1

The circular economy

Every few hundred years in Western history there occurs a sharp

transformation. Within a few short decades, society – its world view, its
All rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.

basic values, its social and political structure, its arts, its key institutions –
rearranges itself. Fifty years later there is a new world.
peter f drucker1

What is it?
Writing the words quoted above in 1992, respected author and business
consultant Peter Drucker continued: ‘And the people born then cannot even
imagine the world in which their grandparents lived and into which their
own parents were born.’
In recent decades, we have transformed the way we live, work and com-
municate. Society, business and governments are realizing that the ‘linear
economy’ (take, make and discard), which emerged from the early industrial
revolutions, is not sustainable – financially, socially or ecologically.
Instead, a new approach, the circular economy, is emerging. Companies
will rethink how they design laptops, furniture, sneakers, cars, mobile
phones, cleaning products and even jeans. Rather than focusing on how to
maximize sales and encourage customers to buy the latest model, companies
will develop strategies for continuous value creation and profitable, long-
term customer relationships.
Professor Walter Stahel and others paint pictures of the switch from
‘ownership’ to ‘access’ in the circular economy.2 I do not own a mobile
phone – instead, I lease it from a company that has designed it to be up-
gradeable, customizable and easy to repair or remanufacture. I don’t buy
Copyright 2021. Kogan Page.

expensive things for occasional use – instead, I rent them.

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 14 AN OVERVIEW OF THE CIRCULAR ECONOMY

Businesses large and small, around the world – established global corpo-
rates, and disruptive startups – are rethinking business models and product
design. They aim to capitalize on the fantastic opportunities to trade with
the rapidly growing ‘consumer classes’, secure access to future resources,
and ‘future-proof’ their businesses.
We review the issues arising from our traditional ‘linear’ economy in Part
Two and explore the global trends and drivers creating the context for cir-
cular approaches in Chapter 5. First, in this chapter, we explore the circular
economy in more depth, looking at:

● the background to the circular economy;

● evolution of the concept: the main schools of thought, their principles
and how they compare;
● a brief look at some supporting approaches;
● scaling it up: a quick look at the countries, consultancies and companies
investing in it;
● a circular economy framework, which we explore in more detail in
Chapters 2 to 4.

Instead of leaking value by discarding products and materials after use, the
circular economy redesigns products, processes, supply chains and business
models to create, conserve and circulate value. Creating durable products,
and recovering products and materials at end-of-use, enables reuse, repair,
remanufacture and recycling. Simple examples include:

● Making orange juice: the ‘waste’ becomes by-products, with pectin, pulp
and zest for food manufacture and essential oils for pharmaceuticals and
cosmetics.
● Commercial photocopiers aren’t sold now; photocopying is a service
with efficient repair networks, together with refurbishing and
remanufacturing to enable second and third ‘lives’ for each machine.

Circular economy approaches regenerate resources and ecosystems, sup-

porting our health and well-being. By converting ‘take-make-waste’ into
‘value loops’, thus creating more from less, they decouple resource use from
value creation.
Circular economy terminology often categorizes materials into two
groups.

● Biological (renewable) nutrients – food, fibres, timber – should be

sustainable and renewed to meet or exceed the rate of extraction.

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 THE CIRCULAR ECONOMY 15

● Technical (finite) nutrients – metals, minerals, fossil fuels – should cycle

infinitely. Product design can support effective separation at the end-of-
use, for efficient recycling.

This over-simplifies the choices but starts to encourage a different mindset,

focusing on material choices and the ease of separation at end-of-use.

Why is the circular economy important?

Why do we need a different approach to business? ‘Traditional’ industrial
processes are a ‘linear economy’, meaning we take materials, make some-
thing, use it and then dispose of it. We could even call it a ‘waste economy’!

TAKE, MAKE, WASTE

Modern lifestyles rely on finite resources – metals, minerals and fossil fuels.
Our economy also relies on land and water – and we often forget that they
are finite too. We dump waste and pollution at every stage of the process,
destroying the living systems we depend on, and sometimes harming people.
When we discard the product, we waste all those resources – and we waste
all the energy, labour and knowledge we invested in the product at every
stage in the process.
The linear economy relies on companies striving to sell more: we try to
cut costs, try to encourage customers to buy the latest version, or persuade
them to buy products with a short life-cycle (eg fashionable clothes). We try
to create new ‘needs’, like antibacterial wipes for your kitchen, bottled
water, probiotic yoghurt, or smart speakers.
We extract around 90 billion tons of natural resources, every year, to
make what we consume. That’s more than 12 tons for every person on the
planet. Based on current trends, that number is likely to double by 2050.3
The systems we’ve created are shockingly wasteful. The Circularity Gap
report says we recover less than 10 per cent of our resources to make them
into new products.4
We now know we are causing dangerous climate change by burning fossil
fuels, using fertilizers and clearing forests, all of which creates greenhouse
gas (GHG) emissions. Our world population continues to grow, and people
have more money to spend on food, clothing and other stuff. It’s great news
that people’s standards of living are improving, but the downside is that we
are creating ever more demand for resources.

