| Circular Economy

How Circular Economy business models are transforming industries

Our global economy is still overwhelmingly linear, with only 6.9% of materials reused annually (Circularity Gap Report, 2024), leaving a massive circularity gap. This means more than 90% of natural resources are wasted, lost, or locked away. To reverse this, businesses must shift from intention to action.

Enter circular economy business models: practical, scalable strategies that eliminate waste, circulate materials, and regenerate nature. At Reconomy, we believe circularity is not a cost but a commercial opportunity, an essential lever for sustainable growth, resilience, and impact.

In this blog, we explore:

Let’s dive in.

Diagram of the circular economy loop showing stages from raw materials to design, production, reuse, recycling, and waste recovery.

What is the circular economy model?

A circular economy is an economic system that decouples growth from the consumption of finite resources. It is based on three core principles:

Three key circular economy principles underpin this:

  1. Eliminate waste and pollution
  2. Circulate products and materials
  3. Regenerate natural systems

This stands in contrast to the traditional “take-make-waste” linear model, which fuels overextraction, landfill dependency, and climate breakdown.

By designing out waste and rethinking how we make, use, and recover materials, the circular economy keeps resources in flow and reduces the need for virgin extraction, a vital step in meeting the world’s Net Zero goals.

Find out more about the circular economy
Graphic showing the global circularity rate of 6.9% from the Circularity Gap Report 2024.

The Circularity Gap: Why action is urgent

Today, only 6.9% of the global economy is circular (Circularity Gap Report 2024). This widening gap is caused by rising material extraction and poor resource recovery. Most materials end up incinerated, landfilled, or locked in long-lasting stock like buildings or machinery.

We need to close this gap to:

  • Reduce greenhouse gas emissions
  • Conserve finite natural resources
  • Build supply chain resilience

And to make it real, the circular economy must feel simple, achievable, and valuable.

Learn more about the circularity gap

Why businesses should adopt circular economy business models

A circular economy could reduce global CO2 emissions by 39% by 2032 (World Economic Forum), a significant reason to encourage more adoption of circular economy business models.

Circularity is no longer just about environmental responsibility, it’s good business:

  • Resource resilience: Reduces reliance on volatile raw material markets.
  • Cost savings: Avoids disposal fees, drives efficiency, and reduces input costs.
  • Revenue growth: Unlocks new income streams (leasing, resale, recovery).
  • Regulatory readiness: Supports compliance with growing frameworks like EPR and UK Plastic Packaging Tax.
  • Customer loyalty: Sustainable brands outperform. Circularity builds trust.
  • ESG performance: Delivers measurable impact aligned with ESG goals.

Large office-based businesses could save £24,000/year through smarter waste management alone. (Reconomy 10 Point Waste Framework).

6 Circular Cconomy business models

Businesses adopt a variety of models to operationalise circularity. These often overlap, and companies may combine several approaches.

1) Circular inputs

This model involves using renewable, recycled, or sustainably sourced materials in production instead of virgin resources.

  • Example: UBQ Materials transforms unsorted household waste (including food scraps and mixed plastics) into a bio-based thermoplastic substitute. This replaces conventional plastics in automotive, construction, and consumer goods.
  • Value: Reduces dependency on virgin materials, lowers emissions, and creates value from waste.
Icon representing circular inputs — using renewable, recycled, or sustainable materials in production.

2) Product use extension

Products are designed and managed to last longer, through repair, refurbishment, upgrading, or remanufacturing.

  • Example: Circular Computing refurbishes laptops through a certified process, producing high-quality, “like new” devices. This keeps IT hardware in use longer and prevents e-waste. Similarly, consumer platforms like Vinted and eBay enable individuals and businesses to resell used items, ensuring they go on to be used again rather than discarded.
  • Value: Captures more value per product unit, reduces waste, and appeals to cost-conscious and eco-conscious customers alike.
Icon showing product use extension through repair, refurbishment, and reuse within circular economy business models.

3) Product-as-a-service (PaaS)

Instead of selling products, companies provide access or leasing models. Customers pay for use, not ownership, aligning incentives for durability.

  • Example: MUD Jeans’ “Lease A Jeans” scheme. Customers lease jeans, then return them for reuse, repair, or recycling.
  • Value: Encourages customer loyalty, ensures products are returned, and supports closed-loop recycling.
Icon symbolising product-as-a-service model where customers lease or access products instead of owning them.

4) Sharing / collaborative use

Idle or underutilised assets are shared among multiple users to increase utilisation rates.

  • Example: In construction, equipment-sharing platforms enable firms to access cranes, scaffolding, or machinery when needed, rather than every contractor buying their own.
  • Value: Reduces capital expenditure, increases utilisation, and lowers total demand for new assets.
Icon showing sharing and collaborative use, representing shared access to assets in a circular economy.

5) Resource recovery / reverse logistics

Companies recover value from end-of-life products by collecting, sorting, refurbishing, or recycling.

