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What is the Circular Economy?

As sustainability becomes an increasingly important consideration for businesses and consumers alike, we are here to help you to understand how your auction business impacts the industry and our ability to collectively make a difference. By nature, the auction industry embraces many principles of sustainability by operating within The Circular Economy.

The Circular Economy is a framework that eliminates waste and keeps products in circulation.

According to the Ellen MacArthur Foundation, “In our current economy, we take materials from the Earth, make products from them, and eventually throw them away as waste – the process is linear. In a circular economy, by contrast, we stop waste being produced in the first place.

The circular economy is based on three principles, driven by design:

It is underpinned by a transition to renewable energy and materials. A circular economy decouples economic activity from the consumption of finite resources. It is a resilient system that is good for business, people and the environment.”

So what do auctions have to do with it? Quite a lot actually.

When you look at the auction industry from a birds-eye view, you can see it effectively follows a fully circular model by nature.

Take a look at the graphic to the right to see what we mean…

Auction-Driven Circularity – The Auction Loop

In ‘traditional’ modes of consumption, an item will follow a linear life, also known as the ‘make-take-waste’ or ‘cradle to grave’ path. In ‘auction-driven consumption’, an item can face multiple, and in many cases, infinite life cycles along the four different loops that exist in the auction industry; we like to refer to these four loops as ‘The Auction Loop’, ‘The Repair Loop’, ‘The Upcycling Loop’ and ‘The Recycling/Remanufacturing Loop’. The closer the loop is to the center of the model, the more potential life cycles it can create within the system.

Entrance into Circularity

On the first and inner-most loop of the model, you will see an item’s entrance into auction-driven circularity at the moment it is put up for auction. High-value items such as art, antiques, fine jewelry and classic cars have the ability to stay in ‘The Auction Loop’ infinitely as long as demand for it remains.

From Auction To… The Repair Loop

The next loop we see is ‘The Repair Loop’. Lower-value items would be more often seen to pass through this loop, before re-entering an auction, but this is not exclusive. In this case, let’s look at used cars. Often  at the end of its first lifecycle, a used car will end up at auction. The winning bidder may choose to repair and refurbish this car before reselling in a retail setting or entering it back into “The Auction Loop” in hopes of a higher valuation. 


From Auction to… The Upcycling Loop

Similar  to ‘The Repair Loop’, ‘The Upcycling Loop’ sees an item of lower value transformed into something of higher potential value, or into a completely different item altogether. This is often seen in the art and design world, where an item bought at auction becomes a piece of art or furniture. However, this loops sits outside the Repair Loop, because its chances of ending up back at auction and staying within the loops are low. The only time an upcycled item from auction has the potential to re-enter ‘The Auction Loop’ would be if it is used to create a piece of art with high-enough value to sell at auction again. Otherwise, these pieces would be sold in another B2C route. Either way, such items that would have otherwise have been wasted and most likely disposed of, have the ability to create more life cycles.

Read more about where we have seen this: https://bidpath.com/banksy-from-heathrow-at-royal-academy/

From Auction to… The Recycling Loop

Finally, at the outermost loop of auction-driven circularity, is the ‘The Recycling/Remanufacturing Loop’, which is more likely to be seen at the Industrial and Commercial sector of the auction industry. Let’s look at machinery or equipment for this example. When a piece of machinery or equipment enters ‘The Auction Loop’, it can either go in and out of this cycle, or it can move outwards towards Recycling and Remanufacturing, before heading back to auction or other modes of resale. In the case of Recycling and Remanufacturing, this piece of machinery would be disassembled and follow down one of two paths; recycling- where disassembled parts will be recycled via an external party for material-use or remanufacturing – where parts are sent to a remanufacturing facility for cleaning, refurbishment and re-assembly to form ‘good-as-new’ machinery. This is the point where the machinery has ability to re-enter ‘The Auction Loop’ or other resale network.

But why is this so important?

By understanding the ways in which auction models sit in the circular economy, auction companies of all sizes can evaluate both the impact their business has in eliminating linear waste, and the potential scope the industry has when circularity is truly embraced.

If you would like to learn more about the role auctions play in accelerating the Circular Economy, have a watch of the panel discussion and webinar we hosted as part of ReLondon’s 2022 Circular Economy Week alongside our guests from Sworders Fine Art Auctioneers and CA Global Partners

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