What is the Circular Economy?
Discover what a circular economy is and how it eliminates waste by designing, making, using, collecting, transforming, and reusing resources sustainably. Learn more today!
Why the world needs a circular economy
Every year, the world generates over 2 billion tonnes of waste, much of which ends up in landfills or the ocean. At the same time, natural resources are being extracted at unsustainable rates, by 2050, global resource use is expected to double, leading to environmental collapse if we continue business as usual.
The circular economy provides a solution. Unlike the traditional “take-make-waste” model, a circular system keeps products, materials, and resources in use for as long as possible, reducing waste, cutting emissions, and driving innovation. By rethinking how we design, use, and recover materials, the circular economy reduces waste, cuts emissions, and fosters innovation.
What is the circular economy?
A circular economy is a regenerative system that minimises waste and extends the life cycle of materials. Rather than relying on continuous consumption and disposal, it promotes reuse, repair, refurbishment, remanufacturing, and recycling.
- A circular economy could reduce CO₂ emissions by 39% by 2032 (World Economic Forum).
- Transitioning to circularity could generate £3.4 trillion in economic benefits globally by 2030 (Ellen MacArthur Foundation).
How the circular economy works
A circular economy functions by preserving the utility of materials and products for the maximum duration. This can be achieved through strategies such as reuse, repair, refurbishment, remanufacturing, and recycling.
The aim is to reduce waste generation and restore our natural systems by creating a closed loop for all materials to be recycled or reused instead of being single use.
This approach moves away from traditional linear economy models of “take, make, waste”, where resources are extracted, utilised, and then disposed of.
Materials in a circular economy are collected and reused after each use:
Design
Make
Use
Collect
Transform
Reuse
Design
Circularity begins with design. By focusing on more circular designs, it helps businesses emphasise the importance of creating durable, repairable, and recyclable products. By opting to choose more sustainable materials and modular design, we can keep resources valuable beyond their initial use.
Make
Incorporating more sustainable practices into our manufacturing processes can significantly improve circularity efforts. This could be businesses introducing more sustainable materials, focusing on the minimisation of waste, and the optimisation of energy efficiency.
This approach helps businesses prioritise responsible sourcing, ethical production methods, and the utilising of recycled content to remove the need for virgin materials.
Reuse
The final step is to reintroduce transformed materials back into the economy. This can be achieved through repurposed products, second-hand markets, or closed-loop manufacturing. Focusing on reuse ensures your resources maintain value and contribute to a circular system.
Transform
After collection, all materials should be processed through more sustainable methods such as recycling, remanufacturing, or upcycling.
This process brings new life to discarded items by converting them into high-quality raw materials for new products – limiting the necessity for extracting virgin resources.
Collect
At the end of a product’s first life, proper collection systems are essential to ensure materials don’t end up in landfill. Efficient take-back schemes, waste management programmes, and consumer participation allow valuable resources to be recovered and reintegrated into the system.
Use
Extending the lifespan of products is essential. By shifting to responsible consumption, maintenance, or sharing models, businesses can make sure items are utilised to their maximum potential. Promoting repair, resale, and rental services will reduce unnecessary waste and maximises resource efficiency.
Core circular economy principles
The circular economy aims to tackle climate change, biodiversity loss, and pollution while providing social and commercial benefits for businesses and communities. To drive sustainable change, businesses must embed three key principles throughout their operations, as outlined by the Ellen MacArthur Foundation:
Eliminate waste and pollution
A major flaw of the linear economy is that it creates waste by design. The circular economy prevents waste before it happens by ensuring that materials are used efficiently from the outset.
Key strategies to eliminate waste:
- Eco-friendly product design – Use recyclable, easy to recycle and reusable materials.
- Sustainable packaging – Review material lifecycle with lifecycle analyses to understand carbon usage and food reduction benefits.
- Closed-loop manufacturing – Recycle materials within production cycles.
- Advanced waste analytics – Use data to optimise resource efficiency and reduce excess.
Did you know that by designing waste out of the system, the EU could save €600 billion annually in material costs? (Source: European commission)
Circulate products and materials
Instead of discarding products after a single use, circularity ensures they remain valuable for as long as possible.
How businesses can extend product life cycles:
- Design for durability and repairability – Build products to last.
- Second-hand markets – Platforms like eBay and Vinted promote resale.
- Remanufacturing – Refurbishing used products restores them to near-new condition.
- Product-as-a-service models – Subscription-based access rather than ownership.
Did you know extending the lifetime of smartphones by one year could save the EU 2.1 million tonnes of CO₂ emissions annually. (Source European Commission)
Regenerate natural systems
The circular economy doesn’t just minimise harm, it actively restores ecosystems and regenerates natural resources.
How businesses can support regeneration:
- Switch to renewable energy – Reduce reliance on fossil fuels.
- Adopt regenerative agriculture – Improve soil health and biodiversity.
- Commit to sustainable sourcing – Avoid deforestation and protect ecosystems.
- Regeneration initiatives – Invest in reforestation and carbon sequestration projects.
Did you know that regenerative agriculture could remove 23 gigatonnes of CO₂ by 2050, almost half of current annual emissions (Source: Regeneration International).
Why businesses should embrace circularity
Businesses, governments, and individuals alike stand to benefit from embracing the circular economy.
There are three key benefit pillars, each offering significant contributions:
Some of the most compelling reasons for businesses to adopt a circular economy are financial. With the global economy still only being 7.2% circular (Circularity Gap Report, 2023), businesses leveraging circular economy practices could see significant competitive advantages.
