Growing a circular economy: Ending the throwaway society - Environmental Audit Committee Contents

1  Introduction

What is a circular economy?

1. A circular economy maximises the sustainable use and value of resources, eliminating waste and benefiting both the economy and the environment. It offers an alternative to the predominant current approach where resources are used for one purpose and then discarded. The Government describes a circular economy as:

    moving away from our current linear economy (make-use-dispose) towards one where our products, and the materials they contain, are valued differently; creating a more robust economy in the process.[1]

2. The idea is not new, and is associated with a range of concepts such as 'cradle to cradle' design and 'industrial ecology', which draw inspiration from biological cycles and emphasise the importance of optimising the use of resources in a system over time. A circular economy includes a range of processes, or 'cycles', in which resources are repeatedly used and their value maintained wherever possible. The European Commission talks about:

    re-using, repairing, refurbishing and recycling existing materials and products. What used to be regarded as 'waste' can be turned into a resource. All resources need to be managed more efficiently throughout their life cycle.[2]

In recent years the Ellen MacArthur Foundation have raised the profile of these ideas in the UK through a series of reports with global consulting firm McKinsey. These set out a conceptual framework for the circular economy and highlight the economic and environmental benefits to businesses of taking this approach.[3]

Our inquiry

3. Our interest in the circular economy lies in its potential to reduce waste, use resources more efficiently, and promote sustainable development which fully values the environment. We took evidence from a wide range of organisations and experts, including retail businesses, manufacturers, designers and those involved in the waste management and recycling industries, as well as the European Environment Commissioner, Janez Potoènik, and Parliamentary Under-Secretary of State in Defra, Dan Rogerson MP. We are grateful to them all, and to our specialist adviser Martin Brocklehurst.[4]

The benefits of a circular economy

4. One reason a more circular economy is needed is because current rates of resource consumption are not sustainable. The European Environment Commissioner, Janez Potoènik, highlighted to us that increasing levels of consumption in developing countries will put ever more increasing pressure on resources:

    In one generation, we will have on the planet an additional 2 billion people, which is more than the overall population at the beginning of the 20th century, when it was 1.5 billion. That is more than 200,000 per day. … McKinsey estimates that, by 2030, 3 billion people who are currently living in poverty will join the middle-class level of consumption. If you take into account that, all in all, that would mean that we would need something like three times more resources than we use today in 2050—70% more of food, feed and fibre in 2050—we would likely be around 40% short of drinking water in 2030. If we take into account that already today we are using approximately 60% of our ecosystems in pretty much unsustainable ways that makes a pretty simple conclusion: how we produce, consume and live will have to be changed.[5]

The Ellen MacArthur Foundation similarly concludes that:

    Whilst we cannot say for certain that we will 'run out' of resources—mankind has shown incredible persistence and ingenuity in finding access to new sources—it is clear that we have exhausted the easy to access reserves. This is having a significant impact on prices, and the century of commodity price declines enjoyed between 1900 and 2000 were effectively erased in the first decade of this millennium. There are few signs that this trend will be reversed.[6]

5. The Green Alliance predict a "great resource price shock", as the combination of rising demand and constrained supply leads to rising prices:

    The last decade has seen a dramatic shift from 20th century expectations that relatively ready access to cheap raw materials was the norm, and that the occasional resource crunch would be overcome by new technology and new sources of supply. This has been expressed in restrictions on raw materials like rare earth metals and very substantially greater price volatility across a whole host of commodities. Over the past decade world food prices have doubled, metals prices have trebled and energy prices have quadrupled.[7]

Dustin Benton from the Green Alliance told us that the cost of extracting resources is rising as the easiest to reach sources run out:

    Copper is an area that we have looked at in some detail, because it is not very readily substitutable. There is copper in all of the wires in this room, in our smartphones, everywhere. We could not run a modern society without it. ... When we started measuring back 150 years ago there was about 7% copper in every ton of ore that we got. Today it is about 0.6%. … There is plenty of copper in the earth's crust, don't worry, but getting to it, extracting it, is increasingly a challenge.[8]

Sir Ian Cheshire of Kingfisher told us that he expected that rising global demand for products would continue to lead to increasing prices. He said that businesses needed to adapt to this new reality:

    I am personally convinced that resource prices are going one way because of the next 30 years, and that if you have a planning assumption in your business model that that is not the case I think you are going to be unpleasantly surprised. There is opportunity always to substitute certain material prices and mitigate this, but I think the broader picture is a one-way bet at the moment.[9]

