What is the Circular Economy?
Discover what a circular economy is and how it eliminates waste by designing, making, using, collecting, transforming, and reusing resources sustainably. Learn more today!
What is the circular economy?
A circular economy is a regenerative system that minimises waste and extends the life cycle of materials. Rather than relying on continuous consumption and disposal, it promotes the introduction reuse, repair, refurbishment, remanufacturing, and recycling.
- A circular economy could reduce CO₂ emissions by 39% by 2032 (World Economic Forum).
- A transition to circularity could generate £3.4 trillion in economic benefits globally by 2030 (Ellen MacArthur Foundation).
Why the world needs a circular economy
Every year, the world generates over 2 billion tonnes of waste, much of which ends up in landfills or the ocean. At the same time, natural resources are being extracted at unsustainable rates, by 2050, global resource use is expected to double, leading to increased pressure on the environment, possibly even environmental collapse, if we continue business as usual.
The circular economy provides a solution. Unlike the traditional “take-make-waste” model, the introduction of a circular system keeps products, materials, and resources in use for as long as possible, reducing waste, cutting emissions, and driving innovation. By rethinking how we design, use, and recover materials, the circular economy reduces waste, cuts emissions, and fosters innovation.
How the circular economy works
A circular economy functions by preserving the utility of materials and products for the maximum duration. This can be achieved through strategies such as reuse, repair, refurbishment, remanufacturing, and recycling.
The aim is to reduce waste generation and restore our natural systems by creating a closed loop for all materials to be recycled or reused instead of being single use.
This approach moves away from traditional linear economy models of “take, make, waste”, where resources are extracted, utilised, and then disposed of.
Materials in a circular economy are collected and reused after each use:
Design
Make
Use
Collect
Transform
Reuse
Design
Circularity begins with design. By focusing on more circular designs, it helps businesses emphasise the importance of creating durable, repairable, and recyclable products. By opting to choose more sustainable materials and modular design, we can keep resources valuable beyond their initial use.
Make
Incorporating more sustainable practices into our manufacturing processes can significantly improve circularity efforts. This could be businesses introducing more sustainable materials, focusing on the minimisation of waste, and the optimisation of energy efficiency.
This approach helps businesses prioritise responsible sourcing, ethical production methods, and the utilising of recycled content to remove the need for virgin materials.
Reuse
The final step is to reintroduce transformed materials back into the economy. This can be achieved through new repurposed products, second-hand markets, or closed-loop manufacturing. Focusing on monitoring reuse levels ensures your resources maintain value and contribute to a circular system.
Transform
After collection, all materials should be processed through more sustainable methods such as recycling, remanufacturing, or upcycling.
This process brings new life to discarded items by monitoring and converting them into high-quality raw materials for new products – limiting the necessity for extracting virgin resources.
Collect
At the end of a product’s first life, proper collection systems are essential to ensure materials don’t end up in landfill. Efficient take-back schemes, waste management programmes, and consumer participation allow valuable resources to be recovered and reintegrated into the system.
Use
Extending the lifespan of products is essential. By shifting to responsible consumption, maintenance, or sharing models, businesses can make sure items are utilised to their maximum potential. Promoting repair, resale, and rental services will reduce unnecessary waste and maximises resource efficiency.
Core circular economy principles
The circular economy aims to tackle climate change, biodiversity loss, and pollution while providing social and commercial benefits for businesses and communities. To drive sustainable change, businesses must embed three key principles throughout their operations, as outlined by the Ellen MacArthur Foundation:
Eliminate waste and pollution
A major flaw of the linear economy is that it creates waste by design and accelerates climate change. The circular economy prevents waste before it happens by ensuring that materials are used efficiently from the outset.
Key strategies to eliminate waste:
- Eco-friendly product design – Change to recyclable, easy to recycle and reusable materials.
- Sustainable packaging – Regularly monitoring and reviewing material lifecycle with lifecycle analyses to understand carbon usage and food reduction benefits.