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 16 AN OVERVIEW OF THE CIRCULAR ECONOMY

FROM DESTRUCTION TO REGENERATION

This system is threatening our future on this planet, with lots of downsides:

● people feel excluded, fearful and exploited;

● businesses face resource scarcity, higher charges on waste and risk to
their reputations; and
● we are overloading and depleting nature’s living systems.

It’s easy to forget that we depend on living systems that provide critical ser-
vices for us, including pure air, clean water and healthy soils. We are realiz-
ing that the way we live and work is destroying nature and pushing the
earth’s systems towards irreversible tipping points, threatening our ability to
survive and thrive.
Governments, businesses large and small, NGOs and consultancies are
recognizing these critical problems and risks. They see the potential to re­
design the systems that depend on unsustainable consumption and are
investing in circular economy approaches. The World Economic Forum,
McKinsey, the Ellen MacArthur Foundation, the European Union and many
other organizations are helping to accelerate the transition to a circular,
resilient and sustainable world.

Businesses that work on the basis of circular principles are amongst the fastest
growing in the economy.
Dr Martin R Stuchtey, McKinsey Center for Business and Environment5

Background
As the industrial revolutions scaled up, changing the way many people lived,
worked, travelled and communicated, it seemed that resources were uncon-
strained. Effectively, we were a relatively small population on a large, boun-
tiful planet.
Since the 1950s, agricultural practices have changed in many developed
nations, using synthetic fertilizers, chemical pest controls and irrigation to
achieve massive increases in crop yields. Alongside this, human population
continued its exponential growth path, with increasing numbers of people
and levels of consumption. Rachel Carson, in her book Silent Spring (1962),
raised public awareness of the environment and destruction of wildlife
through the widespread use of pesticides.6 The press condemned her, and the
chemical industry even tried to ban the book.
From the 1970s onwards, we began to recognize that many of the
resources we rely on for our survival are either finite; or are constrained by

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 THE CIRCULAR ECONOMY 17

FIGURE 1.1 The great acceleration

Population
Real GDP (US $ trillion)
Primary energy use (exajoule)
Water use (thousand km3)

1750 1800 1850 1900 1950 2000

2010
SOURCE: Stockholm Resilience Centre7

the speed of regeneration or availability of land in our urban environments.

In Small is Beautiful (1973), EF Schumacher writes about the need to adopt
Buddhist economic principles, understanding ‘the essential difference be-
tween non-renewable fuels like coal and oil […], and renewable fuels like
wood and water power’.8 He goes on to explain that ‘non-renewable goods
should be used only if they are indispensable, and then only with the great-
est care and the most meticulous concern for conservation.’
Economist and systems theorist Kenneth Boulding described the issues of
open and closed systems in relation to economics and resources.9 Would
growth be limited first by running out of places to store our waste and
pollution, or by humanity running out of raw materials to use? Boulding
advocated focusing on maintaining our resource stocks and encouraging
technological change to reduce production and consumption.
In the 20th century, whilst population quadrupled, gross domestic prod-
uct (GDP) and consumption increased by a factor of 20. Many other indica-
tors of consumption and development show the same exponential upward
trend from the 1950s, with Figure 1.1 showing some examples. As the
effects of this ‘great acceleration’ became clear, scientists and institutions
began to question our ‘traditional’ ways of making, selling and consuming
products. You can see more on the World Economic Forum website.10
As we improved techniques for mining, extraction and manufacturing,
resource costs declined steadily, despite some short-term increases resulting

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 18 AN OVERVIEW OF THE CIRCULAR ECONOMY

FIGURE 1.2 Tipping point

Supply Demand

1 billion people
out
of poverty

Degradation of
living systems 3 billion new
consumers

Resource
availability and Increasing world
cost
population

SOURCE: © Catherine Weetman

from wars and geopolitical factors. Over the 20th century, prices halved. As
we moved into the 21st century, a tipping point occurred, and the declining
trend became a steep upward trajectory, described by consultants McKinsey
as a ‘century of price declines, reversed in a decade’.11 We have found, and
used, all the ‘easy to get at’ stuff. Worse still, prices are now volatile, and
frequently a shock in one resource flows through to others.
Predictions show a step-change in global demand between 2010 and
2030, as 3 billion new consumers join the ‘middle classes’, earning enough
income to purchase a mobile phone, more processed food and meat, better
housing and maybe even to take holidays abroad.
This rapid growth in demand, plus the difficulties of finding cost-effective
sources of materials and meeting environmental challenges, puts pressure on
the cost of supply. We have serious global challenges of inequality and pov-
erty too, with over 1 billion people lacking secure access to food, water and
energy. Figure 1.2 highlights the tipping point we have reached. Increasing
pressures of demand, coupled with challenges for supply of resources, and
the health of the living systems we depend on for clean air, safe water, food,
timber, pollination and medicine, mean we need to rethink our systems. We
explore this further in Part Two.
Reports from the United Nations, the European Commission, the OECD,
the World Economic Forum and global management consultancies echo the

