what is circular economy

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.

Today, Circular Economy stands as an alternative to the dominant linear system of produce-use-throw, relying instead on a continuous cycle of reuse, regeneration and recycling. This makes it possible to create a more sustainable system in which the value of a product or service is maximized. What is normally considered “waste” can be enhanced as a resource in other production and consumption cycles. The concept of waste, therefore, loses its meaning.

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

Several academics have devoted themselves to the Circular Economy, and this has led to the formulation of more than 114 different definitions. Several elements recur among these: Circular Economy is often portrayed as a combination of reduction, reuse and recycling activities. This way, the need for systemic change at the global level is also often highlighted.

Among the many definitions, it is the one from the Ellen MacArthur Foundation that has gained widest acceptance among academics and organizations. According to which, Circular Economy is an economy designed to regenerate itself, in which materials never become waste and nature is regenerated. Through three core principles (eliminate waste and pollution, circulate products and materials, and regenerate nature), it is able to offer systemic solutions to address global challenges such as climate change, biodiversity loss, waste and pollution.

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, eliminating 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 article “Cradle to Cradle,” in which even more emphasis is placed on the need for a circular rather than a linear approach.

The concept of the circular economy has become increasingly well-known and in-depth in recent decades, and in this regard one cannot fail to mention the Ellen MacArthur Foundation (EMF), the largest nonprofit organization focused on this area. Particularly important has been its work in producing the Circular Economy Action Plan, which in 2015 established a series of legislative and nonlegislative actions to transition to a circular economy model.

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

To explain circular economy, its characteristics and complexities, reference is often made to the “R” model. This is a hierarchical approach to be taken at different stages of the life cycle to prevent it from becoming waste and to encourage the implementation of circular strategies related to product design and reuse. Kirchherr’s study mentions as many as 9 R-strategies that can be combined depending on the areas of use. Those are reject, rethink, reduce, reuse, repair, recondition, remanufacture, redevelop, recycle, recover

These actions can be grouped into three groups: in general, the shorter the cycle and, therefore, involves the first “R “s, the more circular it is. 

The first group responds to a high level of circularity, and requires less cost and effort to implement, relates to using and producing products in a smart way, and includes three actions.

  • Refuse – it means to refuse to use a product when it is not necessary, such as avoiding buying a car because we are aware that the same journey can also be done on foot.
  • Rethink – making intensive use of a product, adopting innovative eco-efficient and eco-effective management. To rethink is a very simple concept applicable to different sectors. For example, we can rethink the concept of waste: from wine production it is possible to save the marc (mainly grape skins and seeds) and make vegan leather from it.
  • Reduce – to reduce means to be more efficient in the production and use of the product, so that we need fewer resources or virgin materials.

The second group has a medium level of circularity. These are actions to be applied to extend the useful life of the product and its parts: within it we find five actions:

  • Reuse – through this strategy, when a product is discarded by someone while still in good condition, it can become useful to perform its function again for another consumer.
  • Repair – this action consists of restoring an item that is no longer functional so that it can return to its proper function.
  • Refurbish – understanding how to renew an obsolete product to give it a new use. Today this concept is especially prevalent in electronics: Apple, for example, allows its customers to purchase certified refurbished devices, ensuring quality and safety associated with the brand. 
  • Remanufacture – reusing products, or parts of them, to make a new product with the same functions. Today, this approach is mainly applied in the machinery industry to remanufacture machines or equipment.

Finally, the third group of actions is related to a low level of circularity and requires extensive efforts and time for implementation. This includes the useful application of materials, aimed at increasing the usefulness of the material once its life cycle is completed. The actions are:

  • Recycle – recycling the materials of something that has stopped working, allows the recovery of second raw material, of the same or lower quality.
  • Recover – recovering the energy contained in materials through their incineration is another way to create new value from matter that is no longer usable.

Why it matters?

Each year, The Circular Gap Report initiative measures the circularity of the global economy, and looks for opportunities to accelerate change. In 2023, this report showed that the global economy currently stands at only 7.2% circular, down from 9.1% compared to five years ago. This is a picture of how the world economy still relies far too heavily on raw materials. 

It will only be possible to arrest the impact this can cause through efforts to implement the circular economy. This figure implies that the world now depends almost exclusively on the extraction of raw materials. This means that more than 90 percent of materials are either wasted, lost or go unused for years. The situation is out of control and can prove harmful not only to the planet but also to the people who live on it. Several actors are called upon to act to revert this catastrophic descent. These include not only private individuals, but also companies, cities and institutions.

According to the ISPRA Urban Waste Report 2022, and data from the National Waste Cadastre, national municipal waste production has not decreased in 20 years. It went from a total of more than 29 million (516 kg/inhabitant) in 2001, to having exceeded 29.5 million (502.15 kg/inhabitant) in 2021. Surprising, however, is the trend in separate collection over the years: from 17.39% (89.74 kg/inhabitant) to 64% (321.36 kg/inhabitant). Despite improvements in separate waste collection, Italy still needs to work on recycling to meet the common EU targets (50% by 2020, 55 percent by 2025, 60% by 2030, and 65% by 2035) set within the 2018 Circular Economy package: the target of 50 percent of municipal waste recycled in 2020 was reached in 2021 (51.4 percent).

This shows an increased awareness of environmental issues, but still denotes the need for action on production and recycling technologies. To address these needs, the National Recovery and Resilience Plan (NRP) will invest about 600 million euros in flagship projects in circular economy and 1.5 billion in new waste management facilities and modernization of existing facilities.

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