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The Basics of Circular Economy: Definition, Importance, and Examples

The Basics of Circular Economy: Definition, Importance, and Examples


There is plenty to be done when it comes to battling the climate crisis. Conserving energy at home, eating less meat and recycling are a few well-known ways people can help. However, making consumer goods more sustainable on a broader scale is critical. This movement is known as the “circular economy,” a system designed to keep materials in use instead of tossing them in the landfill.

Defining a circular economy

The current economy is linear, meaning raw materials are used to create products. The products are used and then thrown away, ending the lifecycle of the materials. The circular model works to keep materials in use via repairing, recycling and reusing. If new raw materials are required, they are obtained sustainably so as not to disrupt the environment.

Circular key points

A linear economy can be boiled down to take, make and waste. Goods are created for a single use, and raw materials are always needed to create more. A circular system aims to remove the consistent need for finite resources from economic growth. Once raw materials are in the circular system, they can be used again and again. Here are three key points of the circular model:

  • Pollution and waste are eliminated by intentional design.
  • Materials are kept in use.
  • Natural systems are reestablished.

To make this happen, products must be designed with the circular lifecycle in mind.

Sustainability in action

Businesses, communities and countries across the world are already implementing circular ideas. For example, Ikea, Adidas and H&M are working to make their business model more sustainable. More than half of H&M’s products are either made of recycled materials or are sustainably sourced. Their goal is to reach 100% sustainable within the next decade. The European Union also has a circular action plan with a goal to make sustainable products the status quo.

Why circular is critical

Raw materials used to make consumer products are finite. According to the United Nations, by the year 2050, the economy will need the equivalent of three planets’ worth of natural resources in order to sustain people's current lifestyle.

On a micro level, a circular model could help people's personal budgets. In fact, one analysis shows that a circular economy could increase the average European’s household disposable income. More disposable income means consumers are spending more money in the economy.

Where circular stands today

Even though many businesses and governments are implementing circular ideas, there is plenty of work left to be done. This study finds stakeholders in the building sector need to work harder to implement sustainable systems. Other barriers include a lack of environmental regulations and public awareness. Implementing these ideas will take time and effort from everyone.

For businesses, it’s an entirely new way of thinking about product design. They must think about how materials can be used for years to come instead of considering them single use. Likewise, customers must consider the functionality of what they buy instead of simply consuming one product after another. Though change is difficult, the future of the circular economy is hopeful as more organizations start considering a more sustainable future.

Stay involved in the circular movement

Education plays a pivotal role in making the circular system mainstream. Net Impact is committed to helping young professionals make a positive impact. Learn more on their career page on Circular Economy and Sustainable Design.