What is a Circular Economy and How Would it Make Things Better?


At a Glance

Right now, we are all facing unprecedented challenges as a species. As we adapt to counter problems such as climate change, our systems and economies will have to evolve with us. One alternative system that has gained increasing traction over the past few decades is the idea of the circular economy. But what exactly is a circular economy, and what benefits could it bring us?

What is the Circular Economy?

A circular economy can broadly be defined as a system that aims to get the most use and value out of the goods it produces whilst also reducing and reusing waste as much as possible. The resources used in a circular economy should have as much use as possible extracted from them, through recycling and other means.

To better understand what a circular economy is, we need to compare it to our current economic model. The majority of current economic systems can be described as a linear economies. These kinds of systems usually adopt a “take, make, dispose” approach. Raw materials, often finite, are harvested to create products that are used until they are disposed of as waste. The vast majority of these discarded products usually end up in landfill.

This kind of model often relies on raw materials being cheap, plentiful, and easily accessible. Products are often created with finite lifespans, which encourages us as consumers to replace them regularly. These products are not usually built with recycling in mind. Advanced electronics like smartphones, for example, are not easy to break down into their component parts. Products such as disposable forks, plastic straws (I know) and single use face-masks are some examples of a linear economy at work.

A circular economy aims to prevent this kind of throwaway culture that comes about as a result of a linear economy. Practices such as reusing resources and materials as much as possible, especially raw materials and energy, and extending the lifespans of products so that they can be used multiple times are some of the methods used in circular economies. Any waste products from industrial processes, such as excess water, should ideally be recycled somehow to help fuel the next phase of production. These kinds of methods are also known as closed-loop systems.

The Origins of the Circular Economy

A circular economy takes inspiration from natural processes and organisms. At its core, nature is a collection of circular, closed-loop systems that ensure resources are used as much as possible. Take the life cycle of a plant, for example. Seeds or fruits grow into plants. Then the plant produces flowers, which hold the next generation of seeds. The plant then dies, leaving the seeds free to grow again. Dead plants decompose and form the nutrients in the soil which allows new plants to grow, like compost. This is the inspiration for the circular economy.

The theory of the circular economy has been around since the 1960s, when economist  Kenneth Boulding first compared an “open economy” (linear economy) with a “closed economy” (the circular economy). According to Boulding, open/linear economies often rely on unlimited resources and produce high amounts of waste, while closed/circular economies strive to keep materials and resources in use for as long as possible.

Subsequent theorists expanded on this idea. In the 1970’s, the economist Walter R. Stahel coined the first expression of a circular economy; “cradle to cradle”. Stahel contrasted this idea with the “cradle to grave” mindset of a linear economy. In 2002, this idea was developed by German chemist Michael Braungart and American architect William McDonough in their book “Cradle to Cradle; Rethinking the Way We Make Things”.

Their theories focused on the idea of radically rethinking how we design products. According to Braungart and McDonough, a product should be designed so that when it reaches the end of its life, it can be separated into either ‘biological’ or ‘technical’ components that can be reused as part of a circular economy. Biological components would be any raw materials that can be returned to the earth, like compostable materials. Technical components are materials that can be reused in the production process, such as plastics or precious metals.

Stahel then developed the theory of a ‘performance economy‘. This idea focuses on extending the service life of products, reducing waste, and places the emphasis on selling services rather than products. This is also called the ‘functional service economy’. This school of thought focuses more on extracting the most possible value out of a product for the longest possible time, rather than changing things at the design phase. While “cradle to cradle” ideas focus more on the environmental impact, a “performance economy” aims to make a circular economy more palatable in economic terms.

Fast forward to 2013, when the Ellen MacArthur Foundation compiled a report detailing the benefits and opportunities that moving to a circular economy could bring to the EU. The report suggested that various economic sectors could potentially save up to $630 billion a year by 2025 in a circular economy. In the same year, the World Economic Foundation (WEF) launched PACE, the Platform for Accelerating the Circular Economy, to suggest finance and policy structures for circular economy projects.

Why the Circular Economy Matters

Up until 2020, humans were using more than one Earth’s share of resources every year. Essentially, that means we were using more resources in a single year than the Earth could replenish. Continuing along the path of a linear economy would only increase this amount. But if we can gradually transition towards a circular economy, we could get far more use out of our available resources and give the planet some much needed breathing space.

A circular economy could have a considerable effect on drastically reducing our impact on the environment. By turning our waste products into resources through recycling and reusing, we would dramatically reduce the amount of waste being sent to landfill or being incinerated. If we could reuse more of the resources we consume to produce things, we would reduce our reliance on extracting raw materials from the Earth. 62% of greenhouse gas emissions (not including land use and forestry) are produced from extracting and processing raw materials and producing goods. By designing products to have longer life-spans, and using materials and components that are easier to break down and recycle, we could ensure that the raw materials that we use last a lot longer.