- Closed-loop manufacturing – Recycle materials within production cycles.
- Advanced waste analytics – Use data to optimise resource efficiency and reduce excess.
Did you know that by shifting the change to designing waste out of the system, the EU could save €600 billion annually in material costs? (Source: European commission)
Circulate products and materials
Instead of discarding products after a single use, circularity ensures they remain valuable for as long as possible.
How businesses can extend product life cycles:
- Design for durability and repairability – Build products to last.
- Second-hand markets – Platforms like eBay and Vinted promote resale.
- Remanufacturing – Refurbishing used products restores them to near-new condition.
- Product-as-a-service models – Subscription-based access rather than ownership.
Did you know extending the lifetime of smartphones by one year could save the EU 2.1 million tonnes of CO₂ emissions annually. (Source European Commission)
Regenerate natural systems
The circular economy doesn’t just minimise harm, it actively restores ecosystems and regenerates natural resources.
How businesses can support regeneration:
- Switch to renewable energy – Reduce reliance on fossil fuels.
- Adopt regenerative agriculture – Improve soil health and biodiversity.
- Commit to sustainable sourcing – Avoid deforestation and protect ecosystems.
- Regeneration initiatives – Invest in reforestation and carbon sequestration projects.
Did you know that regenerative agriculture could remove 23 gigatonnes of CO₂ by 2050, almost half of current annual emissions (Source: Regeneration International).
Why businesses should embrace circularity
Businesses, governments, parliaments, and individuals alike stand to benefit from embracing the circular economy.
There are three key benefit pillars, each offering significant contributions:
Some of the most compelling reasons for businesses to adopt a circular economy are financial. With the global economy still only being 7.2% circular (Circularity Gap Report, 2023), businesses leveraging circular economy practices could see significant competitive advantages.
Examples include:
- Cost savings – Reduce raw material costs and waste disposal fees.
- New revenue streams – Unlock resale, leasing, and recycling opportunities.
- Enhanced resource efficiency – Maximise productivity and profitability.
By shifting to a circular model, businesses unlock new revenue streams, improve operational efficiency, and build resilience against resource scarcity.
The shift towards a circular economy provides numerous advantages to society:
- Job creation – Drive employment in recycling, remanufacturing, and eco-design.
- Improved quality of life – A cleaner environment and healthier ecosystems.
- Community engagement – Support local initiatives and circular collaborations.
The circular economy promotes responsible consumption and contributes to a fairer society.
The implications when following a transition to a circular are substantial to the environment:
- Reduction of waste and pollution – By eliminating waste, businesses significantly contribute to the improvement of air, water, and soil quality.
- Conservation of natural resources – Reducing demand for raw materials lessens deforestation, mining, and water depletion.
- Mitigating climate change – A circular economy reduces carbon emissions, contributing to environmental sustainability and mitigating climate change.
The circular economy transition is instrumental to addressing climate change and conserving biodiversity, putting more focus on sustainable production and consumption practices in the environment.
How Reconomy enables the circular economy
At Reconomy, we help businesses transition to circularity through data-driven insights and innovative sustainability services. Through cutting-edge technology and strategic partnerships, we provide tailored solutions to help businesses reduce waste, optimise supply chains, and achieve sustainability targets.
We offer a comprehensive suite of services, including:
Waste and resource management
Enabling companies to minimise waste and maximise material recovery. Enabling a transition to a more circular economy.
Waste and resource managementCompliance and reporting solutions
Ensuring businesses meet environmental regulations and sustainability goals.
Compliance and reporting solutionsReverse logistics and returns management
Helping retailers and manufacturers optimise returns and resale operations.
Technology-driven insights
Leveraging data analytics to drive smarter sustainability strategies.
Applications and industry examples
The circular economy is already transforming industries, and Reconomy is helping them lead that transformation. Across sectors, our Recycle, Comply, and Re-use Loops create end-to-end solutions—turning ambition into action. Whether it’s closed-loop packaging, returns management, or regulatory compliance, Reconomy enables your business to think circular and act decisively.