Examples include:
- Cost savings – Reduce raw material costs and waste disposal fees.
- New revenue streams – Unlock resale, leasing, and recycling opportunities.
- Enhanced resource efficiency – Maximise productivity and profitability.
By shifting to a circular model, businesses unlock new revenue streams, improve operational efficiency, and build resilience against resource scarcity.
The shift towards a circular economy provides numerous advantages to society:
- Job creation – Drive employment in recycling, remanufacturing, and eco-design.
- Improved quality of life – Cleaner environments and healthier ecosystems.
- Community engagement – Support local initiatives and circular collaborations.
The circular economy promotes responsible consumption and contributes to a fairer society.
The implications of the circular economy on the environment are substantial:
- Reduction of waste and pollution – By eliminating waste, businesses significantly contribute to the improvement of air, water, and soil quality.
- Conservation of natural resources – Reducing demand for raw materials lessens deforestation, mining, and water depletion.
- Mitigating climate change – A circular economy reduces carbon emissions, contributing to environmental sustainability.
The circular economy is instrumental to addressing climate change and conserving biodiversity, putting more focus on sustainable production and consumption practices.
How Reconomy enables the circular economy
At Reconomy, we help businesses transition to circularity through data-driven insights and innovative sustainability services.
Through cutting-edge technology and strategic partnerships, we provide tailored solutions to help businesses reduce waste, optimise supply chains, and achieve sustainability targets.
We offer a comprehensive suite of services, including:
- Waste and resource management – Enabling companies to minimise waste and maximise material recovery.
- Compliance and reporting solutions – Ensuring businesses meet environmental regulations and sustainability goals.
- Reverse logistics and returns management – Helping retailers and manufacturers optimise returns and resale operations.
- Technology-driven insights – Leveraging data analytics to drive smarter sustainability strategies.
75
tonnes of materials processed
4,000
colleagues driving efforts
75K+
tonnes of materials processed
4000+
colleagues driving efforts
Circular economy by sector
To realise the circular economy, closed-loop principles must be embedded – and their impact measured – at every stage of business operations. Explore how the circular economy is currently adopted across business sectors and what opportunities are available.
Circular economy in construction
Did you know the construction industry consumes a substantial portion of natural resources—around 32%? Explore how the construction industry can adpot a circular economy.
Read hereCircular economy in fashion
Exploring the current state of the circular economy in the fashion sector, examining its challenges, benefits, and the strategies to become more sustainable.
Read hereJoin the circular revolution with Reconomy
Adopting circular practices is not just an environmental necessity, it’s a smart business strategy that delivers tangible benefits.
Let’s shape a waste-free future together.
FAQs
Discover the most frequently asked questions surrounding the circular economy.
The primary objective is to reduce waste, increase product longevity, and enhance natural systems to establish a sustainable and efficient economic model.
This approach lowers expenses, generates new revenue opportunities such as product leasing, and enhances brand reputation.
The circular economy reduces environmental impact, creates economic opportunities, and promotes social well-being by fostering sustainable practices.
The Butterfly Diagram is a visual representation of the circular economy model, showing the flow of biological and technical materials in a closed-loop system.
Reconomy can help your business by providing tailored waste management solutions, resource efficiency audits, and innovative recycling strategies.
A circular economy is an economic model aimed at minimizing waste and maximising resource efficiency. It focuses on reusing, repairing, refurbishing, and recycling existing materials and products to create a closed-loop system that reduces environmental impact.
- Resource security – Finite resources are being depleted faster than they can be replenished.
- Economic resilience – Circular models help businesses stabilize supply chains.
- Sustainability – Over 91% of materials extracted globally are wasted after a single use (Circularity Gap Report).
Did you know a circular economy could reduce global carbon emissions by 39% by 2032? (Source: World Economic Forum).
The concept became notable in the late 20th century, with significant developments in the 1970s when Walter Stahel proposed the idea of a closed-loop economy. The Ellen MacArthur Foundation outlined its principles in the early 2010s.
This term refers to an economic system that shifts towards more utilisation of resources through means of reuse, recycling, and regeneration, subsequently reducing our reliance on finite resources.
The circular economy does not have a single inventor. It draws from ideas like industrial ecology, cradle-to-cradle design (by William McDonough and Michael Braungart), and the work of Walter Stahel on the “performance economy.”
Circular economy can be measured using:
- Circularity indicators: Metrics such as Material Circularity Indicator (MCI).
- Waste reduction rates: The amount of waste avoided is monitored.
- Recycling rates: The percentage of materials recycled is tracked.
- Carbon footprint: Emissions saved through circular practices are assessed.
- Zero Waste Index: Reconomy’s Zero Waste Index provides a detailed breakdown and analysis of your progress towards zero waste, alongside our other consultancy services. Whether you are already on your zero-waste journey and focusing on waste minimisation or have only just begun and are simply trying to recycle as much as possible, our Zero Waste Index can help you focus your efforts and make improvements toward your goals.
Ready to #CloseTheGap?
Closing this gap means embracing circular design, shifting consumer behaviour, adopting policy reform, and implementing infrastructure that supports reuse, refurbishment, and recycling. If you’re business is ready to embed greater circularity into your operations and lead the transition to a waste-free world, we’re here to help. Together, lets #CloseTheGap.
Close the gapThinking circular: knowledge and insight
The latest news, insights, and thought leadership from across Reconomy and the waste management industry.
