What is the Circular Economy?

The idea of a circular economy, sometimes called a closed-loop economy, has been gaining steam over the last five years. It is generating a lot of press in Europe especially in countries like the Netherlands. The EU has agreed to increase its recycling and reuse target to 65 percent by 2035.

The idea has not gained as much traction in the U.S. but this is slowly changing. While some sustainability professionals in the U.S. may not be familiar with the idea of a circular economy, they are likely aware of related concepts like industrial ecology, natural capitalism, biomimicry, cradle-to-cradle, the functional service economy (performance economy), and the blue economy systems approach.

In its most simple essence, a circular economy would do away with consumption-based, built-in obsolesce in favor of a regenerative cycle of durable use and recycling. .In a circular economy, all the resources that are used to make our goods and in large part our services are captured in a closed loop. The Ellen MacArthur Foundation says 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, the circular model builds economic, natural, and social capital. It is based on three principles: Design out waste and pollution, keep products and materials in use, and regenerate natural systems.”

Disposable consumption creates a huge amount of waste even though as much as three-quarters of what ends up in landfills can be reused. The world currently generates more than 2 billion tonnes of solid waste each year and by 2050 this is expected to rise to 3.4 billion tonnes, according to the World Bank.

A circular economy seeks to eliminate waste altogether by developing longer-lasting products that can be reused and recycled, rather than thrown away. The circular economy forces us to rethink our traditional notions of progress and calls into question our emphasis on growth. A circular economy forces us to reevaluate manufacturing and redesign our economies so that they work effectively at all scales.

This is about far more than just reducing the negative impacts of our current economic system. A circular economy is contingent on the idea of decoupling business from materials extraction by focusing on long-term resilience that provides environmental and societal benefits. This represents a seismic systemic shift away from the linear economy. A circular economy strives to eliminate the need for landfills and it supports renewable energy over fossil fuels

The origins of a circular economy date back to ancient schools of philosophical thought. In the modern era, the circular economy was buoyed by the rise of computing after the second world war when the first models were developed. The interest spiked again in the late 60s with the rise of “big picture” thinking that began to factor the interplay of resources, energy, and population. It is also closely connected to the idea that economic growth has limits. This spawned a new way of looking at the world and as explained in the book “The Circular Economy: A Wealth of Flows” by Ken Webster, it also spawned a whole new language including words like tipping points, fractals, attractors, power-law relationships, topographies, and the butterfly effect.

Most recently the circular economy has benefited from information and communications technology (ICT) which envisions what prosperity might look like. Practically, a circular economy is about the optimization of flows in two kinds of capital, 1) natural capital (biosphere) and 2) the user cycle (technosphere).

A circular economy also combats climate change by reducing greenhouse gas emissions in manufacturing and use which account for 45 percent of global greenhouse gas emissions, according to a report by the Ellen MacArthur Foundation. The circular economy will influence everything from education to employment. It will revolutionize the energy sector and transform money and finance. It will also have major implications for policy and taxation.

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