How the circular economy creates a more sustainable, wealthier world

Economic evolution constantly searches for new ways to engineer, redefine, and monetize value. The problem is that this traditional linear economy model offers a one-way route to economic inefficiency and ecological failure. In contrast, the circular economy—a holistic approach to human endeavors, actions, and experiences focused on sustainability—seeks to engineer, redefine, and monetize “waste” not as refuse, but as resources.

The circular economy seeks to keep materials, products, and services in circulation as long as possible, seeing waste as the start of a profitable journey, not as an offramp from the highway of economic productivity. According to the EPA, this means that from a product’s outset, circular economic strategy retains materials in the value chain as long as possible, rethinking material extraction and manufacturing, transportation, and packaging, and even abolishing the idea of “convenient,” single-use anything.

Fifty-three years after the recycling symbol was introduced on the first Earth Day, it’s clear the current system of resource management has fallen short. According to the United Nations, continuing on this current destructive course means reaching 190 billion tons of material extraction by 2060, well beyond what the planet can support.

The circular economy is a systems solution framework for tackling some of today’s most pressing challenges, including a looming resource shortage, environmental degradation, climate change, and economic and social justice. At its simplest, it's centered on four elements: reduce, reuse, recycle, and recover. Economies, which range in scale from a household to a company to an entire city or country, need to be reconfigured around eliminating waste and pollution wherever possible; designing out waste; circulating products and materials at their highest value for the longest period of time possible; and investing in processes that regenerate nature—especially in agriculture and material extraction.

The concept of circularity grew out of systems thinking, social justice constructs, and the burgeoning environmental movement of the 1960s. A number of thinkers and economists contributed to the concept’s emergence, including Kenneth Boulding, an American economist, educator, peace activist, and interdisciplinary philosopher, who wrote of a “cyclical” system of production in 1966. The term “circular economy” first appeared in 1988 in environmental economist Allen Kneese’s article “The Economics of Natural Resources.”

The circular economy concept might seem like a lofty, radical shift. But initial research and small-scale examples show the benefits of this systems-focused philosophy.

Restoring wildlife and native habitats

The circular approach focuses on sustainable materials selection, extraction, and design, offering substantial benefits to the environment, especially the scourge of plastics pollution. The EPA estimates greenhouse gas emissions from plastics alone are predicted to nearly double by 2060, based on current rates of growth. More than 14 million tons of plastic end up in the oceans every year, harming marine life and clogging fragile coastal ecosystems.

Regenerative ocean farming can help by boosting marine ecosystems and biodiversity. GreenWave’s 3D ocean farming method mimics the vertical structure of an ocean reef, providing layers of different habitats for diverse marine species, including shellfish and seaweeds. This approach can be used for regenerative farming of products used for food, fertilizer, animal feed, and bioplastics.

Increasing revenue, resilience, and economic activity for businesses and nations

Reusing materials and natural resources provides more than an environmental boost: Extensive economic research shows it can help a company’s, and country’s, bottom line. A study by Sitra found that Finland’s circular economy plan is projected to boost the nation’s economic impact by 3 billion euros by 2030. While the International Labor Organization predicts that circular economic practices will cost the world 71 million jobs by 2030, it also will make up for it by creating 78 million jobs over the same time period.

Cutting material costs

Reusing existing products can offer significant cost savings across industries. Research from architectural firm Gensler found that clients could save 30–50% on renovation projects by being more judicious about repurposing existing materials. A Goldman Sachs analysis of circular economy benefits estimated roughly $1 trillion in annual material costs could be saved by a wholesale change.

Helping avert the climate crisis

The circular model can make a significant impact on sectors of the economy responsible for excessive emissions, including transportation and construction. The focus on regenerative agriculture and protecting habitat and biodiversity can also help make the landscape more resilient and able to withstand rising temperatures and changing weather patterns.

