What is Circular Economy?

Circular economy is an alternative economic model to the current linear economy we are in. The main differentiation comes from the fact that it is designed to regenerate resources, rather than deplete resources with increasing economic activity.

Main value chain activites

The three main activities in an economy are production, distribution and consumption. These are organized linearly in a linear economy as the word implies.  When we perform these activities, there are non-reversible, detrimental effects to the environment especially at the beginning and at the end. There is environmental degradation as natural resources are extracted at the beginning and when waste is emitted  the end. Both these cause resources to deplete and non-value adding material to accumulate with economic activity. Additionally, when we produce and distribute, there are environmental resources consumed (such as fossil fuel) and emissions to the environment occur.

With this economic model, the more economic activity we have (the higher the consumption), there is more harm to the environment by depleting natural resources, and emitting waste, as regeneration of resources are not thought of or accounted for.

Alternative model to the linear economy


In a circular economy, we design both upstream (economic activities prior to consumption) and downstream (economic activities following consumption to revive resources) activities to regenerate products, components, materials so that they form continuous nutrient cycles.


Exploring possible strategies to implement a circular economy

There are multiple strategies adopted to do that.

The main conceptual difference in all strategies comes from identifying two distinctive resource (nutrient) cycles in an economy – biological cycle and an industrial cycle, where resources can indefinitely circulate.  Resources are seen as regenerative nutrients and they are set to circulate within those two cycles, by addressing DESIGN of economic activity.

Design is addressed prior to consumption (upstream), with the end-of-life management (EOL) of those resources in mind, so that following consumption, the resources have a pre-identified pathway to regenerate back to the economy. Design for a circular economy is such that regeneration happens  with least resources spent managing the end of life of products and least amount non-value processes occurring to bring them back to a useful state.  

Fundamentals of the concepts associated with circular economy has been mainly shaped through the work of Michael Braungart and William McDonough (identified as Cradle to Cradle principle) and performance economy principles by Walter H Stahel.

The key principles of cradle to cradle are:

  • Resources: Nutrients are nutrients  : All resources to be nutrients in circulation. They either belong to a biological cycle or an industrial cycle.
  • Energy:  Use of renewable energy: Produce energy as renewable energy not through depleting resources.
  • Support diversity:  The complexity of natural biological systems, as well as economic, social, cultural systems, are to be embraced, appreciated, and celebrated for their uniqueness. Devising context-specific solutions are encouraged.

Strategies for the biological cycle are:

For the biosphere, regeneration can happen through industrial or natural processes to add the nutrients back to nature.

Strategies for the industrial cycle are:

  • Share (products)
  • Maintain (products)
  • Reuse (products)
  • Repair (products)
  • Refurbish (components )
  • Remanufacture (components )
  • Upcycle (materials)
  • Recycle (materials)

The objective of the performance economy as per Walter Stahel

The key principles of a performance economy

  1. Re-use (decreasing the volume of material flow)
  2. Re-manufacturing (reducing the speed of material flow)

Re-use and re-manufacturing helps maintain the material stock and extend its lifetime by reducing material intensity. (the material flow required to create and maintain material stock)


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