What is a circular economy and why do we need it?

A circular economy is a system that minimizes its input of resources and output of emissions and waste. The linear economy – our current economy – treats the earth as if it has infinite resources and infinite capacity to store our waste. The circular economy, on the other hand, recognizes that these are finite, and seeks to reduce both the resources taken and the waste disposed by changing the way we consume.

A circular economy takes our take-make-waste linear economy and reroutes the waste back into the system, thus creating a recycle-consume-reuse cycle. By this principle of a circular economy, at no point in the process should any waste drop out of the system. Once the materials have served their purpose in one product, they are re-manufactured or recycled to go through the cycle yet again.

A great example of this is industrial symbiosis, in which the by-product, emission, or residue generated from one industry’s production process is used as a resource by another industry. By sourcing that ingredient from one industry’s waste rather than the virgin material, emissions are cut and the rate of resource depletion is slowed.

How does a circular economy function?

Aside from keeping our waste from exiting the cycle, there are many other ways to reduce the resources consumed and waste disposed – such as designing products to last, maintaining existing products, and re-manufacturing the product using recycled and second-hand parts when it breaks.

Another concept is leasing products instead of buying them, just as we lease cars or houses. This system brings advantages for all parties involved – for the consumer, it is beneficial because maintenance and replacements are covered by the provider. It is beneficial for the provider because, in a world where resources are diminishing, it behooves them to recover broken products to re-use their parts. And of course it is better for the environment, as less of its resources are extracted and less of our waste is dumped onto its surface.

Why is it important?

Every year the Global Footprint Network calculates Earth Overshoot Day – the day of the year on which we have used up all the resources the Earth can naturally provide in one year. In 2017, this day was August 2nd. That means that we consume four months’ worth of natural resources more than we should in a year. Needless to say, this is not a sustainable rate of consumption.

Earth Overshoot Day 2018 by country - the day on which one year's resources would be used up if all people consumed like the people of that country. Source: Global Footprint Network
Earth Overshoot Day 2018 by country – the day on which one year’s resources would be used up if all people consumed like the people of that country. Source: Global Footprint Network

And thus the main argument for a circular economy is its power to decrease our depletion of raw materials and therefore lead to a more sustainable consumption rate. Yet another major advantage of a circular economy is that, once perfected, it should cost nothing more for businesses to participate, while the quality of the goods and services they produce would remain the same.

But unfortunately, that’s not quite true yet. The estimated cost of transitioning to a circular economy is 108 billion Euros, according to a 2015 report by the Ellen MacArthur Foundation. This is due to the higher costs required to produce more durable, long-lasting products, as well as the logistical costs of recycling waste material and redesigning the supply chain. It is also important to consider that many countries have underdeveloped and inefficient recycling systems, which makes it more difficult to source recycled materials for manufacturing as they are not likely to be the same price or quality as the virgin material.

So in order to reach this state in which contributing to a circular economy is easy, cost-efficient, and simply the only logical option, businesses are needed to pave the way for others to follow by turning their circular ideology into business policy and demonstrating to others how it can be done.

How does your business contribute to a circular economy? Share your methods in the comments section to get others inspired.

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