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Circular Economy – Definition, Importance, and Benefits
- Peter Bjellerup
- Mar 19
- 11 min read
A key concept when talking about Digital Product Passports is the circular economy, an expression that has come into the spotlight over recent decades but that actually is very, VERY old.
In essence, humanity lived in a circular economy until the industrial revolution, more or less.
The most elaborate and administrated version was probably during the Edo period in Japan, from 1603 to 1868. Edo, now Tokyo, was one of the biggest cities of the world at the time. With almost one million inhabitants, it was bigger than both Paris and London, not to talk about any US city at the time.
Edo was a city without waste. The world’s most elaborate circular economy so far.
The Government had a policy of not trading with outside nations, which resulted in significant scarcity of resources like cotton and timber. Everything had to be reused, repaired, repurposed and, finally - at the end of a very long materials life cycle - recycled.
A cotton kimono was used until the cloth was too worn thin and soft. It then was turned into a pair of pajamas. At a later stage, it was cut up for re-use nappies which after many washes became a floor cloth and finally ended up as fuel.
An elaborate society of “hand-me-downs”. It was similar for wood, as essential for the Edo era as fossil fuels for us today. A strict rotation of repair, re-use, repurposing and recycling, in addition with elements of the social hierarchy.
Which brings us to today and circular economies in general.
What Is the Circular Economy?
Definition and key principles
The way we currently define a circular economy is similar to the Edo era. The key concepts are reducing the use of raw materials and reducing waste through reuse of products, through repairs, refurbishing, re-purposing and recycling. It’s about extending the life of products and the raw materials used in them.
It often involves using other commercial models than our current standard of buying; like hiring, leasing and an expanded second hand market.
An example:
Holiday skiers are accustomed to renting their equipment as many only ski a week each year. But why only rent the equipment? Why not the outfits too?
To make a circular economy at all possible, products need to be designed for circularity and practices like “planned obsolescence” rooted out. Production methods have to minimise waste of raw materials and energy, and distribution methods adapted as well. Finally, waste collection and management has to be recalibrated to become better at extracting and taking care of what is re-usable and separate what is not, in order for such components to be handled to minimise environmental impact.
How a circular economy differs from the current linear economy
Our current practice of buy, use and dump, is called a linear economy. Often we talk about it as “the traditional linear economy” but, in all honesty, if there’s any economy to call traditional, it’s the circular economy. The linear economy has dominated for only a century or two. We only need to go a few generations back to find people mending their socks, repairing their clothes and vehicles (by themselves) and so on. The dominance of the linear economy has followed urbanisation. Rural life was predominantly circular and often still is.
In short, a circular economy is focused on sustainability and saving on resources.
A linear economy behaves as if resources are endless, clean water and air is a given and we have a couple of extra planets where to dump our waste.
The role of sustainability in circular systems
Resource efficiency and sustainability are core to a circular economy. Instead of treating shared resources as infinite, it treats them as they are: finite - even if there’s no “direct variable cost” for using and misusing them.
This is all we have, let’s use it wisely - is the core mindset of a circular economy.
Why Do We Need to Switch to a Circular Economy?
The question “Why do we need to switch from a linear to a circular economy?” has an increasingly obvious, painful and straightforward answer:
There is no Planet B.
Earth is all we have. Let’s use it wisely.
It should also last for generations to come.
What’s the point of colonising Mars, if we destroy Earth while trying?
“Using it wisely” involves a range of factors. Some obvious. Others less so.
Protecting the Environment
Reducing waste and pollution
Obviously, a circular economy would reduce our production of waste and of polluting our environment. It would reduce our emission of greenhouse gases, slowing down global warming (if it’s not too late already).
But it’s not only a matter of waste and pollution from products. Most of our products come with packaging, which also uses resources, produces waste and pollution.
According to the European Parliament, the average European generates about 190 kilos of packages per year. 2.7 x our own bodyweight. What’s the corresponding number in your country?
A factor of our pollution and extensive repurposing of land to support our consumption patterns is how it affects biodiversity, an issue gaining additional notoriety recently. An issue where the speed of biodiversity loss is becoming increasingly obvious, but the consequences are still not sufficiently understood. But, understanding that the role of species usually are as food for another, or to control the population of another, we don’t need to dig too deeply to realise that we’re playing Russian roulette with stakes we don’t understand. One of the most well-known examples is what would happen to our production of foodstuffs if we happen to exterminate the pollinating insects, primarily bees.
