Circular economy: where did it go wrong?

Last week the fourth edition of the World Circular Economic Forum place. Around two thousand participants, including myself, could choose from various meetings, campfire lunch conversations, and side sessions. Europe, with the Netherlands leading the way, has the circular economy Clearly embraced. The forum was well-organized, featured passionate speakers, had a great group, and offered excellent catering. So far, so good.

Yet, in my view, something is amiss. The atmosphere surrounding the circular economy is becoming thick with concern. It's the same atmosphere that used to surround the environment and sustainability, and now surrounds climate change. It's the atmosphere of: we want to, but how do we make it happen? With the same frowning speakers, a similar appeal to moral responsibility, the familiar issues of technology, regulation, and financing, and, also in Helsinki, children on stage with banners and a compelling call to save the world.

Well-intentioned and sincere: no doubt about it! But how did such an economically promising principle end up in this corner? Where did it go wrong?

The phenomenon of the "circular economy" was made popular in Europe by the Ellen MacArthur Foundation, which commissioned McKinsey to calculate in 2010 that, as a result of the linear "take-make-waste" system, €680 billion in value was lost across the EU due to landfilling or incineration of materials. Through a motion, then-member of Parliament Stientje van Veldhoven and I arranged for this calculation to be applied to the Netherlands as well. TNO came up with a figure of €7.3 billion, after which the circular economy suddenly gained political traction. Subsequent studies also demonstrate how much value remains in the market. A recent study by my firm, New Economy, for the MRA region shows that of the €688 million in construction and demolition waste and €144 million in e-waste, 50% is lost due to low-value processing techniques.

So we enter the circular economy from a value perspective, but end up at a cost perspective.

Is this due to our Calvinist nature? Do we enjoy problematizing? Do we mainly see obstacles? One possible explanation is that the circular economy is mostly the responsibility of people already involved in sustainability and the environment. These are driven experts, but not sufficiently visible to their colleagues in the economics portfolio. We see this in the national government, where the circular economy is managed by the Ministry of Infrastructure and Water Management (I&W), with a fraction of the Ministry of Economic Affairs and Climate Policy's budget, and in municipalities and provinces where—with a few exceptions—circularity falls under the purview of sustainability administrators. In companies, too, the circular economy has landed on the desks of environmental departments.

Circular business models are built on value retention rather than cost reduction. This leads to a profitable business case and a sustainable economy. Establishing cycles, in which materials can be reused in new products, provides Europe and the Netherlands with a structural growth path, which simultaneously leads to less geopolitical dependency. It's a missed opportunity that this win-win concept also falls under the DG 'Environment' in the EU, rather than 'Economy'.

As a New Economy, we firmly adhere to the economic perspective of the circular economy. Economy and ecology go hand in hand, which invariably leads to profitable and sustainable business cases. In this way, we prepare products (chains), companies, and regions for the future. And that's an exceptionally cheerful and optimistic prospect!

By Marieke van der Werf