Circular economy

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The circular economy is a generic term for an industrial economy that is producing no waste and pollution, by design or intention, and in which material flows are of two types, biological nutrients, designed to reenter the biosphere safely, and technical nutrients, which are designed to circulate at high quality in the production system without entering the biosphere.


The term encompasses more than the production and consumption of goods and services, including a shift from fossil fuels to the use of renewable energy, and the role of diversity as a characteristic of resilient and productive systems. It includes discussion of the role of money and finance as part of the wider debate, and some of its pioneers have called for a revamp of economic performance measurement tools.[1]


"The concept of a circular economy (CE) has been first raised by two British environmental economists Pearce and Turner (1990). In Economics of Natural Resources and the Environment, they pointed out that a traditional open-ended economy was developed with no built-in tendency to recycle, which was reflected by treating the environment as a waste reservoir".[2] The circular economy is grounded in the study of feedback-rich (non-linear) systems, particularly living systems.[3] A major outcome of this is the notion of optimising systems rather than components, or the notion of ‘design for fit’. As a generic notion it draws from a number of more specific approaches including cradle to cradle, biomimicry, industrial ecology, and the ‘blue economy’. Most frequently described as a framework for thinking, its supporters claim it is a coherent model that has value as part of a response to the end of the era of cheap oil and materials.

Moving away from the linear model[edit]

Linear "Take, Make, Dispose" industrial processes and the lifestyles that feed on them deplete finite reserves to create products that end up in landfills or in incinerators.

This realisation triggered the thought process of a few scientists and thinkers, including Walter R. Stahel, an architect, economist, and a founding father of industrial sustainability. Credited with having coined the expression "Cradle to Cradle" (in contrast with "Cradle to Grave", illustrating our "Resource to Waste" way of functioning), in the late 1970s, Stahel worked on developing a "closed loop" approach to production processes, co-founding the Product-Life Institute in Geneva more than 25 years ago. In the UK, Steve D. Parker researched waste as a resource in the UK agricultural sector in 1982, developing novel closed loop production systems mimicking, and integrated with, the symbiotic biological ecosystems they exploited.

Emergence of the idea[edit]

In their 1976 Hannah Reekman research report to the European Commission, "The Potential for Substituting Manpower for Energy", Walter Stahel and Genevieve Reday sketched the vision of an economy in loops (or circular economy) and its impact on job creation, economic competitiveness, resource savings, and waste prevention. The report was published in 1982 as the book Jobs for Tomorrow: The Potential for Substituting Manpower for Energy.[4]

Considered as one of the first pragmatic and credible sustainability think tanks, the main goals of Stahel's institute are product-life extension, long-life goods, reconditioning activities, and waste prevention. It also insists on the importance of selling services rather than products, an idea referred to as the "functional service economy" and sometimes put under the wider notion of "performance economy" which also advocates "more localisation of economic activity".[5]

In broader terms, the circular approach is a framework that takes insights from living systems. It considers that our systems should work like organisms, processing nutrients that can be fed back into the cycle—whether biological or technical—hence the "closed loop" or "regenerative" terms usually associated with it.

The generic Circular Economy label can be applied to, and claimed by, several different schools of thought, that all gravitate around the same basic principles which they have refined in different ways. The idea itself, which is centred on taking insights from living systems, is hardly a new one and hence cannot be traced back to one precise date or author, yet its practical applications to modern economic systems and industrial processes have gained momentum since the late 1970s, giving birth to four prominent movements, detailed below. The idea of circular material flows as a model for the economy was presented in 1966 by Kenneth E. Boulding in his paper, The Economics of the Coming Spaceship Earth.[6] Promoting a circular economy was identified as national policy in China’s 11th five-year plan starting in 2006.[7] The Ellen MacArthur Foundation, an independent charity established in 2010, has more recently outlined the economic opportunity of a circular economy. As part of its educational mission, the Foundation has worked to bring together complementary schools of thought and create a coherent framework, thus giving the concept a wide exposure and appeal.[8]

Founding principles[edit]

Waste is food[edit]

Waste does not exist… the biological and technical components (nutrients) of a product are designed by intention to fit within a materials cycle, designed for disassembly and re-purposing. The biological nutrients are non-toxic and can be simply composted. Technical nutrients – polymers, alloys and other man-made materials are designed to be used again with minimal energy.

Diversity is strength[edit]

Modularity, versatility and adaptiveness are to be prioritised in an uncertain and fast evolving world. In working toward the circular economy, we should focus on longer-lasting products, developed for upgrade, ageing and repair by considering strategies like emotionally durable design. Diverse products, materials and systems, with many connections and scales are more resilient in the face of external shocks, than systems built simply for efficiency.