No pollinators. No food.
Minimising resource depletion and dependency
The only resources that aren’t finite are the ones we grow. Apart from solar-, wind- and hydropower. (and some local thermo power) All others are finite, although some are still plentiful. But still finite.
Most of these finite resources aren’t evenly distributed either which leads to dependencies between countries, a topic of increasing attention as global politics become increasingly tumultuous.
Reducing the use and increasing the recycling of finite resources therefore serves a double purpose of increasing both sustainability and independence.
A Circular Economy Starts With Circular Design
Over 80% of a product’s environmental impact is determined during the design phase. 80%! No wonder that the Ecodesign for Sustainable Product Regulation is a pillar of the EU Green Deal!
Design for circularity
In a linear economy, product design focuses on efficient production and aesthetics with little or no concern for durability, repairability, componentization, re-purposing or recycling. It’s designed to appeal to you as a consumer, for you to use it while you like it and then throw it in the bin. Typically, batteries cannot be changed, repairs become impossible or expensive and things end up in a landfill at the end of the (short) product lifetime..
With a circular mindset, products are designed to live long, be easy to take care of and to repair, to facilitate transfer of ownership, and easy to disassemble for repurposing or responsible recycling.
Traditionally, designing for circularity has meant making products more costly, sowing shoes instead of just gluing, for example. The challenge, which is likely to boost creativity, is to find ways to design inexpensively for circularity.
Design for resource-efficient production and distribution
Obviously, products assembled for possible repair and disassembly cannot be produced in the same way as if produced with a linear mindset. Circular design will infallibly impact production methods.
But production methods need to be redesigned also to reduce waste, emissions and energy consumption.
Earlier, we mentioned the enormous quantities of packaging waste we leave behind each year. That issue has to be addressed in our efforts to make our way of life more circular. Perfectly circular products generating mountains of packaging waste won’t do.
Obviously, packaging is closely connected with product design, distribution logistics and retailing methods. A case in point: the habits of some people to use e-commerce shipping as a “fitting room at home” only to return the sizes and models that “didn’t work out” are too wasteful regarding packaging and transports to fit in a circular economy. Especially as some retailers lack even a functioning system to handle those returns, leading to them ending up in landfills in some third world countries.
A Circular Economy Creating Jobs and Saving Consumers Money
Such a shift in our way of living will lead to massive changes in businesses and the labour market.
Boosting green innovation and local economies
One probable result is the revival of professions to care, repair and repurpose products as well as a boost for second hand markets and recycling. Such a development carries the potential of creating small scale local businesses, reviving local communities. The second hand business is likely to get a substantial boost or to get integrated into the regular retail trade.
The shift will also involve substantial innovation across industries and professions; to redesign products, to find solutions for increased modularity and reduction of needs for resources, and for repurposing and recycling.
Lowering long-term costs for consumers
At first sight, redesigning products for circular use might seem costly and maybe it will be - in the short perspective. But don’t we all know that it’s usually more economical in the long run to buy one product of good quality rather than three or four of poor quality that last only ¼ as long?
If that product, when its good quality has outlasted your taste for you, can be resold to somebody new, you’ll get some money back, reducing your total cost of ownership.
Don’t forget the growth we predicted in renting things instead of owning them. That will surely be less expensive per time used than buying new, only to use once or rarely.
What Is the EU Doing to Support the Circular Economy?
Regulations and Initiatives, Separate and Under the Circular Economy Action Plan
So far, under CEAP, there have been several packages of proposals and decisions:
March 2022: The launch of the CEAP in general to speed up the transition towards a circular economy, expanding the scope of eco-design rules, empowering consumers for the green transition and a strategy on sustainable textiles
October 2022: A revision of rules on persistent organic pollutants to reduce the volumes of dangerous chemicals in waste and production processes
November 2022: A proposal on new EU-wide regulations on packaging and a proposal on EU certification for carbon removal
March 2023: A proposal to rein in greenwashing by regulating “green claims” by companies and adding a right to repair products
April 2024: The EU Parliament approved establishing an EU-wide certification scheme for carbon removals.
Related to the CEAP, the EU has adopted the Critical Raw Materials Act in December 2023, aiming at reducing the EU reliance on a few non-EU countries for supplies of a few strategic raw materials, partly through improved recovery and recycling.
Maybe the most significant initiative under CEAP is the Sustainable Products Initiative (SPI) which, in turn, comprises the Ecodesign for Sustainable Products Regulation (ESPR), comprising three initiatives, the most talked about being Digital Product Passports (DPP).
