Chapter 9: Circular Economy

Tai Munro and Kalen Pilkington

Key Ideas

In this chapter, you will learn about:

  • what the circular economy is and the principles of a circular economy
  • one set of business models for the circular economy

What is the Circular Economy?

At its most basic, a circular economy is one that keeps materials, products, and services in circulation for as long as possible. It is a model of production and consumption that uses various strategies such as sharing, repairing, and refurbishing to reduce the amount of waste created and practices like recycling and regeneration to use waste from one industry or product as materials for the next. This is opposed to the current linear system where materials are used, a product is produced and used, and when it is no longer being used, it gets disposed of as waste. An increasing number of companies and governments are starting to look at how to participate in the circular economy; you likely have some in your own community.

Activity 9.1: Introduction to the Circular Economy

Watch the video (6:07) Circular Economy: Definition and Examples by Sustainability Illustrated. As you watch, consider:

  • What is the approach to waste in your culture or household? How does that approach fit with either the circular economy or the linear economy?
  • What do you think is one of the biggest barriers to achieving a circular economy?

There are a number of principles for the circular economy. Different sources will list slightly different principles. The following are from the Ellen Macarthur Foundation, a leader in the circular economy.

The three principles of the circular economy are:

  • eliminate waste and pollution
  • circulate products and materials (at their highest value)
  • regenerate nature

In addition, there is an expectation of both a transition to renewable energy and materials. Let’s look at each of these principles a little more in-depth.

Eliminate Waste and Pollution

Ideally, everything in the circular economy has a positive purpose; therefore, there would be no waste or pollution. However, this is difficult to achieve within a single industry. Another way to think about it is that waste becomes food. This is how nature works. Leaves fall off of the trees. Decomposers eat the leaves and return the nutrients to the soil, making food for more plants. Within the current economy, we are starting to see examples of waste from one business or industry being used as a resource in another business or industry. For example, a bakery might partner with a brewery to make bread with spent grains leftover from brewing beer. Or, different plastics are being recycled to create fleece clothing items. On a systems level, there is no waste.

Circulate Products and Materials

You may have grown up hearing about reduce, reuse, recycle, and repair. Unfortunately, recycle became the dominant “R” and the focus of many campaigns. But recycling requires a significant amount of resources. Therefore, we are better off to focus on the other three “R’s.”

Reducing what we have and use is the first step because it reduces the amount of resources that have been used in the first place. There are a number of examples of projects intended to reduce resources, such as tool libraries where you can check out tools like you might check out a book, use the tool for the project you need, and then return it for someone else to use. Book libraries have been around for thousands of years; this is just expanding the idea to other types of materials.

Repairing items is another important step. Rather than throwing out a pair of jeans because they have a hole in them, you, or someone else, would repair the jeans. Repairing items has two requirements. First, someone needs to have the skills to do so. You might not be able to patch your jeans or fix the drive train on your bike, but someone else probably has that skill set. Repairing items can expand the economy through skill-based labour. The second requirement is that the item has to be repairable. Unfortunately, this is not always the case. Proprietary practices have led to certain items, particularly technologies like cell phones, being unrepairable because of how they have been put together. Right to Repair is a growing movement that demands that consumers can repair goods themselves or have them repaired.

Finally is reuse. This has been a big topic in recent years, as the harms of single-use plastics become more well-known. Carrying your reusable water bottle or coffee mug, even selling or donating your fancy dress so that it can be reused by someone else, will contribute to the circular economy.

Natural items are also subject to this principle. Fortunately, recycling is often done by nature; however, there are things that we can do to help. For example, even if your shirt is made of 100% cotton, it will still struggle to decompose if you drop it in the landfill. And using more of something because it is natural still doesn’t help us use less energy and reduce our overall use of materials.

Regenerate Nature

Many of our current practices degrade nature. Over-extraction and pollution are two ways we consistently leave nature worse than before. If we instead focus on regeneration, then we can rebuild natural systems or at least give them time to rebuild themselves. This requires us to emulate natural processes more than trying to control what is happening. Indigenous cultures hold vast amounts of knowledge that could lead the way on this principle, as they have for many generations prior to colonization, supporting their local environment to flourish while also being able to take what they needed from nature.

