What is the Circular Economy? The complete guide

Circular economy eco friendly

The Circular Economy is the answer to global environmental challenges everybody will be eager to hear. It is the answer that isn’t restrictive, that isn’t telling us to do less, travel less, buy less. The Circular Economy is the eco-guilt free, innovative, and collaborative answer to some of our biggest global challenges.

Through the COVID-19 pandemic, we have seen that the commonly suggested sustainable solution of reducing our purchases and travelling, can have detrimental effects on both our economy and our wellbeing. But we are living in a finite world, where continuing to operate under a take-make-waste, Linear Economy is having catastrophic effects on our planet. Change needs to happen; we need to decouple growth from our environmental impact. After reading this, whether through the lens of a philanthropist, economist, environmentalist, or all of these, you will be asking yourself, what can I do to be a part of making the Circular Economy our reality? And good news: I will cover this, along with some examples of companies leading the charge as inspirations to follow.

So first and foremost, what is the Circular Economy?

A common declaration when experts speak about the Circular Economy is that it is an epiphany. Circular is happening, you have most likely already made your first purchase, or seen the social, economic, or sustainable impact that the Circular Economy has. You might just not know it as the Circular Economy. The key point is designing and making purposeful decisions to make products deliver more value.

Circular Economy vs Linear Economy

The Linear Economy, our most used economic system, is take-make-waste. We live in an exciting world with the skills and technology to create “new” things all the time, meaning consumerism is at an all-time high. We take resources from the planet to make products, which we use, and, when we no longer want them, throw away. But as Ellen MacArthur frequently says there is no “away”. This is a systemic problem, which needs a systemic solution. Say hello to the Circular Economy!

SOURCE: Ellen MacArthur Foundation

It would be impossible to write about the Circular Economy, without siting the Ellen MacArthur Foundation. Whilst Ellen MacArthur herself asserts she did not invent the Circular Economy, her foundation has developed and communicated the strategies. Driving and bringing about huge change in some of the most influential businesses and organisations. Accelerating the change from a Linear to a Circular Economy. 

The Ellen MacArthur Foundation when explaining the Circular Economy in their youtube series said:

There’s a world of opportunity to rethink and redesign the way we make stuff. ‘Re-Thinking Progress’ explores how through a change in perspective we can re-design the way our economy works – designing products that can be ‘made to be made again’ and powering the system with renewable energy. It questions whether with creativity and innovation we can build a restorative economy.”

The Ellen MacArthur Foundation has defined three main principles to Circular Economy

  1. Design for disassembly
  2. Keep Products and Materials In Use.
  3. Regenerate Natural Systems.
SOURCE: Circular Economy Diagram, Ellen MacArthur Foundation

First step, Design for disassembly, as explained perfectly by The Ellen MacArthur Foundation:

Waste and pollution are not accidents, but the consequences of decisions made at the design stage, where around 80% of environmental impacts are determined. By changing our mindset to view waste as a design flaw and harnessing new materials and technologies, we can ensure that waste and pollution are not created in the first place.”

When designing a product, the central focus should be ensuring the product can be easily repaired and maintained, using the most environmentally-friendly materials – this is where innovation is at its finest, there are some impressive examples of this below.

The product should be designed for disassembly, finding the most efficient way to recover the material at the end of their first life and raring to live their second. Made to be made again. Not forgetting that all the design and manufacturing can be powered by renewable energy.

Next step on the circle takes us to keeping products and materials in use.

We spoke in the design principle step about designing for products to have a first, second, even, third and fourth life. Put simply, in the current linear model, we extract materials to make our products, when we are finished with them, we throw them away. But why can’t we have an economy, where the choice of material is a reused, repaired or remanufactured one? So, we are not just using up what we have, because the planet is finite.

Doing this efficiently may mean changing the way our economy and business models look. Taking a washing machine as an example. Most people in the UK have one in their home, but few long to own one. What if we changed the question and asked:

“Do you want to buy 3000 washes?”, guaranteeing you 3000 washes without having to worry about the costs of ownership and responsibility of disposing of it at the end of life – or the sinking feeling of having to replace it, not an exciting purchase we hope to make!

