As defined by WRAP , a circular economy is an alternative to a traditional linear economy (make, use, dispose) in which we keep resources in use for as long as possible, extract the maximum value from them whilst in use, then recover and regenerate products and materials at the end of each service life.
In a perfect circular economy, no new biological (i.e. non-manmade) resources or raw materials are used in the production of new products, and only biological materials or product components re-enter the biosphere at the end of the lifecycle of a product (i.e. there is no manmade waste).
The circular economy affects practically all businesses regardless of size or sector: any organisation can take low-cost or even no-cost steps to increase its resource efficiency and minimise waste. Historically, businesses have pursued a ‘take, make, dispose’ mode of production due to the widespread availability of raw materials and resources, and the promise of short term added value. However, in recent decades, the scope and scale of modern economic activity have become bound by environmental constraints. The ‘business as usual’ approach is reaching its physical limits. Further, given increasing demands from consumers and investors to adopt more social, environmental and ethical practices, businesses are under significant pressure to act.
A circular economy is characterised by minimising waste and maximising efficiency. It is tempting, but ultimately unhelpful, to consider the circular economy as ‘recycling’, given it is only one element. Examples of activities which take place in a circular economy include, but are not limited to, a strong emphasis on shifting to renewable energy sources; actively working to promote the health of ecosystems; prolonging object usage and upgradability by design, increasing product performance/efficiency; removing production supply chain wastage; remanufacturing products; and re-using product components.
The financial incentives for a circular economy are powerful. WRAP estimates that circular economy initiatives have generated £2.2bn to the UK economy between 2008-2011. Productivity and efficiency gains have a significant impact at the company level. PwC have implemented initiatives equivalent to an additional £500,000 of turnover per year, and Sky claims savings of £7m per annum by repairing and refurbishing satellite boxes rather than replacing them, according to a Telegraph article written by Sir Ian Cheshire, the chairman of Debenhams, a Government lead non-executive, and the chairman of the Business in the Community environment leadership team.
Evidence suggests indirect commercial benefits for engaging in a circular economy. Research indicates that workplaces with comprehensive recycling programs have happier, more engaged employees. Additionally, businesses that are seen to be making genuine efforts to alter the way they do business, as opposed to simply offsetting costs or making tokenistic gestures, will enjoy significant reputational benefits. For example H&M, a member of the Ellen MacArthur Foundation, is working to find ways to make the business 100% circular. Currently, they are working on strategies to create a closed loop for textiles, where unwanted clothes can be recycled into new ones. Similarly, Nike has set a strategy based on a move to low-carbon and closed loop manufacturing.