7. Cities and the Circular Economy

Oriana Romano
Tadashi Matsumoto
M. Bruce Beck
Michael Thompson
Brian Fath
Wei Liu

Cities are important for the global system and will continue to face profound challenges due to climate change, population growth, and urbanisation. Cities are certainly causes of environmental problems, but also part of the solutions, which urban policies with the right scale, strategies, and stakeholders can provide. The approach that both OECD and IIASA pursue is a people-centred systems approach to matters of governance, but also to matters of orchestrating and mobilising the relevant knowledge bases, models, engineering and ecological thinking, technological innovations, and holistic systems approaches. This chapter argues for the importance of applying the systems approach to cities and urban policies, taking the circular economy as an example.

Cities are facing and will continue to face intense challenges due to megatrends such as climate change, demographic growth, and urbanisation. Cities are where people, information, finance, and global flows of resources (energy, water, plastics, carbon-, nitrogen-, phosphorus-bearing materials, etc.) are gathered to interact with each other in the most intensive, complex, and often unexpected ways. Cities are responsible for over 70% of energy-related CO2 emissions (IEA, 2016) and a growing share of waste - 1.3 billion tonnes of global municipal solid waste were generated in 2016, which is expected to rise to 3.4 billion tonnes in 2050 (UNEP, 2017). With an increasing population living in cities (up to 70% by 2050), together with the effects of climate change, notably sea-level rise affecting coastal regions, the environmental impacts look set to intensify.

Rich and poor urban dwellers, moreover, usually live in different neighbourhoods, with unequal access to goods and services and asymmetric experiences. Global frameworks such as the 2030 Agenda for Sustainable Development clearly recognise the need for making cities inclusive, safe, resilient, and sustainable: through improved access to services; novel ways of arranging human settlements; and innovative ways of re-engineering urban infrastructure to reduce and eliminate the negative atmospheric, aquatic, and terrestrial environmental impacts of cities. Indeed, systems approaches are capable of enabling cities to go above and beyond their becoming merely “less bad” for the environment and the global system.

The complexity of urban issues cannot stay in policy silos and instead requires a systems approach. In particular, since decisions are taken at every moment across multiple scales (households, firms, local, regional, and national governments), there is a need for synergies and a better understanding of how decisions are made and executed in cities. Government decisions are often made according to sectors, which overlooks a “whole-of-government” approach that can maximise synergies, while minimising overlaps and transaction costs.

A systems approach refers to a set of processes, methods, and practices that aim to affect systems change. For governments, this approach has several implications: to develop a vision and related strategies to transform the system in the face of changing circumstances; to mobilise a broad range of actors to achieve a common good rather than narrow institutional interests; to confront problems that traverse administrative and territorial boundaries in a holistic manner; and to face constant adjustment throughout the policy cycle, with implications for the ways in which institutions, processes, skills, and actors are organised. For this to happen, certain conditions should be in place, such as having a champion committed to change; capacity to experiment; ability to engage with internal and external stakeholders; and sufficient resources to delay a business-as-usual approach (time, capital, etc.). Understanding problems and needs requires identifying underlying gaps and synergies across sectors and actors and connecting the dots (OECD, 2017).

However, current methodologies can be overly focused on the global level, overlooking the local dimension. Contemporary Applied Systems Analysis (ASA) “never reaches the ground” as a result (Beck et al., 2018). What is called for, analysed, and proposed at the global level can lose its significance and political immediacy at city, neighbourhood, and household levels. The well-known aphorism, “think globally, act locally”, has its complement, first coined for engineering styles of ASA (Beck, 2011; p xvii): “Engineers “Acting Most Locally” to build a community eager to engage in ‘Thinking Globally’”.

Individual actions can make the difference in our consumption behaviour. Highly local acts can have impacts on the distant destinations of post-consumption products: flushing the toilet, or sorting out the growing categories of recyclable and – still regrettably non-recyclable – household “waste” (itself an increasingly unhelpful misnomer). Cities thus present an effective focus for the design and implementation of systems-based solutions.

