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Creating the Circular Economy, Part II

david dornfeldRead Part I of the Circular Economy here.

At the end of my last article, I asked whether the “internet of things” can be part of the circular economy. Can this connectedness push consumers to consider more sustainable behavior, or create products that provide increased value with lower impact, or allow effective recovery of resources at end of life? The answer proposed was the very definitive “it depends.” Which is true – depends on reaction (or pro-action) of consumers, depends on reaction (or pro-action) of companies, and depends on reaction (or pro-action) of governments and non-governmental organizations (NGOs).

In attempting to insure products and services in the manufacturing sector that reduce impact per unit of value created we’ll need to be careful in accounting for all the impacts generated and environmental return on  investment.

That means data … and metrics. Good data (not just streams of “information”) and real metrics that relate the engineering and manufacturing efforts with machine, system, enterprise and product performance.

This starts with how we measure growth in the economy. If we do not consider the impact of growth, broadly speaking, then the growth is pushed without consideration of the collateral issues – energy, water, materials consumption and the relevant impacts as well as the important social impacts across the supply chain.

A recent article posted on the Aljazeera America site, written by Sean McElwee, makes the point well. The article, titled “Gross Domestic Problem” (after GDP more traditionally meaning gross domestic product), states that “GDP is a fine measure of the goods and services produced within a country’s borders. However, it does not tell us how sustainable that growth is or at what cost it comes.” The sustainable part here refers to the business sense … will it keep going. It is the last bit “… at what cost it comes” that should interest us. They author refers to a paper in the January issue of Nature by a group of social scientists who argue that “If a business used GDP-style accounting, it would aim to maximize gross revenue — even at the expense of profitability, efficiency, sustainability or flexibility.” And this time they mean the real sustainability!

The Nature article states that the gross domestic product is a misleading measure of national success. They cite Robert F. Kennedy’s observation that the country’s GDP measures “everything except that which makes life worthwhile.”  And the result is … while world GDP has made impressive gains since it was introduced around 1950, “progress” defined broadly may not be so impressive.

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One thought on “Creating the Circular Economy, Part II

  1. Most interesting and insightful article. The issues raised are genuinely important and critical to our sustained development and progress. There’s definitely a need for an indicator that balances the focus on a nation’s traditional GDP and its impact on the environment as promoted here. The acceptance of that indicator is contingent on satisfying conflicting interests of course such as for industrial growth and environmental sustainability. I’m of the opinion that if such index grows with the growth/progress of both interests it may be more acceptable than if it attenuates one by the growth of the other as in a “ratio” index. Perhaps a “multiplier” such as a “GDP x GPI” or the like may be psychologically more acceptable.
    P.S at the end of the article abbreviation GDI was used, is GPI intended?

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