No more ex and hopp: Why there is no way around the circular economy - and why it does not yet work

The second of August marks a whole series of inglorious events in history. In 2023, it will be Earth Overshoot Day: the day when humanity has used up all the natural resources the Earth can provide within a year. 151 days before the end of the year is not a very flattering date - and it gets worse: if all people lived like the average German citizen, we would already have been in the red since the beginning of May; if you take US citizens as a measure, even since 13 March. One of the main reasons for this is our linear economy: "take-produce-dispose" has been the logic of our actions up to now: we extract raw materials and manufacture products from them, which are disposed of at the end of their use. And in view of a growing world population and increasing demands, this logic has ever more serious consequences: it not only leads to ever greater bottlenecks in resources, but also exacerbates regional imbalances and fuels global distribution conflicts.

Recycling rate declines worldwide

70% of global greenhouse gas emissions are now due to the extraction and processing of materials - and the trend is rising. In the EU alone, around 2.5 billion tonnes of previously used materials are disposed of as waste every year. And the recycling rate is shockingly low: only 7.2 % of the recyclable materials contained in waste are recovered worldwide - and the trend is even downwards.

These examples illustrate why there can be no "business as usual" and why there will not be in the long run due to a lack of resources. But there is hope: "circular economy" is the approach that has been propagated for some years now not only by environmentalists but increasingly also by industrial companies. Two prominent examples are provided by the furniture giant Ikea and the plastics manufacturer Covestro: they have resolved to orient their companies completely towards the circular economy. For example, Ikea wants to use only renewable and recycled materials by 2030, while Covestro plans to produce plastics and their components in a climate-neutral way from alternative raw materials and renewable energy by 2035. However, reducing "circular economy" to recycling and the use of recycled materials falls far short - it is about much more. The German Engineering Federation lists ten "R-strategies", starting with "Refuse", i.e. doing without materials, through "Rethink", the design of products with a view to cycles, to "Reuse, Repair and Refurbish", i.e. reuse and finally "Recycling".

Focus on recycling and waste falls short

Although the concepts have been known for a long time and some of them have been practised for two decades, it has to be said that the circular economy has not yet achieved a breakthrough. The reason for this is that there is too much focus on recycling and waste management - this also falls short because it not only involves a great deal of organisational effort and high investment, but also simply creates too few economic incentives for the actors.

The situation is different, however, when a growth perspective emerges - and the automotive industry has now recognised this: With its already strong networking between suppliers and customers, it is predestined for new, circular business models in which producers not only manufacture cars, but also accompany them throughout their entire life cycle and at some point also operate them, because customers no longer buy the car but the mobility service. Such business models are called "as-a-service".

"The circular economy offers the opportunity to improve profitability by 1.5 times along the entire value chain and to earn 15 to 20 times its sales value per vehicle during this time," estimates the Circular Cars Initiative in a report for the World Economic Forum. Because customers' awareness of sustainable products is growing, a clear factor for the future. By 2030 - according to the CCI's expectations - CO2 emissions can also be reduced by 75 % with the help of circular models and resource consumption per kilometre driven can be cut by 80 %. The EU Commission estimates that existing and planned legislation on a circular economy could save €600 billion and create two million new jobs.

Resilient supply chains, more business

An increasingly important argument for manufacturers to close loops is also resilient supply chains: If products are no longer disposed of at the end of their use cycle but can be reused due to their design being optimised towards recyclability, the need for new raw materials decreases dramatically and material availability increases. How serious such problems can be became clear in 2021, when the automotive industry lost an estimated 210 billion US dollars in sales due to the chip shortage.

But because recycling and the production of high-quality materials require the know-how of specialised companies, the production and supplier networks must be strongly interlocked. Examples of this are not only the production of plastics, but currently also the production and recycling of batteries. This can help the industry in future to compensate for galloping nickel or lithium prices.

Conclusion: The circular economy could become a key factor: Increase sustainability, increase the resilience of the economy and at the same time promote economic growth. But this requires companies to expand their business models - and think bigger: especially beyond Earth Overshoot Day.