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 THE CIRCULAR ECONOMY 19

strong warnings published in the Club of Rome’s report, Limits to Growth,

in 1972.12 They share concerns about overexploitation of important ecosys-
tems and natural resources, an increasingly unstable climate, and pollution
of air, water, soil and the earth’s atmosphere.

Evolution of the concept: architects, scientists and sailors

In the latter part of the 20th century, leading thinkers developed new con-
cepts for sustainable business models, with systems of recirculation and re-
generation of resources being a recurring theme. New terminology appeared
in business publications, including Cradle to Cradle, biomimicry, ecosystem
services, design for disassembly, industrial ecology and resource efficiency.
First, let’s review the different schools of thought, shown in Figure 1.3,
looking at how they prioritize different aspects and outcomes, before con-
solidating them into the circular economy framework used throughout this
book.

FIGURE 1.3 Evolution of the circular economy

Industrial
ecology Cradle to Business
Service/ Cradle models
performance Circular
economy
economy
Materials
Circular
Blue and product
Natural flows
Economy design
capitalism

Influences Key elements Holistic approach

SOURCE: © Catherine Weetman

The performance economy

Swiss architect Walter Stahel is recognized as one of the earliest theorists
developing ideas for what is now known as the circular economy. After re-
ceiving recognition for his prize-winning paper ‘The Product Life Factor’ in
1982, he co-founded the Product-Life Institute in Switzerland, a consultancy
devoted to developing sustainable strategies and policies.
The Product-Life Institute outlines its main objective as: ‘to open new
frontiers of economic development towards a Performance Economy (or
Functional Service Economy), which focuses on selling performance (ser-
vices) instead of goods in a circular economy, internalizing all costs (closed

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 20 AN OVERVIEW OF THE CIRCULAR ECONOMY

loops, Cradle to Cradle).’13 It goes on to explain that this can be achieved by

combining system design, technical and commercial innovation. The focus
will be on regional economies, developing business models of remarketing
goods (reuse), and extending the product life of goods and components (eg
through remanufacturing and upgrading) to create local jobs, increase
‘resource husbandry’ and prevent waste.
Five ‘pillars’ support the vision of the sustainable economy and society:

● Nature conservation: nature and living systems provide the foundation

for human life. We depend on resources ‘supplied by the global eco-support
system’ such as biodiversity, forests, clean air, rivers and oceans. The
‘carrying capacity of nature’ links to the regional populations and their
lifestyles, eg water use, land-use patterns, pollution and waste assimilation.
● Limiting toxicity: thus protecting the health and safety of humans and
other living species. Examples here include toxic agents such as heavy
metals, pesticides, process chemicals and so on. This requires precise
measurements (eg in nanograms) and assessment of nature’s capacity to
absorb and process these toxins.
● Resource productivity: with industrialized countries reducing their
material use, or ‘dematerializing’, so other countries can develop. Stahel
estimates that we need to reduce resource consumption by a factor of 10,
to prevent the threat of a radical change at planetary level and support
reduced inequality between nations.
● Social ecology: Stahel highlights the importance of peace and human
rights, race and gender equality, dignity and democracy, employment and
social integration, security and safety.
● Cultural ecology: including education and knowledge, ethics, culture,
values of ‘national heritage’ and attitudes towards risk.

Natural capitalism
Natural Capitalism: Creating the Next Industrial Revolution (1999), by
Paul Hawken, Amory B Lovins and L Hunter Lovins, describes a blueprint
for a new economy.14 It imagines a new industrial revolution, where envi-
ronmental and business interests overlap. Companies can simultaneously
improve profits, help solve environmental problems and feel positive about
their impacts. It sees the key driver for previous industrial revolutions as
human productivity, whereas now people and technology are abundant, but
natural capital is diminishing.

