The world has a waste problem. According to Statista, people produce more than 2 billion metric tons of municipal solid waste (MSW) each year on a global scale. And this amount could nearly double by 2050. In the face of all this junk, governments, businesses and consumers are more seriously considering an emerging concept that offers a more effective way to manage resources and eliminate waste altogether: a circular economy.
What Is a Circular Economy?
A circular economy is a model in which extraction, production and consumption feed off each other in a cyclical, mutually beneficial relationship. Ideally, everything is used in a circular economy — even waste — through repair, reuse or creating something completely new.
A circular economy is an idealistic system in which everything is used for as long as possible. This can be done through maintaining, recycling, composting, reusing or refurbishing materials and products, among other processes. Ultimately, the goal of a circular economy is to achieve zero waste.
As a result, the circular economy is being recognized as a way to tackle waste and pollution, while maintaining a strong and prosperous economy. But this isn’t about one company changing one product, or one government passing one bill. It’s about all the interconnecting players behind our infrastructure and economy coming together to use Earth’s resources, the waste they produce and the very laws of nature to create a more efficient and sustainable society.
What Is a Circular Economy?
A circular economy aims to reduce or eliminate waste by ensuring materials and products are used for as long as possible. This involves governments, businesses and consumers reorganizing society around processes that constantly circulate goods. To achieve this kind of system, the circular economy revolves around four Rs:
- Reduce: Center production and design processes around sustainability to minimize waste and extend the lifespan of products and materials.
- Reuse: Find different ways to use the same products, so they can take on new functions and remain in circulation longer.
- Recycle: Once a product or material can no longer be used as is, break it down into raw materials to create a new product or material.
- Recover: Save as much energy or materials from products that can no longer be used or recycled through processes like composting.
In our current economy, we extract materials from the earth, make products out of them and eventually throw those products away as waste. This can have devastating and potentially irreversible effects on the planet. In contrast, a circular economy reuses waste or uses it to create something completely new, producing little to no waste. In practice, this takes many forms — from transforming carbon to refurbishing electronics.
Origins of the Circular Economy
While the term “circular economy” is relatively new, the concept has evolved from many different strains of thought through the centuries. In fact, the beginnings of the circular economy go as far back as the 19th century, with scholars like Thomas Malthus and Henry George bringing to light questions of scarcity and its relationship to the economy. The concept took on new life during the Cold War, when the relationship between environmental scarcity and the potential for economic growth fell under new scrutiny.
Against this backdrop, ideas about circularity and a potential for a so-called “closed-loop economy” began to emerge with popular works like economist and philosopher Kenneth E. Boulding’s landmark essay The Economics of the Coming Spaceship Earth in 1966, and researcher Walter Stahel’s proposal for a closed-loop economy in 1976. Meanwhile, NASA discovered a way to convert carbon dioxide into nutritious, carbon-based crops, creating a closed-loop carbon cycle.
The phrase “circular economy” didn’t appear until 1988 in economist Allen V. Kneese’s paper The Economics of Natural Resources. It then entered the policy realm in the 1990s in countries like Sweden and Germany, followed by China’s five-year plan in 2002 to cultivate a circular economy.
In the 2010s, the concept became mainstream through academic research and legislation. In 2015, the European Commission recast the circular economy from a cautiously optimistic pathway to sustainability to a key element in an ambitious plan for economic growth in the wake of the 2008 recession. Since then, the circular economy has gained traction around the world: China has ramped up its circular economy efforts; the African Circular Economy Alliance continues to oversee sustainability initiatives in African countries; and seven U.S. states have passed varying forms of Right to Repair legislation to enable consumers to repair their products as opposed to just throwing them away.
What Makes a Circular Economy?
In addition to the four Rs, three core principles define a circular economy: eliminating waste and pollution, circulating products and materials and regenerating natural systems.
1. Eliminate Waste and Pollution
This first principle focuses on the design of products. Under the current economic system, many products are designed to be used for a single purpose and then tossed aside. A circular economy requires businesses to reconsider the production process and the design of a product itself in ways that cut waste out of the equation.
For example, technologies like smartphones and laptops are among the dirtiest products today. As much as 70 to 80 percent of these devices’ carbon footprint lies in the manufacturing process, according to Lauren Benton, general manager of U.S. operations at Back Market, an online marketplace for refurbished electronics. Once they’ve been used and discarded, they account for 70 percent of landfill toxins despite accounting for about 2 percent of the municipal trash we produce.
