The aims to eliminate waste and maximize resource use by creating closed-loop systems. It focuses on designing out waste, keeping materials in use, and regenerating natural systems. This approach offers environmental, economic, and social benefits by reducing resource extraction, creating new business opportunities, and promoting sustainability.
Circular business models like and sharing platforms are emerging. Implementing circular strategies requires rethinking product design, sourcing, and end-of-life management. While barriers exist, policies and collaborative networks can support the transition, especially for SMEs. Emerging technologies and urban initiatives are shaping the future of the circular economy.
Principles of circular economy
Circular economy is an economic system that aims to eliminate waste and maximize the use of resources
Based on the principles of designing out waste, keeping products and materials in use, and regenerating natural systems
Focuses on creating closed loop systems where resources are reused and recycled rather than disposed of
Closed loop systems
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Closed loop systems are designed to keep resources in use for as long as possible, extracting the maximum value from them
Involves creating products that can be easily disassembled, repaired, and recycled at the end of their life
Examples include modular product design (smartphones with replaceable parts) and take-back schemes (clothing recycling programs)
Closed loop systems reduce the need for virgin resources and minimize waste generation
Waste as a resource
Circular economy views waste as a valuable resource that can be reused or recycled into new products
Involves designing products with their end-of-life in mind, ensuring that materials can be easily separated and recovered
Examples include using food waste to create biofuels or composting it to create fertilizer
Treating waste as a resource reduces the environmental impact of waste disposal and creates new economic opportunities
Regenerative design
Regenerative design goes beyond sustainability by actively improving the health of ecosystems and communities
Involves designing products and systems that restore and regenerate natural capital (soil, water, biodiversity)
Examples include using regenerative agriculture practices (agroforestry) or designing buildings that generate more energy than they consume
Regenerative design creates positive environmental and social impacts, rather than just minimizing negative ones
Benefits of circular economy
Environmental benefits
Circular economy reduces the extraction of virgin resources, conserving natural capital and biodiversity
Minimizes waste generation and pollution by keeping materials in use for longer and designing out waste
Reduces greenhouse gas emissions by decreasing the need for energy-intensive production processes
Restores and regenerates natural systems through practices like regenerative agriculture and
Economic benefits
Circular economy creates new business opportunities and revenue streams, such as product-as-a-service models and resource recovery
Reduces costs associated with waste management and resource extraction, improving the bottom line for businesses
Increases resource efficiency and productivity, as materials are used more effectively and for longer
Stimulates innovation and the development of new technologies and processes to enable circularity
Social benefits
Circular economy creates new jobs in areas such as repair, refurbishment, and recycling, contributing to local economic development
Improves access to products and services through sharing platforms and product-as-a-service models, increasing affordability
Enhances community resilience by reducing dependence on external resources and strengthening local supply chains
Promotes social inclusion and equity by creating opportunities for marginalized communities and individuals
Circular business models
Product as a service
Product-as-a-service models involve providing access to products without transferring ownership, such as leasing or renting
Incentivizes producers to design durable, long-lasting products that can be easily maintained and repaired
Examples include car-sharing services (Zipcar) and clothing rental platforms (Rent the Runway)
Reduces the environmental impact of consumption by maximizing product utilization and minimizing waste
Sharing platforms
Sharing platforms enable the shared use of products and assets, such as tools, vehicles, and accommodations
Increases resource efficiency by ensuring that products are used to their full capacity, rather than sitting idle
Examples include peer-to-peer car-sharing (Turo) and home-sharing (Airbnb)
Sharing platforms create new economic opportunities and reduce the need for individual ownership of products
Circular supplies
Circular supplies involve using renewable, bio-based, or fully recyclable materials in production processes
Ensures that products can be safely returned to the biosphere or recycled into new products at the end of their life
Examples include using biodegradable packaging materials (mushroom-based packaging) or recycled plastics in manufacturing
Circular supplies reduce the environmental impact of production and support the transition to a circular economy
Resource recovery
Resource recovery involves extracting value from waste streams by recovering and reusing materials and energy
Includes processes such as recycling, , and from waste incineration
Examples include recovering precious metals from electronic waste or creating building materials from recycled plastics
Resource recovery creates new revenue streams and reduces the environmental impact of waste disposal
Implementing circular strategies
Circular product design
