guide

A guide to circular economy: what it is and why it's important

22 December 2021 | Celia Topping

We live in a world with finite resources. And, as we’re becoming increasingly aware, those resources are running out. Our throwaway society isn’t only wasteful of these precious materials, but the way we use them also pollutes our planet. Making single-use plastic items that we throw away, only to end up in rivers and oceans, for example.Or burning fossil fuels that contribute to climate change.  

Taking what we want from the earth, making products we use a limited number of times, then throwing them away as waste can’t continue forever. So what’s the alternative? 

In this article, we’ll introduce the idea of the circular economy and how it can work in our modern society.

What is a circular economy?

Nature is circular. Everything that lives eventually returns to the earth, and from the earth comes new life. Millions of years of evidence proves the living world’s model works pretty well. 

That was until the Industrial Revolution changed everything. It’s at this point that experts pinpoint the beginning of global warming caused by human activity, due to the burning of fossil fuels on a global scale1

Since that time, society has become increasingly wasteful and polluting. The Ellen MacArthur Foundation calls it a “take-make-waste”2 system. The alternative is an economy which returns to the natural world’s model of circularity. One which aims to solve the issues of waste, pollution, and climate change through sustainable production and responsible consumption. 

A circular economy:

  • Manages the earth’s resources better
  • Redefines how we manufacture and use products
  • Rethinks what we do with waste material

But it’s not an easy fix. To switch to a circular economy would demand a major shift in global perspective and a radical redesign of our entire system.

What is the difference between circular economy and linear economy?

Our current “take-make-waste”3 system is a linear economy. We simply take what we need, use it, and throw it away when it’s finished with. It’s based on mass production and consumerism – a system in which we upgrade mobile phones before the old one is worn out, buy the latest fashion every season, and package bananas in plastic. 

A circular economy on the other hand abides by more natural principles, with products designed to be more durable, reusable, repairable, and recyclable. Materials that make up the products are designed in such a way that they can be regenerated at the end of their lifecycle. 

5 useful terms to know

Regenerative production: Producing food and materials in a way that doesn't destroy nature, but supports it. Such as agroforestry in agriculture, which combines crops, trees, and shrubs with livestock farming on the same land.

Reverse logistics: A type of supply chain management that returns products from the customer back to the manufacturer. This can happen through returns, repair, reuse, recycling, refurbishing, remanufacturing, or regenerating. 

Responsible consumption: Purchasing products or services that are eco-friendly, and made in a socially responsible way. Like only buying fruit and veg in season and grown close to home. Read more about sustainable shopping in our practical guide. 

Renewable materials: Materials such as wood, wool, and sea salt that are constantly naturally replenished at a rate equal to or greater than the rate in which they are depleted. (The opposite of finite materials such as natural gas, metals, and minerals). 

Planned obsolescence: Products which are manufactured with the intention of being no longer usable after a certain period of time. Think: appliances that break easily or mobile phones or laptops that become outdated quickly. This is polar opposite to the way a circular economy wants products designed, because it’s purposefully wasteful.

The 3 guiding principles of a circular economy

nature woodland

A circular economy is guided by 3 principles of reduce, reuse, and regenerate. It focuses on keeping resources (products, materials, energy) in the system as long as possible – and then recycling them once they’re spent. Let’s break down how it all works: 

1. Get rid of waste and pollution

The end goal of a circular economy is to eliminate waste and pollution. By overhauling the way we manufacture, and what we manufacture, we can create products that are long-lasting and recyclable. The process needs to start with designing products that can be disassembled and regenerated when their original life cycle is over. 

2. Keep products and materials in use 

Extending the life cycle of products and materials is vital to reducing waste. Redesigning products that can be reused, repaired, and remanufactured is key. Plus, we have to rethink the way we package food. BYO stores are becoming increasingly common, where we keep the container to refill time and again – instead of buying plastic packaged goods from the supermarket, then throw the container away. 

Read more about how OVO team member Penny went zero-waste for one week. 

3. Regeneration of nature

The pesticides and chemicals used in modern agriculture can lead to environmental damage and soil degradation. By working with more natural processes and taking care of the ecosystem as a whole, we can make less of a negative impact on the environment. Soil health can be recovered by switching damaging pesticides for non-toxic alternatives, and returning organic matter to the earth. 

What are the benefits of a circular economy?

A circular economy offers lots of environmental, economic, and social benefits…

Environmental benefits

At the moment, global production of everyday materials accounts for around 45% of carbon emissions4. By redesigning products to be built to last, we reduce the need to extract raw materials, and the environmental impact caused by it. 