“You understand that a car has pollution, where you can see it on the street and see the brown cloud that comes out behind it,” Benton told Built In. “But your cell phone seems so shiny and crisp — I just plug it into these wires and it charges. I don’t see the mining that happened to get the original metal.”
Eliminating e-waste and other forms of waste can be accomplished through various methods, including creating products with recycled materials, developing environmentally friendly manufacturing processes and building products that can easily be repaired.
2. Circulate Products and Materials
The second principle emphasizes the idea of making products last as long as possible. Organizations must think about how a product can either be reused as is or broken down into raw materials for another purpose, and vice versa. It’s a much simpler concept compared to some of the high-tech solutions proposed to protect the environment.
“If we moved the entire economy to renewable energy, it would only abate the changes to climate change that we all hear about by 55 percent. The other 45 percent of solving that climate change problem is actually scaling a circular economy,” Garry Cooper, founder and CEO of resource exchange platform Rheaply, told Built In, citing a paper by the Ellen MacArthur Foundation. “There’s this $4.5 trillion global opportunity to design out waste and to design out the need for new raw materials by just sharing things that are in circulation already.”
Businesses can give materials and products a second life by establishing secondary markets for reselling products in good shape; asking for customers to return broken products to be refurbished or recycled; and donating older items to composting companies that break products down into raw materials for natural use.
3. Regenerate Natural Systems
The final principle focuses on the responsibility to support and maintain natural processes. This involves taking steps to protect the health of natural environments and restore them when extracting resources. Businesses can follow this principle by participating in reforestation efforts, adopting measures to preserve soil and air quality and avoiding the use of harmful chemicals in the environment.
In the case of tech startup LanzaTech, the company works with industrial facilities like oil refineries and steel mills to transform the waste they generate into sustainable materials. It takes emissions from an industry — flue gasses from steel mills, for example — and recycles the carbon produced by these emissions, then converts it into something else.
“If you think about the industrial systems that we have in place today, a fundamental part of them is that we accept that there is such a thing as waste. We accept the emission of CO2 as an unavoidable and necessary byproduct of the industrial process,” LanzaTech’s chief scientific officer Sean Simpson told Built In. “A circular economy is one in which we no longer accept the concept of waste.”
“When thinking about an industrial process,” Simpson continued, “we have to think about how the emissions and the waste can be used. This is how systems work in nature, and that’s why nature remains in balance.”
Benefits of a Circular Economy
Implementing a circular economy offers upsides for consumers and businesses alike, in addition to preserving the health of our planet.
Healthier Environment
The circular economy is designed with the environment in mind. By reducing waste and encouraging green practices, it helps organizations and governments avoid environmentally harmful processes and more effectively manage Earth’s finite resources. This way, the planet can remain in better shape for future generations.
Longer-Lasting Products
Under a circular economy, businesses create products that are intended to last longer and involve easy repairs. Consumers can then purchase products that don’t break down, saving them from having to constantly buy lower-quality items. In addition, consumers can explore secondary markets to buy refurbished or reused products for an affordable price.
Improved Business Efficiency
Embracing a circular economy enables companies to remove wasteful or energy-intensive processes, resulting in simpler and more cost-effective production. Companies can also reduce expenses by having customers return broken or old products, reusing materials instead of having to keep buying new ones.
Broader Talent Pool
Distributing products that come with replaceable or repairable parts gives consumers the opportunity to make their own fixes. This can support innovation among consumers and help them develop hard and soft skills. Businesses can then tap into a talent pool of individuals who demonstrate desirable traits like problem-solving and creative thinking.
Increased Job Opportunities
A circular economy can lead to the rise of different sectors like refurbishing and composting. In addition, the need to address waste and extend the lifespan of products could pose new challenges in manufacturing, recycling and logistics. Sustainability initiatives can also spur the growth of the greentech industry, generating more tech jobs in the process.
Barriers to a Circular Economy
Despite the promise of the circular economy, a number of challenges stand in the way of making this system a reality.
Scaling Issues
One important barrier to adopting a completely circular economy is scale, Simpson said. Humans consume more than 100 million barrels of oil a day. Replacing that level of demand with just renewable energy would be a massive undertaking. But, he added, “scale is only a barrier until you factor in time and money.”
