What is a circular economy? And why is it even important to know about it? The short answer is: Because there’s no way around it!
As humanity, we are using up more natural resources than can be regenerated by earth. If we continue to do so, it will only be a matter of time until there are no natural resources left to be used anymore.
In fact, the only solution to this is a circular economy, which supports sustainability by enabling economic growth without greater resource use.
Linear Economy vs. Circular Economy
Our current economic system is mainly based on what is the so-called “linear economy”. It is “linear” because of our current “take-make-dispose” approach. In the current system, we are taking natural resources (1), make products out of them (2), which we use (3), after which we dispose of them (4).
Ultimately, these products/resources end up on landfills or are incinerated/burned. That way, the current model involves a lot of waste and does not make efficient use of the earth’s natural resources. In fact, it is a linear process.
In a circular economy, by contrast, we eliminate the production of waste in the first place. Since the ultimate goal of a circular economy is to maintain the material value of products and resources, there is nothing such as waste in a circular economy. So now, let’s explore what a circular economy is and how it can help us in tackling resource scracity and climate change.
Definition of Circular Economy
A circular economy is a systems solution framework that tackles global challenges like climate change, biodiversity loss, waste, and pollution.
By being an industrial system that is regenerative by design, it replaces the end-of-life concept of products, shifts towards the use of renewable energies, eliminates the use of toxic chemicals, and aims for the elimination of waste through the superior design of materials, products, systems, and business models.
That way, a circular economy aims to redefine growth, focusing on positive society-wide benefits. It entails gradually decoupling economic activity from the consumption of finite resources and designing waste out of the system. Underpinned by a transition to renewable energy sources and by the application of green innovation, the circular model builds economic, natural, and social capital. The concept of a circular economy is based on the following three principles:
- eliminate waste and pollution
- circulate products and materials (at their highest value)
- regenerate natural systems
The 3 Principles of the Circular Economy
1. Eliminate waste and pollution (Waste = Food)
The first principle stands for the continuous cycling of materials and products. A material or product that is no longer used, shouldn’t become “waste”, but instead it should be part of a new cycle of use. In nature, one species’s waste is always another species’s food.
For example, a cherry tree drops cherries onto the ground. The cherries are eaten by insects. And the insects keeping the cherry tree’s surrounding soil healthy. That way, the system is sustaining itself in the long-term.
We should use the same principle in re- and upcycling, making a former waste into materials for new high-quality products. In practice this means designing products to last and optimizing them for a cycle of disassembly and reuse, so that it will be easier to handle, transform and renew them. Thus, the circular economy has the goal to minimize any type of waste, such as e-waste (for example, by encouraging the sale of refurbished electronics), and positively impact human environment interaction.
2. Circulate products and materials
The second principle is about numerous actors working together to create effective flows of materials and information. In nature, this is the way the food chain operates. If one species goes extinct, it can affect many other species, because they are interdependent in complex ways. In the human-made system, the changes we make may lead to unexpected and oftentimes unpredictable effects. Thinking in circular, closed and independent systems enables us to maintain them in the long-run. One of the most important parts of this are renewable energies. Since energy is required to fuel these cycles, it is of utmost importance that these energies are renewable by nature. The purpose of this is to decrease resource dependence and increase resilience.
3. Regenerate natural systems
The third principle is all about regenerating nature to make it (and us) more resilient while, at the same time, applying the learnings from natural systems to industrial systems. Resilient means being able to face change while continuing to develop. Greater biodiversity contributes to the general health of the system. Systems with many different components prove to be more resilient. A jungle or a forest ecosystem may serve as examples of this principle in nature. In a man-made system, it may be a farm producing different foods where the production processes are interconnected.
The Top 5 Benefits of a Circular Economy
- Cutting greenhouse gas emissions, waste, and pollution (tackling climate change & biodiversity loss)
- Creating no negative externalities
- Increasing potential for economic growth, employment growth & social justice
- Creating new profit opportunities
- Reducing volatility and safeguarding resources/supplies (increasing resilience)
Barriers to the Implementation of a Circular Economy
Economic Barriers
- Social and environmental externalities are not considered in prices, privileging financial market signals instead of people and nature when economic decisions are made
- Prices of raw materials are fickle and at low prices alternative, good quality secondary resources are not competitive
- Circular economy business models are harder to develop, as most investors are still working under a linear economy logic and sometimes upfront investments are required
- The demand for circular products and alternatives is still small
- There aren’t still many qualified professionals with technical or ‘information and communication technology’ (ICT) knowledge
Institutional Barriers
- Our current economic system is geared towards the demand of the linear economy and it isn’t yet prepared to deal with circular economy entrepreneurs
- New business models may be challenging to implement and develop because of laws and regulations that aren’t prepared for these kind of innovations
- Plenty of businesses rely on old and/or strong alliances, making it harder to create new alliances and therefore to close loops
- Many companies still have goals and appraisal systems that focus on short-term value creation, whereas the circular economy model is a long-term value creation model
- The GDP index doesn’t consider social and environmental externalities, discouraging the creation of value in both these areas
