The circular economy is a systemic approach to economic development designed to benefit businesses, society, and the environment. Unlike the traditional linear economy, where products are made, used, and discarded, the circular economy is regenerative by design and aims to decouple growth from the consumption of finite resources.
It revolves around creating closed-loop systems where waste is minimised, materials are continuously reused, and natural ecosystems are regenerated. Central to this model is considering products and materials as resources that can be reintegrated into the economy at the end of their life cycles.
The three principles of the Circular Economy were first introduced by Dame Ellen MacArthur in 2010, when she launched the Ellen MacArthur Foundation and delivered her famous TED Talk in Vancouver. Since then, the Foundation has played a pivotal role in establishing a clear framework, developing practical tools, and fostering global partnerships to accelerate the transition from a linear to a circular economy.
Waste does not exist in nature; it is a human creation, often the result of poor design choices and inadequate management. The goal of circularity is to eliminate waste from the outset by designing products and systems that enable materials to re-enter the economy continually.
The circular economy aims to restore and enhance natural systems, allowing for resource regeneration and moving Earth Overshoot Day forward. Earth Overshoot Day marks the date when humanity’s demand for ecological resources and services in a given year exceeds what the Earth can regenerate in that same year. In other words, it is the point at which we start consuming natural resources faster than the planet can replenish them. For the last 20 years, it fell in August; in 2025, for the first time in history, it fell on July 24th.
Currently, humanity is operating in significant ecological overshoot, meaning we are consuming the equivalent of 1.8 Earths per year to sustain our current consumption levels. The circular economy is a key strategy to push the date later each year by reducing waste, conserving resources, and promoting more sustainable production and consumption patterns.
Another core principle of the circular economy is to keep products, components, and materials in use for as long as possible, preserving their highest possible value. This means prioritising strategies such as reuse, repair, remanufacturing, and, only as a last resort, recycling. By maintaining products in circulation, we can significantly reduce the extraction of virgin resources, minimise waste, and decrease the environmental footprint of production processes. Initiatives like Loop, which promote reusable packaging, and domestic food composters that return nutrients to the earth, exemplify this approach.
An essential, yet often overlooked, aspect of the circular economy is the legal classification of materials. Once an item reaches the formal legal status of waste, it falls under strict waste management regulations, limiting its handling to certified waste management companies. This regulatory boundary can pose a significant barrier to circular practices, preventing materials from being reintroduced into production cycles. Waste materials can only be downcycled or partially recycled, missing the opportunity to retain their highest possible value. This is why circularity and recycling are two distinct concepts.
Therefore, circular strategies must prioritize resource management before the point of legal waste classification. This involves creating reverse logistics systems, take-back schemes, and repair networks.
The circular economy is usually linked to the “3Rs” hierarchy:
As per the last one, it would be more accurate to include Reverse Logistics: building a system for product return and refurbishment, such as IKEA’s Circular Hub and Levi’s Tailor Shops, makes these strategies practical and scalable, preventing waste from being created.
Circular product design emphasises modularity, disassembly, and traceability. Design for Disassembly (DfD) involves creating products that can be easily taken apart, with components that are recyclable or reusable. This requires careful selection of materials, connection techniques (favouring mechanical over chemical joints), and tracking systems to ensure materials can be reclaimed and reintroduced into the production cycle. Case studies, such as Fairphone’s modular smartphones and Gannon McHugh’s DfD shoe design, highlight the importance of adaptability and consumer empowerment in circular design.
Circular practices significantly reduce waste and emissions. By maximising the lifecycle of products and utilising recycled or renewable resources, companies can mitigate the environmental impacts of production and consumption.
Economic Benefits: Competitiveness, Innovation, and Growth
The circular economy fosters innovation by encouraging new business models, such as Product as a Service (PaaS) and sharing platforms. Companies like HP with its Instant Ink subscription model and Philips’ Light as a Service demonstrate how circularity can unlock new revenue streams, reduce costs, and build customer loyalty.
Circular strategies can secure resource supply chains, reduce dependency on virgin materials, and enhance resilience to market fluctuations. And most importantly, they can guarantee proper End-of-Life management for complex and potentially harmful or toxic components.
The transition to a circular economy favours local employment and upskilling. It also empowers consumers through access-based models, enabling them to pay for services rather than owning products, often at lower overall costs.
Effective transition to circularity requires robust measurement tools. Frameworks like the Circular Transition Indicators (CTI) and Circulytics help companies assess their circular performance across materials, processes, and value chains. These tools help set credible circularity targets and track progress using international standards, such as the recently introduced ISO 59000 family of standards.
Technology plays a crucial role in enabling circular systems:
Advanced recycling technologies and material recovery processes—such as diaper recycling by FATER and marine litter transformation by SEAQUAL—are essential for closing material loops. IoT-based solutions, such as HP’s Instant Ink, also enhance resource recovery by facilitating product returns and recycling.
The circular economy requires alignment between businesses and policymakers. Corporate strategies include adopting circular business models, investing in sustainable design, and engaging supply chains in circular initiatives. Governments can support the transition by implementing policies, offering incentives, and establishing regulatory frameworks that promote circular practices.
In the European Union, regulations such as the Extended Producer Responsibility (EPR) schemes and the Packaging and Packaging Waste Directive (PPWD) play a crucial role in driving circularity. EPR policies make producers financially and operationally responsible for EoL management, thus rewarding who invests in circular design and reverse logistics. The PPWD sets targets for reducing packaging waste and increasing recycling rates, by adopting more sustainable material choices and promoting returnable systems. These regulatory frameworks can shape both corporate behaviour and consumer systems toward circularity.
An example of a coordinated governmental effort is Spain’s PERTE (Proyectos Estratégicos para la Recuperación y Transformación Económica) for the circular economy. PERTEs are large-scale, transformative projects launched by the Spanish government under the umbrella of the Next Generation EU recovery funds to accelerate the ecological and digital transition across key sectors. This € 1.2 billion plan focuses on improving resource efficiency, supporting sustainable production, and scaling up circular innovations in high-impact sectors, such as textiles, plastics, and renewable energy equipment.
The circular economy is expected to grow rapidly, with the reverse logistics market alone projected to reach nearly $1 trillion by 2028. Key trends include:
Looking ahead, the circular economy has the potential to reshape global production and consumption patterns significantly. By reducing reliance on finite resources, minimising environmental impacts, and creating inclusive economic opportunities, the circular model offers a viable path toward sustainable development. It also provides businesses with a competitive edge in a market increasingly driven by environmental and social considerations.
The circular economy represents a transformative shift in how we produce, consume, and value resources. Grounded in principles of waste elimination, resource circulation, and ecosystem regeneration, it offers environmental, economic, and social benefits that align with the UN SDGs.
Technological innovation and supportive policies will be key to scaling circular solutions, and the active participation of companies and consumers alike will determine the pace of this transition. The circular economy is not just a theoretical model—it is an actionable strategy that is already delivering tangible impacts.
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