New ideas for a new economySeptember 2016
by Adam Woodhall — The British are historically world leaders at creating solutions to problems. For example, when in the UK we started running out of wood to build ships and burn for heating, coal was recognised as a very efficient way of creating energy. For a century or more this was, overall, a fabulous solution.
However, the unintended consequences of the solution created problems of its own: first, the smog which enveloped early and mid-20th century cities (and continues to do so in China), then acid rain damaging forests in Europe, and of course, now, global climate change. In the UK we've worked out how to deal with the first two of these issues, and we are one of the leading nations considering how to deal with the latter.
Two rapidly burgeoning areas offer innovative ways to think about our post-Brexit economy: Circular Economy and Crowd Economy. These are change makers who are leading lights, shining a way on the path to a new economy, a solutions-based economy, which hopefully avoids any significant unintended consequences. These ideas are inspired in some way by the concept that there is no such thing as waste, only misplaced resource. There is naturally an overlap between circular and crowd economies; some of the case studies highlighted below demonstrate both.
The Circular Economy outlines a process that closely mirrors nature, where nothing leaves the system. Many indigenous societies understood this concept; however, much of its value got lost in the mists of time as humans found that a linear economy of take, make, and dispose of appeared easier. In many ways, it was effective in creating the comforts we now have, and also for the exponential growth of human society—there are literally hundreds of millions of people for whom technology produced by the linear economy gives them a life akin to medieval kings and queens.
In the 1970s, the linear economy started to be questioned, with people asking, “Why can't we use technology to create circularity and therefore enable us to live with modern comforts and pleasures, but within the means of planet earth”? By the 2010s, global corporate luminaries such as M&S, Unilever and Renault are now engaging seriously with this agenda, not just because it's the right thing ethically to do, but also because it makes huge financial and commercial sense. The circular momentum is gathering such that it is estimated by the Waste and Resources Action Programme (WRAP) that it will generate 210,000 jobs in the UK, and three million in Europe by 2030.
A key driver in the current decade has been the Ellen MacArthur Foundation. As the eponymous founder herself said at the World Economic Forum in March 2016: "When looking at the circular economy as an economic model, that's a system. You see the system that the materials flow within, be it plastic, or a piece of metal or piece of IT equipment, you can build a system that will recover that and feed it back into the economy which delivers more value. If you just take plastics alone, between $80 and $120 billion dollars of plastics by value are lost per year. This is because we don't valorise them and because they are not designed in a way that can be valorised, nor do we have the systems to do that."
Part of the reason why linear economy has ruled for so long is because in some ways it is easier, requiring less thought and up-front investment. Due to the externalising of environmental costs and consequences, a linear manufacturer, for example, doesn't have to bear the true costs of the input raw materials and output wastes. As this model is very embedded, it takes intelligent theoreticians and clever entrepreneurs to find ways to disrupt this model and make money in the prevailing linear economy, whilst delivering circular benefits.
Theoretical models have been developed to enable organisations to understand how to deliver circular value in the capitalist economy. One such model is 'cradle-to-cradle design', which is a holistic framework modelling itself on biological cycles or ‘biomimicry’. Utilising these theoretical concepts, entrepreneurs have seen niches and created successful enterprises.
One entrepreneurial organisation which has very clearly combined the theory and the enterprise is Cradle-to-Cradle Marketplace. This is the world’s first online marketplace for C2C certified products. Co-Founder, Paul Capel comments that “it makes us very excited to help speed up the transition. This platform exists to provide an access point to 'Circular Economy Ready' materials that can be identified by being C2C Certified, helping create a prosperity spiral which is at the heart of the circular economy”.
The Crowd Economy is an umbrella term which is often used to describe economic and social activity involving online activity. It is also known as sharing economy and a number of other terms. As Benita Matofska, founder of the ‘The People Who Share’, a social enterprise aimed at mainstreaming this economy, observes, “Sharing economy is an economic system built around the sharing of human and physical resources and given that we have finite resources on our planet with a growing population, the need to share resources is ever pressing and inherent for sustainability. Sharing economy puts people and planet at its heart and focuses on a sharing culture, where people are sharing not only physical resources, but collaborating and sharing human and intellectual resources.”
