What is the Circular Economy?

As Dr Alexander Saeri explains, it is a model that aims to replace the Linear Economy: a model that 'takes' (for example, the extraction of natural resources), 'makes' (for example, manufacturing products), and 'wastes' (for example, throwing used items to landfill) by closing the loop before items end up in landfill. This can be done through the recycling of materials, up-cycling items to be re-used for new purposes, or shared and re-used between community members.

Describing the benefits and importance of a Circular Economy, Alexander highlights a key program of work he led to understand the barriers and facilitators to businesses adopting Circular Economy practices. What are 'soft' and 'hard' barriers and what do they mean to businesses in Australia, and globally, if they mean to "close the loop" in their production.

Watch the full episode of Pocket Change, The Circular Economy:

Pocket Change is a series of pocket-size videos about a key aspect of behaviour change.  Each episode features a BehaviourWorks Australia Researcher explaining their area of expertise in a clear and simple manner.  

Grab a coffee, press play, and enjoy Pocket Change.

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Transcript:

GEOFF
Hi everyone. Geoff Paine here. I'm talking to Dr. Alexander Saeri about the circular economy. So can we just start off by saying what is the circular economy? What does the term mean?

ALEXANDER
It's a term that's used to refer to the idea of moving from a linear economy, which is much of what we have at the moment, where we take stuff, say, out of the ground or out of the earth, we make something with it, we use it and then we throw it away.

That's a linear economy. And a circular economy is really about trying to close the loop on that. So instead of taking, making and wasting it, perhaps the waste products become new materials to be used again. Or maybe we slow down how much we use something, we share it, things like that.

GEOFF
So this is a giant societal global trading change and it relies on not only the community but business of course, as the basis for this work of generating so much waste. Tell us about the research you were doing in getting business on board with the circular economy.

ALEXANDER
Well, what you can think about is it's there's a kind of conversation, if you like, between consumers and producers or businesses where the consumers need to be kind of willing to buy from the businesses, and the businesses need to make products that the consumers are willing to buy. And so when we think about things from the business angle, not only the businesses need to kind of be confident that any kind of change they might make to their business model or the products that they're creating, say, out of recycled plastic or sort of textile products that they're making out of different suppliers that are that are more circular, are kind of acceptable to consumers.

But we also have to think about, like businesses and conversation with each other. So where does that business who wants to make a recycled plastic item, where do they get that recycled plastic, if not from their regular virgin, never use plastic supplier or if they themselves want to participate in the circular economy as a supplier, Do they have other business customers who will purchase their waste products or they end of use products?

So that's really, I would say, like part of the key challenges in trying to improve adoption of the circular economy is it's not just about what consumers want and it's not just what about individual businesses want, it's actually about the whole ecosystem of businesses in conversation with each other and how that changes.

GEOFF
So there's quite a few barriers to moving to a circular economy.  And you've talked about physical barriers. Are there also kind of attitudinal barriers to this?

ALEXANDER
Yeah, I feel like the so the simplest way to distinguish between them is you can talk about kind of hard barriers and softer barriers. That doesn't mean that the softer ones are any easier, but hard barriers would be things like can you actually make your product using a different kind of material?

So do you have the technology to do it? Do you have the machines that can do it? It can also be things like regulation and policy. So are there certain types of rules about the kinds of materials that you can use to make certain kinds of products? Those are the so-called hard barriers; soft barriers, a more things like can I trust another organisation to like buy from me my end of use products, and can I trust this other organisation to supply to me? Or do we can I convince my boss to change, to take a take a chance or change how it is that we actually switch suppliers or our manufacturing cycle? So in terms of hard and soft barriers in Australia, what we found through our research was that one of the most salient barriers were really softer barriers, particularly because there hasn't been as much activity in circular economy in Australia.

It's almost like there hasn't yet been the chance for activity to run into those hard barriers. Whereas in Europe we found that there was quite a lot of these hard barriers preventing the more mature transition into like a wide scale circular economy.

GEOFF
So if it's easier and cheaper to stick with current suppliers, that is a barrier in and of itself, isn't it? It doesn't make financial sense yet and they might have they had barriers of not being able to source the material and that sort of thing. Did you come across, when you talk about soft barriers, was there agreement that this is the way to go? That this is a good idea, but people are waiting for others to make those hard decisions about how they change?

