We find ourselves at a pivotal moment in history. Our world has reached unprecedented levels of wealth, with humans enjoying longer, healthier lives than ever before. Yet, looming over this progress is the shadow of potential disaster.
The industries and economies driving our prosperity have taken a heavy toll on the planet. Our actions threaten the existence of countless species, vital for maintaining the delicate balance of life on Earth. Global warming could make densely populated areas uninhabitable, disrupting food production.
In this context, the circular economy emerges as a beacon of hope to reroute our current course, offering a pragmatic and innovative approach to addressing pressing environmental concerns while simultaneously fostering economic growth, in a way that enables us to thrive in harmony with the natural world.
Understanding the Circular Economy
At its core, the circular economy proposes a departure from the traditional linear “take, make, use, and dispose” model. Instead, it introduces a closed-loop system where products and materials stay in circulation through sharing, maintenance, reusing, refurbishing, remanufacturing, and recycling. The ultimate goal? To minimize waste, reduce pollution, and regenerate nature.
3 main principles lie at the core of the circular economy:
- Eliminate waste and pollution
- Keep products and materials circulating at their highest value
- Regenerate nature
To better understand the circular economy, the Ellen Macarthur Foundation – a charity founded to accelerate the transition to the circular economy – developed the Butterfly Diagram (see below), offering a visual explanation through the continuous flows of materials in this disruptive system.
In the technical cycle (right side of the diagram), products, components, and materials are systematically maintained in circulation within the economy, and their utility over an extended period. These cycles are usually for products made from non-biodegradable materials such as metals and plastics. However, it’s important to note that recycling, while often seen as a solution, is the least preferable form of circularity within the technical cycle because it requires energy and usually emits greenhouse gases.
On the left side of the butterfly diagram is the biological cycle, which is for materials that can biodegrade and safely return nutrients to the soil while regenerating nature, such as food, wood, and cotton. These materials can naturally decompose and, remarkably, generate additional value when redirected through diverse applications in various value streams.
Significance of Circular Economy
We have so far explained the principles of the circular economy but, you’re probably now asking “Why?”. Why are we so excited about this solution? Why should businesses transform? Why should we care?
The answer lies in the circular economy’s potential to generate an immense positive impact on the Environment, Economy, and Business. The model is unique because the environmental benefits created by circular economy principles, directly and indirectly, generate financial gains for businesses and global macroeconomic benefits, demonstrating that we can continue to foster growth while achieving global climate targets.
Environmental Impact
The circular economy has the potential to:
- Halve CO2 emissions by 2030 in Europe
- Reduce material consumption across primary industries by 32%
- Significantly reduce land degradation, which currently costs the global economy $40 billion per year
Economic Impact
The focus on resource efficiency and waste reduction of the circular economy presents incredible opportunities for economic growth driven by material cost savings and new business opportunities.
- The Circular Economy has been valued conservatively at $4.5 trillion.
- In the EU it has been estimated that the Circular Economy could result in material cost savings of $1.3 trillion for fast-moving consumer goods (e.g. Household Cleaning products) and more complex medium-lived goods (mobile phones and washing machines).
- The European Parliament has reported that the circular economy will create 700,000 new jobs by 2030
Business Impact
The circular economy also presents a significant business opportunity for increased profits through improved resource efficiency and new market opportunities. Transforming operations in line with circularity would also ensure businesses are less exposed to the volatile risks presented by climate change. These benefits will be demonstrated below using real examples of businesses that have already shifted.
It is also important to take a balanced viewpoint of the circular economy. While opportunities across the three dimensions above are desirable, we need to be realistic in considering the magnitude of the challenge in transitioning to the circular economy. Large investments in infrastructure must occur rapidly to facilitate the transition to a circular economy, this has the potential to encourage the exploitation of labor. Therefore, stringent regulation is required to ensure a safe and just transition.
Case studies
Rheaply – Technical cycle
We’re all aware of C2C sharing platforms such as Wallapop or Vinted but have you ever considered B2B solutions?
Well, CEO and Co-founder, Gary Cooper did when he saw an opportunity to develop software that enables the redistribution of industry and office equipment such as chairs, lamps, and filing cabinets. Rheaply’s software helps businesses track and manage inventory by condition and location or list items for sale when they are no longer needed.
These services extend product life cycles, diverting them from going to landfills while saving businesses thousands of dollars.
Rheaply is closing the resource loop by encouraging the reuse of material. Therefore their operations can be mapped within the technical cycle of the butterfly diagram. They are a great example of a business using circular economy principles to create long-lasting environmental impact while simultaneously innovating their business model to access untapped markets and revenue streams.
In 2023, Rheaply captured $2.4 million in savings for organizations using the platform while saving 222 tons of material from becoming waste in landfills.
Familia Torres – Biological cycle
At a more local level, Familia Torres is an example of a business operating within the biological cycle of the butterfly diagram. Familia Torres is a well-known, family-owned, Catalan vineyard. They have been producing quality wines since 1870, building a strong heritage. However, this legacy is under threat as climate change forces Familia Torres to adapt its business. Poor soil conditions as a result of increasing temperatures and reduced rainfall have started to affect operations and revenues. For Familia Torres, principles of the circular economy are necessary to survive but also present significant value for the business in the long term.
At the very heart of the biological cycle of the circular economy is the concept of regeneration. Traditional viticulture practices discourage the growth of other crops besides the vines themselves. However, Familia Torres is now proactively doing so to allow for improved biodiversity and soil fertility. These regenerative farming techniques create carbon sinks which naturally sequester carbon. Without getting too technical, this means Familia Torres can reduce carbon emissions and restore their land to previous conditions.
Familia Torres is protecting their operations from the risk of land degradation, allowing for continued production while also creating a new market for regenerative wines. They have been performing well in capturing consumer demand for organic wines and this now presents an entirely new opportunity for their business as consumer awareness of the importance of regenerative agriculture increases.
Conclusion
Our current economic system requires a radical transformation if we ought to reduce emissions by 1.5°C above pre-industrial levels by the end of this decade. Otherwise, we risk facing extreme weather systems such as large flooding, forest fires, and droughts, impacting both communities and wildlife.
The adoption of a full-scale circular economy has the potential to save us from this catastrophe, not only creating immense wealth but also healing the planet, paving the way for a more prosperous and equitable future for all.
The change starts with you. If something of this article resonated with you, consider integrating these practices into your life and start your journey towards embracing the Circular Economy:
- Ditch single-use plastics: opt for products that align with circular principles, such as reusable bags, water bottles, straws, cups, and any sort of reusable package
- Prioritize Second-Hand Purchases: explore thrift stores and online platforms for second-hand products (e.g.Humana, Vinted, Wallapop) extending the useful life of products
- Support Sustainable Brands: chose companies committed to circular economy practices, purchase fresh produce from local farmers and artisans to minimize transportation-related carbon emissions
- Educate and spread awareness: tell your friends and family about the benefits of the circular economy you learned in this article!
Together, through conscious choices, local support, and education, we can accelerate the circular economy revolution for the benefit of our planet and future generations.
