🧠 Explainer: Circular Economy

What is the circular economy?

In simple terms, a circular economy applies the principles of nature to economics.

Nature cycles materials to be regenerated and reused in various forms again and again. In our current linear economic system, resources are extracted at an unsustainable rate and turned into products that are quickly discarded and never (at least on a human timescale) break down.

The main goal of a circular economy is to build supply chains that cut waste, increase efficiency, and shrink environmental footprints by recovering or recycling resources.

What are the 3 principles of a circular economy?

A circular economy is built on 3 main principles:

• Eliminating waste and pollution by avoiding its creation in the first place by designing materials that are easily maintained to prolong their life

• Circulating products and materials by reusing, redistributing, refurbishing, remanufacturing, or recycling

• Regenerating nature by returning biological materials to the natural world

A circular economy separates biological materials that can safely re-enter the natural world and technical materials, which must continuously cycle to capture and recapture their value via cascades, in which used materials and components can be put to different uses in which stored energy is extracted over time.

Is a circular economy realistic?

A circular economy can make commercial sense if products are designed to be recycled and regenerated from the beginning.

In a circular economy, the “goods of today become the resources of tomorrow at yesterday’s resource prices.” However, a circular economy is only sustainable if value can be economically recovered from a product. This value doesn’t have to be tangible — for example, luxury fashion items can become more valuable over time due to brand cachet.

Many strategies for creating a circular economy require a change in how we think about ownership and our relationship to products. For example, instead of buying a product outright, a consumer rents or licenses the product, and so the business is ultimately responsible for the product when the consumer is finished with it.

Another strategy is extending product lifespans by designing products to last longer. Anyone who’s had to replace their phone after 2 years because the charger no longer works and suddenly they don’t make that kind of charger anymore because screw you, buy a new phone, can get behind this.

Removing obsolescence can open up the market for used products and even be a competitive advantage that justifies premium pricing (e.g. Patagonia).

Is a circular economy the future?

With the right legislation and infrastructure to support the systemic change required to support a circular economy, it could be.

Yes, tracking and reporting emissions and material use, especially indirect emissions, is complex.

Researchers have criticized the circular economy’s emphasis on technological solutions and promises of continued economic growth instead of the human-centered approach of sustainable development models, which is fair.

But if you’re trying to sell an economic system to people who think in dollars and cents, it helps to break down the benefits. In a circular economy, the economic benefits include saving on material costs, the potential to create new jobs and inspiring innovation.

Environmentally, a circular economy would reduce emissions and the consumption of resources, and improve soil health and land productivity.

Businesses can benefit from new profit opportunities, lower costs, reduced volatility and secure supply chains, a new demand for business services, and improved customer interaction and loyalty.

Individuals can benefit from having more disposable income, more utility, improved health, and more confidence in products.

What country has the most circular economy?

Building a circular economy means collaboration between government, small and large businesses, and researchers while setting clear, science-based targets, and some countries are starting to try it out.

Finland was the first country to adopt a national circular economy roadmap in 2016, with a deadline of full implementation by 2035. And to be honest, despite innovations in government and business, they’ve been struggling to stay on track, with circular material use falling from 7% in 2018 to 4.5% in 2020.

Other countries are finding more success. In 2021, Vanuatu’s domestic consumption was estimated to be 59 percent circular — more than any other country. The Netherlands stands at 24.5 percent circularity, and Austria at 9.7 percent. Globally circularity was estimated to be at 7.2 percent in 2023.

What brands use circular economy?

Our friends at Apeel are improving the self-life of produce, eliminating the need for plastic packaging, and reducing food waste in one fell swoop.

Our other friends at Mill are also fighting food waste and contributing to a circular economy by breaking down last night’s leftover poutine and other kitchen scraps and turning them into chicken feed.

Startups in the digital circular economy (projected to be worth $6.7 billion by 2028) are using tools like AI to help cut waste in food and building materials. Others are looking to replace single-use plastic packaging with seaweed. Hell yeah.

The circular economy offers an inspiring vision for how we can build a sustainable future by eliminating waste through smart design and responsible consumption.

While there are still challenges to overcome, with collaboration between governments, businesses, and consumers, circular models have the potential to scale and transform society.

With the right incentives and infrastructure, a circular economy seems not only achievable but a viable solution to prospering on this planet long-term.

After all, as natural systems have shown for eons, there is no such thing as waste in nature—only abundant regeneration.