ALEXANDER
Yeah, so you can think about it a little bit, like kind of pulling yourself up by your bootstraps kind of problem, where if I start, if I'm a business and I'm producing some kind of textile product, I could be disadvantaged. If I say make some investment into a product that consumers don't necessarily want to purchase or I change my supplier and I can't be as confident about the quality or the the security of being able to access that supplier.

And so there's a there's a lot of experimentation that's needed, innovation in business, that's needed to be able to transition to a circular economy. Because most other people aren't kind of doing it, it is seen as weird. It's not seen as something that's normal to do. And so behaviourally, that can also mean that, say, business owners or decision making within businesses and organisations is quite reluctant to kind of take that plunge.

GEOFF
And so does it need a kind of tipping point, or group or enough of a wave of people making this change for others to say, well, this is now becoming the norm?

ALEXANDER
Well, that's exactly our guess through our research and that's what we tried to investigate. This wasn't research that we were just doing by ourselves at BehaviourWorks. The reason that we initiated and kind of like worked through this research is by working with businesses and actors within these ecosystems to try and understand what are the kinds of barriers that they were facing and trying to experiment with circular economy and how it is that we might be able to address it.

So your point about, I suppose, experimenting or trying out new ways of doing things, that was really what we tried to do through our working in the circular economy in waste collaboration, where we tried to identify a particular sector or ecosystem and think about the different actors within that ecosystem who could come together and collaborate together on a kind of pilot project or a niche, you know, innovation project to demonstrate that suppliers and producers and consumers and other groups would kind of be willing to to to participate in the circular economy.

GEOFF
So what did you actually do as the research for the project? What was involved in the work?

ALEXANDER
What we did in our research project is that we looked for a particular sector that we thought was ready to try and experiment with circular economy, and we tried to connect with different actors in those ecosystems. And what we found was that fashion and textiles in Australia is one of those ecosystems or those sectors where there's a lot of potential from circular economy.

But because of particularly consumer demand and the way in which business, the the business sector is kind of structured in Australia where most manufacturing is offshore and there's a strong demand for sort of fast and disposable fashion. Yeah, there was a lot of opportunity to try to start to make that more circular. So not completely circular but more circular.

And so what we did was we connected with manufacturers, retailers, large purchasers and kind of peak representative bodies who have a policy roles as well as our government partners project to try and bring together these different groups and help them figure out what pilot or experimentation could they do together in a really short time, several months that could test some of their ideas about what might happen if they if they took the first step in circular economy.

And so the credit really goes to them. They created a sort of a circular fashion working group. And over the course of several months, they identified that what they really wanted was a single product that they could describe in a fully circular way, and they launched a jumper or a sweater that was designed to be circular, which means that it could be created out of recycled or circularly source materials manufactured in a circular way.

And then at the end of its consumer life could be kind of unraveled and unpicked and turned into other products as well. So sort of at the end of its life, it was also circular. And so this was really intended to be a kind of model for what could a particular product look like if at every stage and with each of the actors, each of the businesses that touch it by the course of its life was somewhat more circular.

GEOFF
And the garment being something we can all relate to, easily measurable, something that's kind of ubiquitous. So what next? What happens next?

ALEXANDER
Well, for us, one of the things that we're really interested in is the idea of once you've done these pilots, once you've done this innovation, once you've started to build this trust or this collaboration to address some of these softer barriers, how do you then increase at scale? How do you kind of get embedded out there in the world?

And so I've been really excited to see that this circular stories idea has really started to have a lot of impact within the fashion and textile sector. And that's really credit to the group that took that forward. But we've also been really gratified to see that in Victoria under Sustainable Victoria, a government agency has set up a circular economy business innovation centre, and some of the principles in that business innovation centre are really connected to some of the softer barriers that we were talking about around trying to bring companies together, thinking about what sorts of things they might experiment with rather than just saying you should all get circular and and not really thinking about how it really comes down to behaviour change within the companies and how they might start to collaborate.

GEOFF
And in a way that innovation centre is a demonstration of this is how it can be done. We'll use this as an example and hopefully you can take that back into your business and to your industry to say, w ell, how can we do the same thing?

ALEXANDER
Yeah, exactly.

GEOFF
Alexander Saeri, thank you very much.

ALEXANDER
Thanks very much.

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