By the manufacturers owning the equipment, not the consumer, they are able to retain the value of the materials they need for their manufacturing processes. With some precious materials future availability being uncertain, and cost of materials rising, it also makes a viable business model to safeguard for the future.

It is great for us consumers too: we get the guaranteed service we dream of the freedom of choice and accessibility to products.

Circular Economy is about living in a world of inspiration, encouraging us to think innovatively, changing the way we ask our traditional questions, allowing sustainability to be at the forefront.

The final principle in the circle, until it all starts again, is regenerating our natural systems.

Again, changing the focus, instead of trying to be a generation of doing less or no harm, why not be the generation that does good, that regenerates. This is the element of Circular Economy which is the most natural. In nature, nothing is wasted; a true concept of zero waste. Natural products within the ecosystem follow a life cycle. All material is recovered. A leaf, the product of the tree, falls from the tree when it is no longer of use, but instead of just going “away”, it feeds the forest, providing the nutrients in the soil for new life within the forest to flourish. What a notion, that we, with our economy could use our once-discarded waste from our processes to do good, to flourish the ecosystems around us which are so valuable to us, creating natural capital.

This idea of interconnectivity that nature also does brilliantly, is another positive of the Circular Economy.  Circular Economy is not limited to interconnectivity as consumers, sharing products, services, and space, which ultimately minimise a wasted resource, it includes businesses and organisations too. By collaborating throughout the supply chain, we benefit from the innovative ideas of the trailblazing start-ups and small businesses who are agile, with the influence and command of a large business. Together, they can deliver an entire shift in the global economy. 

But what is it worth to our global economy? We’ll go into that below.

What are the Economic, Sustainable and Social Impacts of Circular Economy?

The Circular Economy heralds to inspiring the growth of the economy in harmony with nature.

Prosperity in a world of finite resources” – Janez Potočnik (Former European Commissioner for the Environment)

The World Economic Forum has found that only 9% of the global economy is circular. That 91% gap in the world economic market could have been a $4.5 trillion business opportunity in 2020 alone. 

If we take landfill alone, Ellen MacArthur identified on the BBC World of Business podcast that the landfill market in textiles is a $3.2 trillion market and we currently only recover 20%. Therefore, we are allowing $68 billion dollars’ worth of textiles to disappear out of the global economy per year. An asset that we willingly “throw away”. 

Every second the equivalent of one garbage truck of textiles is landfilled or burnt” Ellen MacArthur Foundation

When you consider that 60% of textiles are made from plastic fibres and in India alone “50% of all chemicals used, are used for cotton production”; then just considering textiles alone, you gain the magnitude of the problem and realise that the cost is not just financial. The cost is to our air quality, our land, and our oceans, all of which have considerable sustainability and social impact.

By 2050 there could be more plastic in the ocean than fish and we have seen the devastating impacts this has. The Ellen MacArthur Foundation has released a publication, ‘Breaking the Plastic Wave’ outlining how the Circular Economy is the solution to plastic pollution they state that there will be “80 million tonnes of additional plastic leakage into the ocean, with even just a 5-year delay in implementation. That is the equivalent of 13000 bottles per second, for the next 20 years.”

Some businesses have already got to work on applying the Circular Economy to plastics, with great social, sustainable, and economic benefit. The First Mile is an initiative that has formalised waste collections, monetising plastic waste in some of the most deprived communities. It provides an income and bridges the gap for global brands to have access to a material, made from recycled plastics from landfills and oceans with tremendous positive social impact. The First Mile has “curtailed and remediated child labour in landfills, undercut bad faith practices like predatory lending, and ensured that families can safely make the transition to the formal economy, all while supplying over a dozen global brands with First Mile approved materials that they and their consumers can be proud of. We have experience working with waste collectors in over a dozen low-income countries.” These incredible results of genius work is providing solutions to the seven of the core Sustainable Development Goals i.e.

  • Goal 1: End poverty in all its forms everywhere
  • Goal 3: Ensure healthy lives and promote well-being for all at all ages
  • Goal 4: Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all
  • Goal 8: Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all
  • Goal 9: Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation
  • Goal 11: Make cities and human settlements inclusive, safe, resilient and sustainable
  • Goal 12: Ensure sustainable consumption and production patterns

Top 5 examples of companies building a Circular Economy into their business models

It’s great to see companies already adopting key Circular Economy principles into their businesses, which all help lead the way and show a clear pathway for others to take note and follow suit.

