The philosophy of the circular economy:
Principle #1, real capital preservation
More and more businesses are talking about the circular economy. Organisations like Macarthur Foundation are talking about it as the new business paradigm, the UN have a whole section working on it, and Sweden has adopted the circle economy as one of its central strategies for achieving its Paris climate goals as well as its other environmental goals.
For us at Investors in Peace, the circular economy is one of the cornerstones of peace with the Earth.
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Circular Economy is a practice, a design framework, a set of business models but at the heart of the circular economy is its philosophy.
We see the earth as consisting of four natural spheres:
Aquasphere - the surface water, seas, rivers, lakes, streams. etc.
Biosphere - the living layer of the Earth housing all life, trees, plants, soil, subsoil, etc.
Lithosphere - the surface of the earth containing all minerals, rocks, fossil fuel sources etc
The atmosphere - the air.
In these spheres, atoms are neither made nor destroyed.
The philosophy of the circular economy describes the principles upon which the materials in the spheres are used by human society.
Verus Capital est primum principium philosophiae circularis oeconomia
Real capital is the first principle of the philosophy of the circular economy
Diagram: The four naturtal spheres of the circular economy and the man—made technosphere
The first principal is to treat the matter in the four spheres as real capital. One useful definition of real capital is that which is used in human society to produce goods, but is not used up.
To put it another way, the nature of the four spheres should not be degraded by human activity - and wherever it is degraded it should be restored. This is out of respect for life and future generations. If natural capital is not degraded, future generations will not have the same opportunity to thrive that current generations have.
Real Capital is that which is used in human society to produce goods and services, but is not used up.
We could see the principle of capital as a principle of caring for future generations.
To illustrate these principles let us take some examples: agriculture and forestry.
Using the natural capital of the earth, the biosphere, it is possible that agriculture can have deleterious effects on the ecosystem surrounding it: soil degeneration, water pollution and deforestation.
Using the capital principle it follows that all agriculture must strive to minimise the effects on the ecosystem and to keep soil at a high level of fertility and structure.
If you fell timber in the forest, it is incumbent upon you to ensure that forest structure and functioning return as quickly as possible.
The question arises as to the principles for dealing with metals extracted from the lithosphere. For example, suppose that a nation has iron reserves underground estimated to be a certain number of tonnes (or thousands of tons).
For every mining operation, these reserves are drawn down, but the metal leaves the reserves and enters the economy.
We could add another sphere - human made - the technosphere. This is human society and technology which utilises material from the other spheres. One way to describe the technosphere would be the sum of all the built structures, tools, vehicles etc., belonging to human production systems.
So metal mined enters the economy and the technosphere. Here, the principle of capital should stand: once the metal has been used to provide the goods in society it should be returned to some form of stock so that it can be used again.
Products, therefore should be designed so that metals used in them can be returned to stock so they can be used again. It is against the principle of capital to manufacture something so that the materials are in effect rendered useless for future generations.
For policy, using the principle of Real Capital applied to extraction, all extractors, before selling the material should have a high level of certainty that the material will be returned to stock after use. On selling, the buyer should be given responsibility to see to it that return happens.
For harvesters, each harvest should be sold with the assurance that restauration, and replenishment of the soil, and ecosystem around it, will be carried out.
This brings the functioning of the economy into circularity, ensuring material availability for current and future generations. Thus, Peace with the Earth and Peace with future generations.
There are more parts to real capital than just natural capital. We’ll take these up in coming newsletters. Subscribe for free to keep updated!
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