In terms of concrete impacts on society, a circular economy could create new areas of employment in sectors focused on recycling and re-manufacturing. If products are designed to be easier to break down and for more of the components to be recycled, workers will be needed to do that. In 2015, the UK’s DEFRA (Department for Environment, Food & Rural Affairs) found that the UK waste sector is worth approximately £6.8 billion and provided over 100,000 jobs. With more of an emphasis on recycling in a circular economy, this industry has the potential to grow even more. Governments could also make money by selling surplus recycled materials to other countries, as the report mentions.

But moving to a circular economy wouldn’t be just an economic or environmental shift, it would also require changes to our society as well as our mindset. A circular economy is more of a holistic, across-the-board approach which combines overhauling product design with the move away from a predominantly consumer mindset. In some of the suggested approaches, we would outgrow the concept of ownership altogether, and instead focus more on becoming “users” rather than “consumers”. In practice, this could mean renting appliances per use, or paying per wash for our washing machines. This could be perhaps the biggest hurdle to becoming a true circular economy.

How and Where is the Circular Economy Being Implemented?

By its very nature, a linear economy creates a huge impact on the environment. Sectors like the textile, construction, and electronics industries are the biggest areas in need of change. In high-impact industries, some companies are moving towards accommodating the principles of a circular economy.


Discarded electronics, or e-waste, is becoming an increasingly pressing environmental problem. A UN study estimates that in 2018, almost 50 million tonnes of e-waste was produced worldwide. These electrical appliances (especially smartphones), contain a large amount of precious metals such as gold, silver, lithium and cobalt. These materials are damaging and costly to extract however answers have been proposed, including this case study by the Ellen MacArthur Foundation which details the impact of discarded mobile phones, and also poses some potential solutions.

The Foundation also examined washing machines, finding that the majority of households usually buy cheaper machines that only lasted a few years. These machines usually have a built-in finite lifespan of washing cycles, also know as ‘planned obsolescence’. But if people chose more expensive, higher quality machines that would last longer, they could save money over the lifespan of their machine. This would also mean that fewer washing machines would be produced overall, reducing the total environmental impact in terms of raw materials needed and energy consumption.

In the spirit of Stahel’s ‘performance economy’ idea, some companies have started to offer “pay-per-wash” approaches, like Electrolux. While mainly for business use at the moment, this could be an interesting solution moving forwards for domestic use in our homes. The process relies on the use of smart-meters and other technology to track how often the machine is used and then charging the customer accordingly.

In a circular economy, practices such as reselling old phones, designing products to be easier to break down into recyclable components, halting practices of planned obsolescence, and the introduction of standardised parts could go a long way to decreasing the environmental impact of e-waste.


The fashion industry accounts for about 10% of global carbon emissions every year, and is also responsible for almost 20% of annual global water wastage. A single t shirt, which is estimated to last for only one or two years, can require up to 2700 litres of water during the production process.

According to the Ellen MacArthur Foundation, waste clothing generates around $500 billion of lost value every year. The idea of fast fashion epitomises the throwaway culture of a linear economy. Production processes for clothing usually require a lot of water and heavy chemical usage, with the industry frequently cited as a cause of multiple human rights issues. Beyond all of this, it’s estimated that only 12% of the material used by the clothing industry gets recycled.

The Foundation’s 2017 report titled “A New Textiles Economy” showed how the fashion industry could potentially benefit from adopting a circular economic approach. Giving people more chances to return or recycle their unwanted clothes could kick-start the process, while developing more efficient ways to repurpose unwanted clothing could also help. Designing or making clothes out of more easily recyclable or sustainable materials is another logical step.

A number of companies are experimenting with alternative models for both selling and repurposing clothes. Outdoor clothing brand Patagonia’s ‘Worn Wear‘ initiative encourages customers to return their used Patagonia products for others to purchase. According to Patagonia, buying used clothing increases a garment’s lifespan by over two years. Other fashion brands with recycling programs include Levi’s, H&M, and Zara. Some companies, like Dutch sustainable clothing brand Palanta, are offering ‘pay-as-you-wear’ options within their range.


The environmental impacts of cars are well documented, including their manufacture. Even electric cars, which impact the environment less over their lifecycles than conventional internal combustion cars, have a huge environmental impact during their production process. Adopting more principles in line with a circular economy can help lessen the impact of the automotive industry.

Measures such as using parts made from recycled or sustainable materials, or remanufacturing parts to avoid producing brand new ones, can make a huge difference. Compared to making new parts, remanufacturing old components can require up to 80% less energy and release almost 90% fewer chemicals. Like our smartphones, electric vehicle batteries require precious metals such as lithium and nickel. By designing these batteries to be easier to break down and reuse, less raw materials would be required.

