Will We Ever Achieve a Circular Economy?

A renewed interest in sustainability has revived the long-held dream of a mutually beneficial relationship between our economy and the environment.

Written by Ellen Glover
Published on Aug. 31, 2022
Will We Ever Achieve a Circular Economy?
Image: Shutterstock

It’s been more than half a century since economist and philosopher Kenneth E. Boulding published his landmark essay The Economics of the Coming Spaceship Earth. And yet, in certain passages, it reads as if it was written today.

“Los Angeles has run out of air, Lake Erie has become a cesspool,” he wrote. “The atmosphere may become man’s major problem in another generation, at the rate at which we are filling it up with gunk.”

The problem, according to Boulding, is that the world runs on a “cowboy” economy — an open, linear process that starts with the extraction of exhaustible resources like fossil fuels and ores; and ends with the output of waste materials into “reservoirs” like the atmosphere or the oceans. It’s “reckless” and “exploitative,” he wrote, with no hope of being sustainable long term. 

Instead, Boulding advocated for a closed, “spaceman” economy in which we treat Earth like a spaceship, with limited resources to extract and reservoirs to dump the waste. He envisioned a “cyclical ecological system” that feeds on itself in a process of “continuous reproduction.” But for us to change over to a spaceman economy, we must alter the relationship between our economy and consumption, he wrote.

What Is a Circular Economy?

A circular economy is a model in which extraction, production and consumption feed off of each other in a cyclical, mutually beneficial relationship. Everything is used in a circular economy, even waste — either through repair or re-use, or by creating something completely new. In practice, this takes many forms, from transforming carbon to refurbishing electronics. 

While all this talk of cowboys and spacemen may read like science fiction, Boulding’s vision of a harmonious, interconnected world that can replenish itself is, in fact, one of the foundations of a very real movement in the ongoing fight against climate change — the establishment of a circular economy.

In our current economy, we extract materials from the earth, make products out of them and eventually throw those products away as waste when we are finished with them. In other words: we take, we make and we dispose. This, as we know, can have devastating, potentially irreversible, effects on the planet. In contrast, a circular economy produces no waste (or very little) because that waste is used — either re-used or used to create something completely new. In practice, this takes many forms, from transforming carbon to refurbishing electronics. 

The pursuit of a more circular economy is slowly being recognized by businesses, consumers and governments alike as a way to tackle waste and pollution, while at the same time maintaining a strong and prosperous economy. But this isn’t about one company changing one product, or one government passing one bill. It’s about all the interconnecting players that embody our infrastructure and economy coming together to use Earth’s resources, the waste they produce and the very laws of nature itself to make society run more efficiently and sustainably.

Whether or not we’ll be able to accomplish this is a whole other story.

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The Circular Economy — Then, and Now

While the idea of a circular economy may seem revolutionary and new, it has been around since at least the 19th century, with scholars like Thomas Malthus and Henry George bringing to light questions of scarcity and its relationship to the economy. The concept took on new life during the Cold War, when the relationship between environmental scarcity and the potential for economic growth were under new scrutiny.

Against this backdrop, ideas about circularity and a potential for a closed-loop economy began to emerge with popular works like Boulding’s The Economics of the Coming Spaceship Earth, and researcher Walter Stahel’s proposal for a closed-loop economy in 1976. Meanwhile, NASA discovered a way to convert carbon dioxide into nutritious, carbon-based crops — thus creating a closed-loop carbon cycle. 

The phrase “circular economy” didn’t pop up until the 1990s, when it appeared in the policy realm in countries like Sweden and Germany. It was also part of a five-year plan in China in 2002. Then, in the 2010s, the concept was mainstreamed both in academic research and European legislation. In 2015, the European Commission recast the circular economy from a cautiously optimistic pathway to sustainability to a key element in an ambitious plan for economic growth in the wake of the 2008 recession. 

Since then, the concept of a circular economy has gained traction around the world, from China and Africa to Europe and the United States. Beijing reportedly recycles about 94 percent of its wastewater to irrigate trees and lawns, as well as feed some of its lakes and rivers. The city plans to raise its wastewater treatment capacity to 99 percent by 2035. And just last June, the New York State Legislature passed the “right to repair” bill, requiring electronics manufacturers to make all the parts, tools, information and software that make up their devices available to consumers and independent businesses — a first of its kind in the United States that is meant to incentivize consumers to repair their electronics as opposed to just throwing them away.

