What Is The Circular Economy

“Emanuele Bompan and Ilaria Nicoletta Brambilla have set out their vision of the circular economy that is both comprehensible and thought provoking.

The more people that understand this catalytic economic model the better as, ultimately, it will affect generations to come providing greater prosperity for all.”

Ellen MacArthur Foundation

RENEWABLE MATTER BOOKS Emanuele Bompan with Ilaria Nicoletta Brambilla

WHAT IS THE CIRCULAR ECONOMY editorial project

Edizioni Ambiente www.edizioniambiente.it layout: Mauro Panzeri translated from italian:

Patrick Bracelli

© 2016, 2021, ReteAmbiente Srl, via privata Giovanni Bensi 12/5, 20152 Milano tel. 02.45487277, fax 02.45487333 www.renewablematter.eu All Rights Reserved. No part of this book may be reproduced or utilized in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without permission in writing from the Publisher ISBN 978-88-6627-339-4 Printed in September 2021 by GECA SRL, San Giuliano Milanese (MI) Printed in Italy This book has been printed on FSC certified paper

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WHAT IS THE

CIRC ULAR ECO NOMY

Emanuele Bompan with Ilaria Nicoletta Brambilla Foreword

by Walter R. Stahel

Table of contents

Circularity, Circular Economy and Circular Industrial Economy (CIE) Walter R. Stahel

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Preface Stefano Ciafani

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Author’s note

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Introduction Fabrizio Di Amato

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1. The Circular Economy: the genealogy of a concept 23 2. A theory of the circular economy 61 3. Four business models

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4. The circular economy world

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5. A small guide to implementing the circular economy in your own business

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6. Circular-economy washing: concluding remarks 227 References

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Circularity, Circular Economy and Circular Industrial Economy (CIE) *

Walter R. Stahel

Circularity of molecules has always been Nature’s principle: water, carbon dioxide (CO2) and organic matter circulate in chaotic self-organised systems, with nothing “wasted.” Similarly, early man had to cope with whatever natural resources were available and could be used as, or transformed into, shelter, food, products or tools. Circularity was a necessity, goods were exchanged in a barter economy, worn goods were adapted for new uses – a situation which still exists in less industrialised regions, when oil barrels are transformed into kitchenware. But the difference is that nature knows no time or monetary constraints, no liability and has no plan: Einstein once despaired that “God plays with dice.”

This circular economy of scarcity was ruled by the maxim: use it up, wear it out, make it do or do without, until the Industrial Revolution, which enabled society to overcome scarcities of shelter, food and objects. It liberated man from the limitations imposed by nature but at the same time alienated man and nature: people began to forget that they were part of nature and that any abuse of the environment could possibly destroy the * Walter R. Stahel has been founder-director of the Product-Life Institute, the oldest established consultancy in Europe devoted to developing sustainable strategies and policies.

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basis of human life on Earth. Around 1900, progress in science and technology freed man completely from nature’s limits; hydro- and nuclear electricity replaced wood, oil and coal; oil opened the door to petro-chemistry and man-made fibres replaced wool, silk and cotton. Mass-production eliminated many scarcities and created a world of plenty and a plethora of waste; with water as the only natural resource for which there is no industrial alternative.

Today’s post-industrial “economy in loops” is a circular industrial economy (CIE) characterised by abundance of manufactured objects, and saturated markets. Economic actors and individuals need a personal motivation to reuse goods and recover materials, to abandon consumption in favour of stewardship, to become users instead of consumers and to extend the service-life of objects and materials to reduce environmental impairment. Promoting the CIE decouples wealth and value creation from resource consumption by preserving the energy, material and water embodied in the stocks of manufactured objects. Political framework conditions adapted to this new vision and a sharing society are supporting the shift to a CIE. The vision of a CIE has started to take roots, as this timely new book shows, but some major challenges remain: • transferring the pool of technical and economic knowledge existing today in SMEs and fleet managers, to all classrooms, vocational training institutions, boardrooms and parliaments. Once the economic opportunities and societal benefits of the CIE become common knowledge, it will become the default option for decision makers; • preventing waste costs for society by giving waste – man-made objects at the end of their service-life – a value or defining a liable owner, a task for policymakers; • the liability loop, in addition to closing the physical loops of objects and atoms and molecules for reuse. Manufacturers are the “ultimate liable owner” of the objects they produce; they have the technical knowledge, made the profits and should be ultimately liable for “closing the loop.”

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An Extended Producer Liability (EPL) would provide the financial incentives for action at the source and bring about a sustainable economy.

• Closed liability loops are already the norm for economic actors working in a performance economy selling performance, goods as a service and molecules as a service, instead of selling goods. This business model has been the norm in transport, either as shared use (stage coaches, trains, aircraft) or serial use (hotels, taxis, rental cars).

By retaining the ownership of objects, economic actors have to internalise all liabilities and costs of risk and of waste. To maximise profits, the uncertainties faced by an object during its full service-life have to be considered in its conception and design phase. The 1989 book Limits to certainty – Facing risks in the new service economy by Giarini and Stahel sketched this rethink of economics, after Schumacher had already argued in 1973 for a similar change in his book Small is beautiful – Economics as if people mattered. In 2016, Wijkman and Skanberg quantified the macro-economic benefits of the CIE in their reports on the societal impacts of a CIE, so we now have exact estimates on the substitution of man-power for energy and GHG emissions in the CIE, keeping in mind that the CIE will always exist in symbiosis with the manufacturing, which is needed to introduce the science and technology progress into existing stocks.