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 THE CIRCULAR ECONOMY 21

Natural capital includes both natural resources and ecological systems,

providing vital life-support services to all living things. It may be difficult, or
impossible, to substitute these services. If we tried to substitute pollination
services, provided by bees and butterflies, with hand or robot pollination,
we quickly see big questions: how – and how expensive? The authors point
out that current business practices typically ignore the value of these services
and natural assets, even though this value is increasing in line with their
scarcity. Our wasteful use of energy, materials, fibre, soil and water is
degrading and depleting natural capital.
Natural capitalism has four principles:15

● Increase the productivity of natural resources. Innovations can stretch

natural resources by 10, or even 100, times further than today. Crucially,
the financial savings can help companies to implement the other three
principles.
● Use ‘biologically inspired’ production models and materials. In closed-
loop systems, modelled on nature, every output is either returned to
nature as a nutrient (waste = food) or becomes another manufacturing
input.
● ‘Service and flow’ business models. These deliver value as a continuous
flow of services, such as providing illumination instead of selling light
bulbs. In these models, providers and customers share objectives and
rewards, through resource productivity and product longevity.
● Reinvest in natural capital to ensure future prosperity. Using up finite
resources means those resources are no longer available. For example,
polluting water sources destroys clean water supplies as well as the
healthy habitats for fish and other species.

Natural capitalism emphasizes the importance of ‘whole system design’,

using innovative technologies and rethinking ‘defective practices’ in the way
companies allocate capital and governments set policy and taxation.

Industrial ecology
Preserving the materials and energy ‘embedded’ in a product – raw mater­
ials, energy, water and other process aids – is a basic tenet of industrial
ecology.16 It aims to help businesses understand how they use key resources;
track material, energy and water flows; and how to account for a product
throughout its life-cycle. It aims to change resource use from being implicit
to explicit, from the beginning of the cycle to the end-of-use.

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 22 AN OVERVIEW OF THE CIRCULAR ECONOMY

A key indicator of a country’s environmental impact is what it consumes,

rather than what it produces. Although recycling helps reduce energy, pre-
serve resources and reduce environmental impact, we must change what and
how we consume. Traditional models of industry – ‘take, make and dispose’
– should be transformed into ‘industrial ecosystems’, optimizing consump-
tion of energy and materials, minimizing waste and ensuring that effluents
and emissions from one process become the raw materials for another.

Blue Economy
Economist Gunter Pauli’s first Blue Economy book in 2010 bases its solu-
tions on physics, using nature’s systems of cascading nutrients, matter and
energy as the ideal model.17 Gravity is the main source of energy, solar
energy is the second renewable fuel and water is the primary solvent. Nature
does not need complex, chemical, toxic catalysts, and everything is bio­
degradable – it is just a matter of time.
The Blue Economy is ‘where the best for health and the environment is
cheapest and the necessities for life are free thanks to a local system of pro-
duction and consumption that works with what you have’.18 Waste does not
exist, and any by-product can be the source for a new product. Pauli urges
us to question the use of all materials used in production – can you manage
without it? Can you do more with less? He reminds us that in nature there
is water, air and soil available to all, free and abundant. Sustainable societies
‘respond to basic needs with what you have, introducing innovations in-
spired by nature, generating multiple benefits, including jobs and social
capital, offering more with less’.
Pauli believes that our current economic model relies on scarcity as a
basis for production and consumption. In contrast, Pauli defines ‘wealth’ as
diversity, the opposite of our industrial standardization. Sustainable busi-
ness maximizes the use of available material and energy, so reducing the unit
price for the consumer. Sustainable business respects local resources, culture
and tradition.
Between 2010 and 2013, Pauli published over 100 innovative case
examples, aiming to create 100 million jobs and substantial capital value by
2020. All innovations are open-source and published on the Blue Economy
website (www.theblueeconomy.org (archived at https://perma.cc/VNM9-
6QZU)).

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 THE CIRCULAR ECONOMY 23

Cradle to Cradle®
Architect William McDonough and Dr Michael Braungart, an environmen-
tal scientist, wrote Cradle to Cradle: Remaking the way we make things in
2002. They describe the importance of treating materials as biological or
technical nutrients and extending the ‘use period’ for all these materials.
McDonough and Braungart encourage a systems thinking approach: re-
framing design to be regenerative and constantly progressing from being
‘less bad’ to doing ‘more good’. They reject the idea that growth is bad for
the environment, reminding us that, in nature, growth is good.
Instead of ‘eco-efficiency’, they aim for ‘eco-effectiveness’, driving innova-
tion and leadership towards positive goals. They argue that eco-efficient,
demand-side approaches may only reduce or minimize damage: eco-efficiency
is simply sensible business practice. Eco-effectiveness means setting a design
brief to include positive impacts on economic, ecological and social health.
The brief should focus on supply-side approaches and include Cradle to
Cradle® values and principles. Good design outcomes include fun, beauty
and inspiration; and encourage healthy, abundant environmental outcomes.
Their website summarizes the Cradle to Cradle® principles:19

● material health: value materials as nutrients for safe, continuous cycling;

● material reutilization: maintain continuous flows of biological and
technical nutrients;
● renewable energy: power all operations with 100 per cent renewable
energy;
● water stewardship: regard water as a precious resource;
● social fairness: celebrate all people and natural systems.

