Designing Urban Areas for Sustainable Futures: Will the Circular Economy be the Future Model of Economic Growth in Cities? (2/2)

Following on our previous post, this post is going to focus on how the circular economy could advance in the urban context. The circular economy (CE) offers great opportunities to reinvent our economy, making it more sustainable and competitive. It has the potential to benefit citizens, businesses and the environment alike, and to enhance collaborative innovation and job creation at the same time. However, moving from a linear economy to a circular one will require changing market strategies and economic models of production and consumption. Cities, as home to more than half of the world’s population and responsible for more than 80% of global Gross Domestic Product (GDP), will play the most critical role in this transition.

The 7Rs of the Circular Economy

The circular economy can be an important tool for governments to achieve sustainable futures. Different countries around the world have already started implementing substantial CE policies, initiatives and/or pilot programs, including Denmark, The Netherlands or Japan. The European Union also has a CE Action Plan and a specific package to help businesses and consumers to shift towards a circular economy. However, the route towards a circular economy will start in cities. As meeting points of people, businesses and governments, urban areas are the perfect place to become living labs to test new business models, approach new practices and develop groundbreaking policies and strategies.

Many different authors have tried to conceptualize the different ways in which citizens, businesses and governments can advance towards circularity: the so-called “Rs” of the Circular Economy. The most basic and commonly known is the 3Rs pillar – reduce, reuse, recycle -, but we can also find a varying number of Rs, from 4Rs, 5Rs, 6Rs, 7Rs and even 10Rs. These principles or pillars offer innovative ways or strategies to achieve more sustainable futures. Here we will take the 7Rs approach to exhibit some examples and best practices in cities.

R1 Reduce & Share

This principle arises from the idea of using less products and for longer time, including sharing the use of products. Within this context, the “sharing economy” was born. The exponential rise of the sharing economy globally exhibits that a fundamental shift from ownership to sharing is already taking place. The city of Seoul, for instance, has developed an innovative project, Sharing City Seoul, which aims at solving urban sustainability and social challenges by promoting shared use of public and private resources while enhancing civic engagement and supporting local businesses.

R2 Reuse

This pillar comes also from a consumer point of view, who could resell or buy second-hand products, extending a product’s life cycle. In this regard, new business models have emerged, such as Wallapop, one of the most used mobile-apps in Spain for second-hand buying and selling.

R3 Repair

By repairing, we aim at extending the lifetime of a product, by adding new components to an old product or just making the product work again. A good example is the iFiXiT site, a global community of repair technicians and consumers who help each other to fix almost everything.

R4 Refurbish / Remanufacture

“Refurbishing” or “remanufacturing” consists on taking an old product with multi-components and “upgrade” it into a new product. In the case of electronic waste, this offers huge opportunities. For instance, different companies have emerged in the sector of refurbishing old mobile phones and resale them again, such as Mazuma Mobile and Corporate Mobile Recycling.

R5 Recycle

The idea of “recycling” is at the heart of the circular economy model. It mainly refers to the collection, selection, separation and management of waste to use them as secondary materials. A good example of putting into practice the business opportunities offered by the recycle principle in an inclusive way is the project “Ciudad Saludable”. This initiative born almost 20 years ago in the largest slum of Lima (Perú), Cono Norte, is a model for inclusive recycling that has expanded to other developing cities around the world. This new model of solid waste management aimed at engaging unemployed people in poor communities to take charge of collecting and processing garbage for low service fees and become micro-entrepreneurs, resulting in healthier, more inclusive and more sustainable cities.

R6 Re-think / Re-purpose

Re-think or re-purpose refers to exploring alternatives to old products or services to design or develop new ones. For instance, the construction sector offers great opportunities to re-purpose materials (also recovering, recycling and reusing) for new buildings when an old building is demolished. The city of Brummen in The Netherlands, for instance, built a new town hall that could easily be disassembled in the case that the building will no longer need to be used.

R7 Recover

This pillar can have different meanings, but most of the time refers to energy production/retention as by-product of waste treatment. Waste-to-energy plants have become quite common in different part of the world, as a solution to both waste management and energy production. Many cities in Sweden, for instance, have become so efficient in making use of waste-to-energy plants that the country has run out of garbage and now it has to import waste from other countries.

The recently-published report by the World Economic Forum on the Circular Economy in Cities, offers a wide variety of examples from cities around the world in their transition towards a more circular economy. The books, Cities and the Environment, Cities and the Economy, and Cities and Social Cohesion, of our book series “IESE Cities in Motion: International Urban Best Practices”, also exhibit some examples and best practices from cities globally in their search to balance economic, social and environmental sustainability factors.

