Get the knowledge: What is the circular economy?

Why is a circular economy important?

Moving to a circular economy is vital to help keep global temperature increases to a minimum and avoid the worst impacts of climate change. According to the 2021 Circularity Gap report, doubling global circularity would help to reduce emissions by 39% and reduce total material footprint by 28% by 2032.

Doubling global circularity would help to reduce greenhouse gas emissions by 39% and reduce total material footprint by 28% by 2032. The 2021 Circularity Gap report.

A circular economy is also critical to manage growing demand for products. The global population is expected to reach 10 billion by 2050, so we urgently need to find a way to make the limited resources we have go further. Additionally, many countries are dependent on other nations for raw materials – embedding circular economy principles into national strategies will help to alleviate this reliance on fragile global supply chains.

Are there any other benefits to a circular economy?

There are many economic benefits associated with the circular economy. Scaling up reuse, repair, remanufacturing, and recycling creates millions of jobs and stimulates economic growth and innovation. The International Labour Organization, for example, estimates a global net increase of seven to eight million jobs by 2030 due to shifts towards circular economy.

It can also help in the pursuit of renewable energy and electric vehicles by ensuring continued supplies of critical materials such as rare earth metals. According to the consultancy Accenture, this approach to waste and materials stands to yield up to $4.5 trillion in economic benefits to 2030.  

It’s also good news for consumers, as circularity means longer-lasting, more durable and innovative products, which will mean less money spent on frequent replacements.

How can we create a circular economy?

We often talk about the circular economy as if it’s some kind of future transition that’s yet to take place, but it’s already happening in some places. For example, some food manufacturers are redistributing surplus food to those in need, or repurposing it as animal feed. Some electronics brands will refurbish your items if you no longer want them, while some clothing companies offer take-back schemes to ensure your unwanted clothing is put to good use.

We’re also seeing challenges to traditional models of ownership, with community share schemes and ‘product as a service’ initiatives making it easier for consumers to access the goods they want and need in a more sustainable manner (Get the knowledge: new ownership models).

However, the 2021 Circularity Gap report states that the global economy is only 8.6% circular and sets an ambitious target for 17% circularity by 2030. Achieving this will require action in a number of key areas:

• Product design needs a complete overhaul

Many consumer goods are designed to be replaced frequently, so manufacturers can keep making money. Since a key element of circularity is keeping goods in use for as long as possible, products will need to be created with longevity in mind. According to the European Environmental Bureau, for example, extending the lifetime of all washing machines, laptops, vacuum cleaners and smartphones in the EU by just a single year would save around four million tonnes of CO2 emissions annually by 2030. That’s the same as taking over two million cars off the road.

Giving consumers the option to repair their own products is another key product design consideration, and one that aligns closely with principles of circularity. Read more about product lifespans and repairability here.

• Manufacturers need to understand their supply chains

Manufacturers will play a major role in transitioning to a circular economy by rethinking and redesigning their products. But to do this, they need to know exactly what goes into them, and that can be tricky as global supply chains are often complicated.

While manufacturers might understand that their products are made of basic materials such as wood or plastic, they need to look at their items on a far more granular level. Chemicals, for example, are used in everything from personal care items and cleaning products to the complex components used in electronics. These need careful consideration in the circular economy discussion and must be managed properly throughout their lifecycle.

• Manufacturers need to be incentivised

Manufacturers and companies generally favour the liner ‘take, make, waste’ model because it’s the most profitable way of doing business. Even when they’re aware of the environmental impacts of their operations they will continue to generate waste and emissions because the benefits (financial) outweigh any consequences they might face. If a tougher price was put on social and environmental harms and more sustainable approaches were rewarded, manufacturers would be more inclined to move towards a circular economy.

• Consumers need to change their attitudes

Shifting consumer habits will be key to transitioning to a circular economy. The good news is that many people are already demanding more sustainable products and adopting green behaviours such as plant-based diets and flying less often. But to fully embed circularity we need a total step-change in the way we view consumerism.

Instead of seeking out the newest model of electronics or the latest styles of fashion, we will need to adjust to a world where we keep and maintain the products we buy, and the unnecessary disposal of items becomes a social faux pas. Repair and reuse must become a more highly-valued part of life.

This mindset change is happening, albeit slowly. Fast fashion, for example, is rapidly falling out of favour with consumers, while apps and social media platforms make it easier than ever to share, swap and rehome preloved items.

How are countries adopting circularity?

As the climate crisis becomes more urgent and resource scarcity becomes more apparent, countries around the world will be taking increased action to ensure circularity within their economies. However, while some nations – such as the US – are simply “embracing” the idea within their waste management strategies, other countries are leading the charge.

The EU, for example, has laid out its Circular Economy Action Plan, and several European governments are taking extremely ambitious action in this space. The Dutch government wants 100% of its economy built on circularity by 2050, while France has introduced its own nation-specific roadmap for a circular economy. Italy is also a strong leader in this area.

Elsewhere, China has been driving legislative packages that explicitly mention the circular economy since 2006, and in 2008 it adopted its Circular Economy Protection Law. Japan, meanwhile, launched its Circular Economy Vision in 2020 to encourage industries to shift to new business models that improve resource efficiency.

Circularity isn’t a priority for all countries though, with Cyprus, Bulgaria and Romania frequently at the bottom of the list for circularity measures. However, they are taking action, and in recent years have implemented projects in the field of eco-innovation, efficient use of resources, energy efficiency or renewable energy sources – so they are moving in the right direction.