To take a somewhat broader stance, cities and their hinterlands are naturally interconnected and interacting systems. Together they play a key role in regional development and cohesion. Urban systems planning has ideas and problem-solving approaches to offer to rural systems development, and vice versa. Their interdependence and the need for a systems approach to them both - as one - is evident in the eloquent words of Berry (1977, p 24):

[Our cities] and our country create one another, depend on one another, are literally part of one another; that our land passes in and out of our bodies just as our bodies pass in and out of our land; that as we and our land are part of one another, so all who are living as neighbors here, human and plant and animal, are part of one another, and so cannot possibly flourish alone.

In cities, decisions are taken all the time across the multiple scales of households, firms, community groups, and local, regional, and national governments (to name but a few of the key actors in the system). To begin with, there is a need for a better understanding of decision-making and, more importantly, of the synergies and antagonisms among this host of decisions across scales.

It is possible to conceive and classify the host of decision-making actors and institutions in ways other than scale. There are public-sector government actors, private-sector market actors, civil-society actors (they have been called “.gov”, “.com”, and “.org” actors, respectively); and, just as significantly, there are science and technology communities (adding “.edu” to the list). As witnessed in many environmental and social issues of policy – the transition to a non-smoking public sphere, or the transformation needed to break free from the world’s dependence on fossil fuels – civil society and the private sector are exerting their influence throughout the whole policy cycle. Affairs amount to much more than merely joined-up government thinking. Forming strategic alliances across governments, academics, businesses, and civil society organisations is becoming a new operating norm. The blurring of boundaries makes it increasingly necessary to view urban policymaking as a networked system.

For the benefits of the systems approach to be enjoyed, certain conditions should be in place, such as having an individual who champions change (Katz and Bradley, 2013; pp 64-87), and first-followers not afraid to move the masses. A capacity to experiment, a tolerance of failure, and a capacity to learn from mistakes are needed. This requires an ability to engage with stakeholders both within and outside of government, with sufficient resources (time and capital) to resist the urge to continue with a business-as-usual approach.

“Change” according to a systems approach is thus needed. Transformative change is being sought in many places and ways, with important implications for governments. In particular, choices should be collectively debated and inputs from a broad range of actors need to be mobilised and encouraged in order to achieve a future collective good that spreads beyond narrow institutional interests. The scale at which problems and solutions arise should be taken into account, as well as administrative and territorial boundaries. Constant adjustment and continual adaptation will be needed throughout the policy cycle, which bears clear implications for the organisation of institutions, processes, skills, and actors.

Cities are foci of innovation, including in respect to systems approaches themselves. For what are innovation ecosystems and urban innovation districts, if not the results of deliberate systems thinking and systems design? Cities are the laboratories of the world. The very feature of their “bounded regionality” provides intimate, on-the-ground links. Cities enable the bottom-up entrepreneurial impetus for citizens to stimulate and cultivate innovative social, environmental, and economic benefits, including novel forms of businesses and entrepreneurial partnering. And yet, coordination between the local and national levels is needed for policies and incentives at the two scales to catalyse one another. National strategies play a key role in supporting cities’ unique capacity to foster entrepreneurship.

Governance at the urban level must focus on the material realities of the city and the immediacy of policy consequences for the everyday lives of city dwellers. Accountability is a proximate reality, not something vaguely distant. City managers are obliged therefore to think, invest, and act in the full glare of the longer-term perspective. Their concerns must be to anticipate and adapt to change and to strengthen resilience in the face of the inevitable shocks that cannot even be imagined, let alone anticipated. Governments at this local level should be what is desired of so many: agile. Encouraging and facilitating such nimbleness of governance must be prominent in the remit of the proposed systems approach to cities and urban policies.