  1. Adidas – “Shoes you don’t own”
SOURCE: Adidas

When it comes to Circular Economy in the fashion industry, Adidas are as impressive as they come. They have embraced the Circular Economy and made great strides with their products. They were one of the first to collaborate to deliver sportswear made from recycled plastics with Parley. But one of their latest from the Ultraboost range is a pioneer in the design and keeping materials in use principles. Adidas’ UltraBoost DNA Loop trainers are designed for disassembly by being made from just one material, not even a drop of glue! 

As a consumer, we’ll never own them, as when we’ve finished using them, they will be returned to Adidas to be remanufactured into their second life. In fact, 200 lucky Adidas creators were able to test Gen 1 of the Ultraboost. After they were finished with them, they were returned to Adidas, broken down as designed and remade into Gen 2, which went through the same tests in November 2019.

A shared future. If the end can become the beginning, we can help keep products in play and waste out of landfill”. “A sneaker that you cannot keep, but a story you can share with thousands. Made to be remade, over and over again. Help end plastic waste.”– Adidas

  1. Micro Scooter – Exploring Today, Protecting Tomorrow
Source: Micro Scooter

When it comes to design, Micro have an ECO range, working in collaboration, they are taking ocean plastics and transforming them into scooter decks, bags, helmets and many more accessories, preventing plastics reaching the ocean.

Micro make products that are made to last. Their website offers a multitude of services including a spare finder tool, repair ‘how to’ videos and Micro Experts on hand to answer any further questions. Micro’s are designed to go the distance so there is no need for any part to end up in landfill.

Finally, when it comes to regenerating our planet, Micro Scooter are part of the 1% for the Planet. A global organisation that distributes monies given by companies to environmental causes across the world. To use their words: 

It was borne out of a simple idea: because companies profit from the resources they take from the earth, they should protect those resources.” – Micro Scooter

  1. Looptworks – ‘Business that re-purposes and upcycles abandoned, pre-consumer and post-consumer materials into limited edition products
Source: Looptworks

Looptworks intercept and upcycle material that was heading for landfill, transforming them into products such as bags and even facemasks in a COVID-19 world! All the products are limited edition and officially licensed, using authentic NBA jerseys. 

Looptworks directly address the problems of the fashion and textile industry as mentioned above by using discarded materials they are reducing the amount of waste going to landfill, reducing the amount of water and energy needed to make new virgin materials and ultimately conserving natures finite resources! Overall making them a sustainability brand set for the future, applying circular thinking they have more closed-loop goals to come!

  1. Zip Car – Our mission is bold – to change the way people think about driving in cities around the world.
Source: Zip Car

Zip Car is a brilliant example of changing our traditional business models, for a viable Circular Economy business model. It suits so many of us, laboured by the ownership of a car or excited by the prospected of jumping into the latest tech, like these electric vehicles. Then Zip Car is for you!

Not only does it offer a great service but the environmental impact is incredible, it is a sustainable solution saving CO2, reducing congestion, preventing extraction of more resources and many more. Meaning you close your door on your zipcar being a more responsible you!

  1. Ben and Jerrys – Waste that makes Watts!
Source: Ben & Jerry’s

As part of the Unilever group, a member of The Ellen MacArthur Foundation, Ben and Jerry’s have Circular Economy in their core values. Ben and Jerrys Arjan Vloon, Head Engineer said: “By its very nature, manufacturing produces waste. Our goal is to reduce waste first and then ask ourselves how best to use the waste we do produce in a productive manner. The biodigester gives Ben & Jerry’s the opportunity to take what had been a waste product and turn it into a benefit for our business – producing our own energy!”

How are different countries using Circular Economy?

Whilst there is a lot individual businesses can do adapt and evolve their practices to function within Circular Economy principles, if and when countries use the Circular Economy within policies and governance then we will truly see impactful changes on a mass scale. We have pulled together some countries or cities that are already partaking in the cause.


