While it is a time-taking process, the positive externalities of a circular economy are far more impactful in the long run.
“In the end, the term ‘circularity’ may just be one way to make us aware that we need a more encompassing, integrated and restorative sustainability path that includes people as much as technology and nature.” ― Michiel Schwarz
There’s a new way of doing things in the world of business, and it’s called the circular economy.
The basic idea is that instead of wasting resources by creating products that are only used once and then thrown away, we should find ways to reuse and recycle them.
This can be done by designing products that can be taken apart easily to be recycled or by creating closed-loop systems in which all the waste from one process becomes the raw material for another process.
Until now, we have lived with linear production models; in other words, we extract, produce, consume, and discard.
But unfortunately, the society in which we live means that the pace of consumption is accelerating, a fast but unsustainable model for the planet.
This idea of the ‘circular economy’ is not new.
Still, it has gained traction in recent years as many companies and organizations are looking to drive innovation and adopt more sustainable practices.
The circular economy aims to establish a more sustainable production and consumption model. It is the next step of our transformation.
There are many benefits associated with the circular economy model, allowing for significant environmental and economic gains.
This article will look at the 14 outstanding benefits of the circular economy model.
1. Help To Reduce Greenhouse Gases
The prime purpose of the circular economy is to conserve the ecosystem and combat excessive natural resource exploitation. It can effectively reduce greenhouse gases excessive consumption of raw materials, enhance agricultural productivity, and mitigate unfavorable externalities.
- Utilizes renewable energy resources -limiting the use of fossil fuels
- Promotes dematerialization and reuse to reduce the consumption of new materials
- Reuses residues to their maximum capacity
- Promotes energy-efficient production and use of non-toxic materials
According to the latest Circularity Gap Report, switching to a circular economy could reduce greenhouse gas emissions by 39% and ease pressure on virgin materials by 28%.
The circular economy allows for a reduction in the carbon footprint of products by reducing the need to mine, process, and transport materials used in their production.
2. Increase Recycling And Re-Use Rates
The circular economy encourages the reuse of products and materials, making it easier for companies to invest in recycling efforts.
This helps raise the recycling rate significantly — allowing more valuable resources to be recycled instead of being disposed of in landfills or incineration facilities.
A study by the Ellen MacArthur Foundation revealed that an expected increase in recycling and reuse would see carbon emissions drop by 11%, energy savings of 12%, and increased resource productivity by 14%.
This can be witnessed in natural ecosystems such as forests, which are home to a vibrant diversity of life forms with complex relationships between them, where no part goes to waste.
3. Reduce Negative Impact Of Manufacturing On The Environment
Countries currently generate more waste than they recycle, meaning that unwanted or unusable products are pushed to other countries or regions within the same country.
The manufacturing process is considered one of the leading causes of pollution and climate change today, with around 70% of worldwide energy consumption.
The air quality in many cities is deteriorating, with manufacturing being one of the main contributors. Fortunately, reuse is the core principle of the circular economy model, which means that manufacturers can adopt more sustainable practices.
4. Reduce Energy Costs
As the circular economy focuses on increasing energy efficiency and ‘smart’ usage, energy costs will likely decline with technological advances in the green economy.
The circular economy encourages customers to invest in energy-efficient products as there is a strong business incentive to do so. For example, if a washing machine is designed for easy disassembly, the owner’s ability to repair it easily is increased.
5. Mitigate Land Degradation
The circular economy aims to increase land productivity, reduce food waste from farm to table, and improve nutrient return to the soil to combat such losses.
Apart from the loss of biodiversity, around the US, $40 billion of the global economy is drained due to land degradation. Globally about 25 percent of the total land area has been degraded.
Fortunately, manufacturers are starting to consider the environmental footprint of their products at all stages in the supply chain.
The circular economy makes it easier for companies to monitor their impacts on land usage, encouraging more sustainable practices. In a circular model, waste is considered a resource rather than discarded. As a result, this process can help to preserve land usage.
In addition, it seeks to enhance the soil quality through biological processes like composting and anaerobic digestion, which reduces the need for fertilizers and other additional nutrients.
6. Promote Conservation of Natural Resources
Unlike the linear economy, which is built on constant material extraction, the circular economy has up to 70% potential of saving materials, which can amount to up to a trillion dollars annually.
This makes a circular economic system efficient in dealing with the increasing material needs of the population by extending material cycles, making them last longer, reducing landfills, and energy-based recycling processes.
It also cuts down on the pollution caused by material extraction processes.
7. Develop New Business From Waste
The wealth of emerging markets has contributed to higher living standards, resulting in significant consumer and industrial waste.
Many cities in these regions dedicate up to half of their budgets to solid-waste management. Innovative enterprises, however, are finding methods to turn trash into income streams by applying circular economy principles.
They may aggregate large quantities to justify the company investment and build the infrastructure necessary to organize and manage waste supply chains by pooling significant volumes.
McKinsey’s research demonstrates this through three examples,
- Polyethylene terephthalate bottles in mixed garbage can be incinerated, but the energy produced is modest. On the other hand, extracting the material value of polyethylene terephthalate bottles from combined recyclables or bottle-to-bottle recycling generates a far greater return.
- Tires are a very popular choice for recycling. On the other hand, metals are generally recovered from automobile tires in open backyard fires, which have significant health and environmental consequences. Aggregating tires for use as industrial fuel may increase their value by almost ten times while also breaking them down to create road-paving material with aggregate benefits.
