Bond Pearce

This week, at the World Economic Forum, The Ellen MacArthur Foundation released a report, Towards the Circular Economy, the first ever to look at the economic and business rationale for an accelerated transition towards a circular economy. 

It is significant that a firm like McKinsey, which would not advocate a system without serious commercial and economic benefits, has researched and prepared a report that is so strongly in favour of the circular economy model.

Having read the report, it is obvious that the argument for an early shift away from a linear (take-make-dispose) model towards a 'circular economy' is compelling. It answers many of the questions around "what does a sustainable business platform really look like?" But a move to a fully circular economy would not just involve changes to production processes: markets, taxation, education and others would all need to adapt. The legal and regulatory framework within which the system operates would also have to change, or be changed to enable the shift.

A key part of this transition, as identified in the report, is the use of legislation as a driver and this is a view we have held for some time. Not only does some of the existing legislation represent a barrier to a shift to this sort of model but, used wisely and positively, it could drive this change. For example, current environmental standards place restrictions on the use of waste as a resource, making it commercially unviable for certain 'waste' products to be returned to the materials loop. Clearly, the same standards should be adapted to make it more attractive to do so, rather than less.

Other interesting legal issues arise that would need to be considered: in the service model proposed by the circular economy (where manufacturers retain ownership but lease the goods to the customer), an entirely new contractual platform would need to be considered. Consumer legislation would have to change to reflect this new type of relationship where 'producers can tailor duration, type of use and product components to the specific customer'. Contracts would have to be more flexible, but provide certainty about ownership and what happens at end-of-life. To an extent, this already exists (for example in photocopier leasing, which has been practicing this model for years), but if widely adopted, there will be a sea-change in consumer affairs.

Would a black market develop in materials? How would this be regulated and policed? And what if companies go out of business in the middle of their consumer lease? Who would take ownership of the materials and how would they be used?

These are just a few examples and there is plenty to think about. If brave businesses are going to blaze a trail in this area, pioneering lawyers will need to be prepared to facilitate and adapt. Bond Pearce has a vision for lawyers to make a valuable contribution to the future of sustainability within the business world, and is working with clients and other leading institutions to make this a reality. Find out more about our sustainable law initiative.

Read Ellen MacArthur's comment piece on the Guardian Sustainable Business Blog.