The importance of Circular Economy

What is circular economy and why it is important for everyone: citizens, businesses, institutions

While the circular economic motivations are clear, very often we don’t know how to implement it, as it is shown in the last report of the Global Fashion Agenda. The industry of fashion is the one which often finds difficult to marry an ecological approach. This is why it is even more important that the philosophy of the Circular Economy and its importance is linked to fashion: 20% of water waste resources comes from the fashion industry, at global level, and 10% of the emissions of anhydride carbon are due to textiles.

The reason why Circular Economy importance is spreading, is clear: the plastic residues that invade seas and oceans (and therefore all marine fauna), global warming, climate change are phenomena largely investigated by the scientific community and (almost) all the actors in the field realize that it is time to act in this direction.

The ‘how’ is missing, however, perhaps because there is no unambiguous definition of what the ‘current’ circular economy actually is: what are the objectives? What are the essential processes? What are the founding principles? In fact, similar questions are not at all trivial.

What is the Circular Economy

Where does Circular Economy come from? It is the economist Kenneth E. Boulding, who developed the first circular model for materials, in which the production has no residue, but everything is reintegrated and reused in the production circuit. It is 1966 when Boulding writes his article “The Economics of the Coming Spaceship Earth“.

Since then the concept has evolved and formalized in recent decades, especially for the emergence of climate change, defining the concept of a Circular Economy in the academic sphere. But where we are, it is still far from identifying a single and precise definition.

Julian Kircherr et al., Of the University of Utrecht, for example analyzed 114 definitions of Circular Economy, coming from scientific papers, identifying some frequent frames, but without being able to establish recurrent principles in the whole spectrum of definitions.

The 3 Rs: Reduction, Reuse, Recycling

Mainly, from the analysis of Kircherr et al. it emerges that the academic world sees the Circular Economy as a combination of 3Rs (a fourth is often added).

The three Rs are:

  • Reduction
  • Reuse
  • Recycling

By reduction, we mean the creation of production processes that aim directly at reducing the waste at the base. 3D printing can be an example in this sense, because the material used in the production model is only the one strictly necessary to create an object.

When we talk about reuse, instead, we assume the presence of an object that can no longer be used in its original function, which is than riused in a different area, almost without transformations. A glass bottle can be transformed, for example, into a design object (a lamp, for instance).

Finally, recycling is the best known and most common “R”. Here the idea is to exploit the material that constitutes an unusable object, to create something new. In other words, the plastic of water bottles is again transformed into a “raw” material for the creation of new products.

There is a fourth R, less mentioned in the documents analyzed by Utrecht researchers, which is the one of Recover. In this case, the waste is recovered to produce energy or to be composted, in the case of damp.

According to the analysis of Kircherr et al., most of the Circular Economy models discussed in scientific papers concern a combination of Recycling, Reuse and Reduction practices. In particular, recycling is mentioned in 79% of the definitions analyzed.

A holistic view of Circular Economy

Actually, the analyzed one seems an excessively narrow vision of Circular Economy. Also because it seems to consider exclusively the “traditional” productive process, while the ambition of the circularity should concern different human systems, including institutional ones.

The Utrecht researchers themselves offer a more varied definition of Circular Economy:

“[The EC] is an economic system that replaces the concept of “end of life” with reduction, or alternatively reuse, recycling and recovery of materials in production / distribution and consumption processes. This system operates at micro (products, companies, consumers), medium (eco-industrial park *) and macro (cities, regions, nations and so on), with the aim of producing sustainable development, while simultaneously creating greater environmental quality, prosperity and economic equality, for the benefit of current and future generations. It is implemented by new business models and responsible consumers”.

In this definition, a great number of actors are involved and the objectives of the circular economy are defined more precisely.

According to Ellen MacArthut, Circular Economy is based on three principles:

  • Create systems that permanently eliminate waste and pollution
  • Keep products and materials in use
  • Regenerate natural systems

Source: presentation of “The Circular Economy” by Professor Maria Zifaro (UNIMC)

The idea is that Circular Economy is an overall system changer. From the linear economy, which takes a product and turns it into a chain that inevitably leads it to waste, to a circular model, where everything is transformed and nothing is lost. Finally, a system that aims to bring new business opportunities, but also social and environmental benefits.

Can the impact of the Circular Economy be quantified?

As we have seen, the CE has objectives in different areas, from the environment to social equality. At the bottom of this definition, there is probably the misunderstanding that making the interests of the whole does not represent a profitable business. But, this is not supported by the data.

It is complex, even here, to define exactly the impact of the circularity on the economy, but the European Union has tried to draw up a balance. If the EU adopted at least three best practices (eco-design, waste prevention and re-use) of the circular model, it could achieve, compared to the usual economic scenario:

  • Net savings for businesses of around 600 billion euros (8% of annual turnover)
  • Increased resource productivity: + 30%
  • GDP increase: + 1%
  • Jobs created: two million

Meanwhile, the greenhouse gases released into the atmosphere from the manufacturing world would decrease by between 2 and 4 percent.

Three trends to keep an eye on

As we have seen, the Circular Economy is a vast and complex concept. It can involve companies, primarily, but it concerns everyone: from the ‘micro’ citizens / consumers to the ‘macro’ of states and conglomerates of states.

Reducing the scope on which to focus attention can be interesting to understand where and how the principles of the circular economy can be taken into consideration in practice. We have selected three of them, among the most interesting in the historical moment we are living, which we will mention here, but we will discuss later in as many articles on this blog.

The Cities

85% of GDP is produced in the cities and 75% of resources are consumed. We can say that they are the beating heart of the contemporary economy, where almost everything is produced and consumed.

