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Debunking Misconceptions on Circular Economy

01. Nov 2023

What is the circular economy really? Is it one of many commercial sustainability strategies or a shift to a new economic paradigm? The field of circular economy is contested, and several misconceptions thrive in the public debate. With this article, we want to unravel the contradictory positions, respond to the critique of the circular economy, and take our place in the debate

Long reads

By Therese Balslev, Julie Hjort, and Andreas Korntved Mortensen

When a field we work intensely with is criticized and contested by experts in different corners, it is our responsibility to listen to it and try to understand the critical voices that argue against the circular economy.

In this article, we will outline the critique of the circular economy as we see it. While some critique is valid – and we’ll respond to it – we’ve also stumbled upon some misconceptions and unfounded ideas of the circular economy that influence the public debate and spread confusion. We’ll do our best to shed some light upon these misconceptions and to deflate them.

We’ll conclude this article with our position on how we must address the circular economy if it really is to help us transform into a more sustainable society, as we believe the circular economy indeed can.

So what do the critics say? 

There is a valid critique of the circular economy, which we need to account for if we genuinely want to see a circular economy thrive.

Let us go through the arguments one by one:

Point of critique 1: A fully circular economy is impossible

The first critique addresses the notion that a »fully closed-loop circular economy« is impossible by nature. The critique stresses that a growth economy would always be dependent on virgin raw materials, not only to maintain the status quo but also to foster economic expansion. 

The rationale behind the critique makes sense. Materials circulating in a closed-loop economy will gradually deteriorate and must be replaced with new materials. Replacing those worn-down materials with recycled/reused materials would require a lot of energy. To further grow the economy, you would additionally need to supplement with extra materials. It is, in other words, impossible by design to fully replace a linear extraction economy with a circular economy. 

This critique touches upon The Second Law of Thermodynamics, which states that spontaneous processes tend to move toward greater disorder and randomness (Corvellec et al., 2022). The following illustration can help describe the law: Imagine a neat and organized room. Over time, if no one cleans or tidies it up, the room will become messier and more disordered. In thermodynamic terms, it means that the room’s entropy increases.

Entropy is a term that measures the disorder or randomness in a system. Entropy tells us that not all energy can be used in a cyclic process, i.e., a circular economy. A perfectly reversible process (e.g., a closed-loop material cycle), where no energy is dissipated, is conceivable within thermodynamics. However, in practice, as we know from economic production, energy is consistently lost, and recycling all the lost energy is practically impossible.

In the context of a circular economy, it means that an entirely closed-loop system, even one that recycles, reuses, remanufactures, and refurbishes everything, can still result in excessive resource depletion, pollution, and waste generation as long as it is driven by growth.

The second law of thermodynamics ultimately teaches us that a fully circular economy is a physical impossibility.

Point of critique 2: Jevons paradox and rebound effects

Another valid critique we frequently encounter is the Jevons paradox (named after the 19th-century economist William Stanley Jevons), which is related to the notion that energy efficiency is essential for reconciling economic growth with environmental sustainability.

The paradox asserts how improvements in the efficiency of using a resource can paradoxically lead to an increase in its overall consumption. Jevons noticed how improved steam engine efficiency resulted in higher coal consumption rather than conservation. In simpler terms, the paradox points out that when we make something more efficient, like using less energy to produce a product, people tend to use more of that resource because it becomes cheaper or easier to obtain. So, even though we’re using less of the resource per unit, the total consumption can increase because we use it more intensively or for more things.

A related term associated with the Jevons Paradox is known as the rebound effect, which is an umbrella term for a range of mechanisms that undermine the anticipated energy savings resulting from enhanced energy efficiency (Ruzzenenti et al., 2019).

Rebound effects are crucial to consider when promoting a circular economy as they occur at various levels when implementing circularity and are tricky to measure as much of the environmental harm is generated at an indirect level of implementation. 

Research demonstrates how, for example, recycling strategies for plastic packaging will cause landfills to snowball, as we need a large number of secondary materials to substitute virgin materials and obtain the same properties (Dace et al., 2014). Or how carbon leakage results from carbon taxes in Europe that might boost the sustainable manufacturing sector regionally but simultaneously move extractive industries to developing countries, causing environmental impacts beyond the initial borders (Giljum et al., 2008).

The valid critique stresses how circular economy advocates fail to consider or work to mitigate rebound effects. As money saved on leasing, renting, or sharing a product will likely be spent on other, potentially more environmentally damaging activities, we need better behavioral and systemic responses to technical change. 

Although the Jevons Paradox and the associated circular rebound effects are not a thermodynamic law, it is an irrefutable consequence of human behavior facing efficiency gains and cost-savings. 

They serve as an important reminder that if the systemic and behavioral problems are not mitigated, they will erode the environmental gains promised by a circular economy. 

Point of critique 3: Business as usual 

A third critique we recognize is businesses’ tendency to pursue business as usual under the guise of a circular economy, making the circular economy a dangerous excuse for greenwashing. 

We regularly see new products or services promoted as ‘circular,’ ultimately legitimizing consumers’ current, linear consumption behavior. 

A fundamental change in consumer behavior, as well as business models (coupled with supporting legislation), is needed in the steps toward a circular and even regenerative economy. At DDC, we acknowledge that the most credible way to reduce humanity’s environmental impact and stay within the planetary boundaries involves a fundamental reduction of energy and material use, particularly in developed countries like Denmark. In this context, the concept of a circular economy is a crucial step on the way, but only insofar it is not pursued within a growth-driven economy alone.

Photo: Nate Holland

Misconceptions create confusion

While the critique above is valid and something we must accommodate in our work, we unfortunately also find arguments circulating in the public debate that are unfounded. 