The promise of a circular economy has also gained traction in the tech sector. Years after the cleantech bubble of the early aughts went bust, VC funding in what is now widely referred to as greentech has been steadily on the rise again. In 2021, the space pulled in more than $40 billion — and startups focused on the circular economy got a decent chunk of that pie.


A Circular Economy Means ‘Buying Stuff Smarter’

One big earner so far in this space has been Back Market, an online marketplace for refurbished electronics. The startup managed to nearly double its valuation from $3.2 billion to $5.7 billion in a matter of months thanks to two massive funding rounds.

Back Market’s mission is to tackle one of the biggest environmental issues we have today: e-waste.

Technology like smartphones and laptops are among the dirtiest products on the market today. As much as 70 to 80 percent of the carbon footprint of these devices lies in the manufacturing process, according to Lauren Benton, general manager of Back Market’s U.S. operations. Then, once they’ve been used and discarded, they account for 70 percent of the toxins in the landfill (even though they only account for about 2 percent of the municipal trash we produce). 

“You understand that a car has pollution, where you can see it on the street and see the brown cloud that comes out behind it,” Benton told Built In. “But your cell phone seems so shiny and crisp — I just plug it into these wires and it charges. I don’t see the mining that happened to get the original metal.” Or, all of the labor and resources it took to bring all the metals and other elements together to create the phone itself. 

This isn’t limited to electronics, though. Startups like ThredUp and The RealReal are bringing a similar approach to the notoriously wasteful fashion industry. And Chicago-based Rheaply has secured investments from the EPA, Microsoft and MIT for its resource exchange platform, which lets organizations sell or rent out any extra used furniture or electronics to other organizations.

“There’s this $4.5 trillion global opportunity to design out waste and to design out the need for new raw materials just by sharing things that are in circulation already.”

“If we moved the entire economy to renewable energy, it would only abate the changes to climate change that we all hear about by 55 percent. The other 45 percent of solving that climate change problem is actually scaling a circular economy,” founder and CEO Garry Cooper told Built In back in 2020, citing a paper published by the Ellen MacArthur Foundation. “There’s this $4.5 trillion global opportunity to design out waste and to design out the need for new raw materials by just sharing things that are in circulation already.”

So far, Rheaply has taken a hefty bite out of that global opportunity already, raising yet another $20 million just a couple months ago and garnering the support of giants like Google and the U.S. Air Force.

Going forward, Benton said that building a circular economy of stuff will depend on the consumer demand, first and foremost. And it cannot ignore our innate desire to buy things. Instead, it’s up to businesses to offer models that meet consumers’ insatiable desire for more, without maxing out the limitations of our planet.

“It’s still buying stuff, it’s just buying stuff smarter,” she said. “It’s unreasonable to ask humans to buy less, to want less. I just don’t think it’s in us to change that behavior.”

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A Circular Economy of Resources

Another side to the circular economy focuses on the resources that make all of this stuff to begin with. Thanks, in part, to that closed-loop carbon cycle NASA researchers first discovered in the 1960s, tech startups like Kiverdi and LanzaTech are breaking down carbon and recycling it to make everything from meat to airplane fuel

This is different from the much broader goal among tech companies to achieve carbon neutrality. In LanzaTech’s case, the company works with industrial facilities like oil refineries and steel mills to transform the waste generated there into sustainable materials. It takes emissions from an industry — flue gasses from steel mills, for example — and recycles the carbon produced by these emissions, then converts it into something else.

“A circular economy is one in which we longer accept the concept of waste.”

“If you think about the industrial systems that we have in place today, a fundamental part of them is that we accept that there is such a thing as waste. We accept the emission of CO2 as an unavoidable and necessary byproduct of the industrial process,” LanzaTech’s chief scientific officer Sean Simpson told Built In. “A circular economy is one in which we no longer accept the concept of waste.”

Instead, he continued, “when thinking about an industrial process, we have to think about how the emissions and the waste can be used. This is how systems work in nature, and that’s why nature remains in balance.”

Of course, in an increasingly industrial world, restructuring the way we handle all of this waste is no small feat. One important barrier to adopting a completely circular economy is scale, Simpson said. Humans consume about 100 million barrels of oil a day. Replacing that level of demand with just renewable energy would be a massive undertaking. But, he added, “scale is only a barrier until you factor in time and money.” 

That being said, time is a commodity we are rapidly running out of. “With every passing year, the need for wholesale change in our industrial landscape grows ever more urgent,” Simpson said. “I don’t think, as a society, we are acting with the urgency which is required.”

