Definition

“Circular economy embraces the need to redesign our economy, in a way that we can re-design products so they can be ‘made to be made again’. This sustainable way of thinking, helps to work effectively at all scales – for large and small businesses, for organisations and individuals, globally and locally. Moving to a more circular approach, requires mostly a systemic change that builds long-term resilience, generates business and economic opportunities, and provides environmental and societal benefits”.

(Ellen Macarthur Foundation, 2020)

Source: www.canva.com

The World Economic Forum has officially defined Circular Economy as below:

“A circular economy is an industrial system that is restorative or regenerative by intention and design. It replaces the end-of-life concept with restoration, shifts towards the use of renewable energy, eliminates the use of toxic chemicals, which impair reuse and return to the biosphere, and aims for the elimination of waste through the superior design of materials, products, systems, and business models.”

Circular Economy – scarcity of resources

In today’s economy, society is benefiting from many of products that are both diverse and cover almost every need a human brain can imagine! This increased growth has been however fuelled by the continuous use of natural resources. Today, more than ever, the industry is heavily and extensively using the world’s natural resources. But based on pure economic principles, resources are scarce. So, it is only expected that natural resources will not be available for quite a long time still. Bare also in mind, that the planet’s ability to regenerate itself is slow, and such a process could take hundreds of years.

Therefore, with the clock ticking, a more circular approach as to how we reduce consumption, reuse materials and products, and recycle waste, is essential if we want to continue to enjoy products that cover all our needs without wasting all earth’s resources and damaging the environment!

Source: www.canva.com

Circular Economy – benefits

Did you know that adopting a circular approach could boost EU’s resource productivity by 3% by 2030, generating cost savings of 600 EUR billion a year, and 1.8 EUR trillion more in other economic benefits? (McKinsey & Company, Mapping out circular economy benefits, 2016) The numbers speak for themselves. Let’s check out some more benefits.

But first, let’s observe the 3 basic principles of the circular economy model:

• Design out waste and pollution
• Keep products and materials in use
• Regenerate natural systems

Can you imagine what would happen if waste and pollution never happened in the first place? Or what about, building a world which uses things rather than using things out? Last but not least, what if we could, not merely protecting the environment but, actively helping to improve it?

A circular economy approach can really help to achieve the cornerstones of this model. In terms of designing out waste and pollution, the circular economy model, can, in fact, design the negative impacts of economic activity, so these can be prevented. In an effort to map out such negative impact examples, we could refer to hazardous substances, air pollution, land and water alike, etc.

Circular economy, applicable to the conservation of goods and resources in use, achieves the design longevity of products, reuse, remanufacture and recycle to sustain the circulation of products, parts and materials in the economy. Additionally, the CE model is strongly emphasizing the effective use of bio-based material, in a way that it promotes different uses of these materials; a cycle is created and these materials are circulating between the economy and natural systems. Lastly, in relation to improving the environment, the circular economy model invests in the use of renewable resources; a typical example being the area of mobility, which encourages the use of renewable energy instead of fossil fuels.

Referencing again the concept’s definition CE aims to improve resources’ performance and fight the volatility that climate change might bring to businesses. The CE model brings so many benefits on a multiscale level (i.e., economy, business, environment and society) and as such it carries the potential of creating value in systems and economies alike.

The CE model is based on the concept of Reduce, Reuse, Recycle and it is the exact opposite of the Linear Economy model, which is heavily based on the Take, Make, Use and Dispose concept, which is wasting all-natural resources and drives them to extinction.

Source: https://www.locusresearch.com/think/blog/2019/08/business-value-circular-economy

Here you can find the categories of benefits, each one analysed below:

• Environmental benefits
• Economic benefits
• Profit benefits for existing and new businesses
• Growth benefits for existing and new businesses

Source: www.canva.com

Environmental benefits

As identified in the introduction of this section, one of the goals of Circular Economy is to positively affect the planet’s ecosystems and to minimize or control the excessive exploitation of natural resources. Thus, Circular Economy has the potential to reduce greenhouse gas emissions and the use of raw materials. Controlling the usage of conventional energy resources (per the linear model) the environment is less polluted, with the end result being cleaner air, water and lands. As the model suggests, reusing and dematerializing, results in fewer material and production processes, without compromising the breadth of product lines and products’ functionality. Moreover, since the production of goods (when opting for the circular model), is based on energy-efficient systems and non-toxic materials, recycling is more easily achieved, promoting many health and environmental benefits.

Economic benefits

Companies that invest their resources in new circular activities are benefiting from cheaper production methods; not compromising quality, but at the same time achieving products and material functionality; easily disassembled and reused, has the power to increase GDP and therefore economic growth, according to a McKinsey report. Moreover, the circular model naturally leads to a vast percentage of material savings, which results in higher profit margins and a better economic standing, especially for SMEs.

