With all the hype currently surrounding the idea of a circular economy, it’s easy to forget that this is a concept that has been circulating (sorry) for several decades. One of the people to originally champion the vision is Walter R Stahel. In fact, his 1981 paper ‘The Product-Life Factor’, for which he won a Mitchell Prize, was the first publication to define the closed-loop economy and its impacts on waste prevention and job creation.

Indeed, along with a few other notable figures like Amory Lovins (see interview in Resource 67), Stahel has been advocating circularity to a largely unreceptive audience for decades now: “I normally say my role has fluctuated between the fool on the hill and the camel in the desert”, Stahel laments. “The sad story is that all these ideas, brilliant ideas from all these now famous people, were as valid then as they are today… but until a few years ago, they didn’t seem to incite anybody to take action.”

Now, of course, everyone’s talking about the circular economy – from the government-funded Circular Economy Taskforce to the Ellen MacArthur Foundation (with which Stahel works closely), but Stahel says it wasn’t always so. After training as an architect, he changed course to research in the early 1970s and found himself initially advocating what would become known as the circular economy in a 1976 report for the Commission of the European Communities. ‘The Potential for Substituting Manpower for Energy’ argued for extending the service life of goods and buildings, which he says is essentially a way to define the circular economy. Stahel notes that the economists at the Batelle research institute where he worked at the time couldn’t grasp the idea because it was “about services and not about manufacturing”: “That’s when I realised that, for economists, the economy’s at the point of sale – what comes afterwards is of no interest. So, that was how I basically first defined the circular economy, the obstacles and the opportunities.”

And there certainly are plenty of obstacles and opportunities when it comes to the circular economy – for government, businesses and consumers alike. Conditions have changed recently, Stahel insists, so it now seems as though the opportunities are tipping the balance. He notes that pressure to move towards circularity has increased from different sides, including the EU’s Waste Framework Directive “that now specifically stipulates reuse and service-life extension” and increased commodity prices, which have served as a “wake-up call” because now “it’s actually a better proposition to retain the industry because then at least you have resource security”.

Another key change has been in the shifting perception of liability, which started to revert back to manufacturers of products that damage health like tobacco and asbestos, and has since moved on with other concepts like greenhouse gas emissions. “In the past, at the point of sale, you passed on your liability with the ownership to the consumer, and now there are several cases – tobacco, asbestos, and greenhouse gas emissions – where suddenly a manufacturer or producer is liable for things that he did 20 years ago.” Because of this, Stahel says, the legal framework has changed in some instances and corporations are increasingly managing risk by retaining ownership of the goods they sell, allowing them to withdraw or replace products if needed.

It is exactly in creating a legal framework in which such innovations can take place that government has a role to play, according to Stahel. “Governments have the weakness that they are normally not famous for producing clever, innovative ideas. The role of government is to provide framework conditions based on a vision where they want society to go. And the role of industry then is to, within this framework, produce clever ideas, clever solutions.”

But even in the recent past, government has sometimes failed in this responsibility. Stahel cites the example of the European WEEE Directive, which was passed in 2002 and updated in 2012, though the negotiations around it started much earlier (long before the idea of circularity took hold, of course). “In the late ’80s and early ’90s, there was big, big research going into how to produce electronic components that have a track record because that was obviously the only way to return electronic goods to the manufacturers. For the manufacturer to make money, it was necessary that the component could tell if it had any abuse, humidity or shocks, and there were big research programmes on producing components with this in-built recording of the life of the component. Hewlett Packard had developed a laptop that was built in a way that you could simply turn it over, open it and shake it and all the components would come out and so you could very easily then check and reuse them. And all these efforts were killed when the European Commission gave in to the lobbying of the electronic industry, focusing instead on recycling and meaning individual manufacturers were no longer in charge of their own products.”

The move effectively stopped the circular economy when it came to electronics, but there have been notable developments in other areas where companies have effectively developed circular business plans, despite the lack of effective government guidance and, sometimes, despite their desire to continue operating according to an old business plan. Stahel cites the example of Caterpillar: “When they started remanufacturing engines in the early ’90s, it wasn’t of their freewill, it was a condition to get a contract from General Electric for their diesel truck engines. And Caterpillar said: ‘This is a complete financial waste – we will show you that.’ And they started remanufacturing the engines and then realised that, actually, remanufacturing is cheaper than manufacturing. Very quickly, Caterpillar realised that the real problem in remanufacturing is that a broken engine is regarded as waste by the owner, and so he would bang it into a container and treat it as waste.

“So then they said: ‘We will buy back the broken engine and pay up to 40 per cent depending on the condition’, and that radically changed the behaviour of the customer, because he would now supply the engine on a pallet with all the aggregates because it was in his own interest, he would get the money back.”

Key to getting consumers onboard with this sort of idea is education, Stahel says, both in terms of encouraging them to return products (“by declaring something is waste, you tell the consumer that it has no value and he will treat it as waste”) and in terms of getting them to purchase remanufactured products, something Caterpillar also did: “Caterpillar successfully passed the message on that their remanufactured engines are the same quality as the new engines – you have to educate the customers that the quality of remanufactured products is as good as new.”

For Stahel, consumers play a key role in the circular economy not “in solving the waste problem for industry”, but in acting as the decision makers: “If he gets a choice between renting a washing machine and buying one, he will exercise his preference, and if the preference is renting machines then the companies selling machines will have a huge problem.” The idea of renting – a crucial component of the circular economy – should appeal to people when they can save or even make money as opposed to losing it, Stahel thinks. “Ownership still makes sense for anything that keeps its value, or where the value increases. So, buying things like property, or buying a car if you are prepared to keep it until it has a vintage value, makes sense, because it’s an investment.” This is not the case with many objects that people currently buy, of course, like iPhones where, following purchase, “three years later its value is zero” or underused, non-vintage cars, though in the case of the latter, sharing and leasing are becoming more popular.

Stahel cites the example of car sharing schemes in Japan as an instance where people have both reduced their impact and increased their income through sharing. “Car sharing in Japan is normally linked to a single tower block with an underground garage. Now, in this garage most of the cars are maybe used one or two days a week, but normally in a residential area 25 per cent of the cars compared to the people is sufficient. As this is all shared property from a financial point of view, this means that 75 per cent of the parking spaces can be rented to outside people – you use the parking garage as a source of income for the tower block and everybody is happy.”

More recently Stahel has been expanding his ideas in The Performance Economy, which was first published in 2006 and was reprinted as an enlarged version in 2010. Stahel says the book is about three things: “It’s producing performance, selling performance, and maintaining performance over time. So, maintaining performance over time is the circular economy – it’s about product reuse, product life extension, these things. Selling performance is basically selling goods as a service. Producing performance is the one I recommend to all governments because it means producing high value with little resources and in a high education, high skill context.”

We’re a long way from achieving these and other components of the circular economy, of course, but now that people are finally taking note of the brilliant ideas that Stahel and others have been offering for years, we’re one step closer to squaring the circle, as they say.