Circular product design involves designing products for durability, repairability, and recyclability
Considers the entire lifecycle of a product, from material selection to end-of-life management
Examples include modular product design (easily replaceable components) and designing for disassembly (products that can be easily taken apart for repair or recycling)
Circular product design reduces waste generation and extends the useful life of products
Sustainable sourcing
Sustainable sourcing involves procuring materials and products from suppliers that adhere to environmental and social standards
Ensures that the inputs used in production processes are renewable, ethically sourced, and have a minimal environmental impact
Examples include using FSC-certified wood or Fairtrade-certified agricultural products
Sustainable sourcing supports the transition to a circular economy by promoting responsible resource management and ethical practices
Remanufacturing and refurbishment
Remanufacturing involves restoring used products to a like-new condition, using a combination of new and reused parts
Refurbishment involves repairing and upgrading used products to extend their useful life and improve their performance
Examples include remanufactured automotive parts and refurbished electronics (smartphones, laptops)
Remanufacturing and refurbishment reduce the need for new product manufacturing and keep products in use for longer
Recycling and upcycling
Recycling involves converting waste materials into new products or materials, either for the same purpose or a different one
Upcycling involves transforming waste materials or products into higher-value products, often with a different function
Examples include recycling plastic bottles into polyester fibers for clothing or upcycling old tires into playground surfaces
Recycling and upcycling reduce waste generation and the need for virgin resource extraction, supporting the transition to a circular economy
Measuring circularity
Circularity indicators
Circularity indicators are metrics used to assess the circularity of products, processes, or entire economies
Examples include the Material Circularity Indicator (MCI), which measures the restorative flow of materials in a product or company
Other indicators include the Circular Economy Performance Indicator (CEPI) and the Circularity Gap Metric (CGM)
Circularity indicators help businesses and policymakers track progress towards a circular economy and identify areas for improvement
Life cycle assessment
(LCA) is a tool used to evaluate the environmental impacts of a product or process throughout its entire lifecycle
Considers impacts such as resource consumption, greenhouse gas emissions, and waste generation
Helps identify hotspots for improvement and compare the environmental performance of different products or processes
LCA supports the transition to a circular economy by providing a comprehensive understanding of a product's environmental footprint
Material flow analysis
(MFA) is a method used to quantify the flows and stocks of materials within a defined system, such as a company or region
Helps identify inefficiencies and opportunities for circular strategies, such as closing material loops or reducing waste
Can be used to create material flow diagrams that visualize the movement of materials through a system
MFA supports the transition to a circular economy by providing insights into resource use and waste generation
Barriers to circular economy
Technological barriers
Some circular strategies, such as recycling or remanufacturing, may require advanced technologies or infrastructure that are not yet widely available
The lack of standardization in product design and materials can make it difficult to implement circular strategies at scale
The development and adoption of new technologies, such as bio-based materials or advanced recycling processes, may be hindered by high costs or technical challenges
Economic barriers
Implementing circular strategies can require significant upfront investments, which may be a barrier for small and medium-sized enterprises (SMEs)
The lack of internalization of environmental costs (such as carbon pricing) can make linear business models appear more cost-effective than circular ones
The low cost of virgin resources, compared to recycled or reused materials, can discourage the adoption of circular practices
Regulatory barriers
Existing regulations and standards may not be designed to support circular practices, such as or eco-design requirements
The lack of harmonized definitions and standards for circular products and processes can create confusion and hinder market development
Subsidies or tax incentives that favor linear business models can discourage the adoption of circular practices
Cultural barriers
Consumer preferences for new and disposable products can hinder the adoption of circular practices, such as reuse or repair
The lack of awareness and understanding of circular economy principles among businesses and consumers can limit the demand for circular products and services
The "throwaway culture" and the perception of waste as a problem rather than a resource can discourage the adoption of circular practices
Circular economy policies
Extended producer responsibility
Extended producer responsibility (EPR) policies require producers to take responsibility for the environmental impacts of their products throughout their lifecycle
Can include requirements for product design, take-back schemes, or financial contributions to waste management and recycling infrastructure
Examples include the EU's Waste Electrical and Electronic Equipment (WEEE) Directive and the Canadian province of British Columbia's EPR program for packaging and printed paper
