3. What are the leakage points?
It is high time to tackle the major obstacle to implementing the circular economy at scale: addressing systemic leakages. Given the circular economy’s potential for resource arbitrage, it should take off by itself. However, it has not done so as a result of certain market failures and lack of mechanics, leading to significant leakages. Even sceptics recognize the need to eliminate the economic waste associated with a single-use economy, and to free an ever ‘hungrier’ global economy from increasingly inelastic resource markets.
While there are many different ways to frame and structure leakages, the most frequently cited and most tangible to corporate decision makers is referred to as geographic dispersion, with dispersed manufacturing sites and suppliers. This is compounded by the complex, multi-layered bills of materials (BOMs) of today’s products, reflecting increased materials complexity and proliferation. These issues are joined by a long list of barriers stemming from ‘linear lock-in’: the engrained structures that have anchored themselves around our linear-based growth models.
‘Leakages’ have different meaning for biological and technical nutrients. Biological nutrients represent a large portion of materials flows globally, and ‘leakage’ of those materials is often deliberate and desirable. For example, bio-materials are returned to the soil as nutrients and are part of a continuous flow rather than a closed loop. Bio-cycle materials experience a different type of leakage: the loss of opportunities to maximize the cascaded usage period of the materials and the inability to incorporate the nutrients back into the biosphere due to contaminations. For technical nutrients, ‘leakage’ refers to the loss of materials, energy, and labour as products, components, and materials are not or cannot be reused, refurbished/remanufactured, and recycled, respectively.51 Because of this different solutions are often used to solve leakage for the bio and technical cycles. Bio-cycles focus on defining leakage through cascades while technical cycles focus on closing or continuing loops [see Figure 2].