Businesses need to realise the value of the circular economy and rethink their business practices to take ‘small steps’ towards this new model, Dame Ellen MacArthur tells Christine Ottery
Business leaders take notice when Ellen MacArthur speaks. She has a direct gaze, and riffs at speed and fluently on remanufacturing processes, business leadership and the role of policy in the circular economy.
When we meet under the eaves of her sail loft office on the Isle of Wight, MacArthur tells me that single-handedly sailing around the world prepared her for thinking systematically about solutions to an economic system that has finite resources - just as she had limited resources on her meticulously planned voyages.
“When you put together a project to sail around the world, you have to think through every eventuality - good and bad,” she says. “You have to plan for what would happen if you end up in a life raft and you are probably going to die.”
She says that sailing a boat is like managing a system where you are in charge of many things at once, such as the need to charge your battery or maintain your equipment. This sits within the wider meteorological system of waves, weather and currents.
Back on the subject of finite resources, the circular model seeks to flow materials efficiently through and around the entire production process, minimising materials loss and generating economic growth. Designing products ‘for life’ is a core concept of such a system.
The circular economy concept is gaining momentum, and was discussed by business leaders at the World Economic Forum in Davos in January. “Last year, it was unheard of,” she says.
Why has there been this change in attitude? “The time is right, I would say, in that we are looking for different economic models [because of the global recession of recent years].”
It is not surprising that people are looking at new models, “with another five billion middle-class consumers coming online [by 2030] with more and more demand for raw materials”, according to MacArthur.
Raw materials prices are also going up. She says the average car manufacturer in Europe has seen a raw material price increase of more than e500m (£430m): “We live in a world of constrained resources.”
Her foundation, the Ellen MacArthur Foundation, set up in 2010, has had a part to play in this shift of emphasis. In 2011, it commissioned business analyst McKinsey to write a report on the value of the circular economy to business. The 2012 report looked at the value of the circular economy to the durable goods sector, such as mobile phones and white goods, and found potential savings of $360bn (£240bn) and up to $630bn in an advanced scenario.
It was followed this year by another McKinsey report (MRW.co.uk/ 8642330.article) which said the circular economy was worth $700bn in savings for the consumer goods sectors, such as textiles, food, beverages, and the packaging they come in. It identified anaerobic digestion as an opportunity for businesses to generate $1.5bn a year, and highlighted the potential of textiles reuse or remanufacture and glass recycling as areas where cost savings could be made.
The reports are an important part of the foundation’s aims to accelerate the shift to a circular economy through thought leadership, working with business and education.
MacArthur admits that the foundation is built on decades of pioneering work that has come before, such as Braungart and McDonough’s book Cradle to Cradle and Walter Stahel’s The Performance Economy.
“What the foundation has done is to pull this work together and to say that it makes sense in its basic principles,” she says.
“If you can [re]cycle materials biologically and technically and run that on renewable energy, you have a system that can work in the long term.”
The foundation has been looking at European targets for resource efficiency. It says: “As a result of the work we are doing with the EU and other parties since last June, the Resource Efficiency Platform manifesto (www.ellenmacarthur foundation.org/news/circular-economy-incorporated-into-eu-manifesto) now states that the EU has no choice but to transition towards a resource efficient and ultimately regenerative circular economy.
We will now be focusing in much more detail of how to achieve these goals.”
As for UK policy, MacArthur will not be drawn into saying whether she thinks the Government should be doing more to push the circular economy agenda.
The first McKinsey report noted: “The first $360bn does not need any legislation to change. That is unlockable [attainable] right now.” She adds: “It is not that the circular economy can’t happen without Government intervention. Many companies are already doing this very successfully.”
I shared a Twitter question from the anonymous writer of waste industry blog ‘Rubbish Economics’ (@RubbishEconomics): “If business opportunities really are so large, why aren’t more doing it?”
According to MacArthur, the biggest challenge to change within companies is the shift to a different way of thinking, from the linear system - which she points out has been very successful over decades at generating wealth - to a circular system: “It is rethinking your business model. It is not making your product more efficient, but deciding to create products for a circular system to be remade, using technology and design as enablers.”