EPR policies incentivize producers to design products for circularity and support the development of recycling and recovery infrastructure
Eco-design regulations
Eco-design regulations set minimum requirements for the environmental performance of products, such as energy efficiency or recyclability
Can include requirements for product durability, repairability, and upgradability, as well as restrictions on the use of hazardous substances
Examples include the EU's Ecodesign Directive, which sets energy efficiency standards for a range of products, from household appliances to industrial equipment
Eco-design regulations drive the development of more circular products and reduce the environmental impact of consumption
Circular public procurement
Circular public procurement involves the integration of circular economy principles into the procurement practices of public authorities
Can include requirements for the use of recycled or bio-based materials, the purchase of remanufactured or refurbished products, or the inclusion of end-of-life management in procurement contracts
Examples include the Dutch government's circular procurement program, which aims to make all public procurement circular by 2050
Circular public procurement creates demand for circular products and services and supports the development of circular markets
Tax incentives and subsidies
Tax incentives and subsidies can be used to encourage the adoption of circular practices, such as recycling, reuse, or repair
Can include reduced VAT rates for circular products and services, tax credits for investments in circular infrastructure, or subsidies for circular business models
Examples include the Swedish government's tax reduction for repair services and the Italian government's "Ecobonus" scheme, which provides tax deductions for energy-efficient home renovations
Tax incentives and subsidies make circular practices more financially attractive and support the transition to a circular economy
Circular economy in SMEs
Opportunities for SMEs
SMEs can benefit from circular economy by reducing costs, creating new revenue streams, and improving their environmental and social performance
Circular business models, such as product-as-a-service or resource recovery, can help SMEs differentiate themselves in the market and attract environmentally conscious customers
SMEs can take advantage of their agility and flexibility to quickly adapt to changing market conditions and implement circular strategies
Challenges for SMEs
SMEs may face financial constraints when investing in circular practices, such as upgrading equipment or developing new products and services
The lack of technical expertise and knowledge about circular economy principles can hinder the adoption of circular strategies by SMEs
SMEs may struggle to access circular supply chains or markets, particularly if they are operating in sectors dominated by large, linear businesses
SME circular strategies
SMEs can adopt a range of circular strategies, depending on their sector, size, and resources
Examples include implementing take-back schemes for used products, developing products with recycled or bio-based materials, or offering repair and maintenance services
SMEs can also collaborate with other businesses or organizations to share resources, knowledge, and best practices related to circular economy
Collaborative networks
Collaborative networks, such as industrial symbiosis or circular economy clusters, can help SMEs overcome challenges and access new opportunities
Industrial symbiosis involves the exchange of waste, by-products, and energy between businesses, creating closed-loop systems and reducing waste and resource consumption
Circular economy clusters bring together businesses, research institutions, and other stakeholders to develop and implement circular solutions at a regional or sectoral level
Collaborative networks enable SMEs to share costs, risks, and benefits associated with circular practices and access new markets and resources
Case studies of circular SMEs
Successful circular transitions
Fairphone, a Dutch social enterprise, produces modular, repairable smartphones using ethically sourced materials and a
Aquafil, an Italian company, produces regenerated nylon yarn from waste materials, such as old fishing nets and carpet fibers, using a closed-loop recycling process
Bundles, a Dutch startup, offers a pay-per-use model for household appliances, such as washing machines and dishwashers, incentivizing product durability and repair
Lessons learned from failures
Repack, a Finnish startup that offered a reusable packaging service for e-commerce, failed due to the high costs of reverse logistics and the lack of customer adoption
The failure of Repack highlights the importance of carefully assessing the economic viability of circular business models and the need for customer education and engagement
Other lessons learned from circular SME failures include the importance of securing adequate funding, building strong partnerships, and adapting to changing market conditions
Future of circular economy
Emerging technologies
Emerging technologies, such as blockchain, artificial intelligence (AI), and the Internet of Things (IoT), can support the transition to a circular economy
Blockchain can enable secure and transparent tracking of materials and products throughout their lifecycle, facilitating closed-loop systems and reducing waste
AI can optimize resource use and predict maintenance needs, extending the useful life of products and reducing waste
IoT can enable real-time monitoring of product performance and usage, supporting product-as-a-service models and predictive maintenance
Circular cities and regions
Circular cities and regions are emerging as key drivers of the transition to a circular economy