Source: Instagram @yoursustainablematch

The Galapagos Islands are renowned for their untouched natural beauty. In late 2020, The Galapagos Conservation trust announced that they were going to apply the Circular Economy to plastics, protecting the treasured ecosystems from the global threat that is plastics! The UK Government Global Challenges Fund gave £3.5 million to fund the project led by the University of Exeter and Galapagos Conservation Trust.


Source: The Vintage News

When it comes to renewable energy Iceland is like no other, you only have to drive along the vast roads that, despite freezing temperatures, are clear of ice due to their harnessed renewable energy. Iceland gets “100% of its electricity and heat from renewable sources. 87% of its electricity comes from hydropower, and the remaining 13% from geothermal power. Oil-powered fossil fuel power stations are only used as backups to the renewable sources. Almost 100% of Iceland’s space heating and water heating is obtained from geothermal sources.” as detailed on the REUK site.

London, England

Source: Circular Online

London is a hub of knowledge and collaboration, with the buzz of businesses from start-ups, small and medium businesses to large businesses, in varying industries including tech and finance, they are all looking for something new! ReLondon is harnessing this in their Circular Economy Route Map. ReLondon predict that a move to a Circular Economy by 2036 could create net benefits worth £7 billion per year to the capital. ReLondon are offering support to businesses across London to transition to a Circular Economy. ReLondon are holding a virtual Circular Economy Week 14 – 18 June 2021 to celebrate the work done in accelerating the transition to a circular economy. For more information follow #CEweekLDN.

How Circular Economy can re-shape the future

As outlined earlier, the current economic system is reaching its limits. CO2 emissions, population growth, natural resource extraction, marine plastic pollution are key global challenges, that can be directly impacted by the Circular Economy, though Circular Economy is just one of many solutions. Whilst being one of many solutions being proposed, the Circular Economy is a solution which is not saying do less, travel less, buy less, it is a system encouraging innovation and growth of our economy. 

In fact, another key global challenge, COVID-19, which has impacted the worlds’ global economy massively, has evidenced that the Circular Economy should be the solution of choice! COVID-19 has shown us that whilst doing less, travelling less, buying less can have positive impacts on the environment, having seen the biggest annual fall in CO2 emissions since World War Two. Tt can have devastating effects on our economy. The Financial Times has said that the circular economy can help us become stronger and more resilient post COVID-19.

What are the Challenges with Circular Economy?

Despite appearing to be the silver bullet, the Circular Economy has not become the norm. Instead, as Marc de Wit observes in the National Geographic “the “circularity gap” is growing, not shrinking. Our use of natural resources could double by 2050. Our carbon emissions are still increasing.”. 

A change as marked as the industrial revolution is needed to realise the full benefits of a Circular Economy. We need to turn the tide on a culture of take-make-waste. Fortunately, we are not yet at the point of no remaining resources, forcing us to make the systemic change to the Circular Economy, but do we want to reach that point to make that change? Or will businesses, industries, governments, and individuals drive that change and see the Circular Economy as the answer to some of the worlds modern day challenges, and the future society’s crisis. 

We need to see more businesses with significant market share and control over multiple segments of the supply chain, apply the Circular Economy to their business plans. Leading the way, lifting smaller players or niche players that can design circular, it sets the norm, and may enable competitiveness in a system that is inherently collaborative. This will be a marked change because the Linear Economy is based on competition. Collaboration is the key, if each of these key players can unite, demand this change, we can start to realise the true benefits of a Circular Economy. Collaborating, a shared benefit, across the industry and supply chain, giving consumers accessibility to more sustainable products.

How to Support & Spur the Circular Economy

With the coolest products being forged out of the Circular Economy, get out there and vote with your £, see the whole impact of a product and get excited not only about the product but about the innovation that has gone into making it! 

It has long been said that consumers drive the change in the economy. Support the new way of thinking that is redesigning a system. As an ever-evolving space, continue to seek out the innovative brands and products that are being created under a Circular Economy business model, so you can play your role in accelerating the change in our economy. Join the conversation, the virtual nature of the world right now opens hubs of businesses, individuals and organisations working together to actively make Circular Economy happen, now! For example, the ReLondon’s Circular Economy week, 14 – 18 June 2021, is currently due to be run virtually. The Circular Economy Show podcast by the Ellen MacArthur Foundation is a go to place for updates when it comes to some of the biggest Circular Economy projects and guidance.

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