Disruptive changes in the organization of our society and enterprises are required for sustainable growth. The circular economy (CE) concept provides a new opportunity for innovation and integration among natural ecosystems, companies, our everyday lives, and waste management.

 Definition Of Circular Economy

Raw natural resources are collected, turned into goods, and then discarded in the linear economy. A circular economy model, on the other hand, tries to bridge the gap between production and the natural ecosystems’ cycles, which people ultimately rely on.

On the one hand, this involves reducing waste by composting biodegradable trash or reusing, remanufacturing, and lastly recycling transformed and non-biodegradable garbage. On the other hand, it also entails eliminating the usage of chemical chemicals (as a means of aiding natural system regeneration) and relying on renewable energy.

The World Economic Forum’s Definition Of Circular Economy

“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. ”

Ellen McArthur Foundation’s Definition Of Circular Economy

“Looking beyond the current take-make-dispose extractive industrial model, a circular economy aims to redefine growth, focusing on positive society-wide benefits. It entails gradually decoupling economic activity from the consumption of finite resources and designing waste out of the system. Underpinned by a transition to renewable energy sources, the circular model builds economic, natural, and social capital. It is based on three principles: design out waste and pollution; keep products and materials in use; regenerate natural systems.”

The Principles Of The Circular Economy: Energy and Resources Are Gold

The goal of a circular economy model is to eliminate waste at its heart. A circular economy, in fact, is built on the premise that there is no such thing as waste. To do this, items are built to last (using high-quality materials) and tailored for a cycle of disassembly and reuse that makes them easier to handle, change, or renew.

Finally, these short product cycles distinguish the circular economy model from dumping and recycling, which waste enormous quantities of energy and labor. Controlling limited stocks and managing renewable resource flows are the ultimate goals for preserving and enhancing natural capital.

The Principles Of The Circular Economy: Following Nature’s Cycles And Designs

Technical and biological cycles are distinguished in the circular economy paradigm. Consumption occurs exclusively in biological cycles, in which biologically-based resources (such as food, linen, or cork) are meant to feedback into the system via anaerobic digestion and composting.

These cycles restore biological systems, such as soil and seas, which provide the economy with renewable resources. Technical cycles, in turn, employ tactics including reuse, repair, remanufacture, and recycling to recover and rehabilitate items (e.g. washing machines), components (e.g. motherboards), and materials (e.g. limestone).

At the end of the day, one of the goals of the circular economy is to maximize resource yields by circulating products, components, and materials that are in use at the maximum usefulness at all times in both technological and biological cycles.

The Principles Of The Circular Economy: All In With Renewable Energies

The last circular economy concept is that the energy necessary to fuel this cycle should be renewable by nature, with the goal of reducing resource dependency and boosting system resilience. In this view, this concept is about improving system effectiveness by identifying and eliminating negative externalities.

Benefits Of The Circular Economy Model

Since the industrial revolution, mankind has followed a linear paradigm of production and consumption. Raw resources have been changed into things, which are then sold, utilized, and turned into garbage, which is often thrown and managed unintentionally.

On the contrary, the circular economy is an industrial model that is regenerative by intention and design, with the goal of improving resource performance and combating the unpredictability that climate change may bring to enterprises. It provides operational as well as strategic benefits and brings together a large potential for value creation in the economic, corporate, environmental, and social realms.

Environmental Benefits Of The Circular Economy

Fewer Greenhouse Gas Emissions 

One of the objectives of the circular economy is to have a beneficial impact on the planet’s ecosystems and to combat excessive resource extraction. The circular economy has the ability to minimize greenhouse gas emissions and raw material consumption, improve agricultural production, and eliminate negative externalities caused by the linear model. A circular economy can assist to reduce greenhouse gas emissions:

• Because it utilizes renewable energy, which is less harmful in the long term than fossil fuels.
• Fewer resources and industrial methods are required to generate good and functioning items as a result of recycling and dematerializing.
• Because leftovers are seen as valuable, they are absorbed to the greatest extent feasible in order to be reused in the process.
• Because the desired materials and production and recycling methods will be energy-efficient and non-toxic.

According to an Ellen MacArthur Foundation research, a circular economy development route might cut carbon dioxide emissions in half by 2030 compared to 2018 levels.

Healthy And Resilient Soils

The circular economy principles of the farming system guarantee that critical nutrients are returned to the soil via anaerobic processes or composting, softening the exploitation of land and natural habitats. As “waste” is returned to the soil in this manner, the soil becomes healthier and more robust, allowing for greater balance in the ecosystems that surround it.

