What is Circular Economy: definition and meaning

What is Circular Economy?

Circular Economy is a regenerative economic system with the goal of reducing waste through the efficient use of resources, thereby creating added value to the environment, society and the economy.

Circular Economy offers an alternative to the linear produce-use-discard model. It aims to keep products and materials in use through maintenance, reuse, repair, refurbishment and recycling. Preventing waste comes before recovering it: this does not mean that every material can circulate indefinitely or without losses.

Today, the topic of Circular Economy has also interested governments and supranational organizations. One example being the European Union, which in 2019, with its new European strategy, the Green Deal, embraces and embraces the principles of the Circular Economy to build a more resilient and sustainable Europe. 

This involvement, not only in academia but also in industries and governments, has posed new reflections on the status of Circular Economy. The recent study by Kirchherr and Urbinati, highlights the spread around this theme of an increasingly coherent set of shared beliefs and concepts, numerous practical resources and enabling authorities, and a vibrant community of actors. All this suggests that Circular Economy can be considered an increasingly institutionalized field of study.

Circular Economy: definition

Circular Economy has several definitions in the literature. A 2017 study analysed 114 definitions, identifying recurring themes such as reduction, reuse and recycling, alongside the need for systemic change. That number describes the study’s sample, not an up-to-date count of all definitions.

The Ellen MacArthur Foundation describes three design-led principles: eliminate waste and pollution, circulate products and materials at their highest value, and regenerate nature. These are design objectives, not automatic outcomes of any initiative labelled circular.

Another noteworthy definition is that of the European Commission. According to it, in a Circular Economy, the value of products, materials and resources is maintained in the economy for as long as possible, and waste generation is minimized.

The European Parliament, on the other hand, defines the Circular Economy as a model of production and consumption that involves sharing, leasing, reusing, repairing, refurbishing and recycling existing materials and products for as long as possible. In this way, the life cycle of products is extended.

Tondo adheres to a definition that is the synthesis of these presented, specifically referring to that of the Ellen MacArthur Foundation. We believe that the Circular Economy is a regenerative system that promotes the sharing, reuse and recycling of materials, aiming to prevent waste, promoting circularity of products and the regeneration of natural ecosystems.

Importance of the circular model

The shift from the linear to the circular economic model is nowadays crucial to addressing the various environmental and social challenges of our time. The linear model-born in the late 19th and early 20th centuries responded perfectly to the need to rebuild the economy and well-being of Western societies following World War II. Extraction of natural resources and production of goods and waste, aimed at profit maximization, characterized the linear economy. Today, however, the consequences of these human activities, heedless of the limits of the ecological system, are among the main causes of greenhouse gas pollution and climate change.

Circular Economy could provide an answer to current challenges and contribute to the creation of a more sustainable future. This push toward this new economic model is linked to several factors:

• Economic benefits: McKinsey Sustainability estimates that Circular Economy can lead to resource productivity growth of 3 percent per year in Europe, with an economic return of 600 billion euros per year by 2030, plus intangible benefits, such as avoided negative externalities, which would amount to 1.2 trillion euros.
  
• Social benefits: the European Commission has predicted 700,000 new jobs related to the Circular Economy by 2030 in Europe, thus promoting research and innovation.
  
• Environmental benefits: it contributes to climate neutrality, preserves biodiversity, reduces greenhouse gas pollution, promotes cleaner energy and greater security of supply of resources by decreasing dependence, avoiding waste and making Europe more resilient.

The term Circular Economy is often -mistakenly- used as a synonym for sustainability. But not everything that is circular is sustainable, and not everything that is sustainable can be called circular. The linkage of these two paradigms is being studied in numerous articles, including Salomone’s. Many of these studies show that in order to consider a practice circular, even, sustainable it is necessary to assess the impact generated by production processes through scientific methodologies such as LCA (Life Cycle Assessment). 

Circular Economy is also recognized, by other authors, as a tool to support the achievement of the 17 Sustainable Development Goals of the 2030 Agenda proposed by the United Nations. Its application can help promote actions to combat climate change (SDG 13), ensure sustainable production patterns, make infrastructure more resilient, and foster lasting, inclusive, and sustainable economic growth (SDG 12, SDG 9, SDG 8), in addition, it can ensure access to clean energy for all (SDG 7) as well as protect, restore, and foster sustainable use of the Earth’s ecosystem (SDG 15).

Finally, a circular system is an opportunity to achieve greater and concrete independence from raw materials, establishing itself and ensuring more stable economic, social and environmental systems for its communities. An example of this is urban mining, which is the activity of extracting precious metals and materials from waste that become secondary raw materials, entering the circular economy.

History of circular economy

Contrary to what it might seem, the concept of Circular Economy dates back as far as the 1970s, when the first studies and accounts of it began to appear.

