Circular economy – sustainable consumption and business value from efficient use of resources

While consumption and the demand for production keep growing, circular economy offers a solution for sustainable growth and economic prosperity. Circular economy is all about doing more with less. The focus is on more sustainable use of natural resources through efficient reuse and recycling. In circular economy the waste of one product becomes building material for another, and ultimately the goal is to minimize or even eliminate waste in production processes.

The concept of circular economy has come to challenge the old linear economic model, which has been based on the assumption that natural resources are endless, and products are discarded when they are no longer needed. According to The European Commission’s definition, circular economy as an economic system in which “…the value of products and materials is maintained for as long as possible, the generation of waste is minimized, and when a product reaches the end of its life, it is used again to create further value.”

Principles of circular economy

Despite its name, circular economy includes much more than just recycling. Besides materials, it is important to enable the use and recirculation of products as well. Concepts such as product-as-a-service are also necessary in ensuring that products remain in use for a longer life span.

The UK-based charity Ellen MacArthur foundation that focuses on promoting circular economy, divides the concept into three main principles:

• Designing out waste and pollution

• Keeping products and materials in use

• Regenerating natural systems.

The purpose of a circular economy is to design out negative impacts of economic activity, such as greenhouse gases and pollution, that damages human health and natural systems. Circular economy also favours activities that preserve energy, labour, and materials, and avoids the use of non-renewable resources.

What does circular economy mean for consumers and businesses?

Consumers are increasingly interested in a more sustainable way of life. This can mean buying environmentally friendly products, recycling, minimizing household waste and using low-emission transport. Using services instead of owning things is also a vital part of circular economy. Digital sharing platforms for renting, selling and reuse are becoming more popular and extend the life cycles of goods and resources.

Circular economy is both a necessity and a great business opportunity, which can be seen in the changing operating and revenue models of companies. Especially the rapid technological advances and customer demand for sustainable products and services have made circular business models common among companies. In circular economy value is created by maximising the performance and customer value of products. The benefits for companies include stronger customer relationships and reduced costs due to lower virgin-material requirements.

The Finnish Innovation Fund Sitra lists five different circular economy business models:

• Product as a service: providing services instead of products

• Renewability: using renewable and recyclable materials as well as renewable energy in product design and manufacturing

• Sharing platforms: maximising the usage of goods and resources and extending their life cycles by using digital platforms for renting, selling, sharing and reuse, for instance

• Product-life extension: using products according to their original purpose for as long as possible or enabling multiple instances of reuse through means such as maintenance, repair and refurbishment

• Resource efficiency and recycling: material and energy-efficient solutions, and the collection and reuse of products and raw materials that have reached the end of their life cycle.

Getting the most out of raw materials

The biogas production is a good example of getting the most out of raw materials and enhancing circular economy. Biogas can be produced from e.g. household, agricultural and industrial wastes. Reusing bio-based materials from e.g. wastewater of a paper mill reduces energy loss, use of chemicals and particulate emissions from waste combustion.

Circularity is further enhanced by the fact that nutrient residues arising as a by-product in biogas production can be returned to the food chain as a fertilizer or processed for industrial needs to replace mineral or fossil nutrients and fertilizers. The production process carried out in biorefineries makes it possible to get the most out of the raw materials. For example, the water drawn from producing fertilizers can be utilized again in biogas production. This reduces the amount of clean water needed.

Renewable biogas can be used as a fuel for cars, buses and trucks as well as in the maritime transport sector. The emission reduction can be as much as 85 % compared to fossil fuels.

Towards low-carbon future

Circular economy represents a powerful contribution in achieving global climate change targets. The European Commission’s first Circular Economy Package was launched in 2015, and since then many new measures related to it have followed. Under the directive e.g. the rate of recycled municipal waste must be increased 65% by 2035, compared to the present level. In 2018 the EU Strategy for Plastics was also released, according to which all plastic packaging in the EU market is to be reusable or recyclable by 2030.

Circular economy is a high priority also in the new European Parliament’s and the Commission’s agenda, and the target for carbon neutrality has been set for 2050. To achieve the set goal, changes need to be made in all areas of the society. Demand for circular economy solutions seem to be growing among both consumers and businesses, and global and national legislation will further strengthen this development.

28.4.2020