One of the greatest challenges of our time is reconciling improvements in living standards with the amount of natural resources and energy required worldwide. A viable solution is championing a circular economy that incorporates environmental protection with economic gains for businesses while maintaining modern conveniences. However, companies and industries are reluctant to adopt circular business models due to misinformation about the circular economy. Do not allow misinformation to sway you from doing good!

In this post, you will:

• Learn what the circular economy is and how it can help your business.
• Bust five common circular economy myths that may be hindering your progress.  
• Learn why product and service sectors are crucial for society to achieve a circular economy.

What Is the Circular Economy?

The circular economy decouples virgin natural resource use and its associated environmental degradation from economic growth by increasing resource efficiency. 

While several definitions of circular economy exist, all agree with this concept. The circular economy moves away from the linear economic model of 'take-make-consume-throw away.’ This new economic model values materials and aims to prolong their utility by closing the loop as much as possible through reuse, recycling, repair, refurbishment, leasing, and sharing strategies. Product planning and designs that integrate material from end-of-life products, which are not considered waste under circular models, help achieve circularity.

Adopting a circular economy matters from a business point of view because it solves many challenges that industries are currently facing. The circular economy can:

• Dodge production delays from unreliable international supply chains due to insecure global politics and fuel prices.
• Maintain economic growth in the context of finite natural resources by materials circulation.  
• Stimulate innovation to overcome science, technology, and engineering obstacles and generate new jobs.
• Cut waste management costs by using end-of-life products as resources instead of landfilling and improving business profits.

Five Misconceptions About the Circular Economy

Alexa Böckel, the co-author of the book, "Mythen der Circular Economy", explains that, 

"Myths are stories that we tell ourselves to justify the current status quo and prevent us from achieving a substantial change towards a circular economy. Busting them opens our thoughts and opportunity spaces and makes it possible to think about circular alternatives. We must start thinking about the possible instead of clinging to the impossible."

Industries can achieve circularity, so take a look at the five common circular economy myths that may be hindering you from adopting this business model.

Myth #1: Circular Economy Is a New Trend

The concept of a circular economy is not new. Some scientists argue that circularity and system thinking in economics and ecology can be dated back decades, and so can specific elements of the circular economy, such as:

• The cradle-to-cradle (C2C) concept, first proposed in the 1990s by Michael Braungart and William McDonough, a design process that eliminates waste by developing products from safe materials that can be reused to make new products;
• And industrial ecology, suggested by Frosch and Gallopoulos in 1989, where every output is used as a new input by market participants to balance industrial production and environmental sustainability.

Other broader concepts are also not new or exclusive to the circular economy models. Cleaner production, for example, aims to prevent waste production for environmental management, while eco-efficiency advocates using fewer resources to produce goods and services and decrease waste and pollution. Additionally, the Closed-Loop-Supply Chain Management covers the entire product and service lifecycle and requires collaboration between supply chain partners.

Kreislaufwirtschaft: The German Circular Economy

In Germany, 'Kreislaufwirtschaft', which translates to circular economy, is not the holistic concept we are discussing. The law (Kreislaufwirtschaftsgesetz, KrWG) refers only to a waste management system introduced in 1994. The KrWG focuses only on resource efficiency to conserve natural resources and ensure environmentally compatible waste disposal (KrWG § 1).

The KrWG aims to prevent waste by reducing landfill use (cf. KrWG § 2, Paragraph 1). Waste is segregated and recycled for material recovery or incinerated for energy recovery.

Though Kreislaufwirtschaft is sometimes confused with the holistic circular economy model, the broader concept and applications of the circular economy are also well-established in Germany.

Myth #2: Circular Business Models Are Always Sustainable

Achieving zero-waste through infinite recycling is the theory behind the circular economy. However, this is not always possible, and industries adopting circular economy models should not be disappointed when their chemical, biological, and industrial processes do not close the loop entirely.

Even when a system reuses materials efficiently, all loops gradually lose materials and energy due to byproduct production, mixing, downgrading of quality, and other factors. Therefore, transitioning to a circular economy requires injecting new materials and energy. To offset this, shifting to zero-emission renewable energy is advisable.

Other challenges include material limitations, technological obstacles, and emerging and specific toxic waste streams. Practical difficulties also exist in connecting waste to production via secondary materials.

