Optimizing Circular Value [1]

Backcasting our 10 main Circular Outcomes

While implementing Circular Economic strategies, the comprehension of value creation is of critical essence

Part 1 - Internalizing Externalities

The Economy we Want

Too often the Circular Economy is portrayed as a frugal or an advanced recycling economic model. It is not so. The Circular Economy is based on the abundance of flows generated from our alignment with ecosystemic metabolisms. Put simply, we should be imitating natural cycles as closely as we possibly can.  

The Circular Economy holds the keys of positive perspectives about the future of business, the future of the environment and about our future as people. It depicts a world without waste, where unused resources will find a function in an economy that will regenerate itself while growing within our systemic boundaries. Yet, one needs to understand the:

• Why do we want to achieve this versus another model?
• The what for? Is it worth the investment?
• Where is this all going?
• What about the "Circular rebound"?
• How are we going to prove the Circular Economy is better than our current linear model?
• And the When do we know “solutions” are considered “circular” or not?

So let us align ourselves on assumptions and definitions to avoid any confusion:

1. We assume that the Circular Economy is the "Future We Want" given the exposure and the work done so far on this topic, the expected decoupling of economic growth versus our current needs in resources as well as the probable CO2 emissions decrease;
2. Optimization is about finding an alternative with the highest achievable performance under given constraints, by maximizing desired factors and minimizing undesired ones. In this definition, "under given constraints" is our critical component here as we recognize the many systemic challenges we will be facing. And we should be able to overcome them by deciding on ways to reduce their negative impact by means of a draconian process;
3. Value is important or lasting beliefs shared by the members of a culture about what is desirable or undesirable. What is the perceived and recognized value of some communities or a group of people with its specificity might not be the same as the one perceived by another group of people. This point also highlight the fact that the way a circular economy is designed in Canada might not be the same, and/or perceived the same way, as a circular economy designed in Brazil ;

Therefore, something has value when people are involved, given that value is essential to people. This is the reason why we must to understand people's role in this next economy.

The need to integrate Human Flows

We all know the “Butterfly Diagram” from the Ellen MacArthur Foundation:

On one hand we have the biological nutrients flowing either in cascade or be used as biochemical feedstock, bioenergy or with the purpose of regenerating our soils.

On the other hand we aim at circulating our technical nutrients the longest time possible either using sharing models, redistributing or remanufacturing ones. And if we have no other option, we then continue using advanced recycling until such time we find a better option.

Yet, there is the need to integrate human flows as part of this diagram to comprehend whether we are creating Circular Value or not.

By integrating these flows within the “Butterfly Diagram” we have a better understanding of the role of humans in our next economy and ways to preserve a balance between the natural capital, the human capital and the remanufactured capital.

On one hand our relation with the BioSphere should evolve. We - as humans - need to adapt by seeing ourselves as endless flows of energies and abundant ressources of matter. Using innovative approaches we could thus help the BioSphere grow and regenerate itself. The feedback loop from the BioSphere is here about providing better living conditions and food.

On the other hand, humans should be considered endless energy and services to maintain the value of the technosphere by seeing ourselves as highly skilled and knowledgeable labour. The feedback loop from the technosphere provide us with accesses to a world of experiences ensuring our own development and real progress.

The above graph is explained in details here.

Internalizing externalities

Now that we visualise our human roles in-between these two spheres, we are able to grasp the value generated by these spheres. But the question is, when do we start creating Circular Value? Is there any tipping point to pass by? Any guidance to follow to be able to claim that our solution is truly circular, creating regenerative value?

Claiming that we start creating value most probably comes with successfully internalizing externalities (pollution, waste, chemical hazards and the likes).

Let us take an example: an electric car.

Our input is “We invest in an electric car production unit”.

Our activity is “producing electric cars”.

Our output could therefore be “CO2 avoided when cars are on the move”.

Our aim of reducing CO2 emissions is happening. Yet we could also claim that we are on our way to achieve zero emissions (only when driving).

The question is: is this good enough? Is this output enough to prove that a specific situation has changed thanks to our electric cars?

To prove a situation is changing for the better, outputs are usually not enough. They can be measured using Circularity Indicators, Indexes and/or Guidelines issued recently. Still, should we wish to prove that change is happening, we need to go beyond outputs into proving outcomes. This helps aiming at the wider goal, like our helicopter view from where we view our progress and keep updating our path so that we stick to our vision.

A potential outcome would be here “improved air”. To achieve long-lasting “improved air” as a real outcome, we might need many other partners and stakeholders. Indeed, focusing on outcomes as a way to measure our circular progress often requires additional skills and partners to ensure its successful achievement, hence collaboration should take the lead over competition.

“Improved air” could then lead to “improved environment”, to “improved health”, and so on… [...]

Article to be continued...

Next: Optimizing Circular Value [2] - The Regenerative Stage

December 2017 update: The Optimization of Circular Value (#OCV) has been featured in a recent report by the Chatham House UK as outcome-based measurement and valorisation tool focusing on "whether a person's needs have been addressed rather than measuring a product circularity per se" (extract of page 15).

The Chatham House UK - the Royal Institute of International Affairs - is an independent policy institute based in London. Their mission is to help build a sustainably secure, prosperous and just world.