GBP 1 billion invested, and
balance of nutrients. In Ireland for example the is currently investing in anaerobic digestion in
government has put in place a comprehensive the U.K.
range of measures. One of the provisions
of its ‘Standards of Good Agricultural and Besides direct government funding, public-
Environmental Condition’ is to maintain the private organisations also play a crucial role, for
organic matter content of soil above the critical example in circular systems for soil nutrients.
limit of 3.4%. A number of agricultural funding One example is the Nutrient Platform’s program
mechanisms include soil fertility criteria and to ‘close the loop’ in Ghana. It is working on
a fertility monitoring system is in place. developing organic fertiliser products for the
Expert matter advice is available to farmers cocoa sector from different waste streams.
where needed. Nutrient Platform’s approach is strongly focused
on business development, combining local and
Leading by example and driving scale up fast. international private sector players on both the
There are many opportunities for governments demand and the supply side.
to use their own procurement and material
handling processes to accelerate the spread While the list of enablers is long, the trends
of circular setups. In the U.S., the policy of supporting a large-scale shift bode well. Both
moving towards procurement of performance- resource prices and disposal costs are rising,
based services (rather than products) has increasing motivation to find new solutions.
created a market of significant scale. In its Progress in technological and material
convenor or ‘matchmaking’ role, a government development supports longer-lasting and more
160 Maximum USD 500,000 can initiate concerted efforts among different reusable designs, and increased visibility along
loan, over 5 to 15 years, at companies in the value loops that are large the value chain enables all participants to better
5.5% - Money market rate is
around 7.5% enough to overcome diseconomies of scale. track products and materials.
78 | TOWARDS THE CIRCULAR ECONOMY
Howard Gardner
Recent work by educationalists Bill Lucas
Professor of Cognition and Education at
the Harvard Graduate School of Education and Guy Claxton seems more in tune with a
changing world. They advocate ‘reframing
discussion on skills in terms of developing
dispositions and habits of mind’.162 This
The root of our existing educational system connects with the thinking of Howard
mirrors that of our economic system. Both Gardner (quoted above) and with leading
emerged from the traditions and worldview intellectual and business advisor Nassim
that originated in the Enlightenment: the Taleb who writes, ‘Solutions can only come
world is ‘machine-like’. Science now reveals from simple heuristics. That’s what we
that the world is not especially ‘machine- have been doing since civilisation began ...’
like’—it is more connected, feedback-driven The underlying sense in the term ‘circular
and reliant upon non-linear systems. As a economy’ is an attempt at such a heuristic,
result, with ‘systems thinking’ at its heart, a framework for thinking.
a new scientifically based worldview is
taking hold: a kind of revitalisation—an apt The education system, if it remains true
word, for many of its insights are based on to the rationale of mirroring the scientific
insights from living systems—a 21st century state of play and the economic concerns
Enlightenment. of dominant nation-states and leading
institutions, will have to evolve to enable
The nature of the shift learners to grasp the ‘habits of mind’, the
‘simple heuristics’ and the ‘dispositions’
The shift towards systems thinking is that enable effective ‘whole systems’
epitomised by the examples of the bio- design. This spans products, technologies,
based economy presented in this report. and molecules, materials, and energy flows,
A systems-based scientific worldview and perhaps makes explicit those links
recognises the importance of connection between the subject specialties
and flow, of dynamic equilibrium where that are chronically underplayed at the
feedback drives change and where the old present time.
161 Professor Howard
one-way production system replete with
Gardner (26th April 2012) waste is replaced by cascading materials. Whole systems design demands a thorough
OECD Education Today:
Educating for innovative ‘Waste = food’ is the notion of capturing rebalancing to make sure the specialist and
societies. value in all of the flows and, importantly, general skills underlying systems design
162 Bill Lucas and Guy of rebuilding natural capital to ensure flow into one another, creating a richer
Claxton 2010 New Kinds
of Smart (Buckingham
enhanced flows. Just as the relationship understanding altogether.
OUP Press) of the part to the whole has reversed
TOWARDS THE CIRCULAR ECONOMY | 79
Examples of rebalancing
Analysis Synthesis
Closed and immediate cause and effect Multiple influences through time and space
1
82 | TOWARDS THE CIRCULAR ECONOMY
a company’s exposure to ever more volatile end-of-life treatment options and incentives
raw materials prices, increasing its resilience. to use them could increase the number of
consumer touch points. This is especially
The threat of supply chains being disrupted true for businesses that rely on consumer
by natural disasters or geopolitical participation, for example to separate waste
imbalances is lessened, too, because such as Brantano, which periodically runs
decentralised operators provide alternative ‘new for old’ program in their shops to
materials sources. As Jean-Philippe Hermine collect used shoes in exchange for discount
at Renault remarks: ‘By reusing material, you vouchers. Here again, systems can only work
disconnect from market price volatility and if they offer mutual benefits.
secure supplies’.