If you factor in renewing and regenerating those products, they’ll be kept in circulation for even longer. Remanufacturing raw materials uses less energy than manufacturing, so this can also cut carbon emissions, air pollution, and toxicity exposure5. Basically, it all means we can limit environmental impact and reduce waste, as well as restoring habitats and biodiversity. 

Economic benefits

The economic and social impacts of a circular economy are closely linked.  A circular economy can drive smart, sustainable, and inclusive growth. By increasing reuse, repair, remanufacturing, and recycling on a global scale, we would create millions of jobs and boost innovation. This also encourages competition and kick-starts economic growth. 

Social benefits

A healthy economy creates employment opportunities that everyone can benefit from. With production models based on local reuse of nearby waste, communities can also benefit6. And innovative, new products that are more durable mean consumers will get better value for money – and a better quality of life too.

Why we need a circular economy to tackle climate change

According to the Ellen MacArthur Foundation, “Renewable energy and energy efficiency can only address 55% of global greenhouse gas emissions. The remaining 45% of emissions come from industry, agriculture, and land use7.” 

So how does a circular economy tackle that last 45%? Let’s take a look at those 3 principles again with specific reference to climate change:

  1. Eliminating waste and pollution means we’re reducing emissions from manufacturing and production, and from the waste itself.

  2. Keeping products in use means we’re producing less, which generates fewer emissions.

  3. By regenerating nature, we’re keeping carbon in the soil where it’s beneficial and not allowing it to be released into the atmosphere. 

The challenges of a circular economy

Moving towards a more circular economy requires some pretty radical change in the way we make, buy and use products.  Let's not forget that lots of people's livelihoods depend on the current linear we use to manufacture goods today.

Take fast fashion as an example – it's an industry that employs millions of people, like workers in garment factories in low-income countries.  To achieve a circular economy that's also fair, we must create that change whilst providing new employment opportunities and livelihoods for everyone.  In other words, to make a "just transition" to a circular economy isn't just about the planet – it's about people too.

3 examples of circular economy in practice

car

So what does a circular economy look like in practice? Here are 3 real life examples of how brands are embracing the circular economy and making it work. 

Car manufacture: Renault

French car manufacturer Renault is leading the way in promoting circular economy within the automotive industry. Historically, car manufacture has always generated a lot of waste. Renault is trying to change that by extending the life of its vehicles and their components. By keeping car materials in use, and reusing them, they follow one of the prime principes of circular economy by reducing waste. Here are a few ways in which they’re going circular:

  • Components like gear boxes and turbo compressors are remanufactured
  • Plastic content is recycled
  • Electric car batteries get a second life elsewhere 

And in 2020,  Groupe Renault founded their “RE:Factory” – Europe’s first dedicated circular economy automotive factory. 

Clothes and textiles: Patagonia

The cult outdoors clothing brand was an early adopter of the circular economy concept, with new innovations coming thick and fast. 2017 saw their Worn Wear clothing range land, reselling their own second hand clothes. And a couple of years later, their ReCrafted collection launched – made up from recycled garments deemed too ragged for Worn Wear. 

And 2020 saw them go one step further, by creating repair guides, which help customers repair their own Patagonia gear. To make it even easier for customers to buy upcycled rather than new, they added the option to buy from WornWear next to every piece of new clothing. Impressive stuff! 

Furniture: IKEA

The Swedish furniture giant, IKEA, is pioneering circular economy principles in the world of interiors, with their groundbreaking “Buy Back” project8. Launched in Germany, Australia, Canada, and Japan, the project entitles customers to return their old Ikea furniture for up to 50% of its original price, in the form of a store voucher. Any items not resold will be recycled or donated to local community projects. 

5 ways to get circular in your life! 

1. Just say no 

The best way to welcome a circular economy into your life is to say no to items that create waste. A good example is packaged fruit and veg. When you're doing your weekly shop, consider opting for food with less single-use plastic packaging – reach for those loose veggies from your local greengrocer instead

And if you're tired of seeing lots of pointless single-use packaging in your supermarket, then let them know by taking the opportunity to write to them. This will help them to see that there's customer demand for change. Responsible consumption is about consumers and businesses working together. 

A good way to think about being circular is before you buy anything, think about how many times you’ll use it. If it’s once, don’t do it! 

2. Bring back the milkman (or woman)

Traditionally, the milkman would do his rounds, deliver your milk, then come back for your empties. No waste! That sadly went out of fashion, and we began to haul gargantuan plastic flagons of milk back from the supermarket instead. 

But the “milkman” model is on the rise again. In the UK, Milk and More saw 75,000 people sign up for milk delivery in 2019. 