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Barriers to a Circular Economy

Scale isn’t the only thing standing in the way of us achieving a circular economy. Dissipation in the environment, contamination and a general wearing down of materials all set limits on a circular economy coming to be. Plus, some argue that, paradoxically, a reliance on waste as a resource will increase the demand for waste rather than reduce waste volumes. 

There are a lot of critiques out there highlighting the circular economy’s limitations, shortcomings and even dangers — not least of which is that, for all their lofty goals of sustainability and zero-waste, companies today underestimate the problem they are trying to solve. The circular economy is touted as a sort of win-win for society, benefiting the world economically, socially and environmentally. While recent analyses have supported this claim, many say that any potential gains made through a circular economy would be “incremental” at best.

Back Market’s Benton disagrees, and argues that one would be hard-pressed to equate the environmental impact of e-waste to what is happening in the refurbished technology sector.

“If you’re going to tell me ‘Oh, well they have to ship that device to a refurbisher, and that refurbisher had to work on it and ship it to somebody else.’ I would challenge, ‘Did we just make up 70 to 80 percent for that next new device that [the consumer] was going to purchase?’” Benton said. “I don’t think there’s an argument that finding ways to reuse, repair and extend the lives of those devices is not a good thing.”

Then there’s the matter of validation. Companies staked in the linear economic structure that exists today (the one in which we take, make and dispose), tend to be more easy to validate from a business perspective than those staked in a circular economy. And, due to their time-consuming, research-heavy nature, these companies don’t typically pull in the kind of venture capital required to help them scale quickly — so factors like high cost and uncertain returns on investment are a harsh reality in this space. Plus, there is no real benchmark yet for what can be considered a success in this space.

When it comes to a company like Back Market, for example, it’s difficult to say what success is due to the sheer magnitude of the problem it is trying to solve. An estimated 99 percent of consumer goods purchased in North America are trashed within six months, meaning we only retain about 1 percent of what we buy. 

So, what percentage of our stuff needs to be churned through the circular economy for us to make a true environmental impact? “I don’t know,” Benton said. “But if we’re only at 1 percent now — oh my god, we can do better.”

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Will We Ever Have a Circular Economy?

So, is the spaceman economy of Boulding’s dreams even possible? Well, not exactly. Modern ecological theory tends to view the planet as a constantly evolving open system that’s not necessarily always in equilibrium. But that’s not to say we can’t achieve some kind of circular economy down the road. 

While Benton hopes that one day we will accomplish a completely circular economy, she said she is much more focused on accomplishing what, by comparison, can be considered “baby steps” — bringing that statistic referring to the amount of stuff we throw away within the first six months of purchasing it from 99 percent down to 98 percent, for instance. And she thinks it will take generations to just make those shifts, much less revolutionize the entire relationship between consumerism and the environment.

“Nobody’s going to be able to do this alone,” Benton said. “For the circular economy to be able to work, you’re going to have to have a supply chain that supports it. You’re going to have to have legislation that supports it.”

“Nobody’s going to be able to do this alone.”

Indeed, our acceptance of the status quo, both socially and legislatively, is perhaps the biggest barrier to a concreted switch to a circular economy, LanzaTech’s Simpson said.

“In the U.S., there’s legislation that biases certain resources, which in itself is incredibly limiting,” he said. “We’ve got to amend our thinking to accept, in a technology agnostic way, all processes that will offer an opportunity to circularize our economy and to minimize the use of unidirectional, or linear fossil resources.”

For a society to accomplish a truly circular economy, consumers, businesses and governments will need to align their goals and collaborate on solutions. Without this collaboration, “there may be a danger that the circular economy will only be implemented partially or, worse, in ways that do not mitigate environmental and social impacts due to burden shifting,” researcher Miguel Brandão and his colleagues wrote in a 2020 Handbook of the Circular Economy. 

In other words: This will only work if we all work together.

And although the specifics of Boulding’s theories on how the world worked may not hold up today, there is certainly something to be taken from his views on how humanity plays a role in all of this.

“A long-run vision, as it were, of the deep crisis which faces mankind may predispose people to taking more interest in the immediate problems and to devote more effort for their solution,” he wrote. “This may sound like a rather modest optimism, but perhaps modest optimism is better than no optimism at all.” 

Correction: An earlier version of this story misstated Lauren Benton’s job title at Back Market. It has been updated to reflect her current title.

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