Ahead of speaking at CIWM’s Festival of Circular Economy, Dr Walter Stahel, one of the key contributors to the ideas and theories that helped formulate the concept of the circular economy, discusses the past, present and path to a sustainable future. Phil Lattimore reports.
With his initial research and writing on closed economy loops beginning more than four decades ago, Walter Stahel is widely recognised as one of the key pioneers of the ideas and theories that have developed into the concept of the ‘circular economy’.
A trained architect living in his native Switzerland, Stahel is co-founder and director of the Product-Life Institute in Geneva, a consultancy that works to develop sustainable strategies and policies.
In the 1970s, Stahel developed his theories proposing that industry adopts the reuse and service-life extension of goods as a strategy of waste prevention, regional job creation and resource efficiency in order to decouple wealth from resource consumption. His report The Product-Life Factor, which was published in 1982, first set out his ideas.
Nature works in a circular way, because every waste becomes food for something else.
He has since developed them to include a model of the ‘performance economy’, which sees selling goods and products as services as the most efficient means for maximising resources in a circular economy.
Stahel has been a visiting professor at the Faculty of Engineering and Physical Sciences of the University of Surrey since 2005. In 2020, he was nominated Senior Research Fellow at the Circular Economy Research Centre of the École des Ponts Business School in Paris.
In 2019, Stahel’s latest book, The Circular Economy: A User’s Guide, was published. It outlines the key themes and latest thinking around the topic, refining the concept and exploring how a circular economy can be applied.
Stahel has been invited to be a guest speaker at CIWM’s flagship Festival of Circular Economy virtual event on 20-21 April. Here, he discusses some of the issues, developments and ways forward.
Circular (C): What are the origins of your ideas about the circular economy?
Walter Stahel (WS): I trained as an architect at the Swiss Federal Institute of Technology in Zurich, and worked in London and Switzerland before I joined the Battelle research centre in Geneva. In the 1970s, Battelle was the largest contract research organisation in the world and I was working in the applied economics department. After the oil price shock in 1973, which led to a sharp rise in unemployment and higher energy costs, I thought: if you have too much labour and, obviously, a shortage of energy, why don’t we substitute manpower for energy?
I was commissioned to write a report on my ideas by the European Commission (EC) employment section.
At the time, economists would dismiss such an idea, saying you cannot turn the wheel of history backwards. But the conclusions of this report in 1976 formulated the concept of the circular economy. We compared the automobile and construction sector, and the differences between maintaining existing stocks versus producing new stock. It was obvious that, first of all, the industrial development of the last decades has been a tremendous substitution of energy or machines for people. It was equally obvious that extending the service life of objects would do the opposite – substitute manpower for energy. We called the circular idea ‘economy loops’. I felt this was revolutionary, but it was frustrating because nobody seemed interested. In fact, it took the EC five years to finally accept and publish the report.
C: Is the concept becoming more mainstream?
WS: Yes, though I term it the ‘circular industrial economy’ to clarify exactly what I am talking about. Everything tends to get mixed up when an idea becomes mainstream, and we have to distinguish between the natural circularity of nature, which includes energy, water, food and so on. Nature works in a circular way, because every waste becomes food for something else. So, the only reuse takes place on a molecular level. But then we have the anthropocene [the epoch where humans have a significant impact on the planet’s geology and ecosystems] – the circular industrial economy is based on modern science, physics, chemistry and metallurgy.
The problem is that these human-made materials are no longer familiar to nature and cannot get automatically reprocessed. So, if we throw objects such as aluminium cans or plastic bottles into our environment and oceans, nature cannot cope with them. Nature may be starting to develop bacteria and enzymes that might be able to break down this waste, but it could take thousands of years until nature has caught up with it.
What society overlooked in the process of technical, scientific advancement was also a liability for scientists to take these things back rather than delegate their disposal to nature.
C: What has driven this increased interest in the model?
