The idea behind circular economy

Key human needs such as housing, nutrition and mobility require natural resources from around the globe. In our current system of a linear economy these needs are satisfied by extracting and processing resources and trading them for further manufacturing. However, materials and products lose their functionality after being used, ending up as waste often burned or landfilled. This current economic system causes an increasingly geographically separation of production and consumption resulting in a highly complex, material and energy intensive, and environmental harming web of supply chains.

The concept of circular economy aims to overcome this linear economic concept of “take, make, dispose” by looping resources, which have lost their former need, back to the society. By reducing the requirements of virgin resources and focusing on local economic activities, circular economy promises economic and social prosperity by limiting the impacts of the current economic structure, reaching from social inequality to depletion of natural resources and environmental pollution. The International Resource Panel has strengthened this assumption, estimating that resource efficiency developments would reduce natural resource use by 28% and GHG emissions by 72% and yet improve economic growth.

Building blocks of circular economy

The circular economy pursues a harmonious intergrowth and sustainable development of both the economic and the social system without harming the natural ecosystem. By improving the productivity of materials and products (as shown in the graph below), not only the extraction of virgin resources but also the generation of waste can be reduced.

An increase in material productivity is achieved by elaborating various looping opportunities within the life cycle of materials. These loops are not thought to be run through only once by materials and products, but to be repetitive as often as possible. The further a material is processed along the supply chain, the bigger the looping can become for reusing the materials. However, the tighter the circle, the faster materials return to consumption and the less resources are required. A tight circle of sharing or reusing products among consumers, for example, does not need new materials and requires less energy than the bigger loop of recycling those products.

Conceptual scheme of the components of a circular economy

The mentioned loops are achieved by the following building blocks of Circular Economy: The design of circular products apt for circularity and the establishment of circular business and purchasing models. The new product design plays a key role for extending product life-span and closing material loops, as new design strategies are thought to address durability, maintenance and repairability, as well as upgradability or compatibility.

Circular business models focus on sharing, maintenance, redistribution or manufacturing. Sharing as a business model generates an increased utilisation rate of products by providing access instead of ownership, whereas maintenance focuses on performance rather than products by retaining the ownership of products to the service provider. Redistribution, however, means resell and buy-back business activities, and remanufacturing focuses on refurbishment and maintenance of used parts and components in order to be sold again.

Apart from business models for the production side, also on the consumer side there are new purchasing models being an important part of the circular economy. One type are access- or usage-based purchasing models, meaning that goods and products are purchased for a certain usage or access period. In comparison, applying performance-based models a defined performance or service is purchased, which is not bound to a particular product or good. Finally, result-based models focus on a defined service result.

These building blocks emphasize that a transition requires both producers and consumers in combination with technological innovation, in order to overcome the linear use of materials and products and loop them back into the economic system.

Circularity today

In 2015, around 92 Gt of raw materials such as minerals, biomass or fossil fuels were extracted worldwide. In comparison, only about 9 Gt (less than 10%) of recycled materials re-entered the economic system. This relationship underlines the considerable potential of circularity to shift from extraction to reuse and recycling of raw materials.

However, looping potentials are not only dependent on the product design or the business and purchasing models but also on the type of processed materials. Biomass, for example, is used by more than 80% energetically in form of food, feed and fuel, and is therefore difficult to reuse. For the same reason also fossil fuels have a low circularity potential. In contrast, metals and minerals have an infinite reuse and recycle potential. In 2016, for instance, 77% of the global Aluminium output was recycled globally.

As described above, circular economy is much more comprehensive than the traditional focus on recycling. In order to achieve the transformation into a circular economy in all regards, in 2016 the European Commission launched the Circular Economy Action Plan, which sets out a concrete and ambitious programme of action. An indicator set helps monitoring progress, covering all dimensions of circular economy – including competitiveness and innovation, production and consumption, waste management and secondary raw materials. While the indicator set has still a strong focus on waste and recycling, indicators like the “circular material use rate” (CMUR) provide insights in the circularity of a country’s economy. It measures the share of material recovered and fed back into the economy in overall material use – thus saving extraction of primary raw materials.

Comparison of circular material use rates in 2011 and 2020, and of absolute circular material use rates in selected countries
Source: Based on data from Eurostat (2021)

Among the EU-27, in 2020 the Netherlands had by far the highest CMUR with 30.9%, followed by Belgium (23.0%) and France (22.2%). In contrast,  Romania, Ireland and Portugal had the lowest CMUR with 1.3%, 1.8%, and 2.2% respectively.

Many of the EU-27 managed to increase their CMUR in the period 2011-2020 – hence, their economy became more circular. Italy showed the largest increase (+10.0 % points), followed by Belgium (9.0% points). However, a number of countries decreased their CMUR in the same period. Here, Finland (-7.8% points) and Luxembourg (-7.1% points) stand out.

In absolute terms, some of the big economies of the EU also show the largest amounts of circular material recovered and fed back into the economy. In the case of France and Germany, these quantities amount to 155 and 150 million tonnes, respectively.