How the circular economy works: Key concepts
Three principles underpin the circular economy:
- Design out waste and pollution.
- Keep products and materials in use.
- Regenerate natural systems.
Materials—our relationship to them, how they are used, and what they can do—are completely reimagined in the circular economy. A selection of the most basic concepts are described below to illuminate how the circular economy works.
Material life cycle
As you might have guessed, “life cycle” is a term that was originally developed to describe how biological organisms and ecosystems grow and change. With the emergence of industrial sustainability, researchers turned to this concept as a model for better understanding the spectrum of ways in which manufactured goods like smartphones or cars impact the environment over the course of their life.
Life cycle analysis (LCA) is a methodology that applies this concept to the lifespan of materials and products. LCA considers all the materials sourced to make a product, the energy and labor used to produce it, how it’s transported to stores, how consumers use it, and what happens to it once its useful life comes to an end.
Half of all the greenhouse gases that are put into the atmosphere come from heavy industrial activities like mining, extraction, processing, and the transport of materials. These extractive industries expend a massive amount of energy. So when a commodity like a smartphone ends up in a landfill, all the energy and associated value that went into it also goes to waste while new materials are extracted to make a new one.
The concept of embodied energy is a way of taking into account all of the energy that goes into a product from the perspective of the entire supply chain. This takes into consideration not only the extraction of materials, but also everything else that follows to transform those materials into a product that gets used in the world, like manufacturing, transportation, labor, and disposal. Embodied energy is a way of reckoning the cumulative energy that goes into a product in order to reveal the value it holds even after it reaches its useful life. In other words, when a product ends up in a landfill, which 80% of consumer electronics do worldwide, it represents a missed opportunity for bringing value back into the economy and restoring material supplies without depleting natural stores.
Cascading is a concept for planning how materials can be best utilized within an industrial ecosystem that prioritizes reuse and recycling. For example, it has been used within the wood industry to identify opportunities for extending the usefulness of wooden biomass across a number of product applications. One cascade, or stage, would mean that the material would no longer be useful after one life cycle. So, in the case of wood, that might mean virgin wood that is used as fuel. However, in a circular economy, multiple stages would be preferred. The wood would be recovered at the end of many product life cycles and kept out of the waste stream: The solid wood in a chair that is no longer useful would become particle board chips, which might then become fiber for paper products when the board reaches the end of its service life. Only after these three cascades would the wood, as post-consumer fiber, be burned. Strategizing like this means that less virgin wood will enter the supply chain, which will limit deforestation, increase natural carbon capture through trees, and avoid the immense energy and labor spent on logging.
As cascading shows, the circular economy asks governments and businesses to bring intentional, rational thought to bear on industrial and economic flows that sometimes operate in counterproductive ways. It is widely held that the design phase is the single most important determinant of a product’s impact on the environment. Circular design embraces this approach to develop products that anticipate circular economy practices, from manufacturing to use to recovery of post-consumer materials.
A designer following the principles of the circular economy wants to preserve the economic and environmental value of a product and the materials used to make it for as long as possible. The goal is to sustain the economic value of manufactured materials by lengthening the life of products or by planning how they might be “looped back” into the economy at the end of their useful life.
Circular design is deeply informed by Big Data. A designer can use data-rich digital technologies to get real-time information about materials, processes, or supply chain contingencies. This allows for informed decision-making in place of educated guesses. For example, artificial intelligence (AI) can aid the design process, fast-tracking thousands of iterations in milliseconds so a designer can quickly find the most effective solution within different parameters. A remanufacturer could use encrypted data within a “core” (the name for a component or product that is retrieved at the end of its life) to quickly assess its condition, predict its remaining value, and determine best next steps.
Some questions that a circular designer might ask include the following:
- Can recycled or recovered materials be used? What are the availability of each?
- How will the materials used perform after one use? Two? Three?
- How easily can components be removed from others and replaced?
- How will products be recovered after customer use?
- How will the quality of materials and components be evaluated when recovered?