Textile & Fashion
We are helping brands with reshaping fashion by focusing on repair, reuse, and remanufacture. We help fashion retailers optimise take-back schemes and improve recyclability at scale. For more insights into the latest developments in this sector, explore our blog post below.
Construction
Modular design and Cradle to Cradle-certified materials are reducing waste and enabling flexible, future-proof structures. Our services ensure efficient material flows and compliance across sites. Discover how circular economy principles are reshaping the construction industry for a sustainable, waste-free future, into our blog post below.
Grocery
Supermarkets are embracing circular practices by redesigning packaging for recyclability, implementing closed-loop logistics, and reducing food waste. Reconomy supports these initiatives by providing data-driven solutions and infrastructure that enable grocers to minimise waste and enhance sustainability across their supply chains.
Automotive
Leasing, remanufacturing, and intelligent reverse logistics are becoming the norm. Reconomy supports manufacturers in creating durable, serviceable vehicles that stay in use longer.
Join the circular revolution with Reconomy
Adopting circular practices is not just an environmental necessity, it’s a smart business strategy that delivers tangible benefits.
Let’s shape a waste-free future together.
Global developments and policies
Circular economy principles are no longer niche. They’re embedded in international strategy, shaping policy, investment, and business practices across the globe. For leaders of large organisations, understanding and aligning with these frameworks is not only essential for compliance, but it’s critical for maintaining competitiveness in a resource-conscious world.
Europe remains at the forefront of circular policy. The Circular Economy Action Plan, a central component of the European Green Deal, outlines a bold vision to decouple economic growth from resource use. It targets closed-loop flows of materials, supports producer and manufacturer responsibility, and promotes circular design across european value chains.
Supporting this agenda is Horizon 2020, the EU’s innovation funding programme, which has invested heavily in European circular solutions, from eco-design and bio-based materials to reuse infrastructure and digital product passports. These developments are accompanied by a growing body of European reports and legislation that businesses must navigate with precision.
At Reconomy, we translate these legislative frameworks into tailored roadmaps for our european customers, ensuring they remain ahead of regulation, while embedding circularity into their operations and reporting.
The development of globally recognised standards also continues to accelerate. The ISO/TC 323 Circular Economy Standard provides consistent terminology, measurement approaches, and best practices, giving businesses a common language to work across borders. Reconomy aligns its services to this and other relevant standards to support international scalability and assurance.
Collaboration is equally vital. The Platform for Accelerating the Circular Economy (PACE), a public-private partnership supported by global organisations, is driving cross-sector innovation, investment, and policy alignment. Reconomy engages with these efforts to help clients anticipate and benefit from global circular trends.
China was one of the earliest adopters of circular economy thinking at a national level. China’s 11th Five-Year Plan formally incorporated circular economy objectives, focusing on plastic waste management, industrial efficiency, and urban planning. This approach influenced the development of infrastructure that supports resource recovery and circular production systems on a massive scale.
As China continues to evolve its circular development pathway, it sets the tone for other emerging economies looking to balance economic growth with environmental sustainability.
The world is also seeing a shift toward binding policy. New international legally binding agreements, particularly those targeting plastic pollution and waste exports, are reinforcing the global consensus: linear resource use must end.
These agreements are supported by complementary policies such as Extended Producer Responsibility (EPR) and deposit return schemes, which ensure that producers and manufacturers are held accountable for the entire lifecycle of their products.
Explore our insights
Here you will find key industry insight on all things related to the circular economy. Keep your finger on the pulse with the Reconomy blog.
Driving systemic transformation and implementation
A transition to a circular economy is not just a single initiative, it’s a widescale shift that redefines how businesses operate and compete. For organisations seeking to lead the way on circularity, this transformation presents a strategic opportunity: to redesign processes, unlock efficiency, and build long-term resilience.