6. Whilst the threat of increasing prices provides a driver for businesses to become more resource efficient, there are also strong environmental arguments for taking a more circular approach. Many of the wider environmental impacts from the use of materials are not captured by market prices. Dustin Benton of the Green Alliance explained that a circular economy has significant environmental benefits. He noted that the price of resources does not include the full environmental costs associated with extracting, processing and transporting them. If the costs of carbon emissions were included, for example, then the benefits of a circular approach would be clear:

    If we were to price carbon adequately to get real change to tackle climate change … the price of aluminium would jump by 70% because of the amount of energy that goes into its production. Recycled aluminium would only jump by about 7%.[10]

7. Jamie Butterworth of the Ellen MacArthur Foundation explained that it is possible to transform the environmental impact of products by changing the materials they are made from. He gave the example of a Californian company that is making packaging material using used ground coffee to produce mycelium as an alternative to polystyrene. He told us that this material "is price competitive with polystyrene" and "completely restorative".[11]

8. There are several ways of measuring the 'circularity' of the economy. One headline figure is the household recycling rate, which reached 43% in England in 2012-13, up from 12% in 2000-01. However, waste collected by local authorities forms only a 13% of total waste produced in the UK. The main components are construction and demolition waste (49%) and commercial and industrial waste (24%).[12] Household recycling is discussed in more detail below. WRAP (the Waste and Resources Action Programme) estimated that in 2010 the UK economy was 22% 'circular'; an increase from 8% in 2000. In total in 2010, 540 million tonnes of resources entered the economy, and, "after losses to the environment through industrial processes, energy consumption and wear-and-tear",[13] 259 million tonnes were left to be managed as waste, of which 117 million tonnes were recycled. It estimated that by 2030, the UK economy's circularity could increase to 27%, whilst also benefiting from a reduction in materials consumption of 30 million tonnes a year. [14]

9. Waste policy and regulation in England is informed by the 'waste hierarchy', as required by the EU Waste Framework Directive, and transposed into law by the Waste (England and Wales) Regulations 2011. The hierarchy, which is consistent with the circular economy approach, gives top priority to waste prevention, followed by preparing for re-use, then recycling, other types of recovery (including energy recovery) and last of all disposal or landfill.[15]

10. A more circular economy also has economic benefits. The Environmental Services Association suggest that a more circular economy could increase UK GDP by £3 billion a year.[16] A study for the Government in 2011 indicated that there were £23 billion of financial benefits from low/no cost improvements available to businesses in the UK.[17] The Green Alliance told us that the circular economy makes good business sense:

    Where companies control the full cycle of a material or product, they choose circular models to offset the need to hedge for the price volatility of new materials. This also avoids the (normally uninsured) risk that lack of availability of resources will constrain production.[18]

11. In their evidence, the Chartered Institution of Wastes Management (CIWM) drew on analysis from the EU that estimated that full implementation of the 8 existing EU main waste-related directives could save €72 billion a year (€9 billion in UK). The value of the 'waste industry' in Europe could increase by €42 billion (€5 billion in UK), with 400,000 new jobs (50,000 in UK). EEF, the manufacturer's association, highlighted research by the Next Manufacturing Revolution, which suggests that in just three UK manufacturing sub-sectors re-manufacturing has the potential to create £5.6bn to £8bn a year and support over 310,000 jobs. Commissioner Potoènik told us:

    Environmental protection and health protection and economic development are two sides of the same coin. Flipping that coin makes no sense. We simply have to recognise the integration of environmental concerns into not only industrial policy, but transport policy, energy policy, fisheries policy, agricultural policy, trade policy, research policy and so on. It is an absolute necessity.[19]

Business engagement

12. Professor Tim Jackson told us "unless you have a business model that is different from the one predicated on the material throughput of consumer products, you cannot create an economy that will deliver the circular economy in toto".[20] Clearly, one solution to rising populations and resource scarcity is for people to consume less, but there are also opportunities for new business models which use resources more efficiently, such as those which provide access to products, such as cars, rather than ownership. Sir Ian Cheshire highlighted that "the emergence of things like the 'sharing economy' and different forms of more sustainable consumption become easier for customers".[21]

13. Some businesses are taking the lead in responding to the challenges of rising natural resource prices by adopting circular economy approaches. Ramon Arratia of Interface carpets told us that setting ambitious goals had made his organisation "look for radical options and think big, and things emerged. We went to the inventors of nylon who told us it was impossible to recycle nylon. Now we have 100% recycled nylon, not only across our company but also across all of our competitors."[22]

14. Some new business models offer the potential to use resources more efficiently by rewarding better design and encouraging the repair, re-use and recycling of products. For example, Rolls Royce has switched to a service-based model, offering 'power by the hour' which covers "full in-use monitoring, servicing, repair, remanufacture and replacement" of its engines. WRAP told us that a 'take-back' model for TVs and clothing, where products are returned for recycling or re-use, could increase UK GDP by over £1.75 billion by 2020. It is working on a 'REBus' project "to demonstrate profitable, resource-efficient and resilient alternative business models" in the electrical products, textiles, furniture and construction products sectors.[23]

15. Dan Rogerson, Defra Minister with responsibility for waste, highlighted the REBus project's work looking at hiring out baby equipment: "As your needs change with buggies, … and what you need the buggy to do, depending on how many children you have and so on, you buy that service rather than just a product".[24] By supporting research into these areas, the Government can help support businesses in their decision-making, potentially reducing risks associated with taking new approaches.