Source: www.canva.com

Profit benefits for existing and new businesses

Material and production efficiencies bring a result of lower input costs. Moreover, existing and new businesses, have the potential to create entirely new profit streams. Using the CE models, existing and new businesses are in a position to realise new profit opportunities, especially because they can create new products addressing totally new markets while minimising their costs with efficient energy and waste techniques. The CE model, due to its circularity, can also safeguard the continuity of supply, which is also positively affecting the profitability potential of companies.

Growth benefits for existing and new businesses

Perhaps one of the most significant benefits that the Circular Economy model has to offer, is that it gives the potential to existing and new businesses to create demand for new services, and new job opportunities. Both parameters are good indicators of business growth. Such examples can be:

• Product sales platforms that facilitate longer lives or higher facilitation of products
• Parts and component remanufacturing and product refurbishment offering specialized knowledge
• Logistics companies that support the reintroduction of “end of life products” into the global market

Transitioning towards the circular economy model is alarming us to reduce the number of raw materials used. This can equally mean, that more recycled material can be used, which helps companies depend less on the volatility of prices for raw materials. CE is also helping companies (and at a certain level protecting them) from crises that could strike in the world’s geopolitical scene, which can be devastating for supply chains. The CE model gives companies the freedom to rely on their in-house supply chains, thus making them more resilient in front of negative world events.

Given the recent pandemic (Covid-19) it is essential to note, that CE was suggested as an excellent economic recovery model. A very interesting report by the Ellen McArthur Foundation mentions that “a circular economy offers a tangible pathway towards a low-carbon and prosperous recovery.”[1]

You are encouraged to read this report using the link provided, so you better understand how the CE model paves the way to a low-carbon and prosperous future, even in difficult times of pandemics or natural disasters:

https://www.ellenmacarthurfoundation.org/assets/downloads/The-circular-economy-a-transformative-Covid19-recovery-strategy.pdf

Circular Economy & the EU

Source: www.canva.com

It is very encouraging that the EU is placing CE really high on its future agenda. As mentioned in the introduction of this module, the European Commission has set the transition of the EU economy to a more circular and sustainable one, very high on its priorities. The transition can help Member States realise the EU Recovery plans. Once this strategic goal is achieved (which we should mention, will take years), the EU can promote a more resilient and strategically autonomous image; the ultimate goal is to help innovative business models to conquer the EU market, by using digital technologies which can enhance the efficient management of resources, secondary raw materials etc. Moreover, the Commission is aiming in improving the current environmental infrastructure, with a keen eye on waste and water management, reducing pollution, protecting the health and well-being of EU citizens from various risks and negative impacts.[2]

In this strategic orientation towards sustainability, the European Commission has very recently approved and adopted the Circular Economy Action Plan. The Plan is part of the European Green Deal, and an important element of EU agenda for sustainable growth. A number of initiatives are announced that encompass the entire life cycle of products, from their development and design to adopting CE processes, promoting sustainable consumption etc. The most crucial initiative, however, is that resources are kept in the EU economy for as long as possible, this is why a number of legislative (but also non-legislative measures) are being brought forward with an ultimate aim: create real growth and value opportunities in the EU economy.[3]

The Circular Economy Action Plan includes the following key measures:

• Establish sustainable products in the EU market
• Strengthen EU consumer and public buyers
• Focus and promote sectors with a high circularity, i.e., ICT, mobility, packaging, waste management and plastics, textiles and more
• Apply effective waste management policies, to ensure less waste
• Promote circularity in way that works for people, regions and cities
• Lead and participate in global efforts in circular economy

*Adopted by the official EU site about CE

Per the official EU announcements, on 10 November 2020, the Commission adopted the first Action Plan’s milestone: a proposal for a Regulation to modernise EU legislation on batteries. According to the announcement, “the aim is that batteries placed on the EU market are sustainable, circular, high-performing and safe all along their entire life cycle, that they are collected, repurposed and recycled, becoming a true source of valuable raw materials”.

In this link (https://circulareconomy.europa.eu/platform/)  you can access the European Circular Economy Platform: a shared space where you can browse all the latest information on the Circular Economy, join the active EU dialogue happening on this area, browse best practices, and access to insights on how you can transform your business model into a pure circular one!

Source: https://www.cec4europe.eu/european-circular-economy-stakeholder-platform/?cn-reloaded=1

[1] https://www.ellenmacarthurfoundation.org/assets/downloads/The-circular-economy-a-transformative-Covid19-recovery-strategy.pdf

[2] https://eur-lex.europa.eu/legal-content/en/TXT/?qid=1600708827568&uri=CELEX:52020DC0575

[3] https://ec.europa.eu/environment/circular-economy/