McDonough and Braungart have developed the ‘Cradle to Cradle Certified™

Product Standard’, managed by the Cradle to Cradle Products Innovation
Institute, an open-sourcing, non-profit organization.20 The standard is a
continual improvement process, assessing a product against the five princi-
ples listed above, and with a range of achievement levels to support contin-
ual improvement.

Ellen MacArthur Foundation

One of the highest-profile organizations promoting the circular economy
is the Ellen MacArthur Foundation (EMF), a charity set up by the record-
breaking round-the-world sailor, Ellen MacArthur. It works with businesses,

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 FIGURE 1.4 Ellen MacArthur Foundation systems (butterfly) diagram

RENEWABLES FINITE MATERIALS

Renewables Flow Management Stock Management

Farming/Collection1
Parts Manufacturer

Biochemical
Feedstock Product Manufacturer
Regeneration Recycle
Biosphere

Service Provider
Refurbish/
Share Remanufacture

Reuse/Redistribute

Biogas
Cascades Maintain/Prolong
6 2803 0006 9

Consumer User
Anaerobic
1 Hunting and fishing digestion Collection
Collection
2 Can take both post-harvest
and post-consumer waste
as an input Extraction of
SOURCE biochemical
feedstock2
Ellen MacArthur Foundation

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Circular economy systems diagram
(February 2019)
www.ellenmacarthurfoundation.org Minimize systematic
Drawing based on Braungart & McDonough, leakage and negative
Cradle to Cradle (C2C) externalities

(Reproduced with kind permission of the Ellen MacArthur Foundation)

 THE CIRCULAR ECONOMY 25

governments and education to accelerate the transition to a circular econ-

omy, and publishes a wide range of books, papers and videos explaining the
concept, principles and benefits. The foundation works closely with consult-
ants McKinsey and with a wide range of global businesses, which form its
‘CE100’ group.
The first major report in EMF’s ‘Towards the Circular Economy’ series,
in 2012, broke new ground, calculating the economic and business opportu-
nities for a restorative, circular model.21 EMF’s circular economy takes its
inspiration from nature, where one species’ waste is another’s food, and the
sun provides energy. A circular economy ‘cycles valuable materials and
products and produces and transports them using renewable energy’.22
EMF has three principles for a circular economy:23

● Design out waste and pollution – what if they were never created in the
first place? This includes designing out the negative impacts of economic
activity damaging human health and natural systems.
● Keep products and materials in use – what if we could build an economy
that uses things rather than uses them up? Preserving value means
designing for durability, reuse, remanufacturing and recycling, to keep
products, components and materials circulating in the economy.
● Regenerate natural systems – what if we could not only protect but
actively improve the environment? A circular economy avoids the use of
non-renewable resources and preserves or enhances renewable ones, for
instance by returning valuable nutrients to the soil to support regeneration,
or using renewable energy as opposed to relying on fossil fuels.

Figure 1.4 shows EMF’s Circular Economy Systems Diagram (the ‘butterfly
diagram’), with the flows and priorities for circulating renewables (biologi-
cal materials) and loops for finite (technical) materials.24
Building on several schools of thought and influenced by Cradle to
Cradle’s material cycles, the ‘butterfly diagram’ is often used to explain the
circular economy, with the tightest ‘loops’ retaining the most value.
If we think about food, we consume it … it can’t be ‘reused’ in its original
state. In the ‘butterfly diagram’, the loops for food and other biological ma-
terials include biochemical extraction, biogas, and agricultural regeneration.
We compare the main schools of thought later in this chapter, highlight-
ing the different priorities in their approaches.

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 26 AN OVERVIEW OF THE CIRCULAR ECONOMY

Other supporting approaches

Over the past few decades, other schools of thought have developed
alongside circular economy approaches, helping to solve specific problems
by enriching circular economy solutions:

● Biomimicry, as defined by the Biomimicry Institute, is ‘an approach to

innovation that seeks sustainable solutions to human challenges by
emulating nature’s time-tested patterns and strategies’.25
● Ecodesign, or ecological design, developed during the late 1980s as an
approach to designing products with special consideration for the
environmental impacts during the entire product life-cycle. We look at
ecodesign in more detail in Chapter 4.
● Permaculture originated in the 1970s, designing ways to mimic natural
forest ecosystems, mainly with tree crops, to create perennial agroforestry,
or ‘permanent agriculture’ systems. It developed into a system thinking
tool for designing low-input, productive landscapes, enterprises, buildings
and communities.
● The Natural Step (www.thenaturalstep.org (archived at https://perma.cc/
6D35-U339)) is a global network of non-profit organizations, focusing
on sustainable development using a science-based framework.26 Its
mission is to accelerate the transition to a sustainable society: ‘in which
individuals, communities, businesses and institutions thrive within nature’s
limits’. The Natural Step is the basis of the Future-Fit Business Benchmark,
which we expand on later in the book.

