What Is the Circular Economy?

Sharing is caring!

There is a lot of confusion as to what is the circular economy.

I’ll give a brief introduction in this post to the cirucular economy. This post is a primer for more detailed articles focused on the circular economy, circular business models, and circular ecosystems.

Increasingly the circular economy has become a focus of work with my clients many of whom struggle to make sense of the complexity involved in developing viable circular solutions.

One of the fundamental start points that influences success in projects is the need for leadership and management teams to shift from an internal firm-centric mindset to an ecosystem mindset.

An ecosystem mindset shifts the focus from we can solve this to we need to collaborate with partners (some new) to solve challenges, improve value, become more resilient and address the challenge of sucessfully achieving sustainability goals.

The circular economy is often framed as a sustainability upgrade. It is more than that. It is now a pillar of Europe’s growth strategy and a practical route to meeting the Paris Agreemen, and it is fundamentally just good business practice.

Companies that design for circularity capture value from wasted resources, build stickier customer relationships, and get ahead of fast-tightening environmental policy.

The trap is thinking you can get there with isolated fixes. A biodegradable package here, some recycled content there. Helpful, yes. Transformative, no.

The circular economy is an economic system that is restorative and regenerative by design. It maintains the value of products, components, and materials at their highest utility for as long as possible while minimising resource use, waste, and emissions through strategies that narrow, slow, and close loops, complemented by regeneration of natural systems and digitally informed coordination of flows.

This definition integrates two research streams. First, strategies at product and process level that narrow, slow, and close flows through design and operations. Second, ecosystem level orchestration that enables regeneration and information rich coordination among actors across the life cycle.

Why circularity now (and why “eco-efficiency” alone is not enough)

The sustainable development challenge is two-sided: lift human well-being while staying within planetary boundaries. Today, a small share of the global population drives a disproportionate slice of climate impact, while billions still need access to health, education, and decent livelihoods.

Most environmental harm clusters in a few consumption categories such as food (especially meat and dairy), energy-using household goods, mobility (cars and planes), and construction and demolition.

Taken together these account for well over three-quarters of global life-cycle impacts. Electronics, fashion, and packaging add further pressure. The business implication is clear: value is leaking through our systems, eroding margins and resilience.

Competitive advantage moment: While competitors chase carbon offsets at the edge, leaders who re-engineer material, product, and data flows at the core lower cost, reduce risk, and open new revenue.

What Is the Circular in the Circular Economy Mean?

Who coined the phrase the circular economy

What does the “circular” part of circular economy actually mean?

The English phrase “circular economy” is widely attributed to economist David W. Pearce with R. Kerry Turner, who used it in their 1990 book to contrast circular with linear resource use.

Contemporary accounts and later summaries document sometimes point to earlier foundations such as Boulding’s “Spaceship Earth” and Stahel’s loop thinking [3].

The “Circular” describes the way in which materials, components, and products are kept in use for as long as possible by reusing, repairing, and recycling them, instead of using them once and throwing them away.

Companies can redesign how they work so they use fewer materials and less energy, keep products in use for longer with multiple lives, and recover materials at high quality when products reach end of use. They can also restore natural systems and use data to coordinate these loops with partners.

The five resource strategies (and the one that enables all of them)

Think of your business as a set of material and energy flows. You can influence those flows in five ways:

1. Reduce the flow: deliver the same or better outcomes with fewer resources through efficiency, dematerialisation, and multifunctionality.
2. Divert the flow: keep products and components in use longer via durability, repair, upgrade, reuse, and repurposing.
3. Complete the loop: return “waste” as feedstock through remanufacturing and high-quality recycling.
4. Renew the base: use renewable, non-toxic inputs and power operations with renewable energy.
5. Inform everything: use data and digital platforms to track assets, optimise utilisation, certify provenance, govern quality, and coordinate exchanges across actors.

Possibility expansion: When “inform” is embedded, every asset becomes a serviceable, financeable, tradable unit which means that it becomes a building block for new services and not a black box that depreciates in the dark.

Appling the Circular Strategies

It is essential to apply thee strategies across three levels, not just one.

• Product level: physical design choices (materials, modularity, reparability).
• Business model level: how value is proposed, created/delivered, and captured (ownership, pricing, service).
• Ecosystem level: the set of partners and rules that make circularity possible at scale (reverse logistics, refurbishers, recyclers, energy providers, finance, and data infrastructure).

