Circles
of Life

In The Circular Economy Handbook, Peter Lacy and co-authors Jessica Long and Wesley Spindler confront the likelihood of half the world being ‘middle class’ by 2030 and the demand for resource-intensive goods that entails.

To them the transition to a circular economy is a chance “to transform some of these challenges to opportunities, creating financial and economic value for business and society.” Their book is a guide for industries and organisations including oil, consumer goods, technology and fashion to achieving ‘circularity’. Shifting from our throwaway culture, it suggests, could deliver a $4.5 trillion reward and “eliminate the concept of waste itself.”

So what is the circular economy?

Two simple ideas lie behind it, Lacy tells me. In his previous book Waste to Wealth: The Circular Economy Advantage (2015), the former McKinsey consultant predicted the shift which the new book spells out in 1500 examples.

“Since the Industrial Revolution, we’ve been living in a linear economy that is all about ‘take-make-waste’. We have assumed that natural resources will be available indefinitely. But it’s become clear that, given the resources and the boundaries of the planet, that’s just not feasible.”

Lacy believes we’re living on borrowed time: even taking into account rapid technological development. He references the think tank the Global Footprint Network, which calculates we’re using 75 per cent more natural resource than we regenerate each year.

The circular economy, Lacy says, addresses both the macro and the microeconomy: “We need a fundamentally different model of growth, for people and for the planet. We need to decouple prosperity, economic development and jobs from the harmful use of natural resources.” At the micro level meanwhile, it’s about innovation. “That might mean moving from a product to a service, or changing material to something biodegradable, [exchanging] fossil fuels for renewable energy but still delivering the same value.”

He cites French multinational Michelin, which is moving from selling to leasing tyres: offering a “by the kilometre” service rather that offering a disposable product liable to end up in landfill.

“You don’t literally ‘buy’ Michelin’s tyre: Michelin owns it for the entire use-phase. You buy the right to use the tyre and for every kilometre travelled. So Michelin designs it so that it can be remanufactured and reused, or so that its individual components can be used in some other way.” An example: the soles of Timberland’s ‘Earthkeeper’ boots are made from recycled tyre rubber.

The product-as-service model fosters long-term relationships between consumer and producer: “That is the ultimate value-creating strategy for the circular economy,” Lacy says. There are challenges ahead: “There are some capital-intensive costs in these industries that need to be upgraded and updated, and that can be tough. It’s going to be even tougher now, in the Covid era, given people’s balance sheets. But innovative finance providers, like [Dutch bank] ING and [Italian bank] Banca Intesa Sanpaolo are increasingly providing the necessary financing mechanisms to fuel the circular transition.”

And while acknowledging the hardships of the global pandemic, he says tough times may be “a window of opportunity for smart governments and for business … a pivot to the next wave of infrastructure to support new economies and new types of work.”

For the individual investor, Lacy sees great opportunity. “If you are passionate about sustainability and want your values to align with your investments, that’s eminently doable these days. There are multiple investment funds out there; It is perfectly legitimate to put pressure on advisors to construct portfolios that align with your values.”

Changes must come at governmental level too. Today, the tax on workers is far greater than the tax on resources: in Europe, labour taxes provide 52 per cent of all tax revenues, while taxes on natural resources provide less than 0.3 per cent. This is, Lacy says, “patently ridiculous … We want people to have jobs – why would we tax the thing we want the most?”

In the coming years, as humanity confronts the climate crisis and the aftermath of the pandemic, “there’s going to be a period of creative destruction.” Crisis, he remarks, is the mother of innovation: “I think, I hope and believe, that we’ll see a shift to taxing the harmful use of natural resources, which will drive change towards the circular economy far faster than we predicted.” The time for change, he says, is right now.

The Circular Economy Handbook: Realizing the Circular Advantage by Peter Lacy, Jessica Long and Wesley Spindler is published by Palgrave, £24.99.

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