The first wave of this new economy began at the start of the global recession, and was, in part, a positive reaction to it. It also surfed on the rapidly evolving technology of the last 10 years, particularly cloud computing and mobile phones. So in a delightful contrast, whilst the circular economy is modelled on processes which are literally as old as nature itself and has been practiced since the dawn of civilisation, the crowd economy is only realistically possible on a large scale due to the most modern technology.
It has clearly disrupted a number of consumer market areas, such as taxis and hotels, with Uber and Airbnb the biggest players, respectively. The latter is a great example of the cross-over between this new economy and sustainability as it enables underutilised resource (spare rooms and homes) to be valued and shared. The key to success here is the trust that is implicit in the system. Fifteen years ago, it would have taken a brave person to turn up to a stranger’s flat to stay for a night rather than in the local Hilton. Now, most people don't give it a second thought.
As the diagram—the 14 parts of the crowd economy—produced by the global platform Crowdsourcing Week, demonstrates, this economy covers a vast array of sectors. Epi Ludvik Nekaj, their CEO, is enthused by what he sees as "the coming second wave of the crowd economy which is going be unlocked by blockchain". Blockchain is based on the ability of all the nodes of network being able to be authenticated by the network. "This is game changing", Epi continues, "as rather than being verified by one institution, its being verified by the whole system and is more secure, much like the World Wide Web itself". The most famous example of blockchain is the crypto currency, Bitcoin. Keep an eye out for how blockchain is going to rapidly disrupt many other market sectors.
There are a massive number of fantastic circular and crowd economy enterprises, products and services being developed, both by large corporates, such as those who are part of the Ellen MacArthur’s Foundation CE100, and start-up enterprises. For example, in just three of the fourteen parts of the crowd economy, there are estimated to be 1500 crowd funding platforms, 1000 crowd sharing platforms, and 100+ crowd innovation platforms.
For most of us, when we've had our morning coffee, the best we can hope for is that our local barista ensures that the grounds go into the compost bin. In 2013, University College London student Arthur Kay saw an opportunity to do something more than this, and launched Bio-bean. This is first company in the world to industrialise the process of transforming waste coffee grounds into advanced biofuels and biochemicals.
Daniel Crockett, Bio-bean Head of Communications, says: "Bio-bean was created under the premise that where others see waste, we see resources, and thus are able to turn the challenges of urbanisation into opportunities”. They certainly have ambition, as their factory in Cambridgeshire can process the waste from one in ten cups of coffee drunk in the UK, and provides a fantastic example of how business can develop market opportunities where nobody saw one before.
Another such example is Globechain, although the ambition of May Al-Karooni, its founder, is arguably even bigger. She set up an online reuse platform that connects businesses, charities and people to enable them to reuse unwanted items within a global supply chain network creating a waste audit and social impact value for members. This platform therefore straddles both the circular and crowd economies.
May explains the inspiration behind this social enterprise: "I discovered that when the bank I worked for moved offices around the corner, it cost £50,000 per person. I realised there was huge waste, and an incredible opportunity in this. I saw the potential to solve these problems, reduce waste to landfill and increase the life of goods whilst at the same time showcasing the social value created for communities in the UK and abroad by these donated resources”.
Globechain is now working with many well-known brands, such as B&Q, Radisson and Nando's, and enabling re-use of shop displays, computers, filing cabinets and hundreds of other items for a huge number of charities and non-profits in the UK and beyond. Whilst we are waiting for the majority of businesses to take on principles such as Cradle-to-Cradle, this is a fantastic bridging solution for a market that is surely worth billions globally.
Photo: Ellen MacArthur by Laura Kidd / Creative Commons