  • Example: H&M’s Garment Collecting Program allows customers to return unwanted clothes (any brand, any condition) to stores. These items are sorted into three streams: rewear (second-hand), reuse (repurposed as textiles like cleaning cloths), or recycle (fibres re-spun into new fabrics). Similarly, Reconomy provides businesses with closed-loop recycling solutions that ensure materials re-enter the economy.
  • Value: Reduces landfill, captures residual material value, and supports compliance with tightening waste legislation like Textiles EPR.
Icon illustrating resource recovery and reverse logistics — collecting, sorting, and recycling materials.

6) Platform / ecosystem coordination

Digital platforms orchestrate circular flows by connecting businesses, consumers, and material streams.

  • Example: Rheaply provides a marketplace where enterprises and universities exchange surplus equipment and assets.
  • Value: Builds circular ecosystems at scale, increases reuse, and unlocks secondary markets.
Icon representing platform and ecosystem coordination — digital networks enabling circular material flows.

Real-world examples: Circular leaders

Here are some of the leading organisations pioneering circular models across industries and setting the example:

  • Patagonia: Worn Wear programme extends garment life, with a strong focus on repair, resale, and recycled inputs.
  • IKEA: Take-back schemes, refurbished sales, and rental models embed circularity in furniture retail.
  • Unilever: Innovating packaging design, recycling infrastructure, and circular inputs across FMCG.
  • Interface: Closed-loop carpet tile recycling, showing how construction materials can be circular.
  • Circular Computing: Refurbished laptops help IT procurement teams reduce e-waste and carbon footprints.
  • MUD Jeans: Circular fashion via leasing, recycling, and recycled content denim.
  • Decathlon: Repair workshops, buy-back schemes, and rentals for sports and outdoor equipment.
  • Rheaply: A platform for businesses to reuse surplus assets and equipment.

For more examples of businesses paving the way towards a circular economy, please visit Reconomy’s Think Circular Award, where we celebrate the circularity successes of our customers.

Chart showing Earth Overshoot Day from 1971 to 2025, highlighting rising resource consumption and ecological overshoot.

Why circular models matter now

The urgency of circular business models is underscored by Earth Overshoot Day, the date each year on which humanity’s demand for ecological resources exceeds what Earth can regenerate in that year. In 2025, Earth Overshoot Day falls on July 24th.

Over the decades, that date has gradually crept forward. In the early 1970s, Earth Overshoot Day was in late December; each year since, it has moved steadily earlier, reflecting our growing ecological overshoot.

By implementing circular systems, businesses can help push Overshoot Day further back, reduce pressure on ecosystems, and align their operations with planetary limits.

Learn more about Earth Overshoot Day

FAQs on Circular Economy business models

A circular economy business model is a way of creating economic value while minimising waste. It involves designing, using, and recovering products and materials in continuous loops, instead of discarding them after use.

 

The six most recognised are: circular inputs, product use extension, product-as-a-service, sharing, resource recovery, and platform coordination. Many businesses combine multiple models.

They reduce costs, generate new revenue streams, mitigate regulatory risks, and strengthen resilience. They also meet growing consumer demand for sustainable brands and contribute to ESG goals.

Frameworks like a Circularity Gap analysis help businesses benchmark their material efficiency against industry averages.

High-impact sectors like construction, textiles, electronics, and consumer goods benefit most, but any industry can implement circular principles.

Circular models support compliance with regulations such as Extended Producer Responsibility, which increasingly requires businesses to manage end-of-life product impacts.

Yes, small businesses can effectively implement circular economy principles, and in many cases, their size gives them a competitive edge. While they may face resource constraints, their agility, innovation, and deep community roots enable them to adopt circular strategies faster and with greater flexibility than many large corporations.

Cover image of Reconomy’s 10-point framework to enable the circular economy.

Reconomy’s Circular Economy Framework

To make circularity real, we need consistent, enabling infrastructure. That’s why Reconomy has proposed a 10-point regulatory framework covering:

  • Seven key resource streams (e.g. textiles, packaging, electronics)
  • Four waste management methods (reuse, recycling, recovery, and compliance)
  • Incentives for landfill reduction, better separation, and investment in infrastructure

Read our full framework to understand how we can simplify, scale, and regulate for a circular economy.

Download our circular economy framework

Final thoughts: circularity made simple

The circular economy is not a far-off ideal. It’s a tangible strategy that:

  • Closes the loop on waste
  • Builds supply chain resilience
  • Delivers business value and environmental impact

Reconomy exists to make circularity accessible, achievable, and advantageous for businesses of all sizes.

Whether you’re starting out or scaling up, we help you:

  • Measure your circularity gap
  • Identify opportunities for circular growth
  • Embed change across supply chains and operations

Together, we can close the gap and create a future where economic success aligns with planetary boundaries.

Ready to think circular? Visit Reconomy’s Circular Economy hub or explore how our three service loops of Recycle, Re-use, and Comply can support your sustainability goals.

Learn more about the Circular Economy

Further reading and resources

Wanting to learn more? Explore further reading and resources available from Reconomy.

What is the Circular Economy?
Circular Economy Glossary
The circularity gap
Media library
Earth Overshoot Day 2025 - #CloseTheGap to #MoveTheDate

Explore some of our related Circular Economy blogs

References