Misconception #1: Circular Economy is all about recycling 

The idea that the circular economy is all about recycling is an argument we often run into at DDC:

While recycling can make sense for some materials depending on the infrastructure, context, type of material, etc., this is one of the last priorities to carry out as a circular strategy for products and materials. We know that several strategies can – and should be – carried out and prioritized prior to recycling, e.g., caring, repairing, and reusing. 

Recycling is the process where products and materials regarded as waste are broken down (either mechanically or chemically) to their basic materials and then remade into new products. The idea is that recycling can replace the extraction of virgin materials by circulating what we already extracted in infinite loops. However, in reality, recycling often becomes downcycling – meaning that the materials will lose their value over time due to the tremendous amount of processing, energy, time, and labor put into the efforts to be recycled. That is far from ideal.

We’ve experienced plenty of circular initiatives built on designing new products from discarded materials. Take, for example, a pair of sunglasses made out of ocean plastic. These waste-to-product companies are producing (sometimes things we do not need more of in this world) out of waste that, in an ideal world, should not even be wasted. It is, therefore, also a misconception to think that everything made from recycled materials is, by default, “good” and circular. 

A pair of ocean-plastic sunglasses might help create awareness – but we see a danger if people start linking circularity with these artifacts.

Misconception #2: Circular Economy is only about resource efficiency

A critical part of the circular economy is minimizing material and resource use by creating more efficient production processes that eliminate waste and keep resources in the loop for as long as possible by applying the different R-strategies. Here, there is still a long way to go for business and industry to achieve significant reduction through a more resource-efficient industry.

Still, the top priority in the waste hierarchy is prevention, and the most impactful R-strategy to apply is “Refuse.” This challenges which products to even produce in the first place. Therefore, reducing the circular economy to a question of resource efficiency dramatically limits the potential impact of the circular economy.  

We must change production by challenging how and what we consume. 

Therefore, we must address the upstream possibilities for the circular economy and think hard about which products are even necessary to design and produce to deliver the value necessary for a valuable life. Products must be robust and repairable, and we need to move away from single-use paradigms and focus on taking care of our resources to a much greater extent than we are currently doing. Companies must stop designing for obsolescence and consider the whole life cycle in much earlier states than what is usually the case. 

So, what is the circular economy?

At DDC, we lean on the three principles formulated by the Ellen MacArthur Foundation to describe circular economy: 

1) Eliminate waste and pollution 

2) Circulate products and materials (at their highest value) 

3) Regenerate nature. 

Nevertheless, we have found it necessary to introduce a fourth principle that accommodates the valid critique to address the critical aspect of reducing consumption:

4) Redefine a meaningful life with less consumption

As the national center for design, we take the critique of the circular economy seriously and are forced to question and challenge the role of design. Therefore, we work to increase the awareness around the fact that we cannot design ourselves out of the problem of the linear economy merely by designing better and more sustainable products as alternatives to the products today. We must design for a systemic shift. 

In this transition to a circular society, design skills must therefore be applied to make the circular choice intriguing, relevant, easy, and irresistible – and often, the circular choice means not buying something new, holding on to products for a more extended period, taking better care of products and materials, repairing and sharing instead of owning. 

People are consumers, and consumption is a prerequisite for staying alive. No one is born wasteful. Nevertheless, for the past 50 years or so, the industry has taught us to be wasteful and overconsumers. 

Therefore, profound shifts in our existing consumption patterns are necessary. We must use all of our creative powers to design for this shift, meaning that we need to design for a value that lasts and for reducing the need to consume instead of articulating the depreciation, loss, and hazards of adapting to a sustainable and circular life.

Design has the power to create new behavior and to animate new choices. Designing for the circular transition is one of the most demanding and rewarding challenges of our time – an opportunity that many more companies and designers should seize despite might having to compromise on the way profit is gained.

Never lose sight of the bigger picture

Transforming production and consumption to be circular instead of linear means changing our mindset, culture, economy, and policy. When an individual organization, company, or citizen works to change their practices, we must always remember that this is a systemic challenge where civic, public, and private parties are very much interdependent.

The circular economy is a broad concept, and it is hard to define. There is a valid critique of the circular economy. However, this critique can be met and accounted for if we understand that the circular economy is a means for sustainability – not an end in itself.

Therefore, circular strategies critically depend on other parallel sustainability efforts – e.g., to recover biodiversity, adapt to renewable energy, and achieve social equity.

While the circular economy is indeed a broad societal transition, it is merely one strategy among many in our efforts to overcome the immense challenge of staying within “the environmentally safe and socially just space for humanity to thrive in” within the planetary boundaries as described by Kate Raworth in Doughnut Economics.

At DDC, we take the critique of the circular economy seriously, and this means that we are also increasingly careful in the way we describe the circular transition to the partners we engage with. 

We dedicate ourselves to working with circular initiatives on different levels. To highlight a few, we have the Circular Behavior Initiative, which works to help companies and organizations drive change in consumption behavior, and Decoupling 2030, which deals with sustainable transition on a broad and systemic level, facilitating collaborations across supply and value chains.

We are mindful that the circular economy can easily be misunderstood and potentially misused. Highlighting the circular economy as a systemic, societal transition that demands a radical change in our consumption patterns is therefore crucial to our work.

Watch: Debunking Misconceptions on Circular Economy

Watch or rewatch our online panel debate on circular economy. We explored what steps to take to make the circular economy a unifying force for sustainability despite internal quarrels and differing views

Therese Balslev

Strategic Circular Designer

Phone +45 2960 3869
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