[MUSIC] In this video, we're going to introduce the circular economy. We're going to talk about the distinction between a linear and circular economy. We're going to talk about the difference between so called downcycling and upcycling. And we're going to talk about the characteristics of a circular economy. Right now as I know, we arguably live in a linear economy. But what is the linear economy? >> That's a good question. And in many ways, we were trained to work and live and understand a linear world, a world where we take resources out of the ground where we produce stuff and then we use it and then we dispose it. >> This is often called the take, make, dispose economy. And there are problems in both ends of this linear economy. If we think about it linearly over here, we take out resources and we take out some more and some more, and eventually we start running out of the resources we need to make all that stuff. >> In a business perspective, that means that the things that were here are getting expensive. >> Exactly, but there's a problem on the other side of the linear value chain as well. Because what happens to all the things that we take out make things with and then dispose of. Well, over here, we then get another problem, we get lots of waste. We get what we really should be thinking of as excess resources because these are resources that at least in theory could be used again if we do something about them to bring them back to their original form. But in the linear economy sadly, this is not how we operate. >> In addition, the energy that is used to move this linear economy is often non renewable. Let's be concrete and look at an example like a phone, we extract resources from the ground, we use it and then we throw it away. So over here, there's a pile of old phones and over here, there's a lack of resources. In a circular economy that we are trying to deal with both of these problems. We're trying to reduce the outtake of resources over here and we're trying to reduce the creation of waste over here. That means that we want higher resource efficiency, we want to create more from less and we want to use the resources and the components and all the things that we make again and again. This is a central aspect of the circular economy that we are really trying to keep things at a higher value for a longer period of time, thereby reducing the need to extract more resources, reducing the need to use energy to transform those resources into products. And also reducing the creation of wealth as a consequence of all the things we produce, use, throw away. There are lots of different ways you can go about doing this. The lowest level if you will is what we've done for a long time, which is recycling. That would mean that instead of throwing the phone in a landfill, we would dismantle it and take the pieces the metal over here and the glass over here, and recycle it for reuse. This is a good start because it means that instead of throwing it away, we are using it again. However, it is still a long way to circle this back so we can get it back into production. So in a more sophisticated circular economy, we would probably make the phone so that it was reusable in some way so that we could get a shorter loop back to the start of life for a new phone. >> So that's the whole phone, but also the components, right? So, instead of de mantling it and then using and recycling the resources, you will use components again. But before that you would like to last longer. And as a consequence, you also need a new business model for the companies in which they don't sell us the product as before. But where we perhaps lease it and don't own it, but we get access to it for a while. In this way it could be rented out again and again and again. In the beginning of the video, we said that we're going to differentiate between upcycling and downcycling and recycling. What did we mean with that? >> Well, there's a lot of talk of recycling and recycling is of course a good thing, but if we think about it, recycling is really a form of down cycling. Like you said, and down cycling means that slowly the product or whatever is recycled is becoming of lower and lower value? Take a plastic bottle for instance, if you recycle it, it potentially becomes a fleece shirt and later on it's really on its way to the landfill. So, you're extending the life of the product or of the material, but you're not really upcycling it. >> So, to upcycle this pet bottle than a system where you, for instance, can refill the bottle will maintain its value on a higher level. >> So, upcycling basically means keeping products, materials, components at their highest value for as long as possible. This is a more sophisticated solution than mere recycling because it means that we get more out of less for a longer period of time. And in the circular economy, this is one of the central goals. >> So, we're here talking about the circular economy, not only a circular business model, but many, many business models acting together in order to make an ecosystem where waste from one company can become a resource for another company. An ecosystem where perhaps a producer of a phone has a partnership together with another company that have a leasing system for that phone. >> And the circular economy, if we think about it, it's a hugely ambitious project. Because like you say, it's about product design, it's about distribution solutions for those products, but it's also about everything around this production. So, where does the energy come from, what happens to excess energy? What happens to excess resources to avoid them becoming waste, and so on and so on? So, when we talk about the circular economy, we're talking about the larger system, the aggregate, like you said, of many business models of many businesses. And essentially how we structure our society to ensure that we get as much as possible out of the scarce resources we have available.