Timing advantage: The firms that build ecosystem capacity now will lock in access to scarce secondary materials, trusted data, and preferential policy treatment as rules tighten.

The 3 Engines That Scale The Circular Strategies

1) Collaboration (ecosystems): Circular outcomes are a collective achievement.

• Partner selection: map who you need across the life cycle—collection, repair, remanufacture, recycling, renewable energy, data services, finance.
• Value alignment: articulate “what’s in it for them,” co-define roles, and design value-sharing so no critical actor loses money by doing the right thing.
• Trust: start with low-risk pilots, share data credibly, and use clear service-level agreements.

2) Experimentation: Uncertainty is the norm; test it.

• Desirability: which customers, jobs-to-be-done, and switching moments make circular offers compelling?
• Feasibility: can reverse logistics, refurbishment, and quality assurance operate at target cost and cycle times?
• Viability: unit economics across first, second, and third lives; price structures that reward care and usage patterns.
• Sustainability: compare impact against a baseline with simple, decision-grade metrics (e.g., embodied emissions conserved through life extension).

3) Platformization: Use digital platforms to coordinate multi-party interactions.

• Openness trade-offs: more open boosts innovation and network effects; more closed simplifies control and capture. Choose a hybrid stance by default, with transparent rules.
• Boundary resources: publish the “rules of the game”—APIs, data schemas, contribution tutorials, and policy for acceptable behaviour.
• Pricing: define who pays, when, and for what (access, usage, outcomes, recovery). Align incentives with lifetime value.
• Control & trust: verification, ratings, dispute resolution, and compliance baked into workflows.
• Data governance: make data flows legible, privacy-preserving, and policy-compliant; use product passports to anchor material value over time.

Personal insight: The biggest circular wins rarely come from greener inputs. They come from higher utilisation, longer life, and better coordination, which are platform problems as much as engineering problems.

What Good Circular Projects Achieve In 12–36 months

• Utilisation up, idle assets down. You have fewer assets doing more work with higher reliability.
• Second-life markets established. You monetise components through certified partners rather than writing them off.
• Renewable power and non-toxic materials institutionalised in procurement.
• Data-rich operations where condition, provenance, and emissions are measurable and financeable.
• Ecosystem contracts that make circular flows routine, not heroic.

Personal empowerment: Leaders in product, operations, and digital hold the keys. You control design rules, service models, and data architecture which are the key levers that change the game.

The R’s of The Circular Economy

Each R-strategy below operationalises the five flow logics. It is circular when it lengthens time-in-use, preserves functionality or material purity, routes assets back to productive use, or enables those loops with data.

Here are a few examples to illustrate how firms can help with circular flows:

• Refuse
  Remove non-value-adding items to cut virgin inputs. Examples include eliminating secondary packaging or unneeded printed inserts. Flow effect: narrow.
• Reduce
  Deliver the same service with fewer resources. Examples include lightweighting parts and virtualising paper workflows. Flow effect: narrow.
• Re-design
  Design for durability, disassembly, mono-materials, and clean inputs so later loops are possible. Examples include mono-material garments for fibre-to-fibre recycling and buildings designed for disassembly and future recovery. Flow effects: slow and close.
• Reuse
  Keep products in circulation with no or minimal processing. Examples include returnable transport packaging and refill systems. Flow effect: slow.
• Repair
  Restore function at component level through access to spares and serviceability. Examples include right-to-repair-ready electronics with replaceable batteries and screens. Flow effect: slow.
• Refurbish
  Restore to good working order with selective replacement and testing. Example: certified refurbished smartphones and professional equipment programs that return assets to service with warranties. Flow effects: slow and close.
• Renovate
  Upgrade performance in situ so assets remain productive. Examples include software and sensor retrofits for industrial equipment and energy upgrades for buildings. Flow effect: slow.
• Remanufacture
  Disassemble, inspect, and reassemble to like-new specification, preserving embedded value. Common in engines, drivetrains, and complex office equipment. Flow effects: slow and close.
• Recycle
  Return materials to high-quality feedstock for the same or similar products where feasible, for example aluminium can-to-can and bottle-to-bottle PET. Flow effect: close.
• Recover
  Capture residual value when higher loops are not viable, for example anaerobic digestion of organics to biogas. Flow effect: close, used sparingly to avoid lock-in.
• Return
  Build the reverse logistics and tracking that make all other loops work, for example prepaid take-back in electronics and product passports that trigger retrieval at end of use. Flow enabler across narrow, slow, and close. 
• Rethink
  Change the value proposition so revenue decouples from throughput, for example product-as-a-service and performance-based contracts. Digital monitoring aligns incentives to maintain and recover assets. Flow effects: narrow, slow, close, and inform.
• Repurpose and cascade
  Shift to the next-best use when same-use loops are not feasible, for example repurposing EV batteries into stationary storage. Flow effects: cascaded slowing and closing.
• Inform
  Use data to identify, maintain, route, and valorise assets and materials. Examples documented in the Circularity Deck include product-in-use data for durability improvements at Rolls-Royce, utilisation tracking in Zipcar’s sharing model, lighting-as-a-service performance monitoring at Philips, and automated waste sorting with ZenRobotics to increase recovery yields. Flow enabler across all loops. 