WS: There are a number of factors. One key driver is the end-of-life problem – the waste problem. We are starting to run out of landfills or places where we can put construction waste and such materials. So, the real shortage is not yet on the resource side, it’s the end-of-pipe side. And that is increasingly putting political pressure on government at all levels, national and local.
The other one is that we are starting to realise that our anthropogenic activity is pushing nature to the brink. We are starting to accept that nature and humankind has got out of balance so, to help correct this, we must decrease – or better manage – our activity. The circular economy, in that sense, is maintaining the value of stocks that we have already, so that means we have less impact on nature.
There is a third aspect too – although that isn’t widely accepted yet – that the circular economy is much more labour-intensive than the manufacturing economy today. So, if we are looking for job creation, then reindustrialising regions with the strategies of repair and remanufacturing is a means to create jobs in industrially abandoned areas.
In 2017, reports by Anders Wijkman and Kristian Sandberg on the macroeconomic impact of a circular and performance economy have shown seven European countries that national CO2 emissions can be reduced by 66 per cent and new, local jobs created by shifting to a circular economy.
C: What changes are necessary to transition to a circular economy?
WS: The circular economy has always existed. It’s as old as humankind, but this was a circular economy of scarcity – and it still is in poorer regions, where everything is repaired or reused. But, in industrialised countries, we live in a society of abundance. To motivate people, to make things last, we need to educate them – we need to change them, their lifestyle, their behaviour, their beliefs.
At the moment, our discussion of the industrial economy is material-focused. I’ve suggested in a recent paper that we have to move to the immaterial world. In other words, behavioural sciences, producer liability, policy frameworks, scientific knowledge and so on. We should consider waste not the way we do today, from the material side, but from the value side. I prefer to call waste ‘derelict objects’, or ‘wasted resources’. Because if you look at waste from a value point of view, it has no positive value – otherwise people would not throw it away. And it has no liable owner, otherwise you could pinpoint the person who should pay for it.
At the moment, waste is the last phase of the linear industrial economy. It’s become the liability of municipalities who are not specialists in technology or management – a problem to deal with, not a resource.
Legislation could possibly give these objects a value, for example, by imposing deposits – because then they have a value – or by determining the ultimate liability, which would be the producer. If they were liable, they would have to take back the waste because they had caused it or avoid producing it in the first place. Applying the ‘polluter pays’ principle to objects through legislation puts a value on derelict objects in the circular economy model.
That would be a sustainable strategy because then the manufacturer would produce goods in a way that either they or someone else can make money if it comes back to them. That completely changes the business strategies at the product design stage.
People need to understand that it’s not about managing waste efficiently, it’s a problem of preventing waste. That’s one side; the other side is the policy frameworks – at the moment, these are geared to suit the linear industrial economy. One of the key issues is taxation. We are taxing labour or wages but, if we want to fight unemployment and create jobs, taxing labour is the opposite of what we should be doing. We should tax waste or resource consumption or dataflows, but not the thing we want to promote: labour.
And the second issue is value added tax (VAT). It makes sense for the linear industrial economy that produces value-added. But the circular industrial economy maintains values. VAT should not be levied on circular economy activities, because it doesn’t apply.
The third element is embodied CO2 in objects, from the energy required to produce the materials and manufacture objects to the secondary resources used in the processes (such as water) and transport. We don’t measure it, but if you remanufacture a product – maybe a building – rather than destroying it and building a new one, you should get a ‘carbon credit’ or tax credit. We need policy frameworks not to promote the linear industrial economy, but to create wealth and welfare by maintaining the stocks we have rather than replacing them.
It’s rethinking the whole value issue. We can have a better quality of life, even if we work less, by maintaining the existing values of stocks rather than producing more.
C: What are the challenges in the transition to a circular economy?
