The Value in a Linear Economy

From a business perspective the circular economy makes sense: reuse of materials can save costs and service models can deliver new business propositions and revenues. Circular businesses allow products to stay at their highest level of value for as along as possible (Ellen MacArthur Foundation, 2015; Bocken et al., 2016; Kraaijenhagen et al., 2016).

All over the world we have developed sophisticated ways to design, produce, distribute and sell goods. By extracting resources from the earth, refining them for manufacturing, assembling them into products and distributing them to consumers, value is added at every step. After the consumer uses the product however, its value goes downhill. Business models are generally sales oriented and therefore revenues come mainly from selling as many products as possible. This creates an incentive for producers to design products that have a relatively short lifespan in order to continuously sell new products. The old products end up in landfills or are incinerated, quickly destroying the value that was created in the manufacturing process. This complete lifecycle is illustrated below in the Value Hill. Value is added as the product is developed (the left side uphill slope) and once the product reaches the top of the hill, the product's value is at its maximum and after a relatively short lifecycle the product's value is destroyed quickly and value rapidly goes downhill.