Energy must come from renewable sources[edit]

As in life, any system should ultimately aim to run on ‘current sunshine’ and generate energy through renewable sources.

Systems thinking[edit]

The ability to understand how things influence one another within a whole. Elements are considered as ‘fitting in’ their infrastructure, environment and social context. Whilst a machine is also a system, systems thinking usually refers to non linear systems: systems where through feedback and imprecise starting conditions the outcome is not necessarily proportional to the input and where evolution of the system is possible : the system can display emergent properties. Examples of these systems are all living systems and any open system such as meteorological systems or ocean currents, even the orbits of the planets have non linear characteristics.

Understanding a system is crucial when trying to decide and plan (corrections) in a system. Missing or misinterpreting the trends, flows, functions of, and human influences on, our socio-ecological systems could result in disastrous results. In order to prevent errors in planning or design an understanding of the system should be applied to the whole and to the details of the plan or design. The Natural Step created a set of systems conditions (or sustainability principles) that can be applied when designing for (parts of) a circular economy to ensure alignment with functions of the socio-ecological system.

The concept of the circular economy has previously been expressed as the circulation of money verses goods, services, access rights, valuable documents etc., as in our system of macroeconomics. This situation has been illustrated in the many diagrams for money and goods circulation associated with our social system. As a system, various agencies or entities are connected by paths through which the various goods etc., pass in exchange for money. However this situation is different from the circular economy described above, where the flow is in only one direction, that is until the recycled goods again are spread over the world. m

The circular economy framework[edit]

The circular economy is a framework that draws upon and encompasses principles from:[9]


Main article: Biomimicry

Janine Benyus, author of "Biomimicry: Innovation Inspired by Nature", defines her approach as "a new discipline that studies nature's best ideas and then imitates these designs and processes to solve human problems. Studying a leaf to invent a better solar cell is an example. I think of it as "innovation inspired by nature.[10] Biomimicry relies on three key principles:

  • Nature as model: Biomimicry studies nature’s models and emulates these forms, processes, systems, and strategies to solve human problems.
  • Nature as measure: Biomimicry uses an ecological standard to judge the sustainability of our innovations.
  • Nature as mentor: Biomimicry is a way of viewing and valuing nature. It introduces an era based not on what we can extract from the natural world, but what we can learn from it.

Industrial ecology[edit]

Main article: Industrial Ecology

Industrial Ecology is the study of material and energy flows through industrial systems. Focusing on connections between operators within the "industrial ecosystem", this approach aims at creating closed loop processes in which waste is seen as input, thus eliminating the notion of undesirable by-product. Industrial ecology adopts a systemic - or holistic - point of view, designing production processes according to local ecological constraints whilst looking at their global impact from the outset, and attempting to shape them so they perform as close to living systems as possible. This framework is sometimes referred to as the "science of sustainability", given its interdisciplinary nature, and its principles can also be applied in the services sector. With an emphasis on natural capital restoration, Industrial Ecology also focuses on social wellbeing.[11]

Cradle to cradle[edit]

Created by Walter R. Stahel, a Swiss architect, who graduated from the Swiss Federal Institute of Technology Zürich in 1971. He has been influential in developing the field of sustainability, by advocating 'service-life extension of goods - reuse, repair, remanufacture, upgrade technologically' philosophies as they apply to industrialised economies. He co-founded the Product Life Institute in Geneva, Switzerland, a consultancy devoted to developing sustainable strategies and policies, after receiving recognition for his prize winning paper 'The Product Life Factor' in 1982. His ideas and those of similar theorists led to what is now known as the circular economy in which industry adopts the reuse and service-life extension of goods as a strategy of waste prevention, regional job creation and resource efficiency in order to decouple wealth from resource consumption, that is to dematerialise the industrial economy.

Blue economy[edit]

Main article: The Blue Economy

Initiated by former Ecover CEO and Belgian businessman Gunter Pauli, the Blue Economy is an open-source movement bringing together concrete case studies, initially compiled in an eponymous report handed over to the Club of Rome. As the official manifesto states, "using the resources available in cascading systems, (...) the waste of one product becomes the input to create a new cash flow".[12] Based on 21 founding principles, the Blue Economy insists on solutions being determined by their local environment and physical / ecological characteristics, putting the emphasis on gravity as the primary source of energy - a point that differentiates this school of thought from the others within the Circular Economy.[13] The report - which doubles as the movement’s manifesto - describes "100 innovations which can create 100 million jobs within the next 10 years", and provides many example of winning South-South collaborative projects, another original feature of this approach intent on promoting its hands-on focus.