That being said, time is a commodity we are rapidly running out of. “With every passing year, the need for wholesale change in our industrial landscape grows ever more urgent,” Simpson said. “I don’t think, as a society, we are acting with the urgency which is required.”
Natural Limitations
Dissipation in the environment, contamination and a general wearing down of materials all set limits on a circular economy coming to be. Plus, some argue that, paradoxically, a reliance on waste as a resource will increase the demand for waste rather than reduce waste volumes.
There are a lot of critiques out there highlighting the circular economy’s limitations, shortcomings and even dangers — not least of which is that, for all their lofty goals of sustainability and zero-waste, companies today underestimate the problem they are trying to solve.
Limited Gains
The circular economy is touted as a sort of win-win for society, benefiting the world economically, socially and environmentally. While recent analyses have supported this claim, many say that any potential gains made through a circular economy would be “incremental” at best.
Back Market’s Benton disagrees, and argues that one would be hard-pressed to equate the environmental impact of e-waste to what is happening in the refurbished technology sector.
“If you’re going to tell me, ‘Oh, well they have to ship that device to a refurbisher, and that refurbisher had to work on it and ship it to somebody else.’ I would challenge, ‘Did we just make up 70 to 80 percent for that next new device that [the consumer] was going to purchase?’” Benton said. “I don’t think there’s an argument that finding ways to reuse, repair and extend the lives of those devices is not a good thing.”
Uncertain Business Outlook
Companies staked in the linear economic structure that exists today tend to be more easy to validate from a business perspective than those staked in a circular economy. And, due to their time-consuming, research-heavy nature, these companies don’t typically pull in the kind of venture capital required to help them scale quickly — so factors like high cost and uncertain returns on investment are a harsh reality in this space. Plus, there is no real benchmark yet for what can be considered a success in this space.
When it comes to a company like Back Market, for example, it’s difficult to say what success is due to the sheer magnitude of the problem it is trying to solve. An estimated 99 percent of consumer goods purchased in North America are trashed within six months, meaning we only retain about 1 percent of what we buy.
What percentage of our stuff needs to be churned through the circular economy for us to make a true environmental impact? “I don’t know,” Benton said. “But if we’re only at 1 percent now — oh my god, we can do better.”
Shifting Political Landscape
Years after the cleantech bubble of the early aughts went bust, VC funding in what is now widely referred to as “greentech” has been steadily on the rise again.
But the reelection of President Donald Trump has put a damper on greentech momentum, especially with artificial intelligence taking priority over the environment. While the need for more sustainable practices remains as urgent as ever, cleantech funding peaked in 2022 and is off to a slow start in 2025, as investors wait and see how a new administration affects the regulations and funding around greentech.
Will We Ever Have a Circular Economy?
While Benton hopes that one day we will accomplish a completely circular economy, she said she is much more focused on accomplishing what, by comparison, can be considered “baby steps” — like reducing the 99 percent of products discarded within six months down to 98 percent, for instance. And she thinks it will take generations to just make those shifts, much less revolutionize the entire relationship between consumerism and the environment.
“Nobody’s going to be able to do this alone,” Benton said. “For the circular economy to be able to work, you’re going to have to have a supply chain that supports it. You’re going to have to have legislation that supports it.”
Indeed, our acceptance of the status quo, both socially and legislatively, is perhaps the biggest barrier to a concrete switch to a circular economy, LanzaTech’s Simpson said.
“In the U.S., there’s legislation that biases certain resources, which in itself is incredibly limiting,” Simpson said. “We’ve got to amend our thinking to accept, in a technology agnostic way, all processes that will offer an opportunity to circularize our economy and to minimize the use of unidirectional, or linear fossil resources.”
For a society to accomplish a truly circular economy, consumers, businesses and governments will need to align their goals and collaborate on solutions. Without this collaboration, “there may be a danger that the circular economy will only be implemented partially or, worse, in ways that do not mitigate environmental and social impacts due to burden shifting,” researcher Miguel Brandão and his colleagues wrote in a 2020 Handbook of the Circular Economy.
In other words, this will only work if we all work together.
Frequently Asked Questions
What is a circular economy?
A circular economy aims to keep products and materials in circulation for as long as possible, with the goal of eventually achieving zero waste. This can be done through processes like repairing, reusing, recycling and composting products and materials.
What is an example of a circular economy?
A common example of the circular economy at work is clothing that incorporates materials from recycled plastic bottles. This demonstrates how materials can remain in circulation by being repurposed for another function.