Automotive manufacturer Renault is leading the circular economy charge within the automotive industry. In March 2020, the French firm announced their Re-Factory, which will transform their site in Flins, France into a centre focused on remanufacturing and recycling old and end-of-life models.

How are Different Countries Approaching the Circular Economy?

The approach taken by international actors varies, perhaps unsurprisingly, by country with different strategies, objectives, and timelines informing the transition to circular economic model of thinking on the world stage.


The UK Government aims to achieve zero waste and double production by 2050 through their “Circular Economy Package” in line with the “25 Year Environment Plan”, in which the UK economy targets “leaving the environment in a better state” than they inherited it. This ambitious goal and approach is replicated across Scotland, Wales, and Northern Ireland and through the plan, the UK is aiming to recycle 65% of waste generated from cities by 2035.

UK organisations like WRAP (Waste and Resources Action Programme) aim to provide help in the transition to a circular economy. According to their figures, WRAP generated £2.2 billion of benefit to UK economy between 2008 and 2011.


While there doesn’t seem to be an official pledge from the US Government regarding the move towards a circular economy, steps are still being taken to move the discussion in that direction. In 2020, the US joined the Plastics Pact network created by the Ellen MacArthur Foundation. The US committed to take measures such as ensuring that 100% of plastic packaging would be reusable, compostable, or recyclable by 2025. Individual companies in the US are also making real moves in aiming to shift toward a circular economy model.

European Union

In March of 2020, the EU Commission presented a new Circular Economy Action Plan (LINK), with the aim of becoming climate-neutral by 2050. This initiative proposes changes throughout the entire production process and life cycle of a product, which would enable its materials and resources to be kept within the economy for as long as possible. The Netherlands aims to have completely circular economy by 2050. According to a list from POLITICO on the EU’s most circular countries, Poland and the Czech Republic are among the front-runners.


China’s CACE (China Association of Circular Economy) works with various industries across the country to carry out government policies of environmental protection and conserving resources. In July 2018, China and the EU signed a joint agreement to collaborate on moving towards adopting circular economic models.

The Pros and Cons of Circular Economic Thinking

One of the main advantages of moving toward a circular economy is reducing waste. This is either achieved through designing products to last for a longer lifespan, or by recycling and reusing waste materials and emissions as part of the ongoing production process. Waste can represent an untapped resource in a linear economy,

Another advantage of a circular economy is its potential to create more jobs and new industries. In particular, the recycling sector has a huge amount to gain from moving to a circular economy, as more waste resources would need to be broken down into their usable parts. This area has huge potential for growth, and could occur in multiple industries like textiles, electronics, and the automotive industry.

A circular economy would also help drive innovation, with products needing to be designed more sustainably and with longer lifespans. There would be an emphasis on quality and efficiency, not quantity. New industrial processes would need to be developed in order to meet the demands of a circular economy; processes that made the most of waste products and functioned as closed loops.

One of the biggest reasons to move to a circular economy is to reduce our impact on the environment. The extraction of raw materials from the Earth, such as the precious metals needed for our smartphones, causes a lot of environmental damage. The amount of waste and pollution produced by a linear economy has had a devastating effect on both climate change and wildlife populations. A circular economy, requiring less reliance on extracting finite raw materials, can help our planet catch up with our demand.

A circular economy would also allow our current available reserves of finite resources to last longer. If our dependency on finite raw materials is lowered, our stocks and supplies will not only go further, but could also regenerate faster; think wood from trees and reducing pressures on rainforests and other woodland areas. This reduction in demand brings an element of security to these stockpiles, as well as decreasing our need to panic and find alternatives as time passes.

However, a circular economy is not an entirely perfect solution. Detractors point out some key pitfalls and problems that a circular economy could face.

On a planet with finite resources, it is becomingly increasingly apparent that striving for endless economic growth is simply not viable and this point is frequently voiced by critics to the current status quo. In a circular economy that can reuse resources multiple times, the ability to produce goods may increase, which may actually end up cancelling out some of the benefits listed above. The Earth is also still a finite space, and no matter how much we increase our efficiency with resources, there will still ultimately be a natural limit as to how much we can grow and produce.

Recycling things is also more expensive than making new ones from scratch. Time has to be spent breaking down a product, sorting the component materials, and then finding ways to reuse them. The processes of breaking down a plastic bottle are time-consuming. In 2019, market specialist S&P Global Platts came to the conclusion that per tonne, recycled plastic cost £72 more than fresh new plastic. If recycled materials are expensive to produce, prices across industries will rise, and this increased cost may price new businesses out of being able to start.

There is also a criticism levelled at closed-loop production systems. If a system is more interlinked and relies on all parts working properly, any disruption to that system can be much more devastating. This can cause huge issues which can severely disrupt production and supply changes, possibly leading to shortages.

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