Improving social and economic justice

Much of the traditional, linear model of manufacturing relies on low material costs, lax environmental regulations, low wages, and nonexistent worker protections. Creating more sustainable models of production eliminated race-to-the-bottom manufacturing practices that often leave the poorest workers saddled with low wages and the impacts of toxic pollution. The Lowell Center Framework for Sustainable Products is a tool that outlines these impacts and adds a social justice lens to circular economic thinking. Truly sustainable products will take into account workplace safety and practices, as well as offer a living wage and benefits to local communities.

Companies, from large multinationals to ambitious startups, can all start to shift toward circularity. Making smaller, incremental changes in operations can help pave the way toward a wholesale change.

One of the most important transformations is designing for less waste. An oft-cited statistic postulates that 70% of a product’s lifecycle costs are determined at the design stage. Using generative design technologies and additive manufacturing reduces mass and excess material, which also reduces cost and environmental impact. Companies can also swap out existing materials for low-carbon options, design products for longer lifecycles, or redesign the product experience so items are rented or leased instead of purchased and thrown away.

Better data management and material control can also cut down on unnecessary waste. A key example is using digital twins in construction, which helps stakeholders assess materials and labor costs accurately. Firms can focus on sustainable supply chain management, which addresses everything from sourcing goods to how they’re stored and shipped; emissions from the supply chain are typically over 11 times higher than operational emissions.

Often, the barriers to adopting circular principles lay in cultural norms and a lack of supportive governmental policies.

First, there’s a general lack of awareness and of mainstream success stories to help sell the circular economy concept and overcome reluctance to change cultural and social norms. There’s also widespread fear about the repercussions of making consumer products less convenient. Changing a company’s packaging, usage models, and even ownership models can be overcome, but requires intentional shifts, user research, and market research.

Better widespread understanding of something seemingly as established as recycling can help overcome misunderstandings about the value of making changes. More standardization of the concept would help accelerate that mindset shift, clarifying for companies and consumers what circular means and how to make larger shifts toward recycling and reusing materials across different industries.

This lack of awareness can feed into other, more systemic problems. Often, localities lack the right infrastructure to enable companies to make these changes, including enough waste treatment centers and up-to-date recycling technology. And the costs of using virgin materials are often much lower, especially at the outset, than scaling up regenerative processes. Firms understand that making circularity economically feasible often means significant upfront costs in research and infrastructure, which can be barriers to change.

One way of explaining the circular economy, the butterfly diagram, shows the many paths that can lead to a systemic shift, including different waste streams and means of reusing materials. There’s significant diversity in the types of firms that have successfully embraced a circular philosophy.

Global carpet brand Desso (manufactured by Tarkett) instituted a “cradle-to-cradle” program, making its products with reusable yarn and starting a buy-back program, guaranteeing that material didn’t get tossed but instead was fed back into the production process. Finnish firm EcoUp makes carbon-neutral thermal insulation in part by sourcing its materials from construction waste. Levi’s Jeans recycles and repairs its iconic dungarees, while Patagonia’s pledge to repair clothing for life builds brand loyalty while curtailing fabric waste. Interface, a certified carbon-neutral business, makes carbon-negative carpet tiles by storing more carbon through recycled and bio-based materials than they emit.

Canadian firm BamCore has industrialized and sped up commercial and residential construction using custom fabrication, 3D animated models, and industrialized construction. But its core innovation is using sustainably harvested bamboo as the key element of its hollow-wall structural lumber system. The combination of data-driven digital construction and sustainable materials means more projects can be finished faster, with much less material waste. The prefabrication system even uses augmented reality models on jobsites, so construction workers can visualize the finished project as they assemble it.

Another construction firm, Sweden’s White Arkitekter, has differentiated itself with a focus on sustainability and recycling. The firm’s proprietary White ReCapture software service evaluates existing buildings using laser scanning and BIM data-management tools to inventory parts and materials and determine what can be reused. The savings are significant: the recently finished Selma Lagerlöf Center, a municipal government building and cultural center in Gothenburg, Sweden, incorporated reused furniture and materials in 92% of its interior design, saving nearly $1.1 million dollars—roughly 70% less cost than using new materials.