Putting the Emphasis on the Economy in Circular Economy
25 May 2023
When it comes to a circular economy, sustainability strategies and environmental planning are typically the focal point of discussion – and rightfully so, considering their importance. However, the circular economy is not one-sided – far from it.
The aspect of economy is often overlooked or infrequently mentioned, even though a circular economy is an economic model in and of itself. In tandem with circularity, the economic component is the base while circularity is the methodology. Furthermore, sustainability and circularity are advantageous for companies not only for environmental reasons, but also for economic purposes. Therefore, in this blog post, we cover the economy from a variety of angles including:
- The challenges that a circular economy could help ease and/or eradicate
- The marked fiscal benefits for the overarching economy
- The advancement of the job market
Together, these points demonstrate that a circular economy is worthwhile at all levels of society from the general economy and companies to the job market and resources.
For more information on not only the economics, but practical applications for businesses in relation to a circular economy, download the guide The Circular Economy: Practical Applications & Benefits for Businesses
Bumps in the (Economic) Road
While there are numerous benefits, it is crucial to understand what pressure points a circular economy could alleviate in the wake of a linear economy. As put by Naturklima, some of the major points driving the push for a circular economy comes from the desire to move away from the shortcomings involved in a linear economy including:
- Economic losses among companies as result of volatile resource prices and unpredictable availability
- Increased regulations set by the European Union, nations and local governments as a direct result of the wastefulness of a linear economy
- The costs of waste management and treatment
To read more about the legal framework and regulations from the EU, download our guide CSRD cheat sheet and check out our blog post The Push for Circularity: Making Circularity in Retail Possible to get started.
Looking closer at the area of resources, according to the European Environment Agency, the implementation of a circular economy has the potential to minimise Europe’s “high and increasing dependence on imports” considering that the dependence on imports could be a point of vulnerability for Europe in the future. Additionally, it should be noted that the increase in competition globally for “natural resources has contributed to marked increase in price levels and volatility.” The aim of a circular economy, as put by het groene brein, is to “decouple economic growth from the consumption of raw materials.” Closing loops and becoming less dependent on the extraction of raw, virgin materials help create more stability for companies and markets.
Furthermore, waste management and recycling itself under a circular economy is different from that of a linear economy. For example, the perception of waste is encouraged to be transformed and to be seen as a valuable resource – in the case of companies, the shift from viewing waste as a cost centre to making it a profit centre. In doing so, a circular economy has the potential to allow companies to:
- Safeguard the supply of materials
- Develop new products from reclaimed materials
- Discover ways to recover unusable material rather than discard it
- Employ innovative approaches to adapt product design to the availability of materials
- Extract value from resources by selling to those who require them
- Save money
If done correctly and mindfully, waste can be regarded as a business asset rather than a burden to be taken care of. As put by George Barrett, Sustainability & Circular Economy Manager at John Lewis & Partners, in the webinar The Circular Economy & Retail: From Theory to Practice, “Waste is a resource that has fallen into the wrong hands.”
The Financial Future is Bright
Going beyond pressure points in which a circular economy could help relieve and erase, there are a variety of economic benefits associated with a circular economy. For example, as put by the European Environment Agency, circularity “could result in considerable cost savings, increasing the competitiveness of Europe’s industry while delivering net benefits in terms of job opportunities.”
In fact, according to a report produced by McKinsey & Company, a circular economy could “generate a net economic benefit of €1.8 trillion by 2030.“ Broken down, this means that a circular economy would:
- Increase resource productivity by up to 3% each year
- Create a primary-resource benefit by 2030 that correlates with €600 billion annually
- Produce €1.2 trillion in non resource and external benefits
- Enable the GDP to rise by as much as seven percentage points
The driving force behind these estimations comes from a combination of components. The Ellen MacArthur Foundation states that the aforementioned economic growth “would be achieved mainly through a combination of increased revenues from emerging circular activities, and lower cost of production through the more productive utilisation of inputs. These changes in input and output of economic production activities affect economy-wide supply, demand, and prices [with these] effects rippl[ing] through all sectors of the economy adding to overall economic growth.“
Encouraging News for the Workforce
One of the emerging circular activities is the transformation of the job market. For example, a report created by the European Parliament states that a circular economy could generate 700,000 jobs in the EU alone by 2030. While the numbers are crucial and demonstrate job growth, the way in which Europeans will work is also vital and worth examining.
For example, a circular economy will not only increase the demand for new, green jobs, but also the development of more recognizable, already existing careers and how they operate. As put by Circle Economy, there are three categories for circular jobs:
- Core circular jobs: jobs which close raw material loops, including those involved in repairs, renewable energy, waste and resource management (i.e., appliance technician, recycling operative, etc.).
- Enabling circular jobs: jobs that break down obstacles and enable the expansion and upscaling of core circular activities, such as those emerging from leasing, education, design and digital technology (circular equipment engineers, teachers, demand planners, etc.)
- Indirect circular jobs: jobs that support the circular economy in an indirect manner (bankers, couriers, etc.)
Together, the enabling circular jobs serve as the supportive shell for the core circular jobs to not only to develop, but to thrive while the indirect circular jobs, with the adoption of circular principles into their operations, utilise the services of core circular jobs (i.e., a post office using second hand bikes to deliver mail).
Overall, each category not only serves its purpose and helps the other categories, but they also all strive for a collective goal of circularity, enabling innovation and job development.
It All Adds Up
Overall, a circular economy is intended to benefit everyone – and things – involved. This is accomplished via methods of:
- Providing security in the availability and retention of materials
- Enabling for the revaluation and valuation of materials once deemed to be waste
- Fostering economic growth and prosperity at scale
- Developing an environment for job creation and development
In general, a circular economy is intended to harmonise circularity and the economy, so they work together and not against each other like within a linear economy. If adopted, a circular economy will be beneficial both environmentally and economically.