Circular Economy

The circular economy is a closed-loop system wherein the focus is on eliminating waste by reusing, recycling, and refurbishing equipment, products, machinery, and infrastructure for a longer duration. This model within an economy improves the ecosystem, protects natural health, and even improves human health from their policies to lower carbon emissions and reduce wastage to zero.

A circular economy model at a government or macro level means to tackle large problems such as global warming by creating awareness, products, and policies supporting reusability, refurbishing, leasing, and sharing. To create a nationwide or even a worldwide impact on a sensitive phenomenon such as this has to involve businesses by providing them with incentives and subsidies.

• The circular economy is a closed-looped system that focuses on discarding waste through reusing, recycling, and refurbishing equipment, products, machinery, and infrastructure for longer.
• It is a system not related to the traditional economic system, which is linear. 
• It advocates the reuse and refurbishment of resources. It also promotes waste recycling as a resource and tends to make more finished goods. 
• The circular economy comprises the 3R concept. So it ensures all the products are eco-friendly. 

The circular economy is termed the closed-loop economy that promotes sustainable development. It is a system that does not relate to the traditional economic system, which is linear. Instead, it advocates the reuse and refurbishing of resources.

A closed loop economy intends to be zero wastage as each product’s waste could be used as a raw material or one of the raw materials for another product, and so on. Thereby, recycling and reusing products is highly promoted in such economies.

The circular economy concept usually advocates and promotes the 3-R approach which is reduce, reuse, and recycle. This approach not only helps in the betterment of the environment but also promotes human health.

In the larger scheme of things, this concept looks to cut down on carbon emissions by afforestation drives or other means. Moreover, zero wastage is a concept that is closely linked to an economy of this nature.

The circular economy is important as it promotes sustainable development. It advocates using waste as an input for producing new finished goods. It supports creating reserves of raw materials and adopting innovative methods to eliminate any steps that reduce the cost and time to make new finished goods.

For any government or organization such as World Health Organization (WHO) to be able to create awareness about such topics, it is important for them to include and incentivize local businesses in the process. Because these businesses ultimately have a more frequent touch point with the citizens and can have a better reach to approach this problem.

The circular economy model is based on a few principles that hold thus mode of operating an economy together. Let us understand these principles through the points below.

• It promotes waste recycling as a resource and input to create more finished goods.
• The materials that are biodegradable automatically decompose and become part of nature.
• However, this is not the case for non-biodegradable resources. Instead, such items are re-introduced into the production system and reused to re-engineer new products.
• Use wastage to repair partially or fully damaged products. In such scenarios, one should analyze the scope of repairs.
• If it cannot recycle the waste, then valorize it to harness energy for the community.
• Ensures that all products are eco-friendly.

Let us understand the circular economy model through a few examples. These examples from practical life will help us understand the intricacies of the concept.

• The best example of a closed economy is collaborative consumption. Uber is a technology-based company that aggregates the cabs nearby and helps in meeting the commutation demands of the nearby riders for a given location. It offers Uber Pool to its customers or riders as a product offering.
• The Uber Pool allows riders to reduce their traveling costs. Additionally, the driver locates nearby travelers who get added up to the active pool rider's busy trip.
• Therefore, the limited usage of resources for both cab owners and the rider saves huge costs and time. At the same time, it holds a good amount of fuel which could be further re-utilized for any other planned travel.
• Such innovative product offerings and concepts focus on reusing and recycling available resources with limited fuel usage. As a result, the rider can reach their destination and save on huge travel costs.

The circular economy concept is based on and comprises the 3R concept. We can describe the 3R concept as reducing or least using raw materials, reusing or re-utilizing the products and services, and recycling high durable raw materials and components. In addition, the 3R concept relies on the closed ecosystem, usage of renewable products and energy, and innovations into existing systems.

Despite the fact that adopting the principles of the circular economy concept can take a significant amount of time, effort, and resources, it is important to consider the thought and shift to such an economy not only to promote the economy but also human health. Let us discuss the importance of the shift through the discussion below.

• The global population has appreciated drastically and exponentially. This factor has negatively impacted the resources that are available across the globe. Since resources are limited, so is the availability of raw materials for processing various types of finished products. Additionally, the extraction of raw materials has led to increased carbon emissions across the globe and adversely impacts the environment.
• Therefore, the world has to switch to a circular economy to lower carbon emissions and promote recycling and efficient raw materials.

Let us understand the advantages of benefits of following the circular economy model through the explanation below.

• It reduces waste as it promotes the recycling of finished goods.
• It offsets any potential price rise of the commodity.
• Its adoption helps achieve efficiency and effectiveness as resources are recycled to get new products.
• It promotes the rental business by advocating to reuse of an economic entity rather than purchasing a new entity.

Despite the advantages discussed throughout the articles and especially in the section above, there are a few factors from the other end of the spectrum that prove to be a hassle for individuals and organizations at different levels. Let us understand the disadvantages of this concept through the discussion below.

Normally, teaching circular economy concept among vast populations is not easy. Additionally, this creates huge interdependence among several processes that create finished goods. Therefore, the unavailability of one input can impact the creation of other finished goods. As a result, it causes value erosion for interdependent businesses.

Both these economies are the exact opposite of each other. Let us discuss their differences in fundamentals and implications through the comparison below.

• A traditional economy is never circular; rather, it is linear. A linear economy system generally performs the procurement of raw materials followed by the creation of end output and usage of the production to optimum levels followed by decomposition of the item after full utilization. On the other hand, a circular economy focuses on utilizing the already decomposed item and recycling it to produce a new output or refurbish the existing item with the intent of further usage.
• A linear economy is never a closed loop. In comparison, the circular economy is a closed loop. That is the case because the traditional economy does not understand the importance of all elements utilized in production. In contrast, the closed economy believes in each aspect involved in the production cycle.

This article has been a Guide to What is Circular Economy. Here we explain its examples, elements, principles, and benefits and compared it with a linear economy. You can learn more about it from the following articles: -

• Pareto Efficiency
• Developed Economy
• Closed Economy
• Homo Economicus