It is therefore essential to think about the future of the Circular Economy starting from the cities. Even urban agglomerations must become circular. To succeed, they must exploit materials, technologies and flows that optimize and connect infrastructure and the people who live there, with their human and social capital.

Examples of this new paradigm are already in place: think of the discourse on smart cities, sustainable mobility, urban-farming.

The Materials

If cities are the “place” of the contemporary productive world, materials still represent the “thing”: each product is essentially a composition of materials. Even digital technologies need solid materials to work (smartphones, computers, servers).

For an effective transition to the circular economy, it is essential that the materials be rethought at the root. Recycling is useful but not enough: it is during the product design phase that we have to completely rethink the type of materials we use, their impact during use and the so-called end of life.

The need is therefore to design materials from scratch that can more easily be recycled or reused. One of the most interesting trends is the one concerning organic or bio-material materials, which use not only food waste and which have the advantage of being reproducible and biodegradable.

The Technologies

Technology is not opposed to the concept of sustainable growth, even if some business models have had a strongly deleterious impact on the ecosystem. In reality, exploiting the most of new information technologies can help us to reduce waste, simplify flows and optimize the use of resources and infrastructure.

Let’s think, for example, about the Internet of Things: the amount of data we receive from technological objects can help us, for example, to improve its energy performance.

Circular Economy: examples

We talked about the circular model in general. We have seen some concrete application areas. All that remains is to get to the heart of things and find out who made it. The stories of circular economy in the entrepreneurial sphere are many. We have selected five.


“Perpetua” is a pencil created by the Venetian company Alisea, made with graphite powder. The material, which has been named Zantech, is actually a waste obtained from the processes of molding electrodes.

The philosophy behind the creation of Perpetua is explained on the Alisea company website:

“We have been dealing for years with the recovery and re-use of customers’ corporate materials – the website states – with which we create objects for corporate communication. Our customers have always been a source of inspiration: so, when we were asked if we had an idea to dispose of several tons of graphite, coming from the processing of one of our customers, with high annual disposal costs, we thought: “Why not dispose of writing?”.


Aquafil (formerly Aquaram) is an Italian company that in the 1960s has staked everything on Nylon fiber, producing clothes first, then carpet. And which today leads the world in research into ecological nylon. It is called Econyl, it is green nylon, which Aquafil produces infinitely zero emissions. The production process is based on the regeneration of caprolactam, a recycled raw material.

Giulio Bonazzi, 54, son of the company’s founder and now president and CEO, explains:

“We started with the fishing nets used in aquaculture, but the goal now is to get 100% ecological nylon regenerated from waste and not from petroleum derivatives. The strong idea is the circularity, creating a product that is a regenerated and can be disassembled and reused at the end of the cycle as a “second raw material”, for a new generation of products and without time limits”.


Alstom is a French train manufacturer, which in 2014 began to market the HealthHub diagnostic system. It is a maintenance prediction tool. In practice, by obtaining analytical data from a series of sensors, it is able to predict with greater precision how long the life cycle of trains, railway infrastructures and network signals can last.

Thanks to this system, it has been possible to extend the life cycle of trains and tracks. According to the company, the system allows a saving in the use of materials up to 15%, because it can signal when to change certain pieces only when it is strictly necessary.


FatLlama is a business that is based on the concept of sharing economy. In this context, real giants of the caliber of Airbnb were born, offering apartment sharing, and Uber, where they share their private cars.

FatLlama is a website that offers the exchange and sharing of practically everything: DIY tools, vehicles, cameras, drones, projectors, radios, and so on. Anyone who does not constantly use an object at home can share it on the platform and rent it for a certain period of time.

The startup was born in London in 2016 and in recent months has been facing an important expansion in the United States, starting in New York.

De Ceuvel

De Ceuvel‘s idea, instead, is to make an entire circular building. An old ferry anchored on the coasts of the city of Amsterdam has been transformed into a sustainable incubator, with 17 office spaces, where everything that is consumed is somehow revived.

The water is then filtered and used to irrigate the soil. Food waste becomes compost to be used as a fertilizer for the food that is offered by the kitchen. Finally, 150 photovoltaic panels make it a self-sufficient system.

Furthermore, the incubator is specialized in business that make the environmental vocation its own figure.

Francesco Castellano

Francesco Castellano holds a Master degree in Business Administration, and he has gathered almost twenty years of experience in research, finance, consulting, and business management. During this time, he was engaged in different types of projects as a consultant at Bain & Company, launched Uber operations in Turin, and worked in the FP&A department at General Electric.Lately, he founded To... Read more

Francesco Castellano holds a Master degree in Business Administration, and he has gathered almost twenty years of experience in research, finance, consulting, and business management. During this time, he was engaged in different types of projects as a consultant at Bain & Company, launched Uber operations in Turin, and worked in the FP&A department at General Electric.

Lately, he founded Tondo, a cluster of organizations focusing on spreading Circular Economy approaches and concepts, and supporting companies in the transition to a clean and circular future. Francesco is also the ideator and coordinator of the Re-think Circular Economy Forum, a format of events organized in many different locations in Italy showcasing the most relevant Circular Economy solutions.

Francesco has been a guest speaker at different universities and events, like Federico II University, Bocconi University, LIUC - Cattaneo University, Pavia University, Padua University, Catholic University, IPE Business School, 24ORE Business School, Campus Party, Torino Stratosferica, Visionary Days.

Francesco is passionate about Circular Economy, Cleantech Innovations, Venture Building and Entrepreneurship.