The Circular Economy as a Philosophy of the Green Economy as a Strategy for Social Responsibility

Abstract

This paper shows the importance that has been acquiring the care to the environment by
industrial organizations, given that the resources of nature are increasingly scarce when
they are extracted, processed, used and refused. Therefore, it has emerged a philosophy
called Green Economy, which is the combination of economic activities but without
damaging the environment. It is here that the Circular Economy model emerges as a system
that seeks the manufacture of more resistant products or the collection of raw materials
through recycling for its reutilization, which represents a way of sustainable development
that maintains the Social Responsibility from companies.

Full text

Key Words:
circular economy;
green economy;
social responsibility;
product;
JEL Q56; Q57.
Abstract :
This paper shows the importance that has been acquiring the care to the environment by
industrial organizations, given that the resources of nature are increasingly scarce when
they are extracted, processed, used and refused. Therefore, it has emerged a philosophy
called Green Economy, which is the combination of economic activities but without
damaging the environment. It is here that the Circular Economy model emerges as a system
that seeks the manufacture of more resistant products or the collection of raw materials
through recycling for its reutilization, which represents a way of sustainable development
that maintains the Social Responsibility from companies.
22
Introduction
The current paper is done with the purpose of
understanding how the Circular Economy operates
as an emerging model of the Green Economy to
contribute to the care of the environment. Since in
the last 150 years of industrial evolution, facilities
are still dominated by the production model and
linear consumption, extracting natural resources
from the environment for the manufacture of
products that meet the needs of consumers, and that
at the end of their life cycle. These products become
in waste, which in many cases cannot be reused, due
to the volatility in the global economy and the
evidence of increasing scarcity, which means a
deterioration and overexploitation of resources that
nature does not offer (MacArthur, 2013).
To explain the benefits of the application of a
Circular Ec o nomy m o d e l, a re v i ew of th e
documentary information on this topic was carried
out.
In order to make the information presented more
comprehensible, th e following s t r u c t u re is
established: first, the problem and the research
question that emerges from it (1) are first addressed,
after establishing the relationship between the Green
Economy with the Circular Economy (2), the models
and precursory philosoph ies of the Circular
Economy (3), the definition of the concept of the
Circular Economy (4) (5), the existing relationship
In the Circular Economy and Social Responsibility
(6), and finally in the conclusions reached through
the study of the Circular Economy.
Problem and research question
At current, one of the most discussed topics in
international forums as well as in academic and
political circles have to do with the problems that are
emerging in the environment. These problems have
led to public debates that have been limited to
polluti o n , thus having a limi t e d vis i o n of
environmental issues, leading to discussions prior to
the Stoc k hol m Co n fer e nce on t he H uma n
Environment in 1972, such as the Founex meeting in
Geneva (1971). It was at that point that a link
between environment and deve lopmen t was
stablished (Bifani, 1999).
Also, in the year 1972 the Club of Rome warned
about the limits of continued economic growth,
because it is not feasible on a limited planet, and even
if this report has been updated 20 and 30 years later,
trends only have been confirmed over time, showing
that the ecological situation is really delicate.
However, in 1987 in the Brundtland report and later
in the Rio Summit in 1992, the term sustainable
ISSN 2321 – 8487 Volume 13, Issue 1, March 2018
The Circular Economy as a Philosophy of the Green Economy
as a Strategy for Social Responsibility
Dr. José G. Vargas-Hernández., & Mtro. Gilberto Israel González Ordaz
University Center for Economic and Managerial Sciences, University of Guadalajara
Periférico Norte 799 Edif. 201-7, Núcleo Universitario Los Belenes
Zapopan, Jalisco, 45100, México
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ISSN 2321 – 8487 Volume 13, Issue 1, March 2018
development emerged as a solution to these
problems, which could be further advanced while
respecting the limits of the environment (Aguilar,
2007).
To understand the severity of the environmental
crisis, it should be noted that since 1990 human
beings have been living above the carrying capacity
of the planet. As an example of this, in 2003 was
exceeded by 25% its capacity for regeneration. The
depletion of resources is evident, as at the current
consumption rate there are only 40 years before the
oil reserves are finished, and 70 years for the
uranium reserves, and the effects at a global level are
increasingly alarming (Aguilar, 2007). It is a very
real fact that the poorest countries have the most to
bear the consequences of the environmental crisis,
although the developed nations are the main cause of
this crisis, but this situation affects all countries
without exception. That is something that competes
to all the nations of the planet to give solution
(Herrán, 2012).
For this reason, the following question arises: How
does the Circular Economy model, as part of the
Green Economy, contribute to business development
by increasing its Social Responsibility?