Involve the integration of circular principles into urban planning, infrastructure development, and local economic development strategies
Examples include the city of Amsterdam's circular economy strategy, which aims to create a fully circular city by 2050
Circular cities and regions can create new jobs, reduce environmental impacts, and improve quality of life for residents
Circular economy vs sustainability
Circular economy is often seen as a key strategy for achieving sustainability, but the two concepts are not synonymous
Sustainability encompasses a broader range of social, economic, and environmental issues, such as social equity, biodiversity conservation, and climate change mitigation
Circular economy focuses specifically on resource efficiency and waste reduction, but may not address other sustainability challenges, such as social inequality or ecosystem degradation
To achieve true sustainability, circular economy strategies must be integrated with other approaches, such as renewable energy, sustainable land management, and social justice
Circular economy in developing countries
Circular economy presents both opportunities and challenges for developing countries
Opportunities include the creation of new jobs and businesses in the recycling and remanufacturing sectors, the reduction of waste and pollution, and the improvement of resource security
Challenges include the lack of infrastructure and financing for circular practices, the prevalence of informal waste management systems, and the competition from cheap, imported goods
Developing countries can learn from the experiences of developed countries in implementing circular economy policies and practices, but must adapt them to their local contexts and priorities
International cooperation and support, such as technology transfer and capacity building, can help developing countries transition to a circular economy
Key Terms to Review (19)
Carbon footprint assessment: A carbon footprint assessment is a process that quantifies the total greenhouse gas emissions produced directly or indirectly by an individual, organization, product, or activity, expressed in equivalent tons of carbon dioxide (CO2e). This assessment plays a critical role in understanding and managing the environmental impact of consumption and production patterns, highlighting opportunities for improving resource efficiency and contributing to a circular economy.
Circular business model: A circular business model is an approach that emphasizes the continuous use of resources by maintaining their value and reducing waste through practices like recycling, remanufacturing, and reusing. This model contrasts with traditional linear business models, where products are created, used, and then discarded. The circular business model aims to create a sustainable ecosystem that optimizes resource efficiency and minimizes environmental impact.
Circular economy: A circular economy is an economic model aimed at minimizing waste and making the most of resources by promoting the continual use of products, materials, and resources in a closed-loop system. This approach contrasts with the traditional linear economy, which follows a 'take, make, dispose' pattern. By emphasizing recycling, reuse, and regeneration, a circular economy supports sustainability, resource efficiency, and contributes to long-term environmental sustainability.
Circular economy legislation: Circular economy legislation refers to laws and regulations designed to promote a sustainable economy where resources are reused, recycled, and regenerated, reducing waste and environmental impact. This type of legislation encourages businesses to adopt practices that keep products and materials in use for as long as possible, which is essential for resource efficiency and sustainability.
Closed-loop system: A closed-loop system is a self-regulating mechanism that uses feedback to control its output, ensuring that the system operates within desired parameters. This approach is crucial for maintaining efficiency and sustainability, as it minimizes waste and optimizes resource use by reintroducing outputs back into the production cycle. By relying on feedback, these systems can adapt to changes and improve their processes over time.
Eco-design: Eco-design is a design approach that considers the environmental impacts of a product throughout its entire lifecycle, from material sourcing to production, use, and disposal. This method aims to minimize resource consumption and waste generation while enhancing product sustainability. By integrating environmental considerations into the design phase, eco-design contributes significantly to sustainable supply chain practices and promotes circular economy principles.
Ellen MacArthur Foundation: The Ellen MacArthur Foundation is a charity organization that aims to accelerate the transition to a circular economy by promoting sustainable practices and resource efficiency. It works with businesses, governments, and academia to develop innovative solutions and strategies that enable the shift away from the traditional linear economic model, which relies on a take-make-dispose approach. Through collaboration and education, the foundation seeks to inspire and support systemic change towards a more sustainable future.
Energy recovery: Energy recovery refers to the process of capturing and utilizing energy that would otherwise be wasted, typically from various waste materials. This practice is a crucial element in promoting a circular economy, where resources are reused and kept in circulation for as long as possible, minimizing waste and reducing the need for new raw materials. By converting waste into usable energy, it supports resource efficiency and contributes to sustainable development goals.
