140
2 The Circular Economy – “Loop”, “Lake”
and “Performance” Models
Distinguishing between capital stock and flows opens up useful perspectives on the
idea of a “circular economy” which aspires to replace the linear “once through”
industrial economy which has dominated business in the industrialised countries
since the industrial revolution. In the linear economy, the focus is on management
of throughput flows. On the macro-economic level, the performance of the industrial economy is judged by measuring the sum of all flows (GDP); on the microeconomic level, by calculating the value added to the flows. Its optimisation stops at
the point of sale where the responsibility for operating and disposing of the goods is
passed to the buyer.
Arguably, the industrial economy is the best strategy to increase stock and expand
economic activity to overcome scarcities of food, housing, infrastructure and/or
equipment, as they exist in many developing countries. However, in markets near
saturation, so that the number of new goods is similar to the number of scrapped
goods, the relevance of the paradigm of economic growth has been questioned (e.g.
Jackson 2009); in the absence of quantum leap innovation, the circular economy is
a more viable business model than the industrial economy with regard to environmental, economic and social factors. Even where technology quantum leaps do take
place through rapid innovation, the circular economy will complement the industrial economy.
The circular economy is based on value preservation, not value added. The basic
elements are shown schematically in Fig. 7.1. The Reuse Loop includes secondhand markets (from garage sales and flea markets to eBay) as well as commercial
and private reuse of goods (e.g. refilling of beverage containers, reuse and resale of
garments). These activities are usually carried out locally. Loop 1, labelled
Remanufacturing, includes repair, remanufacturing and “upgrading” to meet new
technological standards or to meet new fashion expectations (Smith and Keoleian
2004). Remanufacturing may be a local activity (e.g. refurbishing of domestic
appliances or cars) or may be carried out via regional service centres. Loop 2 represents recycling in which, rather than repairing or re-using manufactured goods and
components, the product is reprocessed to recover secondary materials for return to
the same use. Reprocessing may be a regional activity or may be part of a global
supply system. Reprocessing includes operations such as recycling of paper and
plastics, re-refining of fluids such as lubrication oils (Clift 2001) and, where practical, depolymerisation of polymers (Clift 1997). Some end-of-life goods and materials may go to other uses, such as export for re-use in other locations or “cascading”
into lower specification applications (downcycling) including energy recovery, or
may leak from the economic system as waste.
Different interpretations of the circular economy place different emphasis on the
elements in Fig. 7.1. At its simplest (but also least profitable and materially efficient), the circular economy takes the form of the Loop economy, focussed on recycling (loop 2 in Fig. 7.1) in which the material of the product is not lost as waste but
W.R. Stahel and R. Clift
2 The Circular Economy – “Loop”, “Lake”
and “Performance” Models
Distinguishing between capital stock and flows opens up useful perspectives on the
idea of a “circular economy” which aspires to replace the linear “once through”
industrial economy which has dominated business in the industrialised countries
since the industrial revolution. In the linear economy, the focus is on management
of throughput flows. On the macro-economic level, the performance of the industrial economy is judged by measuring the sum of all flows (GDP); on the microeconomic level, by calculating the value added to the flows. Its optimisation stops at
the point of sale where the responsibility for operating and disposing of the goods is
passed to the buyer.
Arguably, the industrial economy is the best strategy to increase stock and expand
economic activity to overcome scarcities of food, housing, infrastructure and/or
equipment, as they exist in many developing countries. However, in markets near
saturation, so that the number of new goods is similar to the number of scrapped
goods, the relevance of the paradigm of economic growth has been questioned (e.g.
Jackson 2009); in the absence of quantum leap innovation, the circular economy is
a more viable business model than the industrial economy with regard to environmental, economic and social factors. Even where technology quantum leaps do take
place through rapid innovation, the circular economy will complement the industrial economy.
The circular economy is based on value preservation, not value added. The basic
elements are shown schematically in Fig. 7.1. The Reuse Loop includes secondhand markets (from garage sales and flea markets to eBay) as well as commercial
and private reuse of goods (e.g. refilling of beverage containers, reuse and resale of
garments). These activities are usually carried out locally. Loop 1, labelled
Remanufacturing, includes repair, remanufacturing and “upgrading” to meet new
technological standards or to meet new fashion expectations (Smith and Keoleian
2004). Remanufacturing may be a local activity (e.g. refurbishing of domestic
appliances or cars) or may be carried out via regional service centres. Loop 2 represents recycling in which, rather than repairing or re-using manufactured goods and
components, the product is reprocessed to recover secondary materials for return to
the same use. Reprocessing may be a regional activity or may be part of a global
supply system. Reprocessing includes operations such as recycling of paper and
plastics, re-refining of fluids such as lubrication oils (Clift 2001) and, where practical, depolymerisation of polymers (Clift 1997). Some end-of-life goods and materials may go to other uses, such as export for re-use in other locations or “cascading”
into lower specification applications (downcycling) including energy recovery, or
may leak from the economic system as waste.
Different interpretations of the circular economy place different emphasis on the
elements in Fig. 7.1. At its simplest (but also least profitable and materially efficient), the circular economy takes the form of the Loop economy, focussed on recycling (loop 2 in Fig. 7.1) in which the material of the product is not lost as waste but
W.R. Stahel and R. Clift