The Green Economy and its relation with the
Circular Economy
For some years the United Nations (UN), through its
Pnuma program, has been concerned with proposing
a new economic paradigm that was defined as Green
Economy or Green Economy. This new economic
paradigm, which emerged as a counterpart of what
was defined as a brown economy that is the model
that did not pay attention to problems such as social
marginalization or resource depletion (Herran,
2012), has the following objectives:
1) To contribute to the revival of the global
economy, to the conservation and creation
of jobs and to the protection of vulnerable
groups;
2) To promote sustainable and inclusive
growth, and to achieve the Millennium
Development Goals (MDGs); and
3) Contribute to reducing carbon dependence
and ecosystem degradation, through fiscal
incentives or political reforms (Roa and
Rodríguez, 2012).
In a general sense, the green economy includes all
institutions, entities and productive organizations
that are concerned about the environment. However,
the term is broader because it is used to refer to all
activities that are related to the environment and
sustainability, encompassing economic activities
such as the development of renewable energies,
recycling and waste treatment, natural resources
management, water treatment, among others. The
green economy also includes companies and
organizations, both public and private, whose
management practices are environmentally friendly
(Monzón-Campos, 2010).
The concept of green economy has acquired
relevance largely because it provides a response to
the multiple crises that the world has been facing in
recent years - climate, food and economic crisis -
through an alternative paradigm that promotes
growth while protecting the planet's ecosystems and,
in turn, alleviating poverty. For this reason, one
cannot speak of a single definition of the green
economy, but the term itself underscores the
economic dimensions of sustainability (Ocampo,
2011).
In this sense, sustainability is the key point that
unites the two concepts of Green Economy with the
Circular Economy.
Models and philosophies precursors of the
Circular Economy
In 1992, within the Rio summit (Brazil), it was an
un p r ecedented moment in t he study o f the
environment in the economic-business sphere, since
it was there that defined the concept of "sustainable
development", which was ratified by 180 countries
(Balboa and Somonte, 2014). However, other
models or philosophies in favor of the environment,
which were precursors of the Circular Economy
(Table 1), were considered before:
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Table 1. Precursors of the Circular Economy
Source: Own elaboration based on information from Balboa and Somonte, 2014.
In the previous table the chronological models and philosophies that precede the Circular Economy model, the
authors of these models and their main characteristics are shown chronologically.
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The Circular Economy
The concept of Circular Economy arises as a systems
organization philosophy that is based mainly on
living beings (Balboa and Somonte, 2014), which
designs product without generating waste, creating
products that are easy to disassemble and reuse. In
addition, to establishing business models so that
manufacturers have economic incentives to collect,
re-manufacture and distribute their products
(Caicedo, 2017). It is a restorative and regenerative
model divided into two cycles:
1) biological cycles and
2) technical cycles; (Tena and Khalilova, 2016, and
Caicedo, 2017), and is considered a continuous
positiv e develo pment cycle, based on three
principles:
1) Preservation and improvement of natural
capital: through the control of finite stocks
and balan c i n g the flow of re newable
resources.
2) B. Optimization in the use of resources:
circulating products, c o m p o n e n t s and
materials at the highest level of utility in both
the technical and biological cycles.
3) Fostering the effectiveness of the system:
through obtaining patents and eliminating
negative externalities.
However, it must be understood that the human
economy is part of a larger system, as resources are
received and waste is produced. For this reason,
there i s no cl o sed C i r cular E conomy, an d
unfortunately it is poor people who are seen, but on
other occasions those affected are future generations
(Alier, 2013). In this way, the Circular Economy can
contribute to environmental sustainability through
the redesign of industrial organizations and domestic
life as a whole, since this is based mainly on the
ecology school making a more profound and lasting
transformation, with the aim of to reduce the impact
of human activities on the environment, since it is
based on the intelligent reuse of waste (Lett, 2014).
Because the Circular Economy is a model that
protects the environment. It is considered an
emerging body of the Green Economy, forming part
of one of the specific forms that the Green Economy
has: circular economy, hydrogen economy, and the
low-carbon economy, which according to Yuan et al.
(2006), the Circular Economy was a term coined by
scholars in China, a country that at the end of the 70's
has had rapid economic growth, but in turn has
reached a serious shortage of natural resources,
depletion, environmental pollution and degradation
due to rapid development (Heshmati, 2014).
According to Olórtegui (S.F.), some of the benefits
of using a Circular Economy model are:
1) Capturing and reusing large volumes of finite
resources (minerals)
2) Manufacture of products with herbal materials
that are biodegradable and can be used as
fertilizers at the end of their life cycle.