16. The circular economy concept can help businesses to think through how they use materials and understand the full life-cycle of their products. It is both a challenge and an opportunity for businesses. Marks and Spencer told us that in their experience:

    The circular economy is most dependent on dematerialisation and re-use. Therefore, the traditional waste hierarchy (and policies) of reduce (dematerialise), re-use, and recycle is still relevant to the circular economy. For example, re-using clothing to reduce consumption is significantly more beneficial in financial and environmental terms than the lesser option of recycling.[25]

WRAP believed that "true circularity is not just about recycling more material, but about using less material in the first place".[26] It is therefore about better design. The Great Recovery project, funded by the Technology Strategy Board and run by the Royal Society for the encouragement of Arts, Manufactures and Commerce (RSA), has led research into the role of design in the transition to a circular economy. They calculated that "over 80% of the environmental impact of a product is determined at its design stage, making it a crucial leverage point in shifting towards more circular systems" and identified four 'design models' for circularity:

a)  Design for longevity;

b)  Design for leasing /service;

c)  Design for re-use in manufacture; and

d)  Design for material recovery. [27]

Design for the circular economy requires specialist expertise. It is not just about making things, but understanding materials and building links between organisations. Sophie Thomas of the RSA highlighted a need for "more system designers, system thinkers."[28]

17. Research by Green Alliance with the Circular Economy Task Force has highlighted business conditions that are more conducive to the circular economy: where the value of materials is high, where they can be collected reliably with little contamination, and where the product or component is easy to re-use or transform through recycling. Where there are multiple owners who control the materials, or where products change rapidly, it can be harder to introduce circular business models.[29] By their nature, alternative business models are 'disruptive', and challenge existing market players. Splosh Ltd, which sells laundry detergents, told us that businesses that attempt to innovate may face intense competition from rivals:

    Many major companies have invested significant sums in brands and business models that support linear products, which may not be turned easily into circular products. Circular products would represent a threat to the status quo which would lead to discounting and marketing pressure from established brands.[30]

18. Ramon Arratia of Interface carpets told us that it is challenging for manufacturers to become services expert because it requires different skills.[31] He told us that other policy interventions can support greater circularity, and that there are different ways that companies can gain from circularity without needing to control the entire process:

    You do not necessarily need to own the product in order for the product to come back. If you impose a ban on the landfill of carpet across Europe—as it is in Germany and in other countries—effectively the carpet will go back to the best technology. If we have the best technology to recycle, it will come back to us. There are other ways. Ownership of the actual product across the whole life is not absolutely critical.[32]

Marks and Spencer told us that "finding practical, workable solutions to growing a circular economy depends on high-quality, multi-stakeholder collaboration".[33] Many businesses to do not have specialist skills or experience to know how to apply circular economy thinking. The Resource Association told us that this was particularly important for small and medium sized enterprises (SMEs):

    For the SMEs that are the backbone of industry and commerce, time and resources for innovation are often hard to find and they are more reliant on support and encouragement from Government. To this end, maintaining support for businesses through funding mechanisms such as the Technology Strategy Board and the Waste and Resources Action Programme remain important.[34]

19. The Government highlighted the work the Technology Strategy Board is doing to support circular economy innovation. This includes work with Knowledge Transfer Networks on design challenges to promote re-use, resource efficiency and supply chain innovations.[35] The Technology Strategy Board has supported around 60 projects, investing over £13 million, including developing recycled aluminium alloys for Jaguar Land Rover car bodies and redesigning a Morphy Richards steam iron for longer life and lower energy use.[36] Professor Rob Holdway of Giraffe Innovation told us about work he was involved in to recover critical metals from printed circuit boards using novel engineering technologies. He told us that these electronic equipment materials are valuable—"by 2020 there will probably be about £1.3 billion worth of value in those materials".[37] CIWM emphasised that Government is playing a significant role in supporting UK businesses, including supporting access to international markets through UK Trade and Investment (UKTI):

    Government is successfully supporting innovation and development in some areas including the valuable work by KTN and TSB, to find and develop and introduce technologies and new approaches at all points in the resources cycle, regardless of 'sector'. UKTI also support access to overseas markets where UK knowledge and experience are highly valued.[38]