Towards the circular economy[edit]

In January 2012, a report was released entitled Towards the Circular Economy: Economic and business rationale for an accelerated transition. The report, commissioned by the Ellen MacArthur Foundation and developed by McKinsey & Company, was the first of its kind to consider the economic and business opportunity for the transition to a restorative, circular model. Using product case studies and economy-wide analysis, the report details the potential for significant benefits across the EU. It argues that a subset of the EU manufacturing sector could realise net materials cost savings worth up to $630 billion p.a. towards 2025—stimulating economic activity in the areas of product development, remanufacturing and refurbishment. Towards the Circular Economy also identified the key building blocks in making the transition to a circular economy, namely in skills in circular design and production, new business models, skills in building cascades and reverse cycles, and cross-cycle/cross-sector collaboration.[14]

Impact in Europe[edit]

On 17 December 2012, the European Commission published a document entitled Manifesto for a Resource Efficient Europe. This manifesto clearly stated that "In a world with growing pressures on resources and the environment, the EU has no choice but to go for the transition to a resource-efficient and ultimately regenerative circular economy."[15] Furthermore, the document highlighted the importance of "a systemic change in the use and recovery of resources in the economy" in ensuring future jobs and competitiveness, and outlined potential pathways to a circular economy, in innovation and investment, regulation, tackling harmful subsidies, increasing opportunities for new business models, and setting clear targets.

The European environmental research and innovation policy aims at supporting the transition to a circular economy in Europe, defining and driving the implementation of a transformative agenda to green the economy and the society as a whole, to achieve a truly sustainable development. Research and innovation in Europe are financially supported by the programme Horizon 2020, which is also open to participation worldwide.[16]

The European Commission will be tabling a Circular Economy proposal towards the end of 2015. To this day,[when?] the policy debate in Brussels has mainly focused on waste management which is the second half of the cycle, and very little is said about the first half: eco-design. To draw the attention of policymakers and other stakeholders to this loophole, the Ecothis.EU campaign was launched raising awareness about the economic and environmental consequences of not including eco-design as part of the circular economy package.[17]


In March 2014 the first large scale event for the circular economy was held with over 11,000 attendees from across the globe and all the major stakeholders in attendance. The launch of such an event signals the rise of the topic and it will act as an enabler for business to transition towards more circular business models. This annual large scale event is now growing to represent the uptake of circular economy principles. (see

See also[edit]


  1. 8 Consequential Macroeconomics--Rationalizing About How Our Social System Works D.H.Chester. Published by Lambert Academic Publishing 2015
  1. ^ Walter Stahel, "How to Measure it", The Performance Economy second edition - Palgrave MacMillan, page 84
  2. ^ "A review of the circular economy in China: moving from rhetoric to implementation". Journal of Cleaner Production. 2012. Retrieved 12 February 2016. 
  3. ^ Towards the Circular Economy: an economic and business rationale for an accelerated transition. Ellen MacArthur Foundation. 2012. p. 24. 
  4. ^ "Cradle to Cradle | The Product-Life Institute". 2012-11-14. Retrieved 2013-11-20. 
  5. ^ Clift & Allwood, "Rethinking the economy", The Chemical Engineer, March 2011
  6. ^ "The Economics of the Coming Spaceship Earth". Retrieved 25 April 2013. 
  7. ^ Zhijun F, Nailing, Y (2007) "Putting a circular economy into practice in China" Sustain Sci 2:95–101
  8. ^ "The Ellen MacArthur Foundation website". Retrieved 23 January 2013. 
  9. ^ Towards the Circular Economy: an economic and business rationale for an accelerated transition. Ellen MacArthur Foundation. 2012. 
  10. ^ "What is Biomimicry?". Biomimicry Institute. Retrieved 2013-11-20. 
  11. ^ "International Society for Industrial Ecology - Home". Retrieved 2013-11-20. 
  12. ^ "Blue Economy : Green Economy 2.0". Retrieved 2013-11-20. 
  13. ^ [1][dead link]
  14. ^ Towards the Circular Economy: an economic and business rationale for an accelerated transition. Ellen MacArthur Foundation. 2012. p. 60. 
  15. ^ "Manifesto for a Resource Efficient Europe". European Commission. Retrieved 21 January 2013. 
  16. ^ See Horizon 2020 – the EU's new research and innovation programme
  17. ^ "The campaign website". Retrieved August 3, 2015. 

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