New business models such as rentals
Both natural and synthetic fibres, for establish a longer-term relationship with
example, have a strong correlation with consumers, as many more interactions take
energy prices, which has led to price surges place between consumers and companies
and higher volatility. This is an important over the lifetime of a product. This offers
issue for clothing producers as materials companies the chance to gain unique insights
input is 9% of the cost of a garment, on into usage patterns that can lead to a
average. Replacing a larger share of inputs virtuous circle of improved products, better
with cycled materials would reduce clothing service, and greater customer satisfaction.
manufacturers’ exposure to the volatility168
of raw materials prices. Establishing a Circular models could also result in
reprocessing industry would therefore be better alignment between the interests
a highly advisable strategy for countries of consumers and companies, increasing
that currently import large quantities of raw customer satisfaction and loyalty. One
material in the form of cotton and synthetic example is the durability of clothes. The
fibres as inputs for the textile industry. trade-off for the company in a linear system is
customer dissatisfaction versus the potential
Mineral fertilisers are another example where to sell a new piece of clothing. In a circular
the local nature of many circular businesses system, where consumers can return clothing
should have a dampening effect on price for inexpensive/free repairs, companies
volatility. Fertiliser prices are set globally, and consumers both have an interest in
as the products are easy to transport and preserving the utility of the product.
depend on globally traded commodities
such as natural gas. Prices have been highly Another important point is that consumers
volatile in recent years, causing uncertainty care about waste, and addressing it
for farmers as fertilisers and crop protection proactively can have reputational benefits.
accounts for a large share of farm operating In 2012, H&M was humbled when it was
costs (40% for cereals production in the found to have been mutilating and then
EU).169 disposing of clothes it had been unable to
sell in order to keep them from turning up
Improved customer interaction and on the grey market. Public outcry forced
loyalty. Circular solutions offer new ways management to halt the practice.170 Food
168 ‘Soaring polyester puts to creatively engage consumers. ‘Instead waste is a particularly emotional topic, and
squeeze on fashion’, FT, April
2011, and ‘Cotton prices surge
of one-time transactions, companies can illustrates how deeply a company’s reputation
to all-time high’, FT, Feb. 2011 develop life-time service relationships with can be affected by their action on this issue.
169 Farm Economics their customers’, says Lauren Anderson, A recent Unilever study showed that a large
brief N°2 - EU production Innovation Director at Collaborative majority of people (94% in China, 96% in
costs overview, European
Commission on Agriculture Consumption Labs. The new ‘Coca-Cola Brazil and 72% in the U.S.) do care about the
and Rural Development
Freestyle’ soda vending machine offers environmentally friendly disposal of food
170 H&M says it will stop consumers a very large choice of flavours, waste both at home and when eating out.171
destroying unworn clothes’,
New York Times, 6 January but has the footprint of just a few packages
2010 of Coke. With rental or leasing contracts in Optimisation of materials recycling systems.
171 Unilever, Sustainable place, companies can gather more consumer Some materials recycling and composting
Kitchens: Reducing food
waste—World Menu Report
insights for improved personalisation, systems are already well established.
global research findings, 2011 customisation, and retention. Providing They typically take the form of regionally
TOWARDS THE CIRCULAR ECONOMY | 85
ESTIMATE
Beyond its fundamental value creation cost savings opportunity of USD 706 billion
potential over the next 10 to 15 years, a or a recurring 1.12% of 2010 GDP, all net of
large-scale transition to a circular economy materials used in reverse-cycle processes.
promises to fundamentally address some This breaks down into the categories shown
of the economy’s long-term challenges. A in Figure 20. In these scenarios, the savings
circular economy could cut net materials would represent ~ 20 percent of the material
costs and reduce price volatility and supply input costs incurred by the overall consumer
risks. Local job creation will be another goods industry.
important benefit, alongside greater
innovation and greater resilience. Importantly, These figures are intended to demonstrate
the greatly reduced materials intensity the order of magnitude of the savings that
and lower energy demands of the circular could be expected in a circular economy.
economy offer a viable contribution to Since the full effect of circularity for the
climate change mitigation and fossil fuel entire economy is highly dependent on
independence, making it easier to cross many factors such as industry structure
the threshold to a production base that and conduct, elasticity, and companies’
largely runs on renewable sources of energy. drive to reap circular potential, we chose
Moreover, the decoupling of growth from the to ground our estimate on the potential
demand for resources will also slow current materials savings observed for the products
rates of natural capital erosion, as the next in the examples examined in Chapter 3 and
section argues. extrapolated those to the rest of the fast-
moving consumer goods categories.
Substantial savings on net materials costs.
This report estimates that the circular
economy could represent an annual materials
86 | TOWARDS THE CIRCULAR ECONOMY
FIGURE 21 Path to a circular economy—design and recover consumer goods for reuse or decomposition
% of FMCG products (by value)
Future5
1 Decomposition to allow materials to be recycled or biodegraded, depending on product/packaging material characteristics and end of life collection
2 Cannot be reused, recycled or biodegraded due to poor design and/or lack of end-of-life collection options
3 Reuse can include direct reuse for the same or different value streams or industries
3 Economic feasibility demonstrated in this report
4 Economic feasibility not yet proven
SOURCE: Euromonitor 2011, Expert interviews, Ellen MacArthur Foundation circular economy team
TOWARDS THE CIRCULAR ECONOMY | 87
FIGURE 22 The impact of more circular production processes accumulates across several layers of inputs
The circular economy will relieve report found that ‘increasingly, jobs that are
environmental burdens by reducing the need created are in research and development,
for landfill and decreasing the public costs product design, engineering, and marketing,
of waste treatment (a severe burden on the whereas most unemployed people are
state as these costs are often not covered unqualified and require relatively less skilled
by the companies that make or process the jobs. While training can help redress this
items that end up in those landfills). Realising imbalance, new entry-level semi-skilled jobs
the full benefits of the circular economy from are also needed to replace the factory jobs
the specific examples we have investigated— that the linear economy has out sourced to
clothing, consumption food waste, food the developing world.
