Ron Gonen explains economies of scale in a circular economy

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The world has operated on a linear economy for the past 75 years, and a monumental shift in waste streams could push it to become more circular.

Ron Gonen, Founder and CEO of Closed Loop Partners, explained how alternatives to natural resource extraction are changing the country’s economy.

“Financial beneficiaries [a linear] system were the extractive industries, the oil and gas industry, the mining industry, ”he told WASTECON attendees. . We want to build on the use of recycled content and material science to develop new types of better and stronger materials. We want to make sure that we never depend on product disposal. We are able to collect these products and reuse them or put them back into the manufacturing system. “

As the world moves towards more efficient waste management systems, the circular economy could represent a $ 4.5 trillion opportunity by 2030.

GDP as an economic indicator

In order to scale up, Gonen first explained how advertising and marketing in the United States has influenced consumers’ sentiment towards recycling.

Prior to World War II, the US government advocated recycling as a “patriotic duty” while a considerable amount of natural resource extraction took place.

“At that time, resources were seen as a major commodity and a major value for our national security, Gonen said. “The message we got from the industry was that quality was the highest form of status in America. The better the product you had access to – whether it was clothing, automobiles or something for your home – the higher the status. “

After the war ended, the statute no longer focused on quality but rather on the number of things each American family had. The marketing message has shifted to mass consumption as a measure of success.

Then came the concept of gross domestic product (GDP).

“A lot of people think that GDP has always existed forever,” he said. “Actually, you didn’t really read much about it until the 1960s.”

Gonen said what makes GDP so interesting is that a professor who developed the concept around GDP never intended to use it as the sole measure of the country’s economy. Still, the metric remained valuable as the country transitioned to massive consumption.

“GDP does not measure the quality of education, the safety of our communities, the quality of our air, water or green spaces, or the affordability of our home,” he continued.

And while the GDP has increased, these factors have decreased.

When the government began measuring economic productivity using GDP in the 1970s, schools began to incorporate the concept into economics and business classes. The core program focused on bottom line rather than supply chain and community health.

When greed turned good

A profit-driven society has emerged as a cultural norm. Gonen cited the 1987 film “Wall Street” with Michael Douglas.

“His character Gordon Gekko had a very famous speech,” he explained. “It’s a talk about how good greed is. It’s the culmination of that kind of attitude that becomes a central part of our corporate culture.”

As individual greed and self-focus over the whole, the consequences of the new mindset began to materialize in the early 2000s. Massive corporate scandals such as Enron, Tyco, and WorldCom made the hits. media headlines on what appeared to be a daily basis.

“These are just a few examples of what happens when you infuse culture and the economy with a pure focus on profit,” Gonen said. “You had a situation where our whole economy was built on the extraction of natural resources. And as you can see today, the extraction of natural resources has caused massive environmental damage, massive damage to our health. . “

As American consumption proliferated, landfills became the end of the game for all products made on the concept of quantity, not quality. And the environmental impact is only just beginning.

“Surface dumps are now the world’s third largest emitter of greenhouse gas emissions, along with a number of other major health problems,” he said.

The winners and the losers

Every time something is purchased, a consumer is essentially forced to pay a fee for the extraction of natural resources.

The mining industry reaped the benefits as taxpayers had to pay for cleanups as the online economy took its toll on the environment. However, there will be another economic change in the next 50 years.

“Retailers, technology companies, materials science companies, financial institutions, individual investors focus on rebuilding our economy to focus on this circular [model]Gonen said. “So what does it look like? It looks like a business model that focuses on local markets, where materials stay in that local market in terms of usability, collection, processing, and remanufacturing. “

Gonen noted that when he started discussing circular concepts in 2014, people saw them as just an aspiration. Today’s headlines show broken supply chains that were first built in the 1950s, when it made economic sense to manufacture internationally and ship them back to the United States. Labor rates were cheap, pollution was not monitored, and it was logistically profitable to ship overseas.

An increase in labor rates over the past 10 to 15 years and regulatory oversight focused on protecting the environment has caused large companies to adjust the way they manufacture goods.

“And the circular economy is one way to solve these supply chain issues,” he said.

Product design is a catalyst in the move towards a circular system as companies develop products with fewer materials, more recycled content and new materials are created.

When reused materials are routinely used in the manufacturing process, a large consumer goods company no longer has to worry about raw materials or regulatory issues related to landfill or pollution. As a result, margins increase and economies of scale are realized.

“It’s a lot cheaper to manufacture in a circular economy than it is to constantly extract natural resources,” Gonen said. “And there are consumer preferences. It is clear that consumers want to understand where their product comes from, how it was made, what will happen to it and that they are not polluting the environment. “


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