She highlights one example of the potential of thinking differently from the first McKinsey report, which found that consumers and manufacturers can benefits from cost savings.
With washing machines in a circular economy lease model, the consumer can pay per wash, which works out at less than half the cost of purchase because they can afford more efficient models under a lease. And the manufac-turer can benefit from expanding its business model to include maintenance and remanufacture - along with capturing the value of the materials to be reused and protection from raw material price volatility.
“Between our five founding partners - B&Q, Renault, BT, Cisco and National Grid - we have already triggered circular economy activity to the value of $1bn towards 2016,” MacArthur says.
Building on this success, the foundation recently launched the Circular Economy 100, a programme designed to share learning around exploring new business models. WRAP has signed up, as has Marks & Spencer, IKEA and Coca-Cola. There are now 23 participants, MacArthur tells me, and others will be recruited during the year.
“What we have found from working with our own founding partners is there tends to be other parties involved, such as BT and Cisco working together as one,” says MacArthur.
She also talks positively about the collaborative work led by carpet company Desso’s chief executive Stef Kranendijk, who went on a journey with his suppliers. It took a couple of years to convince them to go along with his mission for carpets to be able to be recovered and remade.
“Over a couple of years, all the yarn suppliers developed the capability to depolymerise and repolymerise yarn,” she says.
“What I really love about it [the circular economy] is that it makes me think about my previous life. I knew when I was four that I was going to sail around the world. Many would have called it a pipe dream. But when you have a goal you can make it happen. You can take small steps.
“Sometimes you take three steps forward and five steps backward. It’s not easy but, ultimately, you have that goal. If you don’t have that goal, you can make many decisions and many of them can be contrary to another - and I’ve seen that a lot in business.”
But, as MacArthur has learnt from her experiences as a sailor, no matter how challenging things are, it does not mean they are impossible.
CV Ellen MacArthur
In 2001, MacArthur single-handedly raced non-stop around the world in the Vendée Globe yacht race when she was 24 years old. In February 2005, she set a new world record aboard her 75ft trimaran, a feat which gave her international renown.
Following her return to England, she was appointed a Dame of the Order of the British Empire. She was the youngest woman to be made a Dame in Britain.
She is a founder of the Ellen MacArthur Cancer Trust, set up in 2003, a charity which takes young people aged 8-13 sailing to help them regain their confidence during their recovery from cancer.
In 2009 MacArthur announced her intention to retire from sailing to focus on sustainability. She founded the Ellen MacArthur Foundation following three years of preparation, including spending time working with local and national governments and in industry on both BT and E.ON’s Corporate Social Responsibility boards.
MacArthur on incineration
A recent report from Catalyst Corporate Finance and LRS Consultancy (MRW.co.uk/8641955.article) suggested that there would be an increase in mergers and acquisitions activity in the resources management industry as it moved towards a circular economy.
The report predicted that most of the estimated £6.8bn to be invested up to 2018 - based on plants in the planning pipeline - will be in energy from waste (EfW), especially incineration or gasification.
MacArthur was asked: to what extent can EfW be part of a circular economy?
She replied: “The goal of the circular economy is to maintain all materials at their highest value. For example, remanufacturing a car has a greater economic value to the company than deconstructing it and selling the raw materials, as we found in our first economic report. But recycling is still advantageous [over landfill].
“With incineration you are getting towards the end of that line, and you are saying that you can still get out some value through burning it. We would ask whether there is another way to can get more value out of that material?
“The way products are designed and the way we end up with so much packaging, perhaps the best thing to do [with waste] is incinerate it. But what the circular economy says is let’s look at what to change towards in the future.
“What if we moved towards different packaging? It might be part technical materials to be recycled and part biodegradable, like Eben Bayer’s evocative mycelium (mushroom) packaging.
Now on a price parity with styrofoam, he has created a product that never becomes waste.
“So is incineration part of the future?
In an ideal scenario it would be, but less so. With an increasing demand for materials, incineration is not the ultimate goal. But during the transition, before we have redesigned the system that allows you to recover those materials, then it will unquestionably be a part of our economic future.”