20. The Government has, however, stopped directly funding its National Industrial Symbiosis Programme. Liz Goodwin of WRAP told us the reason for ending funding was that "quite a lot of this was just one-offs and it was very difficult to replicate it."[39] International Synergies Ltd told us the that programme is "a business opportunity engagement process which then allows other ideas/tools to be introduced to businesses but in a peer-to-peer way which is far more effective than consultant- or government-to-business",[40] and this work had "recently been recognised by DCLG as being excellent value for money".[41]

21. The Government highlighted a number of initiatives it has promoted to encourage greater collaboration. This includes setting up the business-led Circular Economy Task Force, and working through WRAP to establish voluntary initiatives in different sectors, such as the Sustainable Clothing Action Plan (SCAP) and Sustainable Electricals Action Plan (SEAP). It also supports the Product Sustainability Forum, which brings together retailers and suppliers, NGOs, academics and Government representatives, with a focus on grocery products.[42] It is also funding research on business models (paragraph 14). WRAP told us, however, that the Scottish Government's Resource Efficient Scotland programme provides wider support to businesses, third sector and public sector organisations to reduce overheads through improved energy, material resource and water efficiency.[43]

22. The Government told us, however, that its focus is on "moving towards a more circular economy, rather than achieving or delivering it",[44] and that the "Government is clear that businesses need to drive change".[45] It added that

    Government's role should be focused on the areas where Government is uniquely placed to act, i.e. working with businesses to ensure the right frameworks are in place to allow them to act, remove any unnecessary barriers and ensure that market failures are addressed.[46]

Marks and Spencer told us that responsibility for the circular economy lies 80% with businesses, but that crucially there remained a role for "some degree of support and incentivisation from Government as well".[47] Sir Ian Cheshire of Kingfisher believed that Government has a significant role in facilitating change:

    I think Government acting as a promoter of the circular economy and a promoter of these types of behaviour, and having an explicit role to champion this through BIS and others talking about new models for businesses, is going to be incredibly important.[48]

During our inquiry, we examined a number of areas where Government might focus more attention in order to enable companies to move towards a more circular approach, which we discuss in Part 2.

1   The Government Prevention is better than cure: the role of waste management in moving to a more resource efficient economy (December 2013) p9 Back

2   European Commission website 'Moving towards a circular economy, accessed 17 July 2014  Back

3   EllenMacArthur Foundation, Reports  Back

4   Martin Brocklehurst declared the following interests on 30 April 2014: Independent environmental consultant with KempleyGreen Consultants, advising a number of clients on waste and resource management, catchment management, citizen science and ecosystem services. Until 2011, employed by the Environment Agency. Back

5   Q198 Back

6   Ellen MacArthur Foundation (GCE0024) para 2 Back

7   Green Alliance (GCE006) para 5 Back

8   Q19 Back

9   Q18 Back

10   Q10 Back

11   Q4 Back

12   National Audit Office Environmental Protection (July 2014), p30 Back

13   Chartered Institution Of Wastes Management (GCE0043) para 7 Back

14   WRAP (GCE0025) para 11 Back

15   The Government (GCE0045) para 25 Back

16   Environmental Services Association, Going for Growth: A practical route to a Circular Economy (June 2013) Back

17   The Government (GCE0045) para 8 Back

18   Green Alliance (GCE006) para13 Back

19   Q202 Back

20   Q145 Back

21   Q6 Back

22   Q99 Back

23   WRAP (GCE0025) para 23 Back

24   Q238 Back

25   Marks and Spencer (GCE0049) para 7 Back

26   WRAP (GCE0025) para 11 Back

27   RSA (GCE0048) Back

28   Q69 Back

29   Green Alliance (GCE006) para 15 Back

30   Splosh (GCE004) para 7 Back

31   Q103  Back

32   Q104 Back

33   Marks and Spencer (GCE0049) para 9 Back

34   Resource Association (GCE0023) para 9 Back

35   Government (GCE0045) para 27 Back

36   Technology Strategy Board (GCE0030) para 23 Back

37   Q68 Back

38   Chartered Institution Of Wastes Management (GCE0043) para 25 Back

39   Q24 Back

40   International Synergies Limited (GCE0019) Back

41   International Synergies Limited (GCE0055) Back

42   Government (GCE0045) paras 21-27 Back

43   WRAP (GCE0025) para 65  Back

44   Government (GCE0045) para 11 Back

45   Ibid, para 19 Back

46   Government (GCE0045) para 9 Back

47   Q116 Back

48   Q16 Back

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© Parliamentary copyright 2014
Prepared 24 July 2014