Honourable Mention: Building Resilience

Although the Ellen Macarthur Foundation does not explicitly list resilience as a principle of the circular economy, it is fundamental to implementation. Resilience needs to be built into the system such that no one resource is required in every case. Energy generation is an excellent place to start with what this looks like. One of the critiques of renewable energy is that it is difficult to guarantee. Since we have a difficult time storing energy for the long term, we need to be able to generate energy almost continuously. Renewable energies like wind and solar are, by their nature, intermittent. However, by drawing on multiple different sources of energy, it is possible to build a robust and resilient energy system.

Systems Thinking is Essential

Thinking in systems is an essential part of achieving a circular economy. Systems thinking allows us to identify connections between different companies and industries. As a result, we can see where one industry’s waste might play a role as a resource for the next. In addition, we require causal loop thinking, rather than thinking of causality linearly, in order to assess the implications of each innovation or action fully.

Visualizing the Circular Economy

The butterfly diagram is a helpful tool to picture what is involved in the circular economy.

Activity 9.2: Exploring the Butterfly Diagram

Review the webpage The Butterfly Diagram: Visualising the Circular Economy on the Ellen Macarthur Foundation website. As you review the webpage, consider:

  • What items do you currently use that fit on the butterfly diagram? Which part of the cycle do they fit in?
  • What are some of the barriers that prevent us from using products in the inner circles on the technical side like sharing?

The Business Models of the Circular Economy

We will look at three business models in relation to the circular economy. Please note that the circular economy is still a relatively new concept, so you will find other models. We have chosen these three for their ease of understanding and application.
  • Most of what we are used to falls into a product-oriented model. In this model, you may purchase extra ongoing services like maintenance, but everything is geared towards the sale of the product to the final consumer. The other two models are more likely to contribute to a circular economy.
  • The product is still central in a use-oriented model, but instead of buying the product, you are buying the use of the product. An example of this would be renting a canoe for a canoe trip. Instead of buying a canoe, you are paying for the use of a canoe.
  • The final one is a result-oriented model. In this model, you are not looking for a specific product but for a specific result. This one is a little tougher to understand, but if you think about some of the services you might either provide or want to buy, it can help clarify. For example, you might pay for a lawn care service. You might not care what type of equipment the service provider uses. They could be out there cutting every blade of grass with scissors, or they might replace the grass with something like clover that requires less maintenance. You’re paying to have the result of an enjoyable outdoor space.
One of the biggest challenges for the circular economy is getting the products back from the consumer. The use and result-oriented models support this access to the used products because the supplier is always in touch with the consumer in some way. As a result, they can collect more data, such as what parts are wearing out first. This data will help them to improve their product over time.
Watch the next video (3:12) to learn more about these business models.

Expanding Your Knowledge

The circular economy has the potential to impact every area of our economy and our lives, from how cities are designed to our consumption of food and fashion. Can you think of any opportunities for the circular economy in your personal or professional life?

Activity 9.3: Expanding Your Knowledge

The Ellen Macarthur Foundation is dedicated to providing education and resources for the circular economy. They have developed a number of modules that connect the circular economy to a particular part of the economy. Explore at least one module from their Learning Hub to learn more about the circular economy in an area that interests you.

Activity 9.4: Circular Economy Investigation

Based on what you have learned about the Butterfly Diagram and the principles of a circular economy, find two examples of products or businesses that are engaging with the circular economy. Identify the following for each example:

  • name and purpose of product or business
  • which loop on the butterfly diagram applies?
  • explain how at least one principle of the circular economy applies to the product or business
  • identify the product-service business model that applies (product-oriented, use-oriented, or result-oriented) and explain why





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Introduction to Sustainability Copyright © 2023 by Tai Munro and Kalen Pilkington is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License, except where otherwise noted.

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