What is a Circular Economy?

At the moment the planet is running out of resources to feed its inhabitants, and within the next 20 years the world’s population will increase by 24% to a staggering 9.2 billion. How can the circular economy help to overcome this challenge?

The Earth is already not able to provide us with enough energy, materials, water and food. Scientific research shows that we have crossed our planetary boundaries and have crossed the red line. Now, the Earth can provide resources – in a sustainable manner – for the first 9 months of the population’s annual demand. Natural resources for the remaining 3 months are used up and ecological deficits are created rapidly.

Differences between a linear and a circular economy

The Earth is a ‘closed system’. It means that all materials (in their smallest form) cycle between atmosphere, soil, water and ecosystems. So what does this mean for our economic design?

First, let’s make the term ‘economy’ more tangible and understand what it means. Economy is defined as ‘the production and consumption of goods and services’. So it means that when we talk about a linear economy, we mean the linear production and consumption of goods or services. It covers the extraction, production, usage and disposal of materials and energy. It is a one-way flow of materials and energy that ends, with ‘zero’ value, as waste back into soil (waste dump) or air (waste burn).

A circular economy, in other words: the circular production and consumption of goods and services, is fundamentally different. Here, materials and energy remain available in the product life cycle and are re-used and recycled. Contrary to the linear economy, the circular system uses recycled materials to produce goods. The production and supply of goods is designed to minimize waste and, after consumption, to bring the materials back to manufactures to be reused.


Key elements of circular economy explained

The general idea behind circular economy is to redesign the production and consumption of products so that sustainable materials are used, waste is minimized and end-of-life products are brought back into the economic cycle.

The key element for sustainable production are the materials used. These materials come from a sustainable source and are reusable and recyclable. The materials are produced with high energy efficiency and with minimal waste or residual resources. The materials move through a closed product life cycle back and forth. And the energy to produce and recycle materials is highly efficient and comes from sustainable sources.

Another key element is turning waste into value. Waste is designed out of the production and consumption cycle.

There is simply no waste, or at least it is kept to the very minimum.

Material and production residuals are used as a resource for something else and their value is kept, and end-of-life goods are disassembled and recycled.

Apart from materials and waste, the product design is also important, i.e. design that enables long-term use of materials and preserves high quality of materials after repeated recycling. Products are designed so that they are modular, versatile and adaptive. Additionally, the product lifetime is maximized by maintenance, repair and upgrade schemes.


Most important concepts related to Circular Economy

9R model defines the hierarchical levels between the linear and circular economy. The lowest level is ‘recovery’ and describes the linear economy. Here, waste is burned and energy and heat is recovered from it. The highest level is ‘refuse’ and describes the circular economy. The products become redundant or are replaced by a completely different product.

9r model, circular economy

9R Model

Recycle means re-use of disposed materials and converting them into a new material or product. Water and energy is often used to convert the material into something new. The recycled material can keep the same value, or can be turned into a lower value material (downcycle) or into a higher value material (upcycle).

Downcycle is converting high-value materials into low-value materials. For example quality writing paper or copy paper is recycled into lower value cardboard paper.

Upcycle is converting disposed material into something new with higher value. There are two kinds of up-cycling: material and functional. The former is about converting raw material into a new material of higher value, e.g. converting low-value plastic into high-value plastic. This kind of upcycling is challenging because the costs of upcycling a material often exceed the value of the upcycled material. The latter is about using and combining disposed materials in a new functional product, e.g. converting a plastic bottle into planters or smart phone holders. See this link for more examples.

Closed loop describes the production and consumption process whereby the disposed product returns to the manufacturer. These days we see a lot of so called ‘single product’ loops. Here, for example, a printer cartridge returns to the original manufacturer who uses it to create a new printer cartridge. As people have thousands of products, it is not economical to bring every single product back to its original manufacturer. Instead, the ‘single product’ recycle loops need to be combined and form a ‘network of closed loops’. It creates an ecosystem that brings disposed resources back to manufacturer who can use it. Kate Raworth describes this as an “interrelated network of industries where waste can be picked up by any industry and be used in different ways”.

In this ‘closed loop as ecosystem’, industries collaborate and reduce material costs. Materials come back via the ecosystem and can be used over-and-over again.

Reversed logistics describes the concept of bringing end-of-life goods from the ‘point of consumption’ to the ‘point of recycle, reuse or refurbish’. This involves the collection, transportation, disassembly and sorting of goods. To get the business model underlying reversed logistic right, the production and delivery process often has to be redesigned. Reversed logistics comes with challenges regarding regulations, quality shortcomings, high variety and varying volumes. However, costs are the biggest challenge here. Collected goods should have a higher value after recovery than the costs incurred on recovering them. At the moment volumes are low. Therefore, the cost-price-per-unit is high. See this link for more information about the reverse logistics maturity model

Grade2gradle is one of the most famous frameworks to put circular production and consumption into practice. This certification program assesses company’s production process whether or not materials repeatedly circulate through the product life cycle and keep high quality. A product receives a score (basic, bronze, silver, gold, platinum) in five categories: material health, material reutilization, renewable energy, water stewardship and social fairness. Since 2005 the program has certified more than 400 products, mainly construction materials, packaging and textiles. See this link for more details about the certification program.

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