processing waste, and packaging—would
globally divert up to 340 million tonnes While some of the jobs created by the
of waste from landfill each year, of which circular economy are highly skilled, such as in
more than 80 percent would be from the technology development and research, a large
elimination of food waste alone. These savings share of the job creation is also for unskilled
are equivalent to 2.5 times the municipal labo ur, addressing a major problem of
waste the U.S. generates each year.172 developed countries, where such positions are
172 US EPA: 2010 MSW
characterization fact sheet becoming increasingly scarce. ‘The diverging
and data tables, November
2011 Municipal waste Where GHG emissions are concerned, the fates of high- and low-skill workers are seen
stream includes waste impact could also be substantial. If food across the OECD: the share of employed
from both households
and businesses. Municipal waste were diverted from landfill and the workers who lack an upper secondary degree
solid waste does not
energy from food waste-derived biogas was has declined by one-third since 1995’,177 the
include construction and
demolition materials, used as a replacement for natural gas, total report finds.
municipal wastewater
treatment sludge, or savings of 580 kg of CO2e per tonne of food
non-hazardous industrial waste could be obtained.173,174,175 The resulting Collection and sorting activities to enable
wastes
savings in emissions from household, retail, the reverse cycle are expected to create
173 Ecoinvent: The
and hospitality in the U.K. for example would additional jobs locally. The head of the French
ecoinvent database,
version v2.2, 2012 amount to 7 million tonnes of CO2e. Additional Environment and Energy positive influence
174 Emissions in the value greenhouse gas reduction benefits are gained on the soil’s water balance. Regenerative
chain of the food are not from replacing mineral fertiliser and using the agricultural systems typically pay special
taken into account, as
waste can be considered heat from anaerobic digestion. attention to water management and improve
burden free (IPCC) water balances through such design elements
175 WRAP, Waste arisings Greater job creation. Sectoral shifts will allow as crop choice, field layout, and landscape
in the supply of food and
drink to U.K. households, employment creation in new downstream elements.
2011 businesses. In a recent report, the McKinsey
176 McKinsey Global Global Institute analysed the underlying Management Agency says that 28,000 jobs
Institute: Help wanted: The
reasons for the 40 million people who are have been created in France over the past
future of work in advanced
economies, 2012 unemployed in developed countries. The 20 years in collection and sorting in the
88 | TOWARDS THE CIRCULAR ECONOMY
packaging sector alone.178 Sita Group, the Systems for reusing bottles also create
waste management arm of Suez Environment, jobs. A study of the German system—with a
estimates that some 500,000 jobs have large proportion of both reuse and one-way
been created by the recycling industry in the packaging (reusable bottles accounted for a
EU. This number could well rise in a circular share of 73% at the time of the study)—shows
economy. Clothes recycling, for example, will that production, filling, distribution, and retail
continue to rely on manual sorting. While employs 161,000 people. The study concluded
technologies are starting to emerge to sort that ‘going linear’—i.e., switching to a completely
textiles by type of fibre, human judgement one-way packaging system for beverages—
is required to sort clothes into around 160 would lead to the loss of 53,000 jobs, whereas
different categories according to what would increasing the share of reusable packaging to
be most appropriate for different markets. 100% would result in 27,000 additional jobs.180
Anaerobic digestion (AD) will create jobs Economic benefits from enhanced innovation.
not just at the plants themselves, but also Given the strong fundamentals of the
in logistics and at technology providers and underlying business case (assuming shifts such
related services, like quality testing. Anaerobic as comprehensive design changes to products,
digestion relies on local feedstock, heat sinks, service delivery processes, and technology),
and agricultural land to distribute the fertiliser, adopting more circular business models would
and therefore plants are limited in size (AD yield significant benefits, including greater
plants typically produce 1 - 2 MW, compared innovation across the economy (Figure 23).
to 1,000 MW for a big coal or nuclear power While the exact GDP implications of greater
plant). As James Russell from Tamar Energy innovation across an economy are difficult
puts it: ‘AD creates more jobs per MW than to quantify, benefits include higher rates of
any other energy technology’. Defra estimates technological development; improved material,
that 35,000 new jobs may be generated from labour, and energy efficiency; and more profit
the use of AD technologies in the U.K.179 opportunities for companies.