Opportunities of the Circular Economy

The CE offers multiple economic, social and environmental opportunities. First, the CE has the potential to develop a new generation of business models that create shared value. New technological advances and innovations are key in this regard to improve resource efficiencies and develop cleaner energies and production processes. According to estimates by Accenture in 2015, the circular economy could add as much as $4.5 trillion in economic value by 2030. Second, the circular economy could create significant jobs around the world, offering huge employment opportunities and increasing disposable incomes. A study reveals that only in Europe the growth in the CE has the potential to create 1.2 to 3 million jobs and reduce unemployment by around 250,000 to 520,000 by 2030. Third, the circular economy could reduce raw material consumption in a 32% by 2030 and 53% by 2050, compared with today. This would reduce carbon emissions and natural resources dependence significantly. Finally yet importantly, the CE offers important resource optimization opportunities, making waste almost disappear.

Therefore, the circular economy in the urban context has the potential to increase prosperity, while improving resilience and livability in cities. It seems like the transition towards circularity has started to unfold all around the world, but there is still a long way to go. Local governments and policymakers play a key role enabling mechanisms for new loops to develop and new business models to thrive, setting targets, and directing economic activities in the transition towards a circular economy.

Has your city government implemented any initiative or policy within the circular economy? Let us know in the comments!

About Ana Isabel Duch

Ana Isabel Duch is a research collaborator at IESE Business School. She holds a master’s degree in International Relations from the Institut Barcelona d’Estudis Internacionals (IBEI) and a bachelor’s in Business Management and Administration from the Universitat Pompeu Fabra (UPF). Before joining IESE, she worked on research and consultancy projects related to socio-economic development and international trade at the European Commission (DG Trade), the Inter-American Development Bank (IDB), the European Institute of the Mediterranean (IEMed) and at ACCIÓ Berlin (Government of Catalonia). Her areas of research interest include sustainable development, global and local governance and international political economy.

About Joan Enric Ricart

Joan E. Ricart, Fellow of the SMS and EURAM, is the Carl Schrøder Professor of Strategic Management and Chairman of the Strategic Management Department at the IESE Business School, University of Navarra. In this school he has been Director of the Doctoral Program (1995-2006), Associate Dean for Research (2001-2006), and Associate Director for Faculty and Research (2006-2014). He is also Vice-president of the Iberoamerican Academy of Management. He was the Founding president of the European Academy of Management (EURAM) and President of the Strategic Management Society (SMS). He was the academic director of the EIASM and member of the research committee of the EFMD. Joan E. Ricart holds a Ph.D in Managerial Economics, Northwestern University; Ph.D. in Industrial Engineering, Universitat Politècnica de Catalunya; and Ph.D. in Economics and Business Administration, Universitat Autònoma de Barcelona. He has published several books and articles in leading journals. He is Director of the Center for Globalization and Strategy, co-academic director of IESE Cities in Motion and academic director of the UN center of excellence of PPP for Cities. He is also a member of the Advisory Board of the Future of Urban Development and Service Initiative of the World Economic Forum. His current work focuses on cities, business models, and general management.

About Pascual Berrone

Pascual Berrone (BA, B.Sc., Ph.D.) is associate professor of strategic management and holder of the Schneider Electric Sustainability and Business Strategy Chair at IESE Business School. He is a multi-award-winning researcher whose work on sustainable innovation, corporate governance, CSR and Smart Cities has been published in over a dozen international journals. Among his awards, it is worth mentioned the IBM Faculty Award, which recognizes Berrone’s work in researching and teaching strategies for cities and urban development. Professor Berrone is associate editor of the research journal Organization & Environment and founder of the “Strategic Madrid Group,” an initiative that gathers world-class scholars and practitioners to focus on strategic issues. He is also the academic co-director of the research platform IESE Cities in Motion and academic director of the International Center for Competitiveness (ICC) at IESE.

8 thoughts on “Designing Urban Areas for Sustainable Futures: Will the Circular Economy be the Future Model of Economic Growth in Cities? (2/2)

  1. Here in Brazil I see more people and companies engaged in this context than the rulers. I see a lot of material in social media encouraging people to consciously consume and consciously discard the products.
    One interesting story I saw was the construction of houses with Pet bottles. I found the maximum!

  2. Great article! I think that circular economy is going to represent a big percentage in within some years.

    Platforms such as Wallapop, Ebay and others help a lot with this.

  3. Here in India I see more people and companies engaged in this context than the rulers. I see a lot of material in social media encouraging people to consciously consume and consciously discard the products.
    One interesting story I saw was the construction of houses with Pet bottles. I found the maximum!

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