We see examples of these approaches throughout this book.

Scaling it up: countries, consultancies and companies

Forward-thinking organizations and governments are adopting circular
approaches, moving away from our ‘take, make, waste’ systems towards
holistic, regenerative systems. They aim to retain valuable resources, regen-
erate or at least do no harm to living systems, and balance the needs of
humanity with the constraints of our living planet.

China
The first stage of China’s circular economy began in 1998, starting with
conceptual studies by academics.27 The second stage included clean produc-

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 THE CIRCULAR ECONOMY 27

tion and eco-industrial parks, supported by an increasing government envi-

ronmental protection department. The third stage, starting in 2006, saw the
circular economy presented as an alternative development model. A circular
economy ‘promotion law’ aims to decouple economic growth from resource
consumption and pollutants, and to help China leapfrog to a more sustain-
able economic structure.

European Union (EU)

The EU announced its circular economy action plan, ‘Closing the Loop’, in
December 2015.28 It sees the transition to a more circular economy as an
essential contribution towards a sustainable, low-carbon, resource-efficient
economy, generating new and sustainable competitive advantages for
Europe. This includes maintaining the value of materials, resources and
products in the economy for as long as possible and minimizing waste. By
protecting businesses against resource scarcity and price volatility, it creates
opportunities for innovative, efficient methods of production and consump-
tion. This includes creating local jobs, opportunities for social integration,
saving energy and avoiding irreversible damage from consuming resources
faster than the earth’s capacity for renewal.
The EU recognizes that businesses and consumers are key in driving the
circular economy; and that it must play a fundamental support role. This
will include regulatory frameworks and signals on the way forward, with
ambitious, broad and concrete actions before 2020. In 2019, the European
Commission adopted a comprehensive report on the implementation of the
Circular Economy Action Plan, available on its website.29

Finland
Finland, aiming to be a pioneer in the circular economy, began work on its
national circular economy road map in 2014, publishing the first version in
2016. It wants to ‘ensure its success in a world where our economic com-
petitiveness and well-being can no longer rely on the wasteful use of natural
resources’.30

Japan
Japan, concerned about its limited land and resources, has developed circu-
lar economy principles – ‘Sound Material Cycle Society’ – to support its re-
silience and self-reliance. Aspects of Japanese culture support this: such as

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 28 AN OVERVIEW OF THE CIRCULAR ECONOMY

the concept of ‘mottainai’, meaning it is a shame for something to go to

waste without using its full potential. Japan has wide-ranging recycling
laws, covering everything from plastic and paper to home appliances and
construction materials.31

Global consultants, business groups and NGOs

Major global management consultancy McKinsey & Company is a high-
profile circular economy advocate. It has published several papers, is know­
ledge partner to the Ellen MacArthur Foundation (EMF) and provides
research and insight for many of the EMF and World Economic Forum
(WEF) reports.32 Another consultancy, PwC, includes ‘circular economy
solutions’ as part of its Sustainability Services, was involved in the RSA
Great Recovery project33 and has published white papers and blogs.
Accenture is involved in research programmes, and working with the WEF,
Young Global Leaders Forum and others, exploring the transition and
transformation required to create a circular economy.34,35
New consultancies have emerged to help governments, cities, sectors and
individual organizations to understand the opportunities and implement
circular economy strategies. In particular, social enterprise Circle Economy
and Metabolic (founded in 2012) have contributed to the growing range of
white papers and thought leadership articles. In addition, Circle Economy
hosts the Circle Lab open-sourced database of circular economy case
studies, with over 1,000 worldwide examples by 2019 (see Further Resources
at the end of this chapter).

UNITED NATIONS
The United Nations Industrial Development Organization (UNIDO) sees
the circular economy as a ‘new way of creating value, and ultimately pros-
perity, through extending product lifespan and relocating waste from the
end of the supply chain to the beginning – in effect, using resources more
efficiently by using them more than once’.36 Seeing the circular economy as
complementary to the United Nations Sustainable Development Goals,
UNIDO projects include resource-efficiency, safe and easily recyclable
products with longer lifetimes, and recovery of end-of-use products and
materials.