FIGURE 23 Revamping industry, reducing material bottlenecks, and creating tertiary sector opportunities
would benefit labour, capital, and innovation
274
2.97
180
0.16
0.14 1.87
177 McKinsey Global Institute:
Help wanted: The future of work in
advanced economies, 2012
Gap in
circular
mode
Gap
BAU
29
Soil nutrient
losses
2
(t/ha/year)
How consumers will win Clothing rental models will require clothes
that last, allowing consumers to wear the
The net benefits of a more circular latest fashion without any sacrifice of
economy are likely to be shared between quality or price.
companies and consumers. Marks & Spencer
explains: ‘Our first closed-loop project Lower total cost of ownership. Coca-Cola’s
has demonstrated that it is attractive to Mexican bottler, Femsa, exemplifies how
consumers—for high-value materials like consumers are likely to reap immediate
cashmere and wool, the cost of goods would price benefits from the circular economy:
be double for virgin material, so we would ‘On average, a refillable package is priced
have to sell at a much higher price’.186 Yet the 18% less than the same size non-refillable
examples in this report indicate that the package’.187 Similar savings will be available
real consumer benefits go beyond the throughout the value chain as companies
immediate price effect. Further advantages move to more reusable packaging. B&Q,
include improved utility and lower total Argos, and John Lewis in the U.K. have
cost of ownership. already moved towards reusable transit
packaging for larger items. As this report
Greater utility. The utility or benefit felt has discussed, however, cost benefits to
by consumers during consumption may consumers will go beyond the initial outlay.
be enhanced by the additional choice In apparel, for example, fast-changing
or quality that circular models provide. trends will no longer result in high costs
Consumer choice increases as producers of ownership for consumers: the rate of
deliver systems that allow the tailoring obsolescence will be greatly reduced
of products or services to better meet as wardrobes will no longer be packed
consumer needs. The digital world already with barely worn, out-of-fashion items.
provides many examples of customisation Consumers will also benefit from circular
based on individual taste/requirements (from models through the longer-term reduction
a range of offerings for men’s dress shirts, of municipal waste disposal costs and—
build-your-own chocolate or energy bars directly or indirectly—other environmental
and ice cream combos, to NIKEiD sneaker costs associated with the old linear system.
customisation and Songkick concert or
Amazon product recommendations). As To realise these benefits, consumers, will
new circular technologies go mainstream, of course need to embrace new models
further opportunities will arise for fast- of consumption. However, the changes in
moving consumer products. One example is behaviour associated with more circular
Essential Dynamics, a U.S. startup working models will be motivated by the desire
on a 3D printer for pastry chefs. Researchers for higher utility and lower prices. The
at Cornell University are developing further changes do not require consumers to
professional and at-home food applications assign a higher-value to products just
for printers of this kind. because they are ‘circular’, i.e., produced
using circular business models. On a
Rental models such as those discussed for more crowded planet, greater consumer
apparel will provide consumers with awareness of the issues laid out in Chapter
a greater choice at the same or even 1 is important, but the circular business
lower prices. Similarly, the choice of models we have explored in this report will
soft drinks is dramatically increased via not rely on consumers putting societal or
concentrate delivery systems such as environmental needs ahead of their own.
Coca Cola’s in-store Freestyle machine or These models will provide businesses, the
Sodastream’s in-home system. economy as a whole, and the individual
consumer with economic benefits first
Reuse and rental models also provide and foremost, while also ensuring a
consumers with access to higher-quality regenerative model of consumption for
186 Interview with Mark experiences without trading up to higher- future generations.
Sumner, 16 December 2011
priced propositions. Beer drinkers are able
187 WRAP, Refillable glass to enjoy their beer from heavy glass bottles
beverage container systems
in the U.K., 2008 rather than aluminium cans or PET bottles.
5
TOWARDS THE CIRCULAR ECONOMY | 75
1
94 | TOWARDS THE CIRCULAR ECONOMY
The signs that the circular economy could (average) prices are also very volatile, as the
transform the consumer sector are already 2008 spike of USD 399 per tonne of fertiliser
apparent. But major change is required, showed.
and the linear world will continue to offer
some powerful disincentives for incumbents Second, advanced technology is ushering in
to take action. This chapter examines new opportunities to shift
how companies, consumers and public Technology has progressed to a level that
constituents can jointly accelerate the is opening up entirely new possibilities in
transition towards the new economy that three areas: information & communication,
we all ultimately need. industrial applications, and online retail.
• Technologies that facilitate reuse and are in emerging markets. Brazilian social
recycling: ‘Worn Again’ is an example of network penetration in 2010 was the second
recycling where technological innovation highest in the world, at 87.7%.189 A recent
plays a critical role. It enables the separation McKinsey survey of urban African consumers
of polyester and cotton followed by polyester in 15 cities across the continent found that
recycling into new polyester, leaving the almost 60% owned Internet-capable phones
quality unaltered. Only 0.1% of materials or smartphones.
are lost during processing. The cotton can
be chemically recycled into cellulose and Third, urbanisation is driving the
reintroduced to the textile value chain centralisation of consumer goods flows
as viscose. This technology allows real For the first time in history, over half of the
closed-loop recycling of polyester and world’s population will reside in urban areas.
provides a solution to the industry-wide By 2020, urban populations are expected to
problem of blended fibres. In the food rise by a further 20% to over 4.2 billion, 80%
industry, Wildwood brewery has developed of them in developing countries.
an integrated system to cascade or re-
use materials. Beyond the actual brewing Centralised consumption should mean that
process, the operations of this Montana reverse logistics—like the logistics of new
brewery include mycoculture, vermiculture, product delivery—become more efficient
anaerobic digestion, aquaculture, and more cost-effective. The collection of
and agriculture. household waste, as one example, will be
cheaper due to shorter collection distances,
• Technologies that facilitate cascading: and more efficient due to more frequent
An innovator in the field of cascading collection (increasing the collection rate and
use of waste to another value chain is reducing waste leakage).
