Organisations, environmental management and innovation
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# 2.13 Circular economy

The Ellen MacArthur Foundation, set up by the British yachtswoman Ellen MacArthur, has engaged in a critique of the linear economic model based on ‘take, make, dispose’.

#### Reading 9 EMF, 2014, pp. 12–24

Approximate reading time: 30 minutes

Read the first section titled ‘The benefits of a circular economy’ (pp. 12–24) from the report ‘Towards the Circular Economy’ by the Ellen MacArthur Foundation (EMF, 2014).

## Activity 26 Circular economy

Allow about 20 minutes

What are the main points raised in this critique of the linear economy? Summarise the key principles and features of the circular economy.

Provide your answer...

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## Discussion

The critique of the linear economy includes:

- a ‘take-make-dispose’ pattern of resource use, leading to increased resource inputs and waste outputs
- increases an organisation’s exposure to risk, especially price volatility and supply disruptions
- manufacturing efficiency gains are largely incremental and do not entail competitive advantage
- unintended and accelerated energy use and resource depletion because of increased efficiencies (an LED light bulb is cheap to run and therefore can be left on longer)
- slow growth in agricultural productivity
- increased risks to globally distributed supply chains
- competition for virgin resources.

By way of contrast, the circular economy aims to be restorative or regenerative (replacing the take-make-dispose model). The report suggests this will be achieved through the ‘superior design of materials, products, systems and business models’ (p. 14) to eliminate waste and shifting towards renewable energy. The main principles of the circular economy are:

- designing out waste (waste does not exist)
- differentiation between the consumable and durable components of a product
- energy to power the circular cycle should be renewable.

The move to a circular economy would require and encourage innovative business models, especially shifting from ownership to performance-based payment methods (i.e. leasing rather than buying) to ensure that products are designed to be re-used and/or disassembled easily.

The circular economy is offered as a way of connecting organisations to the environment and ensuring that environmental aspects are valued more appropriately.

You may or may not agree with the critique and alternative suggestions for a circular economy, but it does provide a means to at least engage in a system-level understanding of the activities of organisations and ways in which organisations can connect to their environment in a systems sense – i.e. with the wider context in which they operate, and connecting to biophysical and social elements in the system beyond the organisation. As an innovation in conceptualising the systemic nature of connections, the idea of the circular economy could be understood as a radical innovation at a system level. At the heart of this system-level transformation is the potential for the circular economy to avoid discussion about trade-offs, where the environment tends to be undervalued, and move to a more positive realisation of economic as well as environmental benefits.

In systems language, one way of conceptualising this innovation in making connections is through the idea of a coupled system.

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