At Reconomy, we guide some of the world’s biggest businesses through this shift, embedding circular thinking at every level and sector. By reimagining business models, optimising supply chains, and embracing circular economy principles, we enable our partners to move beyond waste reduction and towards circularity.
But true change goes beyond infrastructure. It requires collaboration across industries, supply chains, and sectors. At Reconomy, we help build and support those partnerships, ensuring that systemic transformation delivers measurable, sustainable business outcomes.
Related concepts and theoretical background
Behind the circular economy lie some powerful concepts: Cradle to Cradle, Biomimicry, Industrial Symbiosis, and the Blue Economy. These frameworks inspire how we design, use, and recover resources. At Reconomy, we translate these concepts into practical action. Our services integrate regenerative design, life cycle thinking, and Extended Producer Responsibility (EPR), ensuring sustainability strategies are grounded in science and deliver tangible results. We support our clients in designing for longevity, embracing closed-loop systems, and shifting from ownership to access. This is where theory becomes practice, and innovation delivers on its promise.
Cradle to Cradle
At its core is the Cradle to Cradle philosophy, designing products with the intention that every material can return safely to nature or industry. This is closely tied to regenerative design, where the goal is not just to reduce harm but to restore and replenish natural systems.
Biomimicry
Biomimicry looks to nature’s time-tested patterns for innovative solutions, informing material design, energy use, and circular processes that mimic ecological balance. Concepts like the laws of ecology and industrial ecology remind us that nothing in nature is wasted, and all outputs can become inputs for another process.
Industrial symbiosis
Building on this, industrial symbiosis fosters cooperation between organisations, allowing waste or by-products from one process to serve as a resource for another. This systems-level coordination is enabled by systems thinking and life cycle thinking, which encourage a holistic view across the value chain.
The Blue Economy
The Blue Economy extends these ideas into models that generate zero waste while creating economic value, often using local resources. Meanwhile, principles such as the waste hierarchy and eco-efficiency help businesses prioritise reduction, reuse, and recycling over disposal.
Policies like Extended Producer Responsibility (EPR) further anchor these ideas in practice, holding manufacturers accountable for the full lifecycle of their products and accelerating the shift toward a looped and performance economy.
At Reconomy, we apply these theories in real-world contexts, bridging knowledge with action to help businesses embed circular thinking into their operations and deliver measurable, sustainable results.
Future prospects and trends
The future of the circular economy is digitally enabled, intelligence-led, and built on collaboration. Emerging technologies like blockchain, AI, and big data are unlocking new possibilities, making circularity more transparent, trackable, and scalable.
Industrial symbiosis, shared platforms, and product-as-a-service models are reshaping value creation. Reconomy helps businesses seize these trends, offering solutions that are future-ready, commercially viable, and operationally effective.
Circularity is not about doing less harm, it’s about creating systems that regenerate. At Reconomy, we enable that regeneration by helping our customers lead with purpose, innovate with confidence, and scale with impact.
FAQs
Discover the most frequently asked questions surrounding the circular economy.
The primary objective is to reduce waste streams (such as food waste), increase product longevity, and enhance natural systems to establish a sustainable and efficient economic model.
This approach lowers expenses, generates new revenue opportunities such as product leasing, helps with monitoring sustainability performance, and enhances brand reputation.
The circular economy reduces environmental impact, creates economic opportunities, and promotes social well-being by fostering sustainable practices.
The Butterfly Diagram is a visual representation of the circular economy model, showing the flow of biological and technical materials in a closed-loop system.
Reconomy can help your business by providing tailored waste management solutions, resource efficiency audits, and innovative recycling strategies.
A circular economy is an economic model aimed at minimising waste and maximising resource efficiency. It focuses on reusing, repairing, refurbishing, and recycling existing materials and products to create a closed-loop system that reduces impact on the environment.
