The regenerative economic model - Introducing circular economy

Our current economy is based on a linear production process in which materials are taken from earth, used to make products and eventually thrown away as waste. The current model is known as “take-make-waste” where materials are transformed into goods or services and then passed on to the end user. The outcome of such a model is financial gain as efforts are focused on saving time and money, but the original resources disappear and waste is generated as a by-product.The current economic model is perceived as unsustainable with dire consequences for people and the planet, as the economic growth is outpacing available resources and some resources are depleting at a fast pace.?

Abandoning old habits is indeed hard. The current model has been put in play since the industrial revolution and bad design practices make up the very DNA of our economy. This is often incentivized by the speed of production and high business profitability. Under normal circumstances, the common approach would be to wait for growth and innovation to clean up the process, however, the present studies suggest that the linear system will keep growing without every addressing its shortcomings

Introducing the regenerative economic model

The transformation towards circular economy CE as an alternative to the linear model has become a strategic point of focus for governments and organizations across the globe. A model that is inspired by the overconsumption of limited resources is clearly unsustainable and economists are calling for an immediate shift from a linear model to one that practices circularity to build a more regenerative economy. CE operates on the principles of regeneration, keeping materials in use while reducing waste and pollution with the ultimate focus on recycling, reusing, and recovering resources.?

Shifting towards CE comes with economic, social, and environmental benefits. Starting with reducing the risk of resource scarcity and supply chain disruptions, boosting economic growth and stimulating innovation, up to enhancing work opportunities and well-being, and finally achieving emission reduction goals.?

As of 2022, only 8.6% of the world economy is considered circular, hence The global need for raw materials and resources is expected to double by 2050 if no drastic changes are made to the current production and consumption processes. Nevertheless, moving from an economy where resources are consumed and discarded towards a global circular economy is an immensely long process and complex challenges lie ahead.?

Barriers to the circular economy

Given the increasing necessity and potential benefits of CE, a national circular action plan is required to promote the transition and to demonstrate a roadmap. Yet performing a meaningful transition on a global level is a mammoth task and significant obstacles abound. The potential challenges for the CE transformation can possibly be categorized as follows:

1- Regulatory:?

One of the biggest obstacles that slow down the transition to CE is the lack of rules, policies, and regulations that support and govern a CE ecosystem. The existing gap in the waste framework directive is that “waste” is not clearly defined in national legislation and the adopted waste management policies are below par as opposed to the CE ecosystem standards. Several national governments are taking serious actions towards adapting existing regulations to emerging needs related to the CE. Taking the Netherlands as an example, the legal and regulatory framework at the national level is expected to be adapted in order to make the country an economy without waste in 2050.?

2- Cultural:

The two cultural obstacles identified against CE implementation are lack of awareness/willingness to engage with CE from the consumer side in addition to the hesitant organizational culture towards adopting new production practices.?

Efforts are required by all sides in order to alter the current reality. Economists advise on offering incentives to businesses and consumers to promote a circular production and consumption of goods/services. Therefore, Understanding behavioral patterns and taking it into account when working with different audiences to help them change the way they create and consume products is key in accelerating the transition towards a CE.?

3- Market:

The lack of economic feasibility in the existing CE business models is a main driver to the rising hesitant attitude within the private sector towards the transition. Businesses tend to lean towards a quick financial gain demonstrated by low cost and high speed production. It is also acknowledged that collaboration is key to enable the transition to CE, however, this is being challenged as it is seen to negatively impact the competitive position of individual companies?

4- Technological:?

There are currently no proven technology solutions to facilitate the transition towards CE. Starting with the lack of ability to deliver high quality manufactured products at low cost and too few large scale pilot projects to benchmark against. Data unavailability and integration is also impeding the transition progress.?

It is very difficult to quantify the circular initiatives without reliable and precise information flows regarding resources, materials and processes As technological development is a complex and slow process, the technology solutions should be designed at an early stage before this barrier dominates the transition process.?

Emerging technologies in circular economy?

Findings in the present literature confirm the positive linkage between digital technologies and building the capabilities for CE. Digitalisation technologies are expected to introduce new innovative business models that can generate value and enhance how CE is perceived from a market perspective. Therefore, it is essential to capture how CE implementation could potentially capitalize upon emerging digital technologies, such as big data, artificial intelligence (AI), blockchain and the Internet of things (IoT), amongst others.?

Blockchain and artificial intelligence can be used to implement incentive schemes for CE adoption. IoT is the main enabler of the integration of processes with other technologies, which, in turn, enhances circularity and supports the overall transition by data-driven solutions. These technologies, combined with proactive decision-making will create a compelling ecosystem for CE to be implemented and perceived as a feasible economic model.?

Source links:

https://www.sciencedirect.com/science/article/pii/S0040162522000403#:~:text=The%20circular%20economy%20(CE)%20has,(IoT)%2C%20amongst%20others.

https://www.sciencedirect.com/science/article/abs/pii/S0921800917317573#:~:text=The%20two%20core%20cultural%20barriers,the%20concept%20in%20recent%20years.

https://www.europarl.europa.eu/news/en/headlines/economy/20151201STO05603/circular-economy-definition-importance-and-benefits#:~:text=Moving%20towards%20a%20more%20circular,creating%20jobs%20(700%2C000%20jobs%20in

https://netimpact.org/blog/Regenerative-Economy-Model#:~:text=It%20takes%20energy%20or%20materials,is%20generated%20as%20a%20byproduct.