Other initiatives include:
Fighting planned obsolescence
Improved durability and repairability
Strengthening consumer rights to repair
Banning greenwashing
A system to verify companies’ environmental-related claims
Industry incentives and sustainability targets
There are also initiatives targeting specific industries.
Plastics - Phasing out microplastics
Textiles - A ban on destroying unsold textiles and footwear is part of the ESPR. There is also an EU strategy for sustainable and circular textiles from 2022, aiming for all textiles to be long-lived and recyclable, made as much as possible of recycled fibres and free of hazardous substances.
Electronics and ICT - EU forces are in motion to extend product life through increased reusability and repairability
Packaging - The rules on packaging and packaging waste were revised in April 2024 to reduce the amount of packaging produced by the consumption of EU citizens
Batteries and Vehicles - Rules have been agreed upon for the production and materials of all batteries on the EU market to have a low carbon footprint and be responsible.
Key Benefits of the Circular Economy
Apart from the obvious benefits of long term survival of humanity, fauna, flora and our planet as we know it, there are several other benefits worth mentioning:
Strengthening Local Economies
Encouraging sustainable business models
Circular economies automatically are more local and small scale. Repairs, re-purposing and re-use usually happens “close to home” in smaller enterprises, minimising needs for transport and distribution. It opens up for local entrepreneurial initiatives.
Reducing reliance on global supply chains
Being more local automatically means a reduced reliance on global supply chains and, therefore, a reduced sensitivity to world affairs. Remember that the reason behind the circular economy of the Edo empire was the avoidance of international trade.
Employment Growth and Innovation
Expanding green jobs in waste management, repair, and recycling
All that small scale entrepreneurship creates new jobs, a revival of craftsmanship and professions taking care of, modifying and re-purposing products.
Driving sustainable product innovation
A good deal of innovation, ingenuity and reinvigorating of old knowledge will be needed to make the shift from a linear to a circular economy.
Promoting Resource Independence
Reducing reliance on finite materials
The basis of a circular economy, to make better use of raw materials, has the most noticeable effects when it comes to raw materials that are scarce, expensive or strategically sensitive. Like the rare metals in our electronics for which we often are dependent on a few countries for supplies.
Encouraging renewable and alternative raw materials
Efforts to become more circular may not only find ways to use less of such sensitive raw materials but find alternative raw materials to use, raw materials that might be less environmentally harmful or strategically sensitive.
How the Circular Economy Works in Practice
The first step towards a circular economy is a shift in mindset. Once the circular mindset is in place, it’s a matter of putting it into practice.
Design Products for Circularity
Designing products for longevity, repair, and recyclability
As we mentioned earlier, 80% of a product’s environmental impact is determined in the design phase. That’s where it all starts, in designing for circularity. Designing products to be more durable and long-lived, easier to repair, re-use, repurpose and recycle. Products that make more efficient use of raw materials, raw materials with a lower environmental load and less scarce.
Sourcing and logistics for reduced environmental impact
In parallel with the design of products, the supply chain for those products is designed. From where and who will each raw material and component be sourced, how will they be transported to production and out to the market? Which impact on packaging needs will those choices have? An integral part of the design process with major impact on environmental effects from products.
Production process design impacts environmental performance
Just as sourcing runs in parallel with product design, so does the design of production processes. Obviously, they can make more or less impact on the environment. Energy consumption and sourcing, waste generation and recycling, emissions, they all impact on circularity and environmental performance
Circular commercial models to reduce impact
A major aspect of circularity which often can be worked on independently of the design of products, production and supply chains is the commercial model for use.
In a linear economy, buy - own- dispose is the default. In a circular economy, various versions of sharing economy and “pay per use” become more common.
Car pools, “gardening tooling pools” (do each house really need their own hedge trimmer?), rent party clothes or ski outfits, sporting gear, home swapping, sub-letting of homes for vacationers or office pools… You name it. Ways to make better use of resources by sharing and renting.
How Digital Product Passports Support the Circular Economy
Digital Product Passports are intended to create transparency on the environmental impact of products, to make it easy for consumers to make informed and environmentally responsible choices.
They will be standardised per product or product type, digital and to accompany all products sold in the EU market.
The intent is to leverage the force of consumer purchasing power to put pressure on producers to design their products to be more eco friendly.
Read more about Digital Product Passports here and here for the timeline of the introduction of DPP.
Image by SolStock on iStock
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