Does a circular economy make sense?

Dame Ellen MacArthur addresses the business opportunities of a circular economy

The debates I was involved in at this year’s World Economic Forum Annual Meeting had a different tone, one that acknowledged the need for systemic change.

This means looking at how the economy could be redesigned to function better at a fundamental level, as well as bring more economic benefit and a positive cycle of development. This would allow developing countries to access the same technologies, products and services which we have enjoyed in the industrialized world.

Feeding this momentum are our economic reports outlining the business opportunities of a circular economy, the first of which brought us to Davos in 2012, and the second of which saw us return this year. The initial report showed that there was an economic opportunity of US$ 630 billion per annum for EU manufacturing, and this year’s, based on the more elusive consumer goods sector, highlighted an opportunity of US$ 700 billion worldwide.

Consumer goods are a huge sector of the global economy as they account for approximately 60% of total consumer spending and 35% of material inputs. Perhaps even more striking, this sector absorbs more than 90% of our agricultural output, which in terms of potential implications for the system as a whole is staggering.

What our research highlights, first and foremost, is the considerable amount of value that gets lost or overlooked in the current model, which fails to realize that an important proportion of what it treats as waste could in fact be potentially useful by-products.

By designing from the outset better products, better processes and collection systems aimed at regeneration, we can implement a model that can work long term, and unlock commercial opportunities along the way.

For example, a tonne of domestic food waste properly treated can generate US$ 26 worth of electricity and US$ 6 worth of fertilizer. This shows the added benefit of the circular model, which has the ability to re-generate rather than simply deplete.

If the circular idea is spreading fast, it’s not only because it makes better sense as a model – the potential is there, in figures.

Read the World Economic Forum’s new report on the Circular Economy 

Read more blogs for the World Economic Forum’s Annual Meeting in Davos 2014.

Author: Ellen MacArthur is Founder of the Ellen MacArthur Foundation, which works with business, education and thought leadership to accelerate the transition to a regenerative, circular economy. 

Image: Consumers select vegetables at a supermarket in Hefei REUTERS/Stringer