Decoupling is a fundamental circularity concept. The term is borrowed from other fields and was redefined by the Organization for Economic Cooperation and Development (OECD) in 2001 for the sustainability context. Decoupling captures well a primary purpose of the circular economy: To break “the link between ‘environmental bads’ and ‘economic goods.’” Ultimately, is an evolution whereby economic growth is decoupled from environmental impact.
The process of decoupling as part of the circular economy is gradual. Technological innovation alongside targeted policies would replace extractive, impactful industrial processes with sustainable methods. For example, remanufacturing supports decoupling because, as an industrial process, an entirely new product is made using post-consumer materials with a minimal draw on the earth’s natural resources. Decoupling is closely associated with the idea of sustainable (green) growth, an underlying principle of the United Nations’ Sustainable Development Goals (2015).
Circular economy and manufacturing
Manufacturing within the circular economy means organizing production in a completely different way from how most companies are structured today. Gone are linear supply chains, where raw materials are drilled, mined, or otherwise extracted from the environment. Instead, post-consumer materials are recovered and processed to make products that already have reuse baked into their design.
Circular manufacturing utilizes new technologies and methods for recovering or mitigating waste as a resource and regenerating value from materials already in economic circulation. A 2018 report published by the United Nations Environment Programme’s International Resource Panel defined these collectively as value-retention processes (VRPs). They include the following:
- direct reuse
Each VRP is a different methodological approach for recapturing value from or extending the life of post-consumer products and materials. Though similar, they represent a broad spectrum. On one end is remanufacturing, which is an industrial process for returning used or worn parts and products to a like-new condition. Next along the spectrum is refurbishment, then repair. Both of these are semi-industrial methods that can significantly extend the life of an existing product or piece of equipment. Direct reuse is found at the opposite end from remanufacturing. Not surprisingly, reusing something requires no industrial processing at all—a product or material can be used again without any substantial alteration or improvement.
Recycling, itself a wide-ranging category of methods, is unique from the other VRPs because it reduces individual products to their constituent materials. As defined by Annex IV B to the Basel Convention in 2014, recycling breaks down the integrity of products to the material level. In this way, recycling frames the spectrum of VRPs at either end, making it a circle of continuous flow.
The circular supply chain
A circular supply chain links businesses and consumers to a regenerative cycle of material use. More resilient and resource-efficient than the traditional linear supply chain, the circular model is less vulnerable to unexpected events, such as the first wave of the global COVID-19 pandemic in 2020, which led to disastrous supply disruptions the world over.
Without doubt, the circular economy supply chain is far more complex than the linear version. The cascading of materials throughout mean that today’s more or less static labels like “raw material,” “product,” and “waste” don’t apply. Instead, a more dynamic understanding of material flows is employed to not only describe the value chain, but to design and plan it. Digital technologies that can process and organize vast amounts of data in real time are critical to this work. They allow for quicker, smarter decision-making. Tools like radio telemetry or machine learning can be used to coordinate logistics; assess recovered materials for VRP intake; or better plan factory intake and production schedules, to name only a few. Better use of digital technology in a circular supply chain also increases its visibility throughout, allowing participants at all points to coordinate more easily in order to make smarter decisions faster.
Business models in the circular economy
When it comes to business, the circular economy uncovers new opportunities that may be hidden or closed off in the existing linear economic model. But, by looking beyond the frontiers of the take-make-dispose system, established companies and entrepreneurs alike can find new ways to grow and innovate. Businesses that are able to embrace circularity are more likely to thrive in it. It’s a practical and profitable strategy for businesses to maximize value and sustain growth without the supply risks that come with reliance on finite resources.
Hewlitt Packard Enterprise (HPE) is one such company that is embracing circularity. The financial information technology (IT) firm announced in 2019 that it will shift its entire portfolio from an traditional purchase model to an as-a-service one in 2022. A subscription model will allow HPE to allocate services according to real-time customer need, having found that most customers significantly underutilize the processing and storage capacity of their systems. This will not only reduce the environmental impact of IT, but transform how HPE manages the materials that they go out of its doors.