WORLD ECONOMIC FORUM (WEF)

In 2014, the WEF, supported by research and ideas from the Ellen MacArthur
Foundation and McKinsey, launched its circular economy ‘scaling up’

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 THE CIRCULAR ECONOMY 29

initiative, ‘Project MainStream’. Building on this work, WEF launched its

Platform for Accelerating the Circular Economy (PACE) in 2017, as a pub-
lic–private collaboration.37 In 2019, the PACE co-chairs were the CEO of
Philips, the heads of the Global Environment Facility and UN Environment,
supported by the Ellen MacArthur Foundation, the International Resource
Panel, Circle Economy and Accenture Strategy.
PACE aims to create systems change at speed and scale by enabling part-
ners to:

● develop blended financing models for circular economy projects, in

particular in developing and emerging economies;
● help create and adjust enabling policy frameworks to address specific
barriers to advancing the circular economy;
● bring the private and public sector into public–private collaborations to
scale impact around circular economy initiatives.

WORLD BUSINESS COUNCIL FOR SUSTAINABLE DEVELOPMENT

The World Business Council for Sustainable Development (WBCSD) says,
‘The future of business is circular, and there’s no room for waste in it.’38 It
also sees the circular economy as critical to supporting the United Nations
Sustainable Development Goals. Its circular economy programme, Factor
10 (referring to a need for a ten-fold improvement in ‘eco-efficiency of
materials’), aims to ‘bring circularity into the heart of business leadership
and practice’.

Global businesses getting on board

Leading businesses are also making significant investments in the circular
economy, developing ways to gain value from their process and end-of-life
waste.

RENAULT: RECYCLING AND REMANUFACTURING

In 2000, Renault began integrating the circular economy into its activities,
aiming to ‘turn our waste into resources’. Renault tells us that today, over 85
per cent of automotive vehicles are metals and plastics, highlighting the
importance of reusing these materials instead of discarding them.
Renault’s corporate ‘blog’, ‘Circular economy: re-cycle, re-use, Re-nault!’,
describes the circular economy as ‘the ultimate recycling programme, where

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 30 AN OVERVIEW OF THE CIRCULAR ECONOMY

ideally nothing goes to waste’.39 By 2014, the Renault Espace car was 90 per
cent recyclable, and all cars in the 2014 range included 30 per cent recycled
materials.
By 1999, Renault’s circular economy plans included developing mobility
services, such as car-pooling, car-sharing and short-term rental, through
Renault Mobility. Groupe Renault signed the French Government’s Circular
Economy Roadmap, which ‘focuses on moving towards a 100 per cent plastic
recycling rate in France by 2025’.40

PHILIPS: SERVICE AND PERFORMANCE 41

Philips’ 2016–2020 strategy sets out ‘ambitious targets for the company’s
solutions, operations and supply chain’. By applying ecodesign and circular
economy principles to design solutions, Philips develops new business models
and ways of working with customers to ‘deliver better health at lower cost and
use resources in the most effective way’.
In addition to ‘improving the lives of 2.5 billion people each year’, its 2020
objectives include 70 per cent of turnover from solutions that meet ecodesign
principles, and 15 per cent from circular economy principles:

● carbon-neutral operations;
● recycle 90 per cent of operational waste and send zero waste to landfill;
● sustainable, collaborative approaches with suppliers.

IKEA: ‘A POSITIVE IMPACT ON PEOPLE AND THE PLANET’

Speaking at a Guardian conference, Steve Howard, IKEA’s former Chief

Sustainability Officer, said:

If we look on a global basis, in the West we have probably hit peak stuff. We
talk about peak oil. I’d say we’ve hit peak red meat, peak sugar, peak stuff
… peak home furnishings … We will be increasingly building a circular IKEA
where you can repair and recycle products.42

In the 2018 update to its 2012 People & Planet Positive sustainability
strategy,43 IKEA recognizes its reliance on both natural resources and people.
By transforming how it works, from linear to circular, it can ‘secure the future
of the IKEA business, value chain and the livelihoods of the millions of people

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 THE CIRCULAR ECONOMY 31

that contribute to it’. It sees the three key challenges as climate change,
unsustainable consumption and inequality.
By 2030, its ambition is to ‘be a circular business built on clean, renewable
energy and regenerative resources, de-coupling material use from our growth’.
This includes:

● ending its dependency on virgin fossil materials and fuels;

● contributing to a world of clean air, water and improved biodiversity;
● turning waste into resources, sending zero waste to landfill;
● transforming secondary materials into clean and safe resources;
● sourcing and producing renewable and recycled materials with a positive
environmental impact;
● set up and promote systems and services to enable a circular economy;
● becoming ‘forest positive’, promoting sustainable management to eliminate
forest degradation and deforestation;
● becoming ‘water positive’, by leading and developing water stewardship
programmes;
● leading regeneration projects on degraded land.44

Businesses adopting circular economy approaches are reducing risk, increas-

ing reliance and improving their competitive edge. They’re focused on ‘do-
ing more good’, not just a ‘bit less bad’, engaging customers, employees and
other stakeholders and helping their business be fit for the future.
Throughout the book, we highlight case studies and ‘snapshots’ covering
a range of sectors and geographies, from global ‘megabrands’ to small busi-
nesses, entrepreneurs and social enterprises.

