The Forgotten Principles of the Circular Economy
Spiral Staircase. (Image: Maxime Lebrun via Unsplash).

The forgotten principles of the Circular Economy

A case study of how to integrate circularity concepts into production and supply chain.

By Deborah Dull, Dennis Vegter and Louise Norman

Most organizations – and governments – pursuing circular designs and models seem to cherry-pick from among the three founding principles of the Circular Economy, articulated by the Ellen MacArthur Foundation.

The circular economy describes a new way of producing and consuming, reshaping supply chains1 to reduce, reuse, recycle and repair materials and products. However, many choose to focus on material innovation or recycling, forgetting the concepts of decoupling, reuse and regeneration. Embracing circularity principles within the supply chain can increase resilience by reducing reliance on virgin materials and by shortening today’s long supply chains that cross many miles and borders. This article uses Cummins Inc.'s2 PLANET 20503, recently evaluated by the Circular Supply Chain Network, as a case study to explore how these forgotten principles can add value throughout the production and supply chain.

The first principle: Decouple to use less

The very first principle is to use less. This means less material, less energy, less water. Formally, this is often called “design waste out” or “eliminate waste and pollution”.

This principle is anchored in a concept called decoupling and, when applied, separates the amount of inputs needed from the amount of economic output created In other words, you can achieve more output from less input (see image below). This is one of the major theories behind why the circular economy will result in so much economic growth – an estimated $4.5 trillion, globally.

Concept of decoupling

The Forgotten Principles of the Circular Economy
Source: European Environment Agency.

In supply chains, some worry that they cannot apply this first principle without a wholesale shift in business strategy towards a circular-economy-friendly model (such as “Product as a Service”). However, supply chains can still take decisions around decoupling specific operations ahead of an overall business strategy change.

For example, Cummins has worked in recent years to decouple water and energy inputs from operational outputs (see next figures).  

Water and energy decoupling at Cummins, Inc.

Source: Circular Supply Chain Network analysis of Cummins, Inc. financial statements and Sustainability Progress Reports.

It can be seen even more clearly when looking at water and energy intensity, expressed as resource usage per revenue dollar (see figure below). The figure shows the result of decoupling-oriented improvement projects at Cummins. These are linked to Cummins’ PLANET 2050 strategy, which includes a 2030 goal of “creating a circular lifecycle plan for every part to use less, use better, use again”. For example, Cummins modified a manufacturing process such that coolant could be reused, rather than using it only once, reducing the overall inputs needed to support the same level of output. They also work to optimize product designs so they use less material (and thereby less energy and water as well). One optimization for one engine family reduced their annual material inputs by an estimated 238,000 kgs – a 10 per cent saving of materials used per year.

Water and energy intensity at Cummins, Inc., revenue dollar

Source: Circular Supply Chain Network analysis of Cummins, Inc. financial statements and Sustainability Progress Reports.

The second principle: Smaller circles to use again

This principle is often depicted by the “butterfly” diagram, it shows the decreasing resource circles of recycling, refurbishment/remanufacturing, reuse and – ultimately – prolonged use. The smaller the circle, the less effort (energy, time, human hours, money, resources) it takes to return materials to a value stream.

The goal is to keep the object "as it is" for as long as possible, creating value with as little intervention as possible. In contrast, recycling (often confused with circularity) takes a lot of effort and should be considered a circle of “last resort”.

Circular economy systems diagram

The Forgotten Principles of the Circular Economy
Source: Kamal Patel, adapted from Ellen MacArthur Foundation.

Consider the case of packaging. In a recycling approach, the packaging must be gathered, broken down, processed, heated to a very hot temperature, moulded and so forth. In a reuse approach, packaging is simply gathered, cleaned, and perhaps repaired before it can be used again – as it is.

Cummins applies this principle by increasing the amount of reusable industrial packaging they use. Today, the intracountry Cummins portfolio uses 25 per cent returnable packaging, and the internal goal is to increase that to 75 per cent

The third principle: Regenerate to use better

The term “sustainability” was first used way back in 1713 by the mining industry with reference to the scarcity of timber, a required input in mining and metallurgy processes4. At that time, the idea was to maximize the “interests” (timber) from capital (the forest) while conserving the capital itself.

In the 21st century, we use 100 billion tons of materials globally each year, broadly without regard for sustainability, leaving the earth depleted. So while 19th century miners aimed to maintain their capital stock, we need to be more ambitious. We now need to replenish our resources, returning the environment to a state that is better than we found it.

The Circular Supply Chain Network has identified “Capture” as a crucial aspect of this principle. This describes a growing industry that finds fugitive materials and returns them to the value stream. This regenerates the environment because it leaves it in a better state. Examples include technologies to capture ocean plastics and schemes to safely recover high-value materials from waste5.

It is important to remember, however, that these principles are meant to work together. Applying them selectively means the full benefits will not be realized.

Disclaimer: The views expressed in this article are those of the authors based on their experience and on prior research and do not necessarily reflect the views of UNIDO (read more).

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