3) Provision of energy through renewable
resources.
4) Redesign of efficient systems to save
energy in the process.
The Circular Economy model contrasts with the
so - c a l l e d Li near E c o n o m y, wh i c h is th e
economic model used today and which is based
on the production of goods and services through
the extract-use-discard model, without taking
in t o account the s u s tainability of future
generations (Caicedo, 2017). In this linear model,
the process is very simple. Companies extract the
necessary raw materials from the environment to
make products that can be inserted in some
market. After the raw materials have been
transformed into some product, it is expected that
a consumer will acquire and use it until the
product deteriorates, decomposes or simply
becomes obsolete; And finally, once the product
is no longer useful to the consumer, it is discarded
to acquire a new one.
A linear economy is responsible for turning natural
resources into waste, this through the production
processes, which leads to a deterioration of the
environment in two ways:
1) Eliminating natural capital of the environment
(through extraction or unsustainable harvest),
and
2) Reducing the value of natural capital caused by
pollution from waste.
This model is a unidirectional system, which has
been referred to by Boulding (1966) as a cowboy
economy (Murray et al., 2015).
The most notable difference between the two models
is that in the Linear Economy model the scheme is
repeated: extraction - production - consumption -
waste, characterized as a system where the life cycle
of a product concludes at the same time as it is
consumed, (Cradle to grave), whereas in the Circular
Economy model, activities, from extraction and
production, are organized so that someone's waste
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becomes the resource for someone else (cradle to
cradle) (Cutaia Et al., 2014). It is therefore
considered as an economy of recovery and reuse,
since it transforms production chains as well as
consumption habits, and dissociates GDP growth
from extractions to nature (Frérot, 2014).
Within a perfect Circular Economy system, the
value of products and materials must be kept as long
as possible, reducing waste to a minimum and
conserving resources within the economy even if a
product has reached the end of its useful life for
constant reuse and thus continue to generate value
(PRIMAS, CDREM, 2016).
The design of products within the Circular
Economy
The manufacture of products within the Circular
Economy should be based on what is known as
Ecodesign, which has been defined as the set of
actions aimed at environmental improvement of
products from t h e in i t i a l stage of d e s i g n ,
improvement, selection of materials, alternative
production processes, transportation, use and
reduction of impact in its final stage of treatment.
For this reason, eco-design has a dual function:
1) To reduce the negative environmental impact of
products during their life cycle, and
2) To provide benefits to both the actors involved in
producing the products and to the end user (Chacin
et al.
In addition, the strategies that have been developed
in p ro d uct eng i ne e rin g h a ve favo r ed the
fundamental principles of the circular economy.
These strategies are shown below, of which the first
four are closely related to Ecodesign (Fernández-
Alcalá, 2015):
1) To increase the life cycle of the products
2) Promote the reuse of products
3) Ensure the recovery of products and their new
market introduction
4) Encouraging the partial recovery of products
5) To take care of the recycling of the raw
materials of the products
The Ecodesign focuses on two priority areas of
action. The first is in charge of design with the aim
of prolonging the useful life of the product, while
the second is based on the design for the purpose of
an adequate end of life. For this reason, the fifth
strategy is focused on those companies that are
dedicated to the recovery of secondary raw
materials, end-of-life managers of products,
recyclers and processors of raw materials that have
already been recycled (Fernández-Alcalá, 2015).
The following diagram shows the five Ecodesign
strategies for the manufacture of durable products
that can be used in a Circular Economy system, as
well as the actions to be taken to realize this strategy.
Figure 1: Strategies that are sought through Ecodesign
Source: Own elaboration based on information from Fernández-Alcalá (2015)
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As can be seen in the model above, the products
created through Ecodesign try to follow the five
strategies of the Circular Economy:
1) Increasing the useful life of the product: this
through increasing its durability, creating
customer loyalty and its ease to be reparable.
2) Re-use: this is to ensure that products with
factory failures are not destroyed, but are
rather repaired and put on sale in second-hand
markets.
3) Recovery and reinsertion in the market: this is
through the search for those devices that have
been discarded and that can be renewed,
reconditioned or rebuilt and then reintroduced
into the market.
4) Partial recovery: that is, the manufacture and
sale of parts that can increase the life cycle of
products, easy-to-dismantle and disassemble,
standardized parts and reuse of components.
5) Recycling of materials: once the product does
not have the possibility of being repaired, raw
materials can be harvested that are still used to
be used in the manufacture of new products.