The circular economy: a generic framework

Those early concepts evolved into many ‘circular economy’ approaches,
promoted by governments, NGOs and consultancies. A study by Kircherr,
Reike and Hekkert in 2017 found 114 different definitions of a circular
economy!45 Generally, they share common principles, as summarized in
Figure 1.5.

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 32 AN OVERVIEW OF THE CIRCULAR ECONOMY

FIGURE 1.5 Circular economy principles

Design products to be: Business models
 Durable  Access, use,
 Repairable sharing
 Shareable  Resell, repair,
 Easy to disassemble remake, recycle
& recycle  Performance &
service contracts
 Recovery at end-
s of-use

Use safe, sustainable Waste is food!

materials  Recover for reuse
 Recycled and  By-products &
recyclable co-products
 Renewable (in the  Regenerate nature
product’s lifetime) (eg compost)
SOURCE: © Catherine Weetman

● Design products and equipment to be durable, repairable and robust, so

they stay in use for longer. For the user, the benefit is a better lifetime cost,
because robust, repairable products can be rented or shared, therefore
more people can use fewer products. Products and resources are more
productive: for example, a rented city bike might be in use for 12 hours a
day, whereas a ‘personal’ bike might be used just a couple of times each
week. Designs should enable efficient and effective disassembly too, for
remanufacturing and recycling.
● Business models encourage access and use of products and equipment,
instead of ownership. Contracts for service and performance help
‘win-win’ outcomes for the supplier and customer; and commercial
options should encourage recovery of the product, components and
materials at the end-of-use. Circular approaches also create markets for
new services: for sharing, reselling, reuse, repair, remanufacturing and
resource recovery.
● We should use safe, sustainable materials that are recycled (and recyclable)
or renewable, both for the product and its manufacture.
● Recover the products, components and materials at the end of each phase
of use, for reselling, repair, remaking or recycling. The aim is to retain the
usefulness and value of products and resources, so we can use them as a
resource for another industrial process, or they can become food for
nature – compost!

Table 1.1 compares the principles of the different schools of thought and
aims to outline their different emphases, rather than provide a definitive list

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 TABLE 1.1 Circular economy approaches – comparisons

Blue Cradle to Circular Natural Performance

Theme Principle Economy ii Cradle Economy Capitalism Economy iii

Design Biomimicry Y Y
Design Diversity Y y y
Design Systems thinking y Y Y
Conditions Internalize externalities i (policies) Y y y
Conditions Open source y
Conditions Services replace products Y Y Y
Flows Circular flows y Y Y y y
Flows Prioritize smallest loop y y
Flows Local systems Y Regional
Living systems Conserve nature y
Living systems Regenerate nature y Y
Resources Limited toxicity y y
Resources Renewable energy y Y y
Resources Resource productivity not enough! esp. natural y
Resources Waste = food y nutrients Y y
Resources Water stewardship Y
Society Cultural ecology y y
Society Social ecology y social fairness meet needs y

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KEY: y = included; Y = strong emphasis; partial reference
i Externalities: In economics, an externality is the cost or benefit that affects a party who did not choose to incur that cost or benefit.
ii Blue Economy: gravity is primary source of energy.
iii Performance Economy: Keep technical materials out of biosphere. Jobs linked to resources or energy inputs. Industrial countries ‘ dematerialize’, allowing other countries to
develop.
 34 AN OVERVIEW OF THE CIRCULAR ECONOMY

FIGURE 1.6 Circular economy loops

Circular service
provider

Recycle

h, Remanufa
bis ctu
fur re
e
ain, Re

R
t p
ain air
M
, Resell,
e

Sh
s
Reu

are
Original brand/ Peer-to-peer
manufacturer

SOURCE: © Catherine Weetman

of the details behind their principles. Some approaches have emphasized

‘closing the loop’ – meaning recovery of the product, parts or materials, for
reuse or for making new products of the same type. In this book, we dif­
ferentiate between ‘closed-loop’ and ‘open-loop’ circular flows, and we
examine the differences in Chapter 2.

Looping products, components and materials

EMF and others use loops to highlight the priorities for circular strategies. I
have simplified the circular economy loops (see Figure 1.6), with the darker
shading highlighting the loops with potential to retain the highest value, and
avoid consumption and waste. This image also shows the range of ‘actors’
involved in