The currently debated transition from a linear to a circular economy is an example of how system thinking can be applied at the city level. The circular economy, as a new socio-economic paradigm aiming at preventing waste and transforming it into resources obliges one to think yet wider still: of the sub-system of the household nested within the city, the city within the region, and the region within the supra-system of the entire globe. The circular economy in cities implies resource flows are not about merely linear supply chains. Better to say, they are supply circles: endless, unbroken chains, between post-consumption resources generated in the city and their return back to the city as pre-consumption resources (Thompson et al., 2019; Beck et al., 2019). To reach such an alternative conception requires summarising the necessary (and necessarily profound) re-thinking of the system of the city and its hinterland. The circular economy provides precisely the problem context needed for testing, refining, and extending the systems approach in cities.

OECD has been at the forefront of research and analysis of urban policy. It is a leading international forum for exchanging views and experience in the field. Acknowledging the importance of place-based polices, the OECD has been working on databases, country reviews, thematic studies, and standards that take into account the specific characteristics of territories, the connection across levels of government, the inclusion of stakeholders in policymaking and implementation, and the interlinkages across a wide range of policies. For example, the OECD Metropolitan Database is defined according to so-called Functional Urban Areas, which extend beyond administrative boundaries of cities, while taking into account the functionality of territories based on people’s daily movements (OECD, 2012). Countries and thematic reviews take into account multi-level governance for clear allocation of roles and responsibilities across levels of government, capacity building, and policy coherence. National Urban Policy reviews (e.g. Mexico, Chile, China) support a coordinated implementation and monitoring of global urban agendas, such as the Sustainable Development Goals, Paris Agreement, and Sendai Framework.

The OECD has also developed standards, the OECD Principles on Urban Policy, to provide governments with a guiding framework to deliver effective urban policies, based on scale, strategies, and stakeholders. The Principles define urban policies as:

“a co-ordinated set of policy decisions to plan, finance, develop, run and sustain cities of all sizes, through a collaborative process in shared responsibility within and across all levels of government, and grounded in multi-stakeholder engagement of all relevant urban actors, including civil society and the private sector” (OECD, 2019).

The role of the OECD as an intergovernmental organisation is to support governments in navigating economic challenges through innovative approaches, such as those concerning the transition to the circular economy. As such, the OECD works hand in hand with governments (e.g. Spain, the Netherlands, and Sweden) to share policy recommendations and best practices on the transition from the linear to the circular economy. Governments at different levels have shown increasing interest in the subject, and want to know more about the economic and governance conditions needed to put in place the circular economy, which is systemic by nature.

Cities are very much concerned with the transition towards the circular economy: first, as already discussed, cities are laboratories for innovation and have the bottom-up entrepreneurial impetus and links to citizens to generate the social, environmental, and economic benefits of such innovations and experimentations, including new forms of businesses and partnerships. Second, in light of the increasing trends of decentralisation of public services in OECD countries, subnational governments have greater responsibility for local public services such as transport, solid waste, water, and energy, which are key for the well-being of citizens. Third, governance at the urban level focuses on the realities of the city and the impacts of policies on the lives of citizens. Cities such as London, Amsterdam, Paris, but also smaller ones like Valladolid, Groningen, Granada, and Umeå are designing and implementing circular economy strategies, as a vehicle to maintain a healthy and regenerative economy, while promoting environmental sustainability and liveability.

At the core of OECD’s work on the circular economy in cities and regions is the 3Ps framework, which argues that for the circular economy to be implemented at local and regional level, three aspects should be highlighted, considering the complex interactions across people, policies and places (OECD, forthcoming):

  • Coordination across people implies coordination at different levels of government and across stakeholders. Several actors (business, government, and civil society) have varying rationalities and divergent objectives in moving towards a circular economy. For this purpose, it is important to engage stakeholders for inclusive policy design and implementation; to motivate stakeholders towards common aims; and to create incentives and framework conditions for building synergies at the right scale and minimising future liabilities for society. The involvement of all stakeholders requires active, specific, and tailored communication strategies. However, information is not enough. Raising awareness about circular economy costs, benefits, challenges, and opportunities is equally important. Stakeholders need to be engaged in the projects in order to secure acceptance and commitment. The business sector is a key player in a circular economy since the transition towards a circular economy will depend on the capacity of the sector to shift towards more sustainable business models (e.g. using secondary material, recycling, sharing, etc.). Citizens make constant consumption choices and can influence production. Therefore, a behavioural change is needed. Government at different levels needs to coordinate to avoid overlaps and duplications. “Who” does “what” and at which level requires clarification in order to create synergies across national and local regulations and financing.