Waste2Chemical, a bioengineering spin-
off from Wageningen University in the Integrated systems are an ideal solution to
Netherlands, where Professor Louise Vet recover materials in urban areas, leveraging
fosters research and innovation around short transport distances and high population
closed loop practices. This company develops densities. Alterrus VertiCrop in Canada is
bacteria that can process mixed waste and another example. In the words of its CEO,
convert the different components (fats, VertiCrop technology represents ‘a radical
proteins, and carbohydrates) into building shift in sustainable food production.’ Its
blocks for the chemical industry. While still at vertical-farming patented technology uses
lab stage, it has already attracted attention hydroponic technology to grow leafy green
and collaboration opportunities from both vegetables and herbs in a greenhouse. The
municipal waste generators and the chemical first rooftop incorporating this technology
industry. MBD Energy, mentioned above, has opened in November 2012 in Vancouver,
a further two projects under construction with the aim of producing some 70 tons
in Australia aimed at using algae to recycle of leafy vegetables per year. The company
captured industrial flue-gas emissions to targets yields up to 20 times higher than
produce liquid bio-fuels. normal (field) production volumes, with
fewer resources—only 8% of normal water
Online retailing provides a platform for new consumption would be used, and no strong
circular business models. In the U.S., online herbicides or pesticides. The vertical farms
retailing amounted to USD 200 billion in are much nearer urban centres, so they
2011, making up 7% of the overall retail promote local sourcing and the supply of
trade, and is expected to grow by a further fresher food. The shorter transportation
10.3% annually to USD 327 billion in 2016.188 distances reduce costs, energy consumption
Over half of US consumers bought an item and carbon footprint.
online in 2011. In emerging markets, where
188 Forrester research
consumption is growing at breakneck pace
and analysis (and, with it, the volumes of discarded
189 McKinsey Quarterly materials and by-products), there has been
article, August 2012, :
Winning the $30 trillion
swift uptake of the Internet and social
decathlon networks. More than half of Internet users
96 | TOWARDS THE CIRCULAR ECONOMY
Some consumer goods companies luggage and packs’, and is willing to accept
are successfully pioneering items for which the recycling or upcycling
circularity approaches process is currently unclear or non-existent.
delivered 4.20 million pieces of clothing to will bring the manifesto of the European
refugees and others in need in 22 countries, Resource Efficiency Platform (EREP) to life in
including victims of the March 2011 disaster its assertion that there is ‘no choice but to go
at Fukushima. for the transition to a resource-efficient and
ultimately regenerative circular economy’?
Sodastream—Making carbonated Clear opportunities, set out in chapter 4, exist
drinks at home in the near term. Awareness and conviction
Israel-based Sodastream (2011 revenues of are also on the rise. While it is too early to
USD 275 million) is to carbonated drinks interpret these portents with precision, there
what Kindle is to books. Sodastream uses are identifiable patterns of events and actors
an established technology to displace that have carried systems-level change towards
consumable beverage packaging with a the tipping point in the past. What change
durable container. It has effectively created in economic pressure, shift in market share,
a revenue stream from both the sale of its or price fly-up will determine which patterns
apparatus and from a new consumable: could usher in the circular economy at the
the gas needed to infuse water and other critical scale required to reach the ideal future
beverages. Sodastream locks in customers state191 (Figure 30)?
through its system of refillable gas canisters
as well as minimising the packaging Most typically, change has been a reaction
material associated with gas consumption. to external shocks. Disruption of the global
food supply would raise awareness of the
Which pattern of change? need to shift to a more resilient model. Also,
it is often in the wake of natural or man-made
Market innovators are probing new patterns disasters that systems are (temporarily)
of circular consumption. But their models rebuilt around resource security and much
remain the exception. What needs to higher degrees of recovery.
happen for them to propagate? What
FIGURE 30 Path to a circular economy — design and recover consumer goods for reuse or decomposition
% of FMCG products (by value)
outlined above and elsewhere in this report. Cities and other public constituents as
supply chain integrators and brokers
Retailing to micro-markets and circular of first resort
supply chain design Companies—as we have seen—have a
How do retailers see their future? Today they growing incentive to redesign products
are confronted by consumers demanding and chains vertically, starting from the top,
higher quality at lower prices, while also to eradicate costly waste and provide a
expecting regionally produced food from more tailored offering. Likewise, cities and
big chains. Walmart, for example, increased regions could play a new role in a world
sales of their locally sourced produce by 97% where materials and energy security are
in 2011, to over 10% of total produce sold in returning to the regional, if not local, agenda.
the U.S.194 Consumers judge supermarkets on Scotland, the Dutch city of Rotterdam, and
their fresh products, yet the fresh chain is the Tianjin, Miluo, and Taiyuan cities in China
most difficult of all to manage. have started to build circular economies
and provide all the infrastructure, services,
Circular principles that could help retailers and policy support needed to advance
master these challenges and meet circularity. They envisage more energy
consumers’ needs would be to shorten recovery, higher land productivity, value
the value chain, making local production creation through new reverse cycle business
possible. A number of examples already development, and employment creation.