 Loop is a good example in the US. A new system has been created where customers book online and durable, reusable containers filled with their favourite products are delivered, then picked up again when empty. Brands getting involved include Pantene, The Body Shop, Dove, Gillette, Tropicana, and others. And over this side of the pond, Loop has been trialling with Tesco. So watch this space if you want to make your groceries more circular! 

3. Composting

One of the most common and natural ways to introduce circular economy style living into your home is composting. Composting systems can be used no matter how big or small your home is, with some smaller systems usable even on a balcony. The Royal Horticultural Society gives a few good tips on how to get started. 

The benefit of composting is it doesn’t create methane or other greenhouse gases while breaking down your leftovers. Food waste is a huge problem in this country, and the world over. Cutting just one day's worth of the greenhouse gases from the UK's food waste would be equal to planting half a million trees9

To find out more about the impacts of food waste on the environment, check out our guide on how reducing food waste can help tackle climate change.  

4. Repair and reuse

It seems simple, but our throwaway society doesn’t often use old-fashioned methods  – like taking broken shoes to the cobbler, mending clothes when they get worn, or repairing our electronics. Repair Cafes are becoming more and more popular as a place to take along broken items and repair them with some expert guidance. For free! 

The Restart Project in London is a social enterprise that focuses on repairing electronics. They run regular parties where people teach each other how to repair their broken gadgets and gizmos, “from tablets to toasters, iPhones to headphones”. 

The project began because of the founders’ frustration with the throwaway consumerist model, and the mountains of tech waste it leaves in its wake. The project allows everyone to share skills and gain confidence to get hands-on with their electronic gear, so we can repair rather than throw away. 

5. Choose charity

Fast fashion is the second biggest polluter of our environment after the oil industry10. Our desire to look stylish consumes more energy than flying and shipping combined! In fact, 10% of the world’s total greenhouse gas emissions comes from the fashion industry. That’s almost as much as the whole of China (12.5%)11

So instead of buying new, why not look to charity, second-hand and vintage shops? They’re way more eco-friendly, and you’re far more likely to find a unique piece than in all those high street stores. Take time to find quality pieces, hold onto them, repair them, and maximise their use – that’s the circular way.

The future for circular economies

We’re in the middle of a climate and ecological crisis, and carrying on with a linear economy simply isn’t a sustainable option. 

The 2021 Circularity Gap Report12 states our current economy is only 8.6% circular. But we needn’t be disheartened. By targeting sectors with big potential for change (such as those we’ve described above) we could become 17% circular by 203013

Although it might not be an easy transition, a circular economy isn’t unrealistic. By being guided by its principles, we can start planning for a more sustainable future. Implementing a circular economy needs wide-ranging policy changes across the world.  It’s not going to be simple, but the alternative is unthinkable. 

Stand up to climate change

You can make a stand against climate change by switching to 100% renewable electricity14 with OVO. And we’ll plant a tree every year in your name15.  

Plus, every OVO member has access to OVO Greenlight, our free energy-saving tool that gives you all sorts of useful info about your energy use. Plus, handy tips to help you cut carbon and bills!

Sources and references:

1 https://www.landmarkacademyhub.co.uk/climate-change-impacts-of-the-industrial-revolution/

2,3 https://ellenmacarthurfoundation.org/

4https://www.europarl.europa.eu/news/en/headlines/economy/20151201STO05603/circular-economy-definition-importance-and-benefits

5 https://www.chathamhouse.org/2021/06/what-circular-economy

6  https://www.repsol.com/en/sustainability/circular-economy/index.cshtml

7  https://ellenmacarthurfoundation.org/topics/climate/overview

8 https://www.ikea.com/gb/en/customer-service/services/buy-back-resell/

9 https://wrap.org.uk/media-centre/press-releases/we-wont-fix-climate-change-if-we-dont-stop-wasting-food

10 https://www.onegreenplanet.org/environment/clothing-industry-second-most-polluting/

11 https://ourworldindata.org/contributed-most-global-co2

12 https://www.circularity-gap.world/2021

13 https://www.chathamhouse.org/2021/06/what-circular-economy

14 100% of the renewable electricity we sell is backed by renewable certificates (Renewable Energy Guarantee of Origin certificates (REGOs)). See here for details on Renewable Energy Guarantee of Origin certificates and how these work. A proportion of the electricity we sell is also purchased directly from renewable generators in the UK.

15 Each year, OVO plants 1 tree for every member in partnership with the Woodland Trust. Trees absorb carbon dioxide from the atmosphere, so tree-planting helps to slow down climate change.