The Circular Economy and its relationship with
Social Responsibility
"Responsibility" means responding to your actions
before others, as well as the future in general, that is,
having the power to make promises and fulfill them,
but this promise is never solitary nor unilateral, since
the promise is done to others, and in front of others,
so something will be expected and judged according
to what has been promised to fulfill (Vallaeys, 2012).
However, when you have global power, you must
have gl o b a l responsibil i t y, and i t must be
democratically instituted as a promise of shared
responsibility between all parties. For this reason,
the idea of a "Social Responsibility" is born, as a
necessity to institute a responsible society in which,
each person participates according to its own power
under a mutual promise (Vallaeys, 2012).
It should be noted that the concept of "Social
Responsibility" is confusing for companies as well
as for the academic field in general, since even if it
seems easy, its difficulty lies in the fact that everyone
believes that it understands it, although the ISO
social responsibility guide 26000 makes the effort to
clarify this concept, has not managed to eliminate
certain doubts, since each person takes from its
definition, only that which is of his interest
(Vallaeys, 2016):
"Responsibility of an organization for the impacts of
its decisions and activities on society and the
environment, through an ethical and transparent
behavior that: be consistent with sustainable
development and the well-being of society; take into
account the expectations of the stakeholders; is in
conformity with current legislation and consistent
with international standards of conduct; and be
integrated throughout the organization and practiced
in all its relations. "
It is for all of the aforementioned, that according to
the corporate image of an industrial organization,
companies should promote Corporate Social
Responsibility, and one way to carry out this
responsibility is through the manufacture of more
d u r a bl e p ro d u c t s a n d m ak e k n o w n t he
environmental consequences which have products at
the end of their life cycle (Ruiz-Malbarez and
González, 2011, cited by Yang 2016).
However, it is completely contradictory to mention
the environment and corporate social responsibility,
before a consumer society that only seeks to satisfy
their needs, creating new needs through advertising,
granting credit facilities and using programmed
obsolescence in their products (Malbarez, 2011),
which i s the bu siness pr a ctice o f pla n n e d
consumption products that will become obsolete in
the short term, either due to a programmed failure or
a deficiency incorporated by the manufacturer (Rey,
2014).
It should be noted that in addition to programmed
obsolescence, there is also what is known as
perceived obsolescence, which unlike the first that is
a marketing strategy, it only arises when the
consumer feels the need to change a product that he
had already acquired for a newer one, before it really
needs it. This obsolescence can be mainly caused by
advertising, since it seduces consumers to buy more
in less time (Rey, 2014).
It is at this point that the Circular Economy can be
established as a system that positively contributes to
Corporate Social Responsibility, since this model
preserves the added value of products throughout its
life cycle and excludes waste. So that the Circular
Economy would reinforce, in addition to protecting
the environment, the generation of jobs, innovation
and its adoption would provide a competitive
advantage in the global market (PRIMAS, CDREM
2016)
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Conclusion
The Circular Economy model is an emerging form of
the so-called Green Economy, which is in charge of
combating the problems generated by the current
model of Linear Economy. Since this model seeks to
preserve the products of companies in a way which
do not have to be consumed frequently, and
consequently the quantity of waste decreases or to
recycle materials from the waste that can be used
again to manufacture new products. This is because
the planet has finite resources, that is to say, that at
some point they are going to end, and that when they
are extracted to become new products that will be
used and later discarded, they will become waste that
will contaminate the planet causing damages in the
environment.
The linear economy model currently used by
companies only seeks to satisfy the desires and needs
of consumers, and therefore is based on the process:
Extract - produce - use - discard. In order to sell, there
are used strategies such as the use of advertising,
facilities for payment on credit and scheduled
obsolescence, to achieve their business goals.
However, the concern that has arisen on the part of
governments, companies and society for taking care
of the environment, have favoured the appearance of
economic models that are opposed to the linear
model, in order to continue producing economic
development but at the same time protecting the
environment. It is here that the Circular Economy
model emerges as a possible solution, since through
this system it is a question of increasing the
durability of the products, repairing them in case of
failure to be reused and / or recycling of the raw
materials of unusable products for the manufacture
of new products.
In order for the product to comply with the
requirements of the Circular Economy, these must be
designed through Ecodesign, which are the actions
for the environmental improvement of the products,
which is opposed to the scheduled obsolescence.
The application of this model by the organizations is
wi t h th e pu r pose o f co n t ributing to Social
Responsibility, which was determined as the
commitment on the part of the companies with the
society and with the care of the environment. From
what can be concluded that the Circular Economy
contributes positively in the economic development
business while generating social responsibility.
Therefore, it is important to continue studying the
benefits of the Circular Economy model, in order to
be able to effectively apply it within organizations
that are concerned about their environment and are
socially responsible.
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