described in previous chapters exemplify They see the circular economy as an
how collaboration along the value chain can accelerator for their economic agenda. Some
simplify processes while also reducing costs are creating knowledge innovation clusters
(and thus prices for consumers). Circularity for the circular economy that will help to
also reduces overall exposure of the value trigger exponential expansion in the field.
chain to commodity inputs and opens Benchmarks could be developed for every
up greater opportunities for using local (relevant) industry that pursued cascading
farms as effective, collaborative suppliers. rather than mere recycling. Infant industries
Discarded foods will serve as fertiliser and might be convened (such as nano-packaging
soil improvement for farms, or as a source of or smart textiles) to evolve circular systems
bio-based energy and chemicals; in return, before the industry is mature, when designs,
farms will sell back quality local produce at manufacturing footprints, and distribution
competitive prices. models are locked in. Another avenue might
be defining a template for a sector labelling
Apparel companies as fashion partners initiative and establishing a pilot in a pioneer
for life industry, such as clothing. Generating an
Apparel and textile companies have always open-source materials database would also
strived for longer-term relationships with assist in driving the change, giving details
their customers. In the circular economy, of each material’s function, performance,
consumers would have fashion partners and economics. In the apparel industry, for
from whom they would select their example, the Sustainable Apparel Coalition
apparel, returning it in exchange for new is developing the Higg Index to measure and
clothes. Products would be more tailored score its industry’s products and operations.
to consumer needs due to the greater Setting up a component trading scheme
interaction between producers and end could make another huge contribution.
users. The benefits for companies would
be greater customer loyalty driven both Some companies are starting to develop
by enhanced customer experience and the full-fledged regional resource plans for
new ancillary services they offer (such as primary/secondary resources. Others are
repairing garments and providing after- generating benchmarks by sector and
sales customisation). The recycling loop region to achieve the resource targets of
would close via smarter product design and such regional strategies as the EU Resource
breakthrough technologies that allowed high- Plan. An effective driver of change might
quality textile reuse. The prime benefit for be to create a circular-economy-based
companies would be lower materials costs. competition for municipalities and industrial
194 Walmart 2012 Global
Responsibility Report parks. Governments could convene and
100| TOWARDS THE CIRCULAR ECONOMY
support supply chain initiatives for specific based on analogous materials, requiring
archetypes, such as high-value, high-volume, estimates. At a minimum, it is possible to
and new supply chains. Taxation scenarios identify the presence of key ingredients
might also be investigated to determine such as sugars, aromatics, polysaccharides,
the impact of a potential shift from labour or oils. For each main family of ingredients,
to non-renewable taxation. The effects lists exist of the platform molecules that
of circularity on EU growth could also be can be derived from them, and potentially
explored, as well as its potential impact on of the chemicals and products that can
employment and the trade balance. be derived from these building block
molecules. (e.g., the U.S. Department
New framework on circular design of Energy investigated 300 platform
molecules that theoretically could be
If circular industrial design is carried by derived from sugar for their technical
strong trends and is supportive of corporate feasibility and commercial attractiveness).
and regional strategies, what is needed is The tally for this part of the investigation
a much more diligent search for waste and yields the incremental gross value creation
leakage along and across supply chains. potential of the ingredients. For flows
Whether for companies, industries, or with a positive value, the next step is to
regions, the search can be organised in investigate the cost of the process of
a very structured way, similar to value extracting the valuable ingredients. In
stream mapping in the context of lean the absence of cost data, the gross value
manufacturing; the framework brings can be used to determine a ‘budget’ for
together the cardinal points to study: the recovering and bringing the ingredients to
wasted resource flows, value creation market, making it easier to form an opinion
potential, possible barriers, and execution— on whether such a process (including
be it in-house or by a third party. This logistics) could be economically viable.
is illustrated below for the food
processing industry. It is useful to complete the resource
mapping exercise with information on how
What flows to go after? Regardless of scope, the environmental or social footprint of the
the search begins similarly by answering company/industry/region will be modified
the questions, ‘What wasted resource flows (ideally, improved) when making use of the
exist?’ and ‘Which flows should we pursue, hitherto wasted resource flow.
or pursue first, based on value?’ For the first
question, likely flows should be mapped What has so far prevented or could
from beginning to end point and including prevent the value from being realised?
information on size, quality, and change, In estimating the cost or working out a
i.e., how each flow will change over time budget, it is necessary to consider known
(reflecting known plans and forecasts) or or potential barriers to extracting the
might change (by assessing sensitivities) value. While the details will differ by the
regarding production growth, process material or ingredient in question, the
changes, or changes in raw material quality. main categories of barriers to look at are:
The mapping exercise should include any technical, infrastructural, commercial, and
waste materials and by-products that are regulatory.
already finding a useful application today,
since higher-value uses might be available. How should the value be extracted? Here,
a major decision is to determine how to
What is the potential payoff? During or upon handle execution. The terms of reference
completion of the basic maps of material will differ somewhat depending on
flows, the second step is to assess the whether the question of execution is being
potential for value creation. This information raised by a company, an industry (e.g.,
may be a current (market) value/tonne an industry association on behalf of its
of material taken from known metrics for members), or by a ‘region’ involving one
documented processes, some of which may or more government agencies and levels.
