Gielen and Saygin reported in 2019 that "circular economy" is a term that has recently emerged. The Ellen McArthur foundation defines it as “A framework for an economy that is restorative and regenerative by design”. In the past other names such as dematerialization or industrial ecology have been used for the same concept. The traditional pattern of production, distribution and consumption is linear: a producer manufactures a product by using primary raw materials, subsequently the product is distributed to the end user for consumption and finally the product is disposed as waste where its building blocks are only minimally recovered. The linear economy has negative impacts on the economy and environment as it relies on a continuous supply of virgin resources, omitting the utilization of the value in waste products and the synergies between the different sectors and stages of the economy.
Transitioning to a circular economy does not only amount to adjustments that will mitigate the negative impacts of the linear economy. The concept of circularity has deep historical and philosophical origins. Its potential is significant. Ernst von Weizsacker, Amory and Hunter Lovins proposed in 1997 a factor four a guiding improvement potential for doubling wealth and halving resource use.
The concept of a circular economy is very much related to the management of physical flows. Circular flows are better from an environmental perspective because they reduce the need to extract primary resources, and they reduce the need to dispose of waste. Circular flows can also reduce energy needs. For example recycling of materials is often more energy efficient than production of primary materials from natural resources. In an earlier Payne Institute CSM working paper we have elaborated the potentials on a global scale. A reduction of 50% and more of energy and resource use can be achieved for many sectors and products. In addition, the same material can be recycled several times without losing quality properties. Finally, there is often a sound economic reason for recycling that can create additional revenue streams for businesses.
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