The following definition by the Ellen MacArthur Foundation (EMF 2015) is used as a core reference to define the Circular Economy ‘CE’ as it has been extensively referred to in both academic and non-academic debates. “The concept is characterized, more than defined, as an economy that is restorative and regenerative by design”.

The term ‘restorative’ refers to post-consumer or post-use material flows which must be fed back in a manner that ‘restores’ the original material sources of these economic activities. The CE “aims to keep products, components, and materials at their highest utility and value at all times, distinguishing between technical and biological cycles.

The distinction between technical (referring to finite resources: in blue) and biological (referring to renewable resources: in green) cycles is well illustrated in the ‘butterfly diagram’ below (Figure 1). These cycles represent the continuous looping and cascading of resources, thus closing material loops, facilitated by processes (or economic activities) such as restoration, remanufacturing and recycling. The EMF comments widely in their reports on how closed loops influence the very essence of the economy, the production, distribution and consumption of goods and services.

Notice that in the technical cycle, use replaces consumption which can only be found in the biological cycle. “It is conceived as a continuous positive development cycle that preserves and enhances natural capital, optimizes resource yields, and minimizes system risks by managing finite stocks and renewable flows. It works effectively at every scale. This economic model seeks to ultimately decouple global economic development from finite resource consumption.

Arguably the most important implication of the CE is referred to in this last section: closing material loops aims at minimizing the extraction of virgin materials and generation of waste. While the definition above outlines principles for action, the following fundamental characteristics describe and operationalize the concept of CE.

Figure 1: The Circular Economy Butterfly Diagram (EMF, 2013)

  1. Design out waste: In a CE, waste is intentionally designed out. Biological materials are non-toxic and returned to the soil while technical materials are designed to be recovered, minimizing the energy input required and maximizing the retention of value.
  2. Build resilience through diversity: Diversity is valued as a means of building resilience, balancing efficiency and adaptability.
  3. Shift to renewable energy sources: The energy needed to fuel the circular economy should be generated using renewable sources, thus decreasing resource dependence and increase systems resilience.
  4. Think in systems: In a CE, systems-thinking is applied broadly, taking into account the system dynamics between businesses, people or plants, the manner in which they are linked and respond to each other.
  5. Think in cascades: Diversifying reuse of materials in different processes and industries substitutes the inflow of virgin materials and increases the resource utility.

Gregory BLAKE – Business Manager at Greenfish