Even circular systems will produce pollution and carbon emissions. Contributions to social benefits are also imperfect since people are involved in manual waste sorting. However, adopting a circular economy can help meet reporting commitments required under the EU's Corporate Sustainability Reporting Directive (CSRD).

Myth #3: The Circular Economy Will Harm Manufacturers

Since circular manufacturing prolongs product life and enables repair, industrialists fear it will reduce sales volumes and return on investment (ROI). However, a look at the bigger picture suggests otherwise. The circular economy can increase ROI for businesses with existing products and those seeking to design new ones.

Firstly, research suggests that returns cost UK retailers £60 billion annually. Dissatisfaction is one of the main reasons for product returns that go unnoticed, as senior management is unaware of the extent of the problem. Producing quality, long-lived products creates opportunities to provide repair and maintenance services and build customer loyalty.

Also, according to a 2022 Forbes report, remanufacturing, where businesses use high-quality, cost-effective secondary materials, is rising. This reduces demand for expensive virgin raw materials by 50-98% and decreases energy consumption by 55-90%. As a result, businesses that implement remanufacturing emit fewer carbon emissions, which translates into savings from carbon taxes.

Forbes reports that global remanufacturing, currently worth $80B in revenue for only 2% of products sold, will be worth $25 trillion by 2050. Circular products exist in all sectors, like automotive, tech, and medical imaging equipment.

Myth #4: The Circular Economy Is a Fancy Name for Recycling

Recycling is a vital part of the circular economy. However, the circular economy is more than recycling—it's a holistic approach that includes other crucial elements. Product design for longevity and repair, material choice and use, manufacturing, distribution, and end-of-life product take-back are all vital components of a circular economy. The circular economy sometimes involves novel product ownership, like leasing, sharing, service packages, and trade-ins.

For example, circular product designs incorporating easy disassembly facilitate the repair or replacement of only specific damaged components and enable efficient material separation for recycling.

Thus, circular economy models integrate recycling in the planning stage to source materials and reduce virgin resource use. Recycling in a linear economy is only one disposal route of many waste management options.

The circular economy evaluates recycling through the measure of circularity, which considers the amount of material used for remanufacturing. Meanwhile, the recycling rate or recovery rate used to evaluate waste management cannot cover complex, comprehensive concepts of circularity.

Gary Lewis, CEO of Resourcify, elaborates on why the circular economy is equated with recycling:

"Recycling is the cornerstone, but the circular economy is the blueprint. At Resourcify, we're not just about recycling waste streams; we're architects of a sustainable ecosystem. While recycling plays a crucial role, our focus extends beyond. We're empowering businesses to embrace the circular economy through innovative take-back systems, keeping valuable resources in the loop. The association with recycling stems from its visible impact, yet the essence lies in creating a holistic system where waste transforms into opportunity, sustainability becomes the norm, and businesses thrive responsibly."

Myth #5: The Circular Economy Only Works with a Change in Consumer Behaviour

Consumer habits and demand for eco-friendly products can drive industries and governments towards circular economic models. However, enterprises and governments are responsible for actually implementing a circular economy.

Several European Commission regulations, like the Circular Economy Action Plan that supports the Green Deal and proposals like the Green Claims Directive, already have incentives and penalties to motivate industries and companies to transition to a circular economy.

However, rules have not been enough to increase circularity. Materials reuse dropped to 7.2% in 2023, according to the Circularity Gap Report, down from 8.6% in 2022.

Industries will have to be responsible for producing circular products and services. For example, designing products for easy disassembly so consumers can repair and replace damaged parts instead of buying an entirely new product.

Industries and governments will have to work together to establish sustainable infrastructure. Government support will be necessary to establish new businesses for widespread repair, servicing, and recycling services, waste segregation and collection, secondary material processing, bulk shopping, etc.

Adopting the Circular Economy

Embracing circular principles in business strategies yields financial benefits and fosters resilience against resource scarcity and market fluctuations. Industries have the power to energise the circular economy since it is in their capability and interest to change and use natural resources sustainably for long-term prosperity, and it's clear that the transition from a linear economy to a circular one does not have to be fully closed or all about recycling.

This shift towards circularity aligns with environmental leadership, and the myths around circularity should not stop companies from acting. Ultimately, the integration of circular principles empowers industries to become drivers of positive environmental change while securing their own long-term viability and growth.

Download our guide and learn more about practical applications for your business to become more circular.