already be commercially established (e.g., for At the high level, however, the question
oil trap grease) or a potential value/tonne can initially be broken down to two basic
TOWARDS THE CIRCULAR ECONOMY | 101
choices: Is the resource flow is part of or effort in increasing the number of available
of interest to the core business? If not, is technologies for processing waste
there a third-party provider available or can valorisation, broadening the application of
one be created (as a shared service or via existing and novel technologies, scaling up
regulation)? commercially established processes, and
addressing any number of framing questions,
Assuming execution is to be by a company such as food safety concerns and distribution
in-house, management must then answer challenges.
the following questions (and an industry
association or regulator analogously): Of course, such a framework needs to be
adapted in the practical case to reflect
• Who should we partner with in our own the different interests and horizons of the
value chain and in other value chains to particular group undertaking an analysis, but
cover our needs regarding in-house logistics, identifying wasted resources is of interest
external logistics, processing, and marketing regardless of the differences in perspective.
end products? While a regional government agency may
well lack detailed knowledge of a given
• Who else in the system can provide support industry’s potential resources, it may have an
in the short, medium, and long term? This can advantage in knowing (or having the option
include local/regional/national authorities, to know) the ‘big picture’ and what other
universities and research institutions, and relevant value chains exist and what steps are
industry associations. being taken that might be usefully designed
into an integrated cycle.
If the resource stream is not of interest to a
specific company, the question to answer is
which third-party provider to contract with. If We are all aware that the materials and
no obvious third party exists, there may be a energy leakage from today’s supply chains
role for an industry association to help form is no longer economically viable, and
a ‘utility company’ to extract the value, or cannot be maintained forever. As this shift
modifications to regulations may be needed takes on clearer contours, the value of a
to bridge the market failure. In any case, design paradigm such as that provided by
both deep industry knowledge and excellent the circular economy cannot be overrated.
matchmaking skills are a must. It provides clarity for the multitude of
decision makers who jointly own today’s
What could a continuous improvement complex industrial chains. It links economics
process look like for a new circular flow? and the environment and delivers actionable
In both in-house and third-party solutions, criteria and tools enabling all of us to be
operations should aim for a steady state of a better steward of our supply flows and—
continuous improvement in value creation eventually—the planet.
and cost reduction. Value creation will focus
on seeking higher-value applications for
the same material flows (without ruling out
waste avoidance) and valorising a broader
set of material flows. Cost reduction efforts
will typically focus on improvements in scale,
logistics, and processes—both in how the
waste stream is created (perhaps changing
one step in production, cleaning, or collection
could result in a more valuable waste
stream) and in how the waste/by-product
is processed to recover value. Organisations
like the Institute for Food Research in the
U.K., or, at the European level, ISEKI Food
Association, a not-for-profit organisation
gathering academia and professionals from
the food sector, are putting considerable
102 | TOWARDS THE CIRCULAR ECONOMY
Appendix
Objective
The objective of our material saving analysis was to assess the value of materials that can be saved at
a global level by applying circular practices within several fast-moving consumer goods categories.
In our research, we studied 10 different consumer goods categories: Apparel, Beauty and Personal Care,
Beverages, Consumer Health, Fresh Food, Home Care, Packaged Food, Pet Care, Tissues and Hygiene,
and Tobacco.
Methodology
Cases analysed in depth
We have identified circular opportunities at different steps of the value chain, specifically in production,
packaging, and consumption. For each category and for each of these value-chain steps, we have based
our estimates of the global materials savings and other effects on in-depth analysis of the configurations
presented as examples in Chapter 3:
The textiles category was modelled for the whole textile value chain, i.e., from production to consumption,
due to its particularly differentiated set of opportunities for reuse.
This ratio is an indicator of the impact on material flows of circular economy solutions. In order to build a
realistic metric rather than a fictive ratio uncorrelated with business reality, we calculated material savings
based on circular practices, conditional on these practices being profitable.
Scenarios
Both local factors and the status of implementation of circular practices can affect the materials savings
ratios. Hence, we accounted for these differences and modelled four different scenarios.
The first three scenarios are status quo, transition scenario, and an advanced scenario. The fourth scenario
was a fictitious fully linear model that shows the results of having no circular solutions at all.
The status quo corresponds to the current situation observed (information gathered through interviews
and Ellen MacArthur circular team analysis).
The transition scenario represents an intermediate situation in which the activation of circular enablers has
initiated.
The advanced scenario corresponds to a situation in which key circular enablers have been activated and
circular practices are in place.
Geographies
We have defined materials savings as savings from the application of profitable circular practices. Our
analysis has shown that this ratio would be affected by local factors such as labour costs, organisation /
business structures and processes, and infrastructure already in place. To adjust for this, we have varied the
savings ratio across three geographic regions: Canada and the U.S., Europe, and the other large economic
regions (Asia, Africa, and South America).
Scale-up of findings
We have scaled up the materials savings using the cost of materials inputs for each of the ten fast-
moving consumer goods categories. The costs of materials inputs were derived using end consumption
data from Euromonitor for 2011 and the share of materials inputs (in terms of retail price of the products)
for each category. These percentages of material input were obtained through interviews with experts for
each of the ten consumer goods categories.
