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December 2, 2020

What is a circular economy?

Circular park with trees, view from above

A circular economy is an economy in which resources flow in a circle rather than a line. A good example would be a manufacturing process that makes use of recycled materials.

How a circular economy works

Think of an aluminum part for a bicycle. Bauxite is mined, then aluminum is extracted from it, and then that aluminum is made into a component for a bicycle. The consumer uses it until it wears out, then it gets tossed into a landfill.

So far, the raw goods have moved in a line, from mine to refinery, refinery to manufacturer, manufacturer to consumer, and consumer to landfill.

But if the landfill is treated like a secondary source of the raw goods needed to make that same component out of recycled materials, you turn that line into a circle. Now, the path goes like this: recycling plant to manufacturer, manufacturer to consumer, consumer to recycling plant, and continues to cycle.

Another example comes from the farming industry in the form of sustainable farming. While the supply chain of, say, a batch of coffee beans won’t be circular, the yearly growth of crops can be.

For example, you can compost the plants you grow, use seeds or shoots from your own harvest to grow new plants, reuse waste produced by your harvest, and work towards reducing water waste. When you implement a number of these techniques at once, you reduce the amount of outside resources you’ll need in order to grow additional crops, instead relying on resources you already have on hand.

The Economics of the Coming Spaceship Earth

The concept of the circular economy dates back to a 1966 essay called “The Economics of the Coming Spaceship Earth” by Kenneth Boulding. While Boulding did not use the phrase “circular economy,” he laid the groundwork for the concept.

The essay discusses the current shift in perception taking place when it comes to our environment as a whole — the earth.

“Primitive men, and to a large extent also men of the early civilizations, imagined themselves to be living on a virtually illimitable plane. There was almost always somewhere beyond the known limits of human habitation, and over a very large part of the time that man has been on earth, there has been something like a frontier. That is, there was always some place else to go when things got too difficult, either by reason of the deterioration of the natural environment or a deterioration of the social structure in places where people happened to live. The image of the frontier is probably one of the oldest images of mankind, and it is not surprising that we find it hard to get rid of. Gradually, however, man has been accustoming himself to the notion of the spherical earth and a closed sphere of human activity.”

As we know now, a circular economy is the future of our world. Reusing resources benefits everyone, from governments and businesses to families and individuals.

A circular economy is better for business

All resources are finite. And it’s important to understand the possibility of a world in which those resources dwindle to virtually nothing, so we can plan ahead and avoid such an outcome.

A circular economic model is simply more cost effective to manage. If you’re creating products in a way that’s not sustainable, you’re driving yourself out of business in the long term. But even from a short-term perspective, a circular economy has numerous benefits, including cutting operational costs by sourcing recycled materials and more.

A circular economy is better for the world

Mining and refining create a lot of waste and take a massive toll on the environment. Farming non-sustainably does as well. When you create circular models within the supply chain or harvesting process, you reduce that toll substantially.

A circular economy is better for you

The whole reason people work in the first place is to create a decent life for themselves and their loved ones. You want to enjoy the hobbies you love and spend time with your family and friends without having to worry about eating your next meal or having a place to sleep. The circular economic model creates a better life for everyone, including you and your children.

When the world is healthier, and your business is saving money by implementing sustainable business models, you’re going to live a happier, more fulfilling lifestyle as a result.

Circular economies allow all of us to live our best lives.

BanQu creates blockchain solutions for some of the modern world's biggest challenges, such as supply chain transparency and identity platforms for impoverished populations. We believe that with blockchain's bright future, world poverty can become a thing of the past.

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