WS: First, we have to reintegrate the absorption and regeneration capacity of nature. So, we have to be in sync with nature with regards to the biocycles there. The second major issue is the legacy waste of the anthropocene – plastics, metal alloys, nuclear energy – we have to find ways to develop what I call the era of ‘de’ (technologies to depolymerise, dealloy, devulcanise, and so on). We have to find ways to delink materials to recover the atoms and molecules. We can do it for some but not all plastics, and it doesn’t work with metal alloys so far. The biggest challenge for science is to develop circular sciences. We have to develop a chemistry that is fully circular. This is happening in plastics now – a lot of university research is in developing polymers that can be reused almost endlessly.
We need circular energy, and the one candidate is hydrogen – hydrogen fuel cells, because then the only waste is water.
We need circular energy, and the one candidate is hydrogen – hydrogen fuel cells, because then the only waste is water. But the really tricky one is a circular metallurgy so that you can reuse, for example, iron or steel endlessly. In a smartphone, for instance, there are more than 70 chemical elements and few of these are currently recovered and reused, even though their extraction as a raw material is expensive and often environmentally damaging. We have to design goods and manufacture them in a way that we can disassemble and separate the components for reuse.
Again, Extended Producer Responsibility could immediately get the manufacturers more interested in these circular sciences.
C: Where are we now, and how can we measure it?
WS: The path varies depending on the location – the development of the circular economy is different regionally, and cultural elements play a part. To measure the circular economy, you should measure whether the quantity and quality of the stocks are increasing – and that includes natural capital, human capital, manufactured capital, financial capital, all these different capitals, including cultural capital and knowledge. So, if the quantity and quality of the stocks are increasing, society is moving positively.
The World Bank has started a system to measure the wealth of nations, and that is approaching those areas. But all the other measures have nothing to do with the circular economy or circularity, because they pick a certain specific metric or group of metrics that do not reflect circularity.
C: How do you feel now that your ideas have become more mainstream?
WS: It is very positive in the sense that lots of young people have got involved in the concept, because they should learn how you repair things and the values surrounding that. The danger is that what happened to the concept of ‘sustainability’ might happen to the circular economy. There isn’t a single company that has not become ‘sustainable’, but they still sometimes do the same thing they always did. So it’s really important to define exactly the concepts; we have to make clear what they are, what the differences are between the different strategies, and the advantages, opportunities and limits.
For your information
The performance and the circular economy
In a performance economy, you buy the performance of something rather than the product. Then the firm you buy from – the manufacturer or fleet manager – has to guarantee the performance. If they cannot do this, they are liable.
If you are buying a service, you are engaging in the performance economy. People are not aware of the economic difference between buying, renting or leasing a car. But the business models – ownership, value and liability behind it – are different. The performance economy exploits efficiency, sufficiency and systems solutions, whereas manufacturing exploits only efficiency. Performance economy also means those selling services retain ownership, so retain liability for risks and waste. There is uncertainty around revenue for services too.
Selling goods in the linear economy almost completely avoids uncertainty – you get the revenue at the point of sale, when ownership and liability passes to the buyer. The performance economy means you have to design your business models, and your products, for uncertainty and longevity. You design out waste and innovate systems to maximise resources and minimise life-cycle costs.
Impact of Covid-19
Covid-19 has shown that in industrialised countries, there is no shortage of stuff, with the exception of a few pieces of specialised medical equipment.
This is the moment to change to a circular industrial economy, which maintains the value and utility of stocks of manufactured objects over long periods of time. We now need skilled labour and SMEs locally to extend the service-life of infrastructure, buildings, equipment and goods, instead of linear global manufacturing and distribution chains lacking resilience and sustainability (less industrialised countries still need manufacturing to build up their infrastructure and physical stocks).
This is the moment to intelligently decentralise production. 3D print, robots, micro-(bakeries),
crowd-(mapping), local energy production, urban farming, medicines on demand and workshops to repair and remanufacture components and goods enable us to reindustrialise regions and create resilient cities, largely replacing global manufacturing and distribution.
This interview first appeared in the March/April issue of Circular magazine.