The test is simple: will this choice keep value in circulation for longer, at higher quality, with less virgin input?

Why Focus on The Circular Economy?

Companies face sharp swings in material prices, supply chain disruptions, and growing risks from climate change and nature loss.

The underlying problem is a growth model that takes resources, makes products, uses them once, then throws them away.

That wastes value and weakens profit and resilience.

The challenge is to redesign how value is created so materials, products, and information keep working for longer instead of being lost.

The Size of the Circular Economy Problem

The Problem Of Our Raw Material Use

Materials are a huge driver of environmental pressure. Extracting and processing the world’s materials causes over half of global greenhouse gas emissions and more than 90 percent of land-use related biodiversity loss. Source: International Resource Panel, Global Resources Outlook 2024 (UNEP/IRP)

Metals are getting harder to mine cleanly. As ore grades fall, miners move more rock and use more water per tonne of metal. From 2019 to 2022, waste generated per unit of mineral produced rose by over 20 percent and reported water use rose about 25 percent.
Source: International Energy Agency, Global Critical Minerals Outlook 2024

Mine tailings are an overlooked mega-waste stream. Recent assessments put annual tailings at roughly 8 to 14 billion tonnes, with copper responsible for the largest share. Source: Global Tailings Review, Overview and Industry Trends (2020)

Wood use is massive and split almost evenly between fuel and industry. In 2022 the world removed about 4.01 billion cubic metres of wood, roughly half for fuel and half for industrial uses.
Source: FAO, The State of the World’s Forests 2024 (Table: Roundwood production, 2022)

Forest loss surged to a record in 2024. New data show 6.7 million hectares of tropical primary rainforest were lost, with fires driving nearly half of that loss. Source: World Resources Institute, Global Forest Loss Shatters Records in 2024 (Global Forest Watch)

Cement is one of the biggest industrial emitters. Producing cement and concrete is responsible for about 7 percent of global CO₂ emissions. Source: Global Cement and Concrete Association, Cement Industry Net Zero Progress Report 2024/25

We use an estimated 50 billion tonnes of sand and gravel each year. These are the most-used solid materials on Earth and a key input to construction. Source: UNEP, Sand and Sustainability: 10 Strategic Recommendations to Avert a Crisis

Plastics production has exploded and leakage continues. Global plastics use reached around 460 million tonnes in 2019 and each year an estimated 19–23 million tonnes leak into aquatic ecosystems. Sources: OECD, Global Plastics Outlook (2022)

Fashion’s fibre throughput keeps rising with very little true circularity. Global fibre production hit about 116 million tonnes in 2022 and 124 million tonnes in 2023; polyester is the largest share. Less than 1 percent of textiles are recycled back into new textiles. Sources: Textile Exchange, Preferred Fiber & Materials Market Report 2024; Textile Exchange, Preferred Fiber & Materials Matrix (textile-to-textile recycling)

Land degradation is already affecting the global economy. Up to 40 percent of the world’s land is degraded, undermining food security, water systems and biodiversity.
Source: UN Environment Programme, UNCCD: Facts and Figures (2024)

The Circular Economy An Example of The Waste Problem

Global municipal solid waste was about 2.01 billion tonnes in 2016 and is projected to reach 3.40 billion tonnes by 2050.