Extended Producer Responsibility: Extended Producer Responsibility (EPR) is an environmental policy approach that holds manufacturers accountable for the entire lifecycle of their products, particularly the end-of-life disposal and recycling. This concept encourages companies to design products that are easier to recycle and reduces the amount of waste entering landfills. By shifting responsibility from consumers and governments back to producers, EPR promotes sustainable practices and resource efficiency in the circular economy.
Green procurement policies: Green procurement policies refer to the guidelines and practices that organizations adopt to purchase goods and services in an environmentally responsible manner. These policies aim to reduce the negative environmental impacts of procurement processes by emphasizing sustainable products, minimizing waste, and promoting resource efficiency. By integrating environmental considerations into purchasing decisions, organizations can contribute to a circular economy that prioritizes sustainability and resource conservation.
Ikea's recycling strategy: IKEA's recycling strategy refers to the company's comprehensive approach to minimize waste and promote sustainability by reusing and recycling materials throughout its product lifecycle. This strategy aligns with the principles of a circular economy, where resources are kept in use for as long as possible, reducing environmental impact and enhancing resource efficiency. By integrating recycling into its operations, IKEA aims to create a closed-loop system that not only conserves resources but also meets customer demand for sustainable products.
Life Cycle Assessment: Life Cycle Assessment (LCA) is a systematic approach to evaluating the environmental impacts associated with all stages of a product's life, from raw material extraction through production and use, to disposal or recycling. This comprehensive analysis helps businesses understand the environmental footprint of their products, facilitating better decision-making regarding sustainability practices and resource efficiency.
Material Flow Analysis: Material Flow Analysis (MFA) is a systematic assessment of the flows and stocks of materials within a defined system, aimed at understanding the consumption and movement of resources. It helps identify inefficiencies in resource use and waste generation, providing a basis for optimizing processes to enhance sustainability. By analyzing material flows, businesses can uncover opportunities for reducing environmental impacts and improving resource efficiency in a circular economy.
Patagonia's Repair Program: Patagonia's Repair Program is an initiative designed to promote sustainability by encouraging customers to repair their damaged gear instead of discarding it. This program aligns with principles of the circular economy, which emphasizes resource efficiency and waste reduction through reuse and recycling. By providing repair services and resources, Patagonia not only extends the life of its products but also fosters a culture of conscious consumerism.
Product-as-a-service: Product-as-a-service is a business model that shifts the focus from selling products to providing services that utilize those products. This approach promotes resource efficiency and sustainability by encouraging companies to retain ownership of their products while customers pay for the use or performance of those products instead of purchasing them outright. This model aligns well with circular economy principles by extending product lifecycles and reducing waste.
Resource Efficiency Framework: The resource efficiency framework is a strategic approach aimed at optimizing the use of resources, minimizing waste, and promoting sustainable practices across industries. It focuses on reducing environmental impacts while enhancing economic performance by ensuring that resources are used efficiently throughout their lifecycle, from extraction to disposal. This framework is closely linked to principles of the circular economy, which seeks to maintain product value and reduce resource consumption.
Upcycling: Upcycling is the process of transforming waste materials or unwanted products into new materials or products of better quality or environmental value. This practice not only helps reduce waste but also promotes creativity and resourcefulness by giving a second life to items that would otherwise be discarded. Upcycling plays a vital role in the circular economy, emphasizing sustainability, reducing resource consumption, and enhancing resource efficiency.
Waste Minimization: Waste minimization refers to the strategies and practices aimed at reducing the amount of waste generated during production and consumption processes. This concept is essential for promoting sustainable practices within industries, as it helps in optimizing resource use, lowering costs, and mitigating environmental impacts. By integrating waste minimization into operations, businesses can enhance their sustainability profile while contributing to more efficient supply chains and resource management.
World Resources Institute: The World Resources Institute (WRI) is a global research organization that focuses on sustainability and the efficient use of natural resources to address pressing environmental challenges. WRI aims to promote sustainable development through data-driven research, policy analysis, and partnerships, helping businesses and governments transition towards a circular economy and improve resource efficiency.