- Electronic waste, shifting from small-scale recycling to the finest smelting techniques or liquid-chemical extraction processes, increases yields. Keep in mind that there is more gold in electronic scrap than in ore pound for pound.
8. Develop New Opportunities
It is essential to understand that economic growth is not based on resource consumption, and they are two entirely different things.
The economy fails to grow when resource consumption is the only basis for success. However, it does so successfully by creating new opportunities for recycling materials.
A major study with the Ellen MacArthur Foundation demonstrates that such an approach could boost Europe’s resource productivity by 3 percent by 2030, generating cost savings of €600 billion a year and €1.8 trillion more in other economic benefits.
9. Drive Innovation & Entrepreneurship
Circular economics challenges innovative solutions based on a new way of thinking.
New technologies create new opportunities for entrepreneurs in the circular economy to unlock value. As a result, emerging economies will invest in research and development to explore these possibilities.
There is a growing trend of using biotechnologies in the circular economy, where innovative products and materials are created from biological processes. For example, Casper Material is developing mushrooms to replace plastic to create sustainable packaging options.
All these opportunities will lead to new business models such as the sharing economy and guarantees of origin.
This implies considering circular rather than linear value chains and optimizing the entire system. This leads to new insights, multidisciplinary collaboration between designers, producers, and recyclers, as well as sustainable innovations.
10. Create Jobs Opportunities
Another significant advantage for the customer is job creation.
To reach a circular economy, numerous new industries will be needed. This implies that there will be plenty of new employment opportunities available.
On the other hand, many environmental techniques may eliminate specific career prospects, such as coal mining or other occupations related to nonrenewable resources, which are a major worldwide worry.
Moving towards a circular economy will be supported by new jobs in the recycling, re-manufacturing, and repair sectors, seeing growth rates of up to 9%.
These jobs will expand for labor-intensive recycling and high-quality repairs; jobs in the logistics sector through local product take-back; new enterprises through innovation, service economy, and new business models.
11. Make Businesses More Resilient
Since a circular economy model is dependent on reusing and recycling materials, it is free from the influence of raw materials’ fluctuating prices.
It allows businesses to stay in operation by assisting them in keeping their supply chains going. It also prepares organizations to deal with unforeseen events.
If, for example, a company cannot acquire the materials or produce their products due to extreme weather conditions, they are still able to continue operations. They can resort to other sources of material and use recycled goods in place of the usual ones used in production
12. Provide benefits for the consumer
Today’s consumers want to support companies whose philosophies align with their own, and green initiatives are among the most important ideals for customers.
By adopting an environmental business model, you may widen your consumer base and create more loyal customers.
Besides the environmental benefits, a circular economy provides plenty of benefits for the consumer. For example, the reuse of materials discourages practices like planned obsolescence, which means that your products will last longer.
It also promises an increased disposable income since it encourages practices like buying used items, leasing or renting instead of owning, and other more economical practices.
13. Increases Demand For Services
The demand for these services increases as more companies adopts a circular economy approach. Such a policy creates sustainable development that is beneficial to the overall economy.
Ellen McArthur’s Foundation report shows that a circular economic system can create demands for new services and create job openings.
- Reverse logistics organizations that endeavor to reintroduce products into the system
- Selling and marketing platforms that aim to provide lasting products
- Companies specialized in refurbishing products and re-manufacturing parts and components
The circular economy endorses businesses that rent or lease products instead of selling them. Such a system encounters frequent interaction of businesses with the customers, which helps them learn more about their clients’ consumption patterns and preferences.
This can ultimately improve user satisfaction and enhance their loyalty.
Moreover, the business can help it develop products and services that are better suited for its consumers and stick to the circular economy’s notion of providing lasting products according to current demands.
14. Foster Collaboration
The circular economy requires the participation of several sectors such as government, policy-makers, consumers and producers, investors, innovators, and financial institutions.
It is a daunting task requiring collaboration from these key players for its success. This also includes input from all levels of society and industry, from north to south.
A powerful model that allows everyone to contribute to its success.
Everyone has a role to play in this system, making sure materials are used repeatedly, so nothing goes to waste.
The current linear economy has exposed our natural resources to severe exploitation to fulfill the increasing population’s requirements over the years.
With the circular economy’s evolution, we will be empowered to design models to conserve our environment and natural resources while satisfying the growing population’s needs.
Although the circular economic model has started to pave its way into the linear economic system, we are currently facing the challenge of mainstreaming it and bringing it to scale.
However, considering the current disruption, it is high time to adopt the circular economy’s sustainable economic system. While it is a time-taking process, the positive externalities that it guarantees are far more impactful in the long run.
Start by identifying ways to embrace the fundamental principles by asking questions like,
- How might we design out of waste?
- How might we reintroduce materials into the system?
- How might we regenerate natural resources?
Achieving a circular economy is no small undertaking; it will require individuals, businesses, and governments worldwide to collaborate.
But, with all of its benefits, there’s no reason why we shouldn’t start moving toward this model today.
References and additional resources
- Towards the Circular Economy
- Ellen Macarthur Foundation — Circular-economy
- Barriers to the Circular Economy — Integration of Perspectives and Domains
- Toward-the-circular-economy-accelerating-the-scale-up-across-global-supply-chains — World Economic Forum
- Towards Circular Economy Report — World Economic Forum