A circular economy will protect us against future shocks
Over the past few months of upheaval, Covid-19 has succinctly highlighted many shortcomings of what used to pass for the ‘normal’ functioning of economy and society. It’s made many rethink what they value and what they expect the state to value, protect and promote. While it remains unclear what changes will stick and what greater changes are coming down the line, it seems inevitable that the pandemic will permanently alter how we live and how the economy functions.
A key theme emerging is the need for increased resilience and, as part of that, big questions are being asked about the modern preference for the ‘just in time’ production system that is the current engine of the global economy. The desire for lean supply chains with very tight margins has gradually became the norm over recent decades, but the onset of the pandemic has swiftly highlighted its folly. In the initial days of the crisis, there was outrage as frontline healthcare workers – and therefore entire populations – were put at higher risk through shortages of essentials like masks, tests and ventilators. But people are increasingly noticing that other sectors, like food, electronics and automobiles, are at risk of supply disruptions, too. The latter two are in no small part because of China’s dominance in manufacturing certain component parts (and, indeed, its dominance in extracting some of the critical materials they contain, more of which in a moment).
How the drive for efficiency has led to very inefficient resource use
The supremacy of the just in time supply chain is down to its incredible efficiency. It is designed to get a product to a customer as cheaply as possible, with very low margins at each link of the chain. The thing is, this efficiency only goes in one direction, which is just one reason why the model is so lacking in resilience. What happens after someone has received a shiny new device or car is rarely a concern for those who make and supply them. There are precious few instances where companies take an interest in – let alone volunteer to help preserve – the materials and products that they put onto the market.
The upshot of this focus on efficiency of supply alone is that, once such products cease to be useful to their first owner, they are often discarded. In most instances, that means the products, and the materials and components they’re made of, which were so efficiently manufactured and delivered, are lost forever. This is a ludicrously inefficient use of resources and a failure of the system.
More circularity will improve resilience
It doesn’t have to be this way. A circular economy should see materials, parts and products keep circulating, retaining their value in the economy for as long as possible. It is generally envisaged as a series of concentric loops, with those that enable the highest value to be retained, like reuse and remanufacturing, at the centre, and those of less value, like recycling, on the outside.
Increasing all forms of circularity is particularly important when critical raw materials like rare earth elements (REE) and cobalt are involved. It turns out that many of the products with global supply risks, like electronics and electric vehicles, require critical raw materials. The UK imports 100 per cent of its supply of REE and cobalt, making us very vulnerable to supply shocks. To make matters worse, when the products reach their end of life, they are entirely lost through inefficient recycling processes or exports.
Past research we’ve done for the Circular Economy Task Force, suggests that, if we put the right policies in place, by 2035 reusing and recycling the critical raw materials in existing low carbon technology, like wind turbines and electric vehicles, could supply over a third of domestic rare earth elements and nearly half of domestic cobalt demand. That would significantly reduce the UK’s supply risks.
Now is the time to do it
Of course, even before the pandemic, there were some that recognised the strategic importance of such materials. Recycling rare earth elements has been a particular challenge that academics have been trying to crack. They’re often used in extremely small quantities and with complex formations that make them difficult to separate. Birmingham University, in particular, has been working on a pilot facility to recycle rare earth elements in magnets, and Innovate UK is now funding Birmingham’s spin-off HyProMag, which aims to create an end to end supply chain to incorporate recycled rare earth magnets into electric vehicles.
This is very good news, and technological breakthroughs like this will help close the outer loops of the circular economy and shore up economic resilience. Of course, circular economy purists would be calling for a greater emphasis on reuse as well. This, too, requires a breakthrough, but in product and system design rather than simple technology. Green Alliance’s research in 2015 found that the raw materials in a £600 smartphone at the time, for instance, were worth a mere £1.50, and were worth half that again (72p) when the phone reached the end of its life. The highly engineered component parts, by contrast, were worth £188 in a new phone and maintained their value remarkably well in an old one, at £170. Clearly, the best way to maintain value is by designing both the devices and their parts to be reused.
Neither our current economic system nor our addiction to just in time delivery has so far managed to encourage these changes, so the government needs to lead the way, not least through a new approach to infrastructure. Given the urgent need for our economy to be more resistant to shocks in future, now is the time to invest in this type of resource efficiency. Perhaps the best news, for those in government tasked with the big decisions about what to value, protect and promote in this time of upheaval, is that investing in this now will create employment. In fact it has the potential to create over 100,000 net jobs, of various skill levels right across the country. If that’s not building back better, I don’t know what is.