A circular economy is an alternative to a traditional linear economy (make, use, dispose) in which the economy keeps resources in use for as long as possible, extract their maximum value while using, then regenerate materials and products at the end of their service lives. This system aims to reduce waste to a minimum and extend the life cycle of products through the continual use of resources. Consequently, it minimises resource inputs and the creation of pollution and greenhouse gas emissions.
The linear industrial process (make, use, dispose) and the lifestyles dependent on them use up finite resources to create products with a finite lifespan that end up in landfills or incinerators. Switching to a circular economy is important since the world’s population is growing and with it the demand for raw materials, while the supply of raw materials is limited. Furthermore, extracting and using raw materials has a major impact on the environment, increasing energy consumption and carbon emissions.
Circular economy delivers benefits such as driving greater resource productivity, improving resource security, increasing competitiveness of an economy, stimulating innovation, creating jobs, boosting economic growth and helping reduce the environmental impacts of production and consumption. Consumers will also be provided with more durable products that could save them money in the long term.
Circular business models are business models that are closing, narrowing, slowing, and dematerialising loops to minimise resource inputs into the system. This is done by recycling (closing), efficiency improvements (narrowing), using phase extensions (slowing), and substituting products by service and software solutions (dematerialising).
An example of a circular business model is the implementation of renting models in traditional ownership areas such as electronics, transportation, and clothes. By renting the same product to several clients, firms can increase revenues per unit, which reduces the need to produce more to increase revenue. An Australian company called Close the Loop turns old printer cartridges and soft plastics into roads. Their road surface products are a mixture of asphalt and recycled glass and last up to 65 per cent longer than traditional asphalt. In every kilometre of road laid, 530,000 plastic bags, 168,000 glass bottles and the waste toner from 12,500 printer cartridges are used in the mix. Instead of ending up in landfill, all that waste is given a new life. An American company, Cambrian Innovation, uses EcoVolt technology to treat wastewater contaminated by industrial processes and turn it into clean water, as well as producing biogas that can be used to generate clean energy. The company has already treated an estimated 300 million litres of wastewater across the U.S. Not only that, a number of industries including textile, construction, automotive, agriculture, furniture, oil and gas industry are adopting a circular economy.
Digital technologies such as the Internet of Things, Big Data, Artificial Intelligence, and Blockchain are seen as a key to upscale the circular economy by improving sustainable resource management.
Intuitively, the circular economy appears to be more sustainable than the current linear economic system. However, it is argued by some that there are simplistic assumptions involved in it; they disregard the complexity of existing systems and their potential trade-offs. For instance, there are cases that require different strategies like purchasing new, more energy-efficient equipment. Allwood (2014) questioned the desirability of the circular economy in a reality with growing demand, and if circular economy activities (reuse, repair, remake) actually reduce, or instead displace, primary production.
While the potential and environmental performance of circular economy remain largely unexplored yet, it is undeniable that circular economy provides a new paradigm for viewing the world and planning for a sustainable future.