In 2022, the European Union made two key steps to not only achieve a circular economy by 2050 but also move away from what Dr. W. Van Winden describes as a throw-away economy. First, it introduced the ‘right to repair’ law as a way to enable supply of spare parts and extend the life of devices that were otherwise getting replaced every year or two. Then it introduced a framework for a common charger that will reduce e-waste and support cross compatibility for chargers across devices.
While these steps are crucial to enable sustainable development, Winden, a professor of urban economics at Amsterdam University of Applied Sciences, sees a need to rethink conventional economic structure.
The current economic structure, or capitalism, has concentrated wealth in the hands of few and is also responsible for destroying the planet. In order to overcome the 21st century challenges, there is a need to rethink our economic structure and along with the circular economy, there is now growing interest in implementation of the doughnut economy.
Doughnut economy: what is it and how does it differ from circular economy
The doughnut economy is a theory first laid out by British economist Kate Raworth in a 2017 book. Raworth argues that 20th century economic thinking is not equipped to deal with 21st century challenges and proposes doughnut economics as a framework for sustainable development.
Shaped like a doughnut, this model envisions the disc as a lifebelt where Raworth argues finding a “sweet spot” between the “social foundation” that allows everyone to lead a good life with the “environment ceiling.”
The outer circle of the doughnut is the ecological ceiling while the inner circle is the social foundation. The space between the two is the doughnut, what Raworth describes as the “safe and just space for humanity.”
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Amsterdam is leading the way when it comes to implementing the doughnut economy on a level. According to Time, Amsterdam aims to bring all its 872,000 residents inside the doughnut to “ensure everyone has access to a good quality of life, but without putting pressure on the planet that is sustainable.”
Dr. Winden says doughnut economy is broader than circular economy since it promotes “the development of an economy that stays in the safe space for humanity.” He says a circular economy is needed to stop overshooting the planetary boundaries and thus plays a crucial part in the doughnut economy.
“They are not very different,” says Thomas Siderius, a policy advisor on doughnut economy and researcher of local currencies for circular or doughnut economies. “The doughnut focuses more explicitly on a social foundation, whilst circularity has more focus on materials and resources,” Siderius adds.
A need to redesign our economy
Both Siderius and Dr. Winden agree that there is a need to redesign our economy so that it does not pollute, destroy ecosystems, and reduce biodiversity. Dr. Winden says, “Our economy should produce more equal outcomes, it is unacceptable that we have so much poverty amidst the incredible richesses of a few.”
“[An economy] that is able to imagine cooperation, innovation and community without the pervasiveness of the logic of markets,” adds Siderius.
In order to get there, there is also a need to differently design our companies, rules, and policies. Dr. Winden recommends true pricing, which implies tax on polluting activities, stricter regulation, and compliance.
Siderius says, “Any instrument, metaphor or vision that includes a solid social foundation can help uplift those in poorer countries. The core issue is escaping market logic, which views labour as a commodity, making our survival dependent on our performance in the market.”
One of the industries playing a crucial role here is the tech industry. While Siderius argues that it is not up to the tech industry to enable doughnut economy and instead up to new economic dynamics, he does see tech industry helping with solutions necessary to make doughnut economy practically viable in the society.
Role of tech ecosystem in doughnut economy
One of the cornerstones of doughnut economy and circular economy is sustainability and the tech industry plays a crucial role in development of green innovations needed to build a better world. The tech ecosystem can play a role in creating platform solutions that do not go for maximum extraction but offer a fair share to other stakeholders.
From tech that helps reduce impact in any way possible to creation of complementary currencies, there is an outsized role of the tech industry in making doughnut economics work. “Think about Fairphone, that made a circular cell phone and put much effort into a responsible supply chain,” says Dr. Winden.
However, the tech industry itself needs to rethink its business model just like any other business to truly aid development of doughnut economies. “For them it’s more important to integrate supply chains, standardise more, make sure to design for recycling/resource recovery, and create platforms that facilitate commons and knowledge sharing,” says Siderius.
Dr. Winden sees a need for the tech industry to shun its Silicon Valley model that has only made “the founders and investors richer.” He argues for a shift towards “tech for good” model and developing responsible tech or doughnut tech in the form of cooperative tech platforms or regenerative business models.
“That would require capacity building, a cultural shift in the sector and a lot of learning, but I am sure it will pay off for the founders and investors as well,” he adds.
Amsterdam leads the way but still needs to adapt
The city of Amsterdam has become a case study in its own right on how to implement a doughnut economy. It introduced a true pricing initiative during the pandemic and now has an active “doughnut coalition” of citizens, companies, local communities, and civil servants. According to Dr. Winden, these coalitions have played a key role in generating interest among the people of Amsterdam.
With Amsterdam emerging as a major tech hub in the past decade, a number of startups have also played a key role in pushing this idea. “Sustainability has become big business, and Amsterdam entrepreneurs are in the front row,” says Dr. Winden.
Every Dutch startup‘s contribution in the form of developing sustainable products and services, the city is moving further into the doughnut economy. For the Netherlands to stay within its ecological boundaries, Siderius feels these sustainable startups are crucial and their success is directly proportional to the success of the doughnut economy.
Both Siderius and Dr. Winden believe Amsterdam is still not at a stage where the doughnut economy can be implemented at the city scale. With Amsterdam still overshooting on the planetary boundaries due to excessive and unsustainable consumption, Dr. Winden says “old economic paradigms and practices are very resilient in practice.”
Another factor stopping Amsterdam from full-scale implementation of the doughnut economy is the city’s interest in other economic models but none guide the cities’ decisions and investments.
Dr. Winden adds, “The city is quite active when it comes to promoting the circular economy, clean energy, net zero, climate resilience etc, there are many many initiatives but it’s fragmented and many projects do not survive the pilot stage.”
“The city has created a City Doughnut, which has multiple ideas and potential projects in it, but in the end it depends on the amount of money that will flow to these projects,” says Siderius. “I believe that if we, with every new project, policy or legislation, take into account whether it exceeds ecological boundaries or erodes social foundations, we will have practically adopted the model. This could even happen without explicitly adopting it.”
The road ahead for Doughnut economy
It is very clear that the doughnut economy definitely offers a path to overcome 21st century challenges. However, the whole ecosystem to support this economic model, whether it be the tech companies building products around this model or governments wholeheartedly embracing it, has not happened yet
When asked if the doughnut economy remains an experiment, Dr. Winden calls it a different way of looking at the economy. He says more than 60 cities around the world are trying to work with the doughnut, but businesses need to catch up as well. For Siderius, a doughnut economy is an outcome that cities and businesses will arrive at through their sustainable measures and actions.
He calls for attention towards “investing in, and supporting doughnut-related initiatives, as well as projects such as local currencies, can be very important steps towards realisation.”
One thing is evident through the work of Siderius as well as Dr. Winden are at the very early phase of realising the doughnut economy at the grassroots level. However, there is a need for more concentrated efforts from the likes of businesses, tech entrepreneurs, sustainability startups, and the governments that want to see this profound change happen. Amsterdam is surely trying but it alone cannot change this landscape.