  • Coordination across policies provides an opportunity to seek complementarities across sectors (e.g. environmental, regional development, agricultural, industrial policies) and enhance better planning for the use of water and energy in the building sectors or the reuse of food waste for agricultural purposes, for instance. Some of these interactions are not well-known or thoughtfully considered when designing and implementing urban policies.

  • Coordination across places is also important to manage trade-offs across urban and rural areas, amongst others. The issue of scale is key for the circular economy in cities, as they are not isolated systems, but a space for inflows and outflows of materials, resources, and products, connected with surrounding areas and beyond. A circular economy can reinforce and create opportunities across urban and rural areas.

The variety of actors, sectors, and goals makes the circular economy systemic by nature. It implies a re-thinking of governance models based on multi-stakeholder and multi-sectoral approaches. For the circular economy to happen, policies need to be aligned, stakeholders informed and engaged, legal and regulatory frameworks updated and supportive of innovation. In addition, technical, human, and financial resources need to be adequate; new capacities need to be built; and progress and results need to be monitored and evaluated to stimulate economic growth, social well-being, and environmental sustainability.

One highlight of IIASA’s work on cities has been motivated by the idea of “Cities as Forces for Good in the Environment” (CFG) (Crutzen et al., 2007). Its vision and challenge may be expressed thus:

How can city infrastructure be re-engineered and re-operated - indeed, through the participation of the plural .org, .gov, and .com actors - so as to reduce the city’s ecological footprint to zero, even to go above and beyond this, such that the city may become a net generator of ecosystem services?

The challenge calls for a new mindset: making ourselves “more good”, a fully intentional liberating motivation (McDonough and Braungart, 2002). It is also a mindset intended to accompany that of the framings of the SDGs and of the climate change science community. We must be mindful of our “planetary boundaries” and “safe operating space for humanity”. In sum, we should progressively make ourselves “less bad” (Fiscus and Fath, 2019). In other words, the challenge is to ask how to rectify the environmental “bad” of, say, an agriculturally or industrially degraded watershed and, with a change of mindset, to build the environmental “good” of a city in the depleted watershed.

The companion Sustainability Concepts Paper significantly elaborates the complementary agenda of CFG (Beck, 2011). This agenda is people-proximate, like that of the OECD, and is supported computationally by a Multi-sectoral Systems Analysis (MSA) model. The model has been applied to case studies of Atlanta, USA, Suzhou, China, and London, UK (Villarroel Walker et al., 2017). It accounts for how energy, water, carbon-, nitrogen-, and phosphorous-bearing resource flows circulate through the energy, water, food, forestry, and waste sectors of the city and the surrounding hinterland of its watershed.

First results with MSA were published as a matter of “Understanding the Metabolism of Urban-rural Ecosystems” (Villarroel, Walker, and Beck, 2012). The framing of MSA falls well within the ambit of the circular economy. It enables the systems analyst to ask and respond to the following kinds of questions (Villarroel Walker et al., 2017): what re-engineering interventions and technological innovations might be key − under gross uncertainty − to achieving a more sustainable and less resource-intensive urban metabolism in the future; and which sectors of commerce and society (.org. .com, .gov) offer the greatest opportunity and promise for such technical and policy interventions? Indeed, the central purpose of MSA is to re-orient such interventions, from a reactive to a more proactive, people-driven task: which actors in the urban-rural communities might want to cultivate and advance which of several schools of engineering thought in order to contribute to realising CFG? The first signs of such people-proximate re-engineering and innovation are foreshadowed in Beck et al. (2011, 2013). Strategy development can be supported by foresight models, such as MSA, in the setting of Adaptive Community Learning (Beck, 2011; pp 83-101).