- Resource security – Finite resources are being depleted faster than they can be replenished.
- Economic resilience – Circular models help businesses stabilise supply chains.
- Sustainability – Over 91% of materials extracted globally are wasted after a single use (Circularity Gap Report).
Did you know a circular economy could reduce global carbon emissions by 39% by 2032? (Source: World Economic Forum).
The concept became notable in the late 20th century, with significant developments in the 1970s when Walter Stahel proposed the idea of a closed-loop economy. The Ellen MacArthur Foundation outlined its principles in the early 2010s.
This term refers to an economic system that shifts towards more utilisation of resources through means of reuse, recycling, and regeneration, subsequently reducing our reliance on finite resources like food.
The circular economy does not have a single inventor. It draws from ideas like industrial ecology, cradle-to-cradle design (by William McDonough and Michael Braungart), and the work of Walter Stahel on the “performance economy.”
Circular economy can be measured using:
- Circularity indicators: Helping with monitoring metrics such as Material Circularity Indicator (MCI).
- Waste reduction rates: Monitoring the amount of waste avoided.
- Recycling rates: The percentage of materials recycled is tracked.
- Carbon footprint: Emissions saved through circular practices are assessed.
- Zero Waste Index: Reconomy’s Zero Waste Index provides a detailed breakdown and analysis of your progress towards zero waste, alongside our other consultancy services. Whether you are already on your zero-waste journey and focusing on food waste minimisation or have only just begun and are simply trying to recycle as much as possible, our Zero Waste Index can help you focus your efforts and make improvements toward your goals.
Critiques and limitations
The circular economy offers a compelling vision, but as with any transformative model, it comes with complexity, contention, and criticism. For managers and directors making strategic decisions, understanding these limitations is essential for setting realistic expectations and building robust, future-proof solutions.
One of the most frequently cited challenges is the lack of a unified definition. The circular economy is often described as an umbrella concept, encompassing everything from recycling and reuse to product-as-a-service and regenerative design. This broadness makes the model adaptable, but also leads to diverging definitions, which can dilute focus and complicate implementation.
Additionally, the field still lacks widely accepted circular economy performance indicators and economic performance measurement tools. Many organisations struggle to quantify their progress toward circularity in a way that satisfies both internal stakeholders and external regulators. Without robust, standardised metrics, it becomes difficult to benchmark impact, track ROI, or compare outcomes across sectors.
Much of the circular economy literature and practice remains rooted in engineering-centric assumptions, focusing on materials, technologies, and flows. While all are still crucial, this approach can sideline the social dimension of sustainability.
Issues such as the distribution of benefits and costs, who wins, who loses, and who bears the burden, must be considered. For example, shifting to circular models without inclusive policy design may result in choice editing or rationing unsustainable products, limiting access for lower-income groups, and raising ethical questions. The social justice component of circularity must not be overlooked.
At Reconomy, we prioritise a balanced model, one that optimises material circularity while embedding fairness, accessibility, and stakeholder engagement.
In complex global supply chains, circularity can be difficult to implement at scale. Even well-designed systems can face cascading failures, where a disruption in one part of the loop (e.g., materials recovery) creates inefficiencies or breakdowns across the entire system. These risks are heightened in industries heavily reliant on fragile or decentralised infrastructure.
There’s also a need to recognise where circular models are simply not yet feasible, due to cost, policy gaps, or technological barriers. Not every product or sector can transition to a closed-loop model overnight, and businesses must be equipped to identify the most viable opportunities first.
Thinking circular: knowledge and insight
The latest news, insights, and thought leadership from across Reconomy and the circular economy.
Ready to #CloseTheGap?
Closing this gap means embracing circular design, shifting consumer behaviour, adopting policy reform, and implementing infrastructure that supports reuse, refurbishment, and recycling. If you’re business is ready to embed new and greater circularity into your operations and lead the transition to a waste-free world, we’re here to help. Together, lets #CloseTheGap.
Close the gap