The subscription or as-a-service model means that a company is connected to a product’s entire life cycle, not just up until the point of purchase. But this isn’t an extra burden—it’s a way for a firm like HPE to evade up to 75% of the costs associated with the extraction of natural resources for production. It means materials remain in a circular productive flow so that as much value can be realized as possible. HPE staff will perform basic upkeep and preventative maintenance on equipment installed at customer locations. They will also take outdated or malfunctioning equipment back for repair, refurbishment, or remanufacturing. In this way, HPE is invested in what happens to its equipment throughout use and afterwards—materials aren’t thrown away by customers.
Or take the smartphone company Fairphone. The European manufacturer recycles existing electronic waste (e-waste) to make new smartphones. This not only saves the company immense costs in terms of material extraction, production, and labor, but it helps to stem the more than 50 million tons of e-waste that go into landfills globally every year. The consumer electronics industry relies on the mining of finite, rare earth minerals like copper, tungsten, and lithium in countries where labor and environmental regulations are weak or easily undermined. Fairphone smartphones are growing the market for sustainable electronics, delivering products that are competitive with the features of newly manufactured phones and compatible with recent versions of the Android operating system.
Circularity in action today
The circular economy is more than a theoretical concept. A global constellation of companies, government agencies, and research organizations are working to realize it through research and development, policymaking, and innovation. Explore the links below to learn about some of the most notable initiatives.
- Ellen MacArthur Foundation: A nonprofit based in the United Kingdom, the Ellen MacArthur Foundation was established in 2010 with the mission to accelerate the circular economy. Today, it is the leading voice for defining and advocating the circular economy among governments and businesses worldwide.
- European Union Circular Economy Action Plan: In March 2020, the European Union’s Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions published a strategy for advancing the circular economy within the economic bloc’s member states.
- International Resource Panel of the United Nations Environment Programme: The International Resource Panel was launched by the United Nations Environment Programme in 2007 to build and share the knowledge needed to improve the use of resources worldwide. Members include scientists, policy-makers, academics, and others who bring skilled expertise in resource management.
- REMADE Institute: The REMADE Institute, a member of Manufacturing USA®, brings together government entities, manufacturers, and research universities in the United States to advance research that will dramatically increase the recovery, reuse, remanufacturing, and recycling (collectively referred to as Re-X) of metals, fibers, polymers, and e-waste.
Selected studies in the circular economy by GIS faculty
- Althaf, S, CW Babbitt, and R Chen. "Forecasting Electronic Waste Flows for Effective Circular Economy Planning." Resources, Conservation and Recycling 151. (2019): 104362.
- Babbitt, CW, et al. "Closing the Loop on Circular Economy Research: from Theory to Practice and Back Again." Resources, Conservation and Recycling 135. (2018): 1-2.
- Barber, S, J Yin, K Draper, and TA Trabold. “Closing nutrient cycles with biochar - from filtration to fertilizer.” Journal of Cleaner Production 197. (2018): 1597-1606.
- Hegde, S, JS Lodge, and TA Trabold. “Characteristics of food processing wastes and their use in sustainable alcohol production.” Renewable and Sustainable Energy Reviews 81. (2018): 510-523.
- Kasulaitis, BV, CW Babbitt, and AK Krock. "Dematerialization and the Circular Economy: Comparing Strategies to Reduce Material Impacts of the Consumer Electronic Product Ecosystem." Journal of Industrial Ecology 23. (2018): 119-132.
- Rodríguez Alberto, D, K Stojak Repa, S Hegde, CW Miller, and TA Trabold. “Novel production of magnetite particles via thermochemical processing of digestate from manure and food waste.” IEEE Magnetics Letters 10. (2019): 3504605.
- Ryen, EG, et al. "Ecological Foraging Models as Inspiration for Optimized Recycling Systems in the Circular Economy." Resources, Conservation and Recycling 135. (2018): 48-57.