At least one third is mismanaged through open dumping or burning. At the system level, the share of secondary materials in the global economy has fallen from 9.1 percent in 2018 to 7.2 percent in 2023, indicating a widening problem often called the circularity gap.

Plastics illustrate the scale of value loss. In 2019 only 9 percent of plastic waste was recycled while 22 percent was mismanaged [10].

Meanwhile, electronic waste reached a record 62 million tonnes in 2022, with documented formal collection and recycling at 22.3 percent and a projected decline to 20 percent by 2030 without significant intervention [11].

Fresh Kills in New York City operated for 53 years, accumulated about 150 million tons of waste, and was for a time the largest landfill in the world before closure in 2001.

The capped site covers about 2,200 acres and is being converted to parkland through long term engineering and ecological restoration [12][13]. Among the largest active sites today is Bantar Gebang on the outskirts of Jakarta.

It spans more than 100 hectares, receives roughly 7,000 to 9,000 tonnes of waste per day, and has grown beyond 40 million tonnes with sections reported over 50 metres in height. Thousands of people live and work around the site, which underscores the social and health problems of linear systems [14][15][16].

Summary of What Is a Circular Economy

Every firm has a part to play in improving how we treat the environment. A key point here is that value leaks and risks do not stop at just within your company – so yes you must think through the entire flow of what you produce from sources to how products are then treated at the end of their life.

For instance, consider how materials travel through shared supply chains, markets, and cities, so your choices ripple outward.

Each time a single business designs for repair, sources recycled inputs, and builds take back routes, it unlocks value for partners and customers as well. You can make a broad impact and an even bigger one with the right partners (your ecosystem).

However, waiting carries costs in margin, resilience, talent, and trust.

But, acting early creates options and influence. Your contribution does not need to be grand to matter.

Pick one product line, fix one value leak, and prove the return. As more firms act, loops close, waste falls, and the whole system becomes more resilient and more competitive.

Addressing the challenges we now face requires collective action.

---

References

1. Bocken, N. M. P., de Pauw, I., Bakker, C. and van der Grinten, B. 2016. Product design and business model strategies for a circular economy. Journal of Industrial and Production Engineering, 33(5), 308 to 320.
2. Centobelli, P., Cerchione, R., Chiaroni, D., Del Vecchio, P. and Urbinati, A. 2020. Designing business models in circular economy. Business Strategy and the Environment, 29(4), 1734 to 1749.
3. Geissdoerfer, M., Savaget, P., Bocken, N. M. P. and Hultink, E. J. 2017. The circular economy. Journal of Cleaner Production, 143, 757 to 768.
4. Konietzko, J., Bocken, N. and Hultink, E. J. 2020. A tool to analyze, ideate and develop circular innovation ecosystems. Sustainability, 12, 417.
5. Modak, P. 2021. Practicing Circular Economy. CRC Press.
6. Suchek, N., Fernandes, C. I., Kraus, S., Filser, M. and Sjögren, H. 2021. Innovation and the circular economy. Business Strategy and the Environment, 30(8), 3686 to 3702.
7. Ellen MacArthur Foundation, PA Consulting, University of Exeter Business School. 2020. Circular Business Model Design Guide, V1 Nov 20.
8. Kaza, S., Yao, L., Bhada Tata, P. and Van Woerden, F. 2018. What a Waste 2.0. A Global Snapshot of Solid Waste Management to 2050. World Bank.
9. Circle Economy. 2024. Circularity Gap Report 2024. Circle Economy.
10. OECD. 2022. Global Plastics Outlook. OECD Publishing.
11. Forti, V., Baldé, C. P., Kuehr, R., et al. 2024. The Global E waste Monitor 2024. ITU and UNITAR.
12. NYC Parks. 2024. Freshkills Park. Site information and history.
13. NYC Parks. 2019. Fresh Kills Landfill closed in 2001.
14. Eco Business. 2023. Life on Southeast Asia’s largest landfill.
15. Danida Fellowship Centre. 2025. Bantar Gebang overview and scale.
16. Reuters. 2016. Green entrepreneurs tackle Indonesia’s growing trash mountains.