Any circular economy’s objective is to make the best use of stocks (assets, capitals) and to maintain their value, be they natural, human, cultural, manufactured or financial assets. But whereas nature is a self-organised system of virtuous cycles, the CIE is a system driven by entrepreneurship, innovation, regulations, human desires and policymaking, by values and liabilities, of which the performance economy holds the most sustainable business models.

I am pleased to introduce the english edition of this book by Emanuele Bompan and Ilaria Nicoletta Brambilla, a positive contribution to the de-

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bate that revolves around and about circular economy. A wider approach to the circular economy is yet to come and this book might help readers to orientate themselves in the long transition of our economy.

Preface Stefano Ciafani*

2021 marks the year when the ecological transition is enshrined in Italy’s institutions. Finally. This concept, in fact, is very dear to our hearts, having clearly emerged in our organisation’s publications as early as the 1980s. Now, despite Italy’s chronic and insufferable backwardness, the issue is firmly at the centre of the national political agenda. Europe has been a major driving force for this, first with the Green Deal and then with Next Generation EU. Indeed, the formation of the Draghi Government was characterised by the institution of a new Ministry that united the Ministry for Environment, Land, and Sea with the general directions concerned with Energy and Economic Development. The most significant part of the government’s National Recovery and Resiliency Plan is dedicated to the epochal challenge of the green transition. This is because at least 37% of the funding the EU has provided to relaunch the economy after the Covid-19 pandemic must be destined to the continent-wide goal of carbon neutrality by 2050.

The great circular economy challenge has to be one of the pillars of Italy’s green transition, at the centre of the fledgeling Ministry’s policies. This innovation, driven by European institutions, has led to the approval of the package of directives on the circular economy and the launch of the new action plan. In practice, this will entail a new industrial revolution that pushes aside centuries of polluting productive cycles, products designed * National President of Legambiente.

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to last less and less, disposal facilities for all kinds of waste. Now is the time to push for academic and industrial research, redesigning goods and manufacturing cycles, evaluating products’ life cycles, low-carbon economies, and productive systems that minimise the use of raw materials.

On this front, Italy is not really a latecomer. Far from it. Our country can count on world-leading industrial experiences within the new bioeconomy paradigm. The only facility in the world that produces butanediol from renewable matter and not from oil, for example, is not in Germany or the United States but in Italy, more precisely in Adria, in the province of Rovigo.

To tackle the structural lack of raw materials and spread the unique experiences that our country can boast on the world stage to the entire national territory, it is crucial to maximally develop the circular economy’s full potential. This is a competitive advantage that we will not retain for much longer without a strategy and, most importantly, without adequate resources. In this regard, we are still lacking, both in terms of public funding for circular economy research and due to the still-backwards cultural approach seen in much of Italy’s business community.

The country’s many positive experiences must be increasingly highlighted while sharing knowledge and promoting expertise in a sector that still has a great potential for development. In the coming years, we can create new jobs, bring savings to businesses and benefits to the quality of the environment and the climate, reclaim industrial areas, and renovate obsolete facilities. Italy’s world-leading realities in this sector, which are currently the “exceptions”, must become standard practice as soon as possible.

This needs to happen in the chemical industry, in the production of true biofuels – the short supply chain ones that do not affect food crops and biodiversity – in steel working and metalworking, and in the food industry.

There also needs to be a paradigm shift to complete the ecological and circular transition of Italy’s economy. This cannot happen without a strong stimulus to the research and development sector, clear and innovative industrial policies, simplified regulations and licences, the completion of the industrial infrastructure network, adapting it to the future circular econ-

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omy landscape, the development of a thriving market for recycled products, without finance that is compatible with social and environmental factors, and a system of effective environmental controls to stop illegality and unfair competition.

Until now, what had been missing was the willingness of the country’s ruling class. But it’s never too late to complete our country’s circular revolution. This book provides a good explanation of the key actions needed to set up this new economy. As long as we put them into practice, we will be on the right track.

Happy reading!

Authors’ note

Ever since it was first written, What Is the Circular Economy was conceived to be updated, changed, rewritten. By definition, non-fiction regarding economic, political, and geographical issues is fluid, incremental, a constant race to understand the evolution of facts, phenomena, trends, and theories. Especially when the facts being observed are ever-changing, mutating, and multi-faceted. Few things are happening as quickly as the transformation of the economy and society as a response to climate change and the loss of biodiversity, and to create a more inclusive and prosperous world, based on universal rights for all – objectives that are perfectly synthesised in the SDGs (Sustainable Development Goals). The Covid-19 pandemic, growing interest in the circular economy in politics and business, but also among the public, the large amount of research on the topic, and the launch of many new projects throughout the five years since this book was first published have led us to pick up this text once again, to update it, revise it, extend its scope.

After all, cultural and social changes have been inherently embedded in the genealogy of the concept of the circular economy since its inception.

This topic is covered in the first chapter of this book, edited by Ilaria Nicoletta Brambilla. In this new edition, the historical, cultural, and political trajectory of this idea is explored in more detail, with the inclusion of the most recent theoretical contributions. In the second chapter, Emanuele Bompan – Editor-in-Chief of Materia Rinnovabile / Renewable Matter, illus-