TOWARDS THE CIRCULAR ECONOMY | 103
Scenario6 End-of-life Collected Reuse1 Recycle2 Cascade3 Components and business model,
products Percent Percent4 Percent4 Percent4 transition and advanced scenario
Millions p.a.
Food and Status quo 12 30 - – 100 • Currently, 47% of municipalities collect; increase to
beverages: 75% in transition and 100% in advanced scenario
households • Households assumed to separate 50% of food waste
and retail7 Transition 12 50 - – 100 produced, rising to 70% (WRAP trials: up to 77%)
• Assume 90% of waste separated by commercial food
waste producers, as easier to achieve by regulation and
Advanced 12 75 - – 100 paying directly for waste
Food and Status quo 2.3 60 100 – 60 • Collection rates increased through better handling
beverages: of brewer’s spent grains (BSG) due to improved
production communication and cross-value-chain collaboration
Transition 2.3 70 100 – 70 • Cascade rate is equal to collected rate due to full reuse
of collected BSG in other value chains
Packaging Status quo 1.0 – – 49-61 – • Transition scenario assumes 50% of all beer in reusable
glass bottles; advanced scenario assumes industry-
wide collaboration for 100% adoption
Transition 0.8 95 50 49-61 – • Recycling rates assumed constant for all packaging
types (e.g., PET, aluminium and glass)
• Collection rates for reuse at 95% via deposit scheme
Advanced 0.1 95 100 49-61 –
1 Reuse refers to both domestic and exported reuse of products in their original form
2 Recycling: A process of recovering and converting materials into new products within the original value stream and industry
3 Cascade: A process of putting materials and components into different uses after end-of-life across different value streams and industries
4 Rates as % of products collected; add up to 100%
5 End-of-life clothing decreases between stages as takeup of clothing rental schemes increases from 0% to 15% to 30%, thereby decreasing annual new
production and end-of-life clothing
6 The cases are based in different locations. Food and beverages (households): UK; Food and beverages (Production): Brazil; Clothing: UK; Packaging: UK
7 Waste from households, food service and restaurants, and retail/distribution
Appendix
Continued
Adjustments to assumptions for net material cost savings calculations in different regions
Changing
variables Europe North America Rest of World
Volume • Status quo U.K. 30%, rising • Status quo U.S. 2%, • 12% rising to 30%
Food and
collected to 75% rising to 50%
beverages:
households
and retail All materials values assumed to be the same globally
Value (e.g., electricity, heat, fertiliser)
• Higher collection rate due to • Higher collection rate due to • Lower collection rate due to
Volume
Food and more efficient infrastructures more efficient infrastructures lack of infrastructure
beverages:
production
Value All materials values assumed to be the same globally1
Volume • Medium initial collection rate • Low initial collection rate • High initial collection rate
(25%) rising to 40% and 65% (15%) rising to 35% and 55% (65%) rising to 75% and 90%
in transition and advanced in the transition and advanced
scenarios scenarios
Clothing • Chemical recycling increased • No chemical recycling
from 0% to 9% in advanced
scenario
Value All materials values assumed to be the same globally (e.g., t-shirts, trousers)
1 Relevant assumption only for the materials savings calculation. The value is derived based on the nutritive value of brewer’s spent grains, minus discount for their wet state
2 Combination of reuse opportunities for beverage packaging and improved recycling opportunities due to better sorting for all other packaging
Treatment costs
SOURCE: WRAP, Valuing Our Clothes, 2012, WRAP, Textile flow and market development opportunities, 2012, expert interviews,
Ellen MacArthur Foundation circular economy team
106 | TOWARDS THE CIRCULAR ECONOMY
Appendix
Continued
Appendix
Continued
1 For purposes of comparison, costs associated with packaging choice (e.g., materials costs, processing, transport, collection, in-store handling and capital requirements)
are included. Revenues assumed to be equal for all packaging options, therefore not included in the analysis (since it is assumed that price and volume sold would not
change based on packaging choice).
2 Status quo assumed to be current UK market split for beer packaging across glass, aluminium, and PET.
SOURCE: Expert interviews (SABMiller, Coca-Cola, WRAP), Recoup 2011 report, PwC : ‘Reuse and Recycling Systems for Selected Beverage Packaging from
a Sustainability Perspective’, letsrecycle.com, Canadean ‘Global beer trends 2012,’ Ellen MacArthur Foundation circular economy team
TOWARDS THE CIRCULAR ECONOMY | 109
List of figures
Appendices
Scenarios for more collection and circular treatment rates
Adjustments to assumptions for net material cost savings calculations in different regions
Clothing: economics of circular business activities
Food and beverage production: economics of circular business activities
Food consumption waste: economics of circular business activities
Packaging: economics of circular business activities
111 | TOWARDS THE CIRCULAR ECONOMY
The Ellen MacArthur Foundation was established in 2010 with the aim of inspiring
a generation to re-think, re-design and build a positive future through the vision
of a circular economy, and focuses on three areas to help accelerate the transition
towards it.
The Foundation, with the support of the Founding Partners, has gone on to create a
programme that focuses on building capacity across the wider business community.
The Circular Economy 100 will provide the opportunity for 100 companies to
stimulate circular economy innovation, foster collaboration, build capacity and
unlock the economic opportunity through accelerator workshops, distance learning
modules and an annual summit, hosted by the Foundation and its Founding Partners.