A Circular Economy Explained

A circular economy is an alternative to a traditional linear economy (make, use, dispose) in which we keep resources in use for as long as possible, extract the maximum value from them whilst in use, then recover and regenerate products and materials at the end of each service life.

Why a circular economy is important

As well as creating new opportunities for growth, a more circular economy will:

  • reduce waste
  • drive greater resource productivity
  • deliver a more competitive UK economy.
  • position the UK to better address emerging resource security/scarcity issues in the future.
  • help reduce the environmental impacts of our production and consumption in both the UK and abroad.

Key Elements

Prioritise regenerative resources

Ensure renewable, reusable, non-toxic resources are utilised as materials and energy in an efficient way. Ultimately the system should aim to run on ‘current sunshine’ and generate energy through renewable sources. An example of this principle is The Biosphere Rules framework for closed-loop production which identifies Power Autonomy as one of nature’s principles for sustainable manufacturing. It requires that energy efficiency be first maximized so that renewable energy becomes economical. It also requires that materials need to be non-toxic to be able to recirculate without causing harm to the living environment.

Use waste as a resource

The second element aims to utilise waste streams as a source of secondary resources and recover waste for reuse and recycling and is grounded on the idea that waste does not exist. It is necessary here to design out waste, meaning that both the biological and technical components (nutrients) of a product are designed intentionally in such a way that waste streams are minimalised.

Design for the future

Account for the systems perspective during the design process, to use the right materials, to design for appropriate lifetime and to design for extended future use. Meaning that a product is designed to fit within a materials cycle, can easily be dissembled and can easily be used with a different purpose. Hereby one could consider strategies like emotionally durable design. It should be stressed that there is not something like one ideal blueprint for future design. Modularity, versatility and adaptiveness are to be prioritised in an uncertain and fast evolving world, meaning that diverse products, materials, and systems, with many connections and scales are more resilient in the face of external shocks, than monotone systems built simply for efficiency.

Preserve and extend what’s already made

While resources are in-use, maintain, repair and upgrade them to maximise their lifetime and give them a second life through take back strategies when applicable. This could mean that a product is accompanied with a pre-thought maintenance programme to maximise its lifetime, including a buyback program and supporting logistics system. Second hand sales or refurbish programs also falls within this element.

Collaborate to create joint value

Within a circular economy, one should work together throughout the supply chain, internally within organisations and with the public sector to increase transparency and create joint value. For the business sector this calls for collaboration within the supply chain and cross-sectoral, recognising the interdependence between the different market players. Governments can support this by creating the right incentives, for example via common standards within a regulatory framework and provide business support.

Incorporate digital technology

Track and optimise resource use and strengthen connections between supply chain actors through digital, online platforms and technologies that provide insights. It also encompasses virtualised value creation and delivering, for example via 3D printers, and communicating with customers virtually.

Prices or other feedback mechanisms should reflect real costs

In a circular economy, prices act as messages, and therefore need to reflect full costs in order to be effective. The full costs of negative externalities are revealed and taken into account, and perverse subsidies are removed. A lack of transparency on externalities acts as a barrier to the transition to a circular economy.