When the challenge requires nesting CFG within the circular economy, the traditional systems approaches may not suffice. In this instance, the much sought-after transformational change is needed in the systems approach itself. If a new systems approach is being forged, new cohorts of applied systems analysts must be trained differently. The appropriate engineers and economists will have to be given the capacity to “think differently”, not least to exercise more systems thinking. Decisions in the circular economy will not be made “once and for all” and will always need to be adapted.

Such change implies broadening enquiry and procedure beyond customary conventional boundaries, indeed, to be somewhat disruptive of its routine. Specifically, conventional policy analysis contains four precepts that should be prefaced by the word “not”: not to insist on a single and agreed definition of the problem; not to distinguish facts from values; not to set up a single metric for comparing and assessing options (e.g. dollars, lives saved); and not then to optimise around the most promising option. When working within the common conventions, the procedure of decision analysis can be called elegant. Outside the conventions, the procedure would be called clumsy − precisely to emphasise the contrast. The two, elegance and clumsiness, are complementary.

Deciding which approach to apply depends on whether the problem is tame or wicked. Addressing the issues of cities and the circular economy requires the latter, as exemplified in the slogan, “Wicked Problems, Uncomfortable Knowledge, Clumsy Solutions” (Thompson and Beck, 2014). This means that the problems may preclude convergence to any solution, unless the overarching governance and innovation framework is shaped to enable a solution to emerge. Knowledge of the way the system works may also be plural. How civil-society (.org) actors believe the world to be may be at odds with what public sector (.gov) and private sector (.com) actors hold it to be. For any type of actor, the knowledge held by the other types is thus uncomfortable. In such settings, success in the policy process can thus be gauged along these lines: in a clumsy solution, each type of actor gets more of what they want (and less of what they do not want) than they would have got had they excluded all the other types of actors, taken no notice of their knowledge and aspirations for the future, and “gone it alone”. Governance thus has a key role to help clumsy solutions to emerge.

Some two decades of practical experience has now been accumulated in addressing wicked problems with this form of people-centred systems approach − gathered around our anthropological hypothesis of clumsiness, based on the theory of Plural Rationality (see Box 7.1) or Cultural Theory (Thompson et al., 1990). This approach has been deliberately exposed to debate, dialogue, challenge, and criticism, in a recent (November, 2019) workshop co-sponsored by the Institute for Science and Innovation in Society (InSIS) at Oxford University and the UK Collaboratorium for Research on Infrastructure and Cities (UKCRIC): “How Engineers Think — About Infrastructure, Cities, and Resource Flows” was the workshop’s title, accompanied by the sub-title “The Social Anthropology of Engineering Problem-solving and Technological Innovation”. Such practical experience is especially relevant to the people-proximate issues of resource management, infrastructure, and cities − just as argued in the foregoing, in respect of OECD’s 3Ps approach to cities and the circular economy.

OECD and IIASA’s approaches to cities and the circular economy are closely aligned in their interests and aspirations. Both seek impact “on the ground” and are concerned with the roles of governance in their respective systems approaches.

OECD’s experience in supporting national, regional, and local governments with policymaking and place-based, multi-level governance and multi-stakeholder approaches, in exchanging best policy practices, and in dismantling siloed thinking, will shape the way IIASA articulates such experience into re-engineering strategies and cultivating technological innovations in urban policies. IIASA’s experience of strategies for coping with risk and working towards resilience in policy outcomes and people’s experiences of their urban and rural environments – driven by Plural Rationality and reflected in computational modelling – will add to OECD’s elaboration of its 3Ps framework, applied to the ongoing OECD Programme on the Circular Economy in Cities and Regions.

Future directions include continuing exchanges between OECD and IIASA to support policymakers by developing joint research on cities and the circular economy.


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