By Georgia Sherwin, Digital Marketing Associate

Recently there’s been a lot of talk about the circular economy (CE) in the news. It’s becoming a bit of a buzzword, but what really is it?

The circular economy recognizes the unsustainability of the current relationship between economics and the environment. We currently live in a linear system. We take natural resources from the earth, we manufacture them into products and then we dispose of the products, usually in landfill.

This system is fine as long as natural resources are unlimited and cheap, but of course we know they’re not. Increasingly, resources are running out. It’s estimated that we have 188 years left before coal runs out and 29 years left before we use up all the silver. Current population growth and rampant consumerism worsens the issue.

In fact, it increasingly looks like we are hurtling towards complete environmental destruction, unsustainably robbing the earth of its natural resources so as to meet our shortsighted demands. This crisis demands new ways of thinking. And this is what the circular economy is all about…

 Source: Ministry for the Environment, New Zealand

Source: Ministry for the Environment, New Zealand

Rather than the linear approach, it is of course about circularity. Fundamentally, the aim is to mimic the circularity of natural systems. A plant grows, it dies, it decomposes and then its nutrients fertilize new life; it fits within a larger system where everything is connected. Something created in one area or sector can be used in another. By-products become fuel for the next thing. The very idea of waste is eliminated when design is inspired by nature. The term for it – circular economy – first emerged in the seventies alongside growing environmental movements; it loosely referred to various schools of thought like industrial ecology, cradle-to-cradle design and Stahel’s performance economy.

More recently, the concept has gained ground thanks to the popularity of the Ellen MacArthur Foundation, which has devoted itself to championing circular economic principles. The foundation offers a cohesive definition of the CE, calling it ‘an industrial economy that is restorative or regenerative by intention and design.’ It distills it to three core principles (see below).

  1. Preserve and enhance natural capital by controlling finite stocks and balancing renewable resource flows
  2. Optimize resource yields by circulating products, components, and materials at the highest utility at all times in both technical and biological cycles 
  3. Foster system effectiveness by revealing and designing out negative externalities, such as water, air, soil, and noise pollution. 

So, now we can start to understand what the circular economy might look like in practice, not simply hear of abstract ideas about circularity. 

Numerous large corporations are committing to circular economic principles, for example Nike. Through Nike's Reuse-a-shoe program and Nike Grind, their old shoes are turned into sports courts or other sports products. Meanwhile, their Flyknit technology which knits shoes rather than cuts them from templates results in 60 percent less waste.

Simply put, from a business perspective the circular economy translates to better, more efficient use of resources. Accenture calls it the ‘circular advantage’ as companies add significant value to their businesses by going circular. There is an estimated trillion dollar opportunity globally!