After World War II, the countries involved began to pursue thinking about the connection between ecological and economic thinking. In 1966, for example, the British economist Kenneth Boulding published the article “The Economics of the Coming Spaceship Earth“. There, the Earth was depicted as a spaceship with limited resources, where in order to survive humankind had to manage its resources by making the best use of what is available.

However, the modern sense of Circular Economy was introduced by Walter Stahel, who highlighted its meaning in his 1976 report to the European Commission. Later, in 1982, Stahel created the Product-Life Institute, a sustainability strategy and policy institute to explore new circular systems.

Later, in 2002, William McDonough and Michael Braungart published the book “Cradle to Cradle,” in which even more emphasis is placed on the need for a circular rather than a linear approach.

The Ellen MacArthur Foundation has helped advance Circular Economy through research, tools and collaboration with businesses and institutions. The Circular Economy Action Plan is a European Commission initiative: the 2015 plan was followed by the 2020 plan. See the European and Italian regulatory overview for later developments.

The principles of the circular economy

According to the Ellen MacArthur Foundation, the circular economy is based on three principles, the basis of which is always design:

• Eliminate waste and pollution
  In nature, the concept of waste does not exist: it was introduced precisely by human beings as a result of pure design choices. Several products on the market are designed to be thrown away immediately after being used, and some of them were designed without asking, “What happens to this product at the end of its life?”. Asking this question is crucial today. Many products could be circulated through maintenance, sharing, reuse, repair, reconditioning and, only as a last resort, recycling

• Circulate products and materials
  The second principle of the circular economy is to keep materials in use, either as a product or, when they can no longer be used, as components or raw materials, for as long as possible and at their highest value. This can be done through Technical Cycle (products are reused, repaired, reconditioned and recycled), or Biological Cycle (biodegradable materials are returned to the earth through processes such as composting and anaerobic digestion).
• Regenerate nature
  By shifting our economy from the linear to the circular model, we change the focus from extraction to regeneration. Instead of degrading nature, we build and contribute to natural capital. For example, this can be done by starting to use agricultural practices that allow nature to rebuild soils and increase biodiversity.

The R Model

The R model organises strategies to prevent waste and retain value. Several classifications exist. Here we use the ten R0–R9 strategies referenced in the PBL monitoring framework. They are alternatives to assess, not ten mandatory stages.

• R0 Refuse: avoid unnecessary products.
• R1 Rethink: reconsider use and function.
• R2 Reduce: use fewer resources.
• R3 Reuse: use the product again.
• R4 Repair: restore functionality.
• R5 Refurbish: renew an existing product.
• R6 Remanufacture: restore components for the same function.
• R7 Repurpose: use components for another function.
• R8 Recycle: recover materials.
• R9 Recover: recover energy without retaining the material.

Start with the function required. A usable desk might be transferred to another office; a damaged desk repaired; an unsuitable one adapted or dismantled. Immediately recycling its wood could lose the work and value embedded in the product. This is an illustrative example: condition, safety and cost can change the preferred option.

The hierarchy does not mean that the first strategies are always cheaper or environmentally preferable. Transport, cleaning, energy used during operation and actual service life can change the result. Compare each project with a realistic alternative using life-cycle data and an equivalent service delivered.

Data and progress: how to read them

The Circularity Gap Report 2025 estimates that 6.9% of materials entering the global economy in 2021 came from secondary sources. The publication year differs from the data year. The remaining 93.1% refers to virgin inputs: it does not mean that 93.1% of materials are wasted.

Some resources remain in buildings, infrastructure and durable products; others are consumed or dispersed. One indicator cannot describe all aspects of circularity. The 2026 report broadens the perspective to economic value lost through linear and inefficient practices.

Italian and European data also require a distinction between separate waste collection, actual recycling and the use of recycled materials. They measure different stages and are not interchangeable. For an organisation or territory, the objective is to connect quantities to decisions: avoid unnecessary purchases, extend product life and secure destinations for recovered flows.

A credible transition combines prevention, design, services and infrastructure. Technology, including artificial intelligence, should be assessed by its ability to enable these changes. Our measurement of circularity page explains how to compare results and limitations.

Business models and practical conditions

Circularity changes how value is created and paid for. Selling a durable product with maintenance, providing access to shared equipment and taking back products for refurbishment are different models. Each requires a combination of design, services, contracts and supply-chain relationships.

A rental model, for example, is not circular by definition. It needs to increase asset utilisation, encourage maintenance and organise returns. Otherwise, it may merely shift ownership without reducing consumption. Likewise, a take-back scheme creates value only when collected products reach a useful destination.

A business should examine four conditions: residual product value, recovery cost, demand for a second use and responsibility across the supply chain. A technically recoverable material may lack an economically viable market. These constraints need to be part of the solution.