What are the disadvantages of the current linear economy?

The linear economy results from business practices that assume a constant supply of natural resources. This has resulted in the take-make-dispose mentality in which raw materials are extracted, turned into products and after being used or consumed, the products are typically disposed as non-recyclable waste (Accenture). However, this approach is coming under increasing pressure because of its environmental and economic disadvantages.

LINEAR BUSINESS PRACTICES

Companies that operate with a linear economic approach have a particular set of business practices. These companies tend to:

• Utilise non-renewable resources - the company supplies or relies on primary resources that will become scarce or nonrenewable for its operations

• Prioritise sales of new products - the company designs for short, single product ownership lifetimes that results in landfilling, incineration and export of waste products

• Fail to collaborate - the company maintains strict control over knowledge and does not engage in partnerships or collaborative projects

• Fail to innovate or adapt - the company maintains their perspective on the market, and does not innovate or adapt to evolving market conditions

Ecological disadvantages

The ecological disadvantage of the linear economy is that the production of goods is at the expense of the productivity of our ecosystems. Excessive pressure on these ecosystems jeopardises the provision of essential ecosystem services, such as water, air and soil cleaning (Michelini, Moraes et al., 2017).

All three steps of the “take-make-dispose” mentality affect ecosystem services in different ways. The collection of raw materials leads to high energy and water consumption, emissions of toxic substances and disruption of natural capital such as forests and lakes. Product formation is also often accompanied by high energy and water consumption and toxic emissions. Eventually, when these products are discarded, space is taken up from natural areas and toxic substances are often also emitted (PBL, 2018a).

The plastic soup as an example

A lot of plastic is only used for a short period of time, so you can quickly go through the take-make-dispose step-by-step plan. As a result, more than 300 million tonnes of new plastic are produced worldwide each year. Of this, 5 million tonnes ends up in the oceans. This consists of plastic waste that is dumped on land, in the sea or in the sewer system.

Most of this plastic is originally dumped on land, but washes to the sea via rivers and canals. Another category is microbeads. These are tiny granules of plastic that are used in care products, such as shampoos and scrubs. Eventually, the plastic is divided into smaller particles by degradation and fragmentation. Toxic substances may be released during this process. In addition, all kinds of animals see the plastic waste and the microbeads for food. In this way, the plastic disturbs the food chain of fish, which can also damage our own health. Thus, the production of plastic in the “take-make-dispose” step-by-step plan harms the supply of fish as an ecosystem service for the oceans and seas (Plastic Soup Foundation, 2019).

Economic disadvantages

In addition to the damage caused by the linear economy to the provision of ecosystem services, this economic model also jeopardises the supply of materials. This uncertainty is caused by fluctuating raw material prices, scarce materials, geopolitical dependence on different materials and increasing demand. These problems are solved in a circular economy. The risks are explained below.

1. Fluctuating raw material prices

Since 2006, the level and fluctuation of raw material prices have signficantly increased. This not only creates problems for diggers and buyers of raw materials, it also creates greater risks in the market. This, in turn, discourages investments in the extraction and processing of materials, which can ensure that raw material prices continue to rise over time. In addition, these price fluctuations prevent companies from making price forecasts, which gives them a weaker competitive position than companies that are less material-dependent (Circle Economy, 2018a).

2. Critical materials

Another disadvantage of the current linear economic system is that much is produced with scarce materials. A number of industries make intensive use of critical materials for their production processes, such as indium and chromium. These materials are only available to a very limited extent. In particular, the metal industry, the computer and electronics industry, the electrical equipment industry, and the automotive and vehicle industries make use of these raw materials.

3. Interdependence

As a result of the increase in trade, the geopolitical interconnectedness of products has become increasingly strong. For example: countries with water scarcity but a surplus of oil, trade oil to buy grain. As a result, these raw materials are, as it were, linked to each other. In addition, the production process of many goods depends on water and fuels. As a result of this interdependence, the scarcity of one raw material will have a widespread effect on the prices and availability of many more goods (European Commission, 2018a).

4. Increase in material demand

In addition to the limited supply of raw materials available anyway, a significant increase in demand for materials is also predicted. As a result of population and welfare growth, the number of middle class consumers (with a higher demand for material consumption) will increase by three billion by 2030. In addition, the lifespan of products has decreased dramatically in recent years. This is one of the driving forces behind the increasing consumption of materials in the Western world. Product lifespan is still decreasing, because there is a process of positive feedback: consumers want new products faster and therefore use their “old” products shorter. This in turn means that less quality is needed in a product’s lifecycle, which in turn leads to consumers wanting new products even faster (Circle Economy, 2018a).

As a result, companies that continue to operate in the old linear paradigm are at risk of losing clients and access to markets, increased costs, etc. And the financial institutions that have invested in these linear economic businesses could face unanticipated losses