Furthermore, because soil deterioration costs an estimated US$40 billion per year globally, with hidden costs such as increased fertilizer consumption, loss of biodiversity, and loss of distinctive landscapes – a circular economy might be extremely beneficial to both the soils and the economy.

According to research conducted by the Ellen MacArthur Foundation, a circular economy model implemented in Europe’s food systems has the potential to reduce artificial fertilizer consumption by 80%, therefore contributing to the natural balance of soils.

Fewer Negative Externalities

Negative externalities such as land usage, soil, water, and air pollution, as well as hazardous material emissions and climate change, are better handled when the circular economy’s principles are followed.

 

Economic Benefits Of The Circular Economy

Increased Potential For Economic Growth

It is critical to separate economic growth from resource usage. According to a McKinsey analysis, the rise in income from new circular activities, along with cheaper production by making items and materials more useful and readily dismantled and reused, has the potential to raise GDP and hence economic development.

More Resources Saved

Especially compared to the linear strategy’s raw material extraction, the circular economy model has the potential to save more material (up to 70%) than the linear approach. Given that total demand for materials is expected to rise as the world’s population and middle classes develop, a circular economy reduces material consumption by avoiding landfills and recycling and focusing on making materials’ cycles last longer. On the environmental front, it also avoids the increased pollution that would result from the extraction of new resources.

Employment Growth

According to the ‘World Economic Forum,’ the creation of a circular economy model, along with new legislation (including taxes) and labor market structure, can lead to increased local employment in entry-level and semi-skilled jobs.

In addition, the ExTax tax analysis, which was developed by experts from many major consulting organizations, determined that the circular economy had the potential to create new jobs. An August 2018 research on the creation of techniques to implement a circular economy came to the same result, estimating that 50,000 new employment may be created in the UK and 54,000 in the Netherlands.

Another research conducted by the Ellen MacArthur Foundation and McKinsey showed that a transition to a circular economy model would result in changes in job growth. According to the analysis, this additional employment will be produced as a result of increases in:

• Recycling and repairing practices, where new designers and mechanical engineers could be added to create long-lasting and easily disassembled products and materials during the transformation/production stages;
• an increase in new businesses (and niches) due to innovation processes and new business models;
• an increase in consumption and spending due to lower prices.

Barriers To The Implementation Of A Circular Economy Model

As pointed out previously, implementing a circular economic model would have various advantages for the environment, economy, and enterprises. However, there are various explanations for why this model has grown slowly.

Economic Barriers To A Circular Economy Model

There are various obstacles to implementing a circular economy model in our existing economic structure, such as:

• Prices do not account for social and environmental externalities, favoring financial market signals above people and nature when economic decisions are made.
• Raw material costs fluctuate, and at low prices, excellent grade secondary resources are uncompetitive.
•  the circular economy is a type of economy that recycles materials. Business models are more difficult to build since most investors still operate on a linear economy logic, and upfront investments are sometimes necessary;
• The demand for circular products and alternatives is still small,
• There aren’t many qualified professionals with expertise in ‘information and communication technology (ICT).

Institutional Barriers To A Circular Economy Model

Many various challenges may need to be overcome when it comes to establishing and strengthening the circular economy, such as:

• The fact that our existing economic structure is geared toward the demand of the linear economy and is not yet equipped to deal with entrepreneurs in the circular economy;
• New business models may be hard to implement and develop due to rules and regulations that are not equipped for such innovations.
• Numerous firms rely on old and/or strong connections, making it difficult to form new alliances and therefore complete loops.
• Many industries still have goals and evaluation systems that are based on short-term value generation, but the circular economy model is based on long-term value creation.
• The GDP index overlooks social and environmental externalities, which discourages value development in both of these sectors.

A Broad Perspective On The Barriers To A Circular Economy Model

According to a Swedish research undertaken in 2017 to incorporate many viewpoints on this issue, the primary impediments to shifting towards the circular economy model may be classified as financial, structural, operational, attitudinal, and technical.

The first obstacle is the difficulty in quantifying the financial benefits of CE and its profitability. The ‘structural’ obstacle that follows stems from a lack of clarity about who is accountable for CE inside firms. ‘Operational’ issues, in turn, indicate the difficulty of dealing with and maintaining control of processes inside the value chain. The fourth obstacle, ‘attitudinal,’ has generally revealed a lack of understanding about sustainability concerns as well as a strong fear of risk – it demonstrates that disruptive changes aren’t the ideal method to establish circular solutions.

The final barrier to a circular economy is technological in nature, and it has to do with the necessity to change and redesign items and production/take-back processes. These requirements raise questions about the capacity to meet these requirements while remaining competitive and producing high-quality products.

References: various articles from around the world, Ellen McArthur Foundation.