Circular Economy: The Challenges Ahead

This article is part of a series of publications on the topic of the circular economy, including this article, as well as a on the topic of rental and a third on the topic of repair.

Since the world’s resources are limited, infinite growth in their consumption is physically unsustainable. Yet the current economy, for the most part, drives continuous growth in the consumption of virgin resources without questioning the Earth’s capacity to produce them. This so-called “linear” economy extracts virgin resources, manufactures products, and discards them without planning for the reuse of materials.

This model poses a problem not only because of the finite nature of resources but also because of its impacts on the climate, pollution, and the destruction of ecosystems. Upstream, extractive activities degrade natural environments, consume large amounts of fossil fuels, and generate chemical pollution that is difficult to contain. Downstream, the processing^[1] The disposal of materials often results in their return to the environment, leading to pollution and damage to ecosystems and biodiversity. While waste management technologies aim to limit this pollution, discharges in solid, liquid, or gaseous form persist and have a significant impact on the environment.

The circular economy is often touted as the solution to these issues. Behind this broad concept lie various approaches, each with its own challenges.

Let's start with the goal: reducing the pressure on virgin resources

Our use of material resources enables us to produce goods for a variety of purposes. If we aim to reduce the pressure on these resources, three main categories of complementary measures emerge:

• SOBRIETY :

  By questioning our needs to determine what is most essential, we can reduce our consumption of resources with immediate results. Do we need a cat food dispenser with facial recognition? Do we need to buy 40 items of clothing a year when two-thirds of the clothes produced are not worn for more than a year? ^[2] ? Without adopting an ascetic worldview, not all of these clothes are necessary. Buying or producing less is therefore the first step toward reducing the pressure on these raw materials. Given our limited resources, the question of how to prioritize our uses is a legitimate topic for societal debate.

• EFFECTIVENESS:

  To meet a specific need, it is sometimes technically feasible to reduce the amount of material used. For example, most tiles are manufactured with a thickness of 9 mm, even though a thickness of 6 mm would often be sufficient for the same purpose.

• REUSE :

  When a resource is needed, the (re)use of resources that have already been extracted also helps limit our demand on virgin resources. This approach is often seen as emblematic of the circular economy. It encompasses many different aspects, which we will discuss in more detail.

Eco-design

Eco-design is a method aimed at reducing the environmental impacts (e.g., carbon, water, soil pollution) of a product or service throughout its entire value chain, starting from the design phase.

To achieve this, it relies on three key strategies: simplicity (e.g., manufacturing a sturdy product that lasts a long time or is not oversized for its intended use), efficiency (e.g., designing the manufacturing process to minimize factory waste) and reuse (e.g., using repurposed or recycled materials).

It is one of the seven pillars of ADEME’s circular economy^[3] and is also supported by legislation (e.g., European directives on the eco-design of energy-related products).

In practice, the term “eco-designed” covers a wide range of situations: it can range from simply incorporating recycled materials to a design that incorporates all strategies for reducing environmental impact. In particular, we observe that eco-design approaches based on Life Cycle Assessments do not adequately account for extending a product’s lifespan.

Reusing existing resources: the final lever after resource conservation and material efficiency

This third lever can take several forms.

First, it is possible to reuse existing products.

These items may be new, come from unsold inventory, or be functional products considered “defective”; the goal is to avoid throwing them away. When a product has already been used but remains functional, it can be repurposed in the secondhand market (refurbished, used, or donated).

To avoid product obsolescence, a key challenge is to increase the lifespan of products. This involves both combating obsolescence from the design stage onward and maintaining the product to ensure it remains in good working order—in an industrial context, this is often referred to as preventive maintenance.

However, once a product is out of service, these initial options are no longer feasible. In this situation, there are two distinct scenarios. On the one hand, there are products whose characteristics and design allow them to be repair. On the other hand, products that are disassembled so that the various components can be recycled.

Second, our current models result in a significant portion of products in circulation being underutilized. For example, a drill is used, on average, for only about ten minutes over its entire lifespan^[4], or, the average number of passengers per car is 1.4 for short-distance trips^[5]. Sharing these items (particularly through rental services) or these uses (for example, through carpooling) can help limit the number of products owned per person while ensuring access to these uses.

Ultimately, the reuse of existing resources has led to the large-scale development of five activities: Increase longevity, Reuse, Repair, Recycle and Pool. They apply to different phases of the linear economy and help make it circular (or, at the very least, oval).

Functionality Economics

The functional economy aims to shift from selling a product to selling the service associated with it. Moving away from volume-based product growth helps limit the number of items manufactured. In doing so, the focus shifts to increasing profit margins by better aligning with customer needs to serve their purposes more effectively.

For example, Xerox shifted from selling printers to businesses to leasing them. As a result, they own and manage the entire fleet of machines: they design durable devices built to last, repair malfunctioning products, and reuse components from end-of-life machines to manufacture new devices, while the rest can be recycled. The recovery rate for parts in certain equipment can reach 95%.^[6]. Beyond the environmental benefits, service quality improves: printers break down less often, are repaired quickly, and are replaced at the end of their useful life without the customer having to do anything.

After the definitions come the challenges of implementation

Eco-design, repair, remanufacturing, the functional economy, recycling, etc. These activities are gaining momentum, but their implementation faces numerous challenges. Here are the main ones, though this list is by no means exhaustive.

So-called “supply-side” challenges include the supply chain and operations. The recycling For example, there are major challenges involved in separating components in complex products made of multiple materials. The associated processes are costly and require significant financial investment (e.g., the chemical recycling of plastic requires both significant financial investment and a great deal of energy). The repair, on the other hand, is based on a product’s repairability, the availability of replacement parts, the establishment of a competent supply chain, and a seamless user experience (e.g., longer delivery times compared to purchasing a new product).

Demand also poses a significant challenge. It is necessary to boost the appeal of repaired, reused, and recycled products to enable these business models to be profitable and thus become widespread. For example, when it comes to price, if the repair costs more than one-third of the price of a new product, most people will opt for the new product.^[7]. The government's repair subsidy is intended to level the playing field by reducing the cost of repairs^[8].

Beyond these technical, economic, and financial challenges, the implementation of the circular economy also raises environmental concerns. Although it is beneficial in reducing pressure on virgin resources, it can lead to a shift in environmental impacts toward greenhouse gas emissions or other forms of pollution, such as:

• The dilemma between product longevity and energy efficiency: Keeping an electrical appliance, such as a refrigerator, in use for an extended period can result in higher energy consumption because it is less energy-efficient than a new model.
• Sharing a vehicle involves additional logistical steps: does renting a vehicle located several dozen kilometers from home really result in a net reduction in carbon emissions, given the energy consumed during transportation?

The issue of impact transfers is complex and specific to each individual case.

Implementing the circular economy requires a profound transformation of our production and consumption patterns. Such a paradigm shift raises many challenges. In particular, it is important to identify areas where the circular economy does not conflict with other environmental issues.

In upcoming posts, we will examine certain tensions between the circular economy and climate action to identify the conditions under which reducing climate impact goes hand in hand with reduced pressure on resources.

Carbone 4 is working on the circular economy through a cross-functional group focused on upstream issues, leveraging its expertise Industry, and downstream with the expertise Luxury & Retail, particularly in connection with alternative distribution models.

If you have any questions or requests regarding the circular economy, please feel free to contact us here.