The “circular economy” is the latest buzzword in the world of sustainability. Journals, conference speeches and politicians’ statements all pay homage to this new ideal and set out strategies for achieving it. But what exactly is the circular economy, and is it any different from other green concepts such as closed loop recycling or resource efficiency? In the first of three related features, Caroline Hand explains what is meant by the circular economy, and asks whether today’s economic constraints and fears over resource security make this the right time to shift to a greener economic model.

The Circular Economy reports

Dame Ellen MacArthur, best known for her round-the-world sailing triumphs, can be given at least some of the credit for popularising the idea of the circular economy. The environmental foundation that she established has published two seminal reports under the title Towards the Circular Economy. The first introduces the concept of the circular economy and describes its application to manufacturing; a follow-up report, published earlier this year, focuses on consumer goods. Both these reports are available to download free of charge from the Ellen MacArthur Foundation website.

For those familiar with ecology and green economics, the reports will hold few surprises. However, circular economy thinking succeeds in bringing together a range of “good ideas” and knitting them together into a unified model with its own new vocabulary, always helpful in this age of Twitter and the sound bite. Closed loop recycling, anaerobic digestion, design for disassembly, remanufacturing, biofuels and even the reclamation of minerals from sewage all have a part to play in the grand design.

In essence, it is an economy in which resources circulate, being reused and recycled rather than lost forever to landfill once products reachthe end of their lives. Nothing too groundbreaking here, then: in this sense it is just reiterating the familiar mantra of “reduce, reuse, recycle”, which is already embedded in policy and legislation through the EU Waste Framework Directive and producer responsibility obligations. However, the circular economy concept embodies far more than a commitment to recycling. Combined with the familiar ideals of the waste hierarchy is a drive towards resource efficiency, with the emphasis on designing products for durability, reuse and disassembly. This again is a widely accepted concept, which several major manufacturers and suppliers are already taking on board. The circular economy model emphasises the fact that reuse conserves more resources than materials recycling and looks for practical ways in which suppliers can be encouraged to remanufacture and refurbish products for resale, rather than merely dismantle them. In a circular economy, this would be allied with a shift towards selling services rather than physical products, eg the service of 1000 washes rather than the sale of a washing machine.

Cycles and circles

Just like a natural ecosystem, where minerals such as carbon, nitrogen and phosphorus are endlessly cycled through the atmosphere, soil, plants and animals, the circular economy has its own nutrient cycles. The model identifies biological nutrients (organic materials derived from agriculture, forestry and fishing) and “technical nutrients”, a newly coined term relating to inorganic materials derived from mining and manufacturing. Essentially, here we have two separate systems. Technical nutrients take part in the more familiar cycles of reuse and recycling, while the goal for organics is eventually to return to the earth and restore its fertility for ongoing agriculture. The report contains some interesting information on innovative ways of extracting value from organic wastes, such as using them for biochemical feedstock. Sweden has developed one of the world’s first bio-refineries where — with the help of enzymes and bacteria — forest biomass is turned into a full range of fibres, sugars and proteins, and later plastics, medicines and fuels. Using pioneering technology, even sewage could become a valuable source of phosphorus for fertiliser manufacturers, as well as being spread on land, as is currently the case.

The circular economy model comprises a series of concentric circles; the smaller the circle, the more efficient the cycling of nutrients. So, for example, remanufacturing is part of a smaller circle than recycling because it uses fewer resources and produces less waste.

Policy makers will therefore seek to make the circles tighter, using (to quote the report’s terminology) “the power of the inner circle”. Policy-makers across the political spectrum, together with business leaders and environmentalists, have been enthused by the idea of the circular economy, which if working properly could result in huge financial savings and conserve scarce and valuable resources. The Department for Environment, Food and Rural Affairs (Defra) calculates that UK businesses could benefit by up to £23 billion per year through low cost or no cost improvements in the efficient use of resources. WRAP (the Waste and Resources Action Programme) has modelled the flow of resources through the British economy and estimated the savings that could be made by 2020 if a circular economy were to be established. Its vision involves:

  • a 30 million tonne reduction in primary resource use, equivalent to the reduction already achieved between 2000 and 2010

  • a reduction of 50 million tonnes of waste

  • 40 million tonnes more waste being recycled.

The Government has already turned its attention to resource conservation in the Resource Security Action Plan, published in March 2012. Resource security is a pressing concern, particularly for strategic materials such as rare earth metals, which are essential components of much of today’s communications, IT and defence technology but are all imported from outside the EU (see article Strategic Metals: A Priority for Resource Efficiency).

WRAP comments that since most of the easy gains in recycling have already been made, the challenge for the UK lies in implementing ambitious waste reduction strategies. By December 2013 Defra must have in place a national waste prevention plan, required under the EU Waste Framework Directive. A consultation draft was issued in March, identifying priority sectors for waste prevention as:

  • food

  • textiles

  • construction and demolition

  • chemical and healthcare sectors

  • paper and card

  • electronic and electrical equipment

  • furniture and other bulky items (particularly from households).

Some of the conclusions are similar to those of the Ellen MacArthur Foundation, which identified complex consumer goods with a medium range lifespan, such as mobile phones, as ideal candidates for a more circular approach.

What keeps the economy linear?

The traditional model of resources in the economy can be represented as a line, from extraction of minerals through manufacturing and use to disposal in landfill. With all the benefits of a circular economy, why is it that across the world, around 80% of mined and harvested materials end up being disposed of after two or three years of useful life?

The reasons are well known and laid out clearly in several of the reports and documents already referred to. One is the failure to incorporate environmental costs — externalities — into the costs of products, so the state, for example, has to pick up the price tab for environmental damage caused by resource extraction. Another is that those who finance resource efficiency measures do not necessarily benefit financially from them: if a manufacturer makes a more durable product for an affordable price, the consumer will benefit but the manufacturer may lose sales revenue. Consumers may be reluctant to change their behaviour and sacrifice short-term cost savings for long-term gains: a more expensive washing machine will save you money in the long term but you may only be able to afford the cheapest model today. Implementing a business-waste prevention strategy requires investment of time, expertise and resources that may be beyond the scope of many small and medium-sized enterprises.

The good news is that help and support is available from WRAP and other schemes such as Zero Waste Scotland and the National Industrial Symbiosis Project (NISP). Business leaders are also playing their part. Twenty leading companies including Renault, National Grid, BT, Coca-Cola, M&S and Ikea have recently joined the Ellen MacArthur Foundation’s Circular Economy 100 (CE100) group. The aim is for 100 leading companies to sign up, work together and adopt circular practices in their businesses over the next three years to create $10 billion in economic benefits. The group is already providing training in circular economy principles through a distance-learning course based at Bradford University, which could eventually train 1800 executives.


Towards the Circular Economy warns of the transition to a circular economy bringing about “creative destruction”, as there will unavoidably be some losers: the producers of cheaper, throwaway goods that do not fit the new model of efficiency, reuse and durability. But in the current climate of rapidly rising resource prices, soaring demand from emerging economies and threatened shortages of valuable materials, the circular economy represents a long-term sustainable option both for the UK and the wider world.

Look out for...

In the second article of this three-part series, we examine what the circular economy looks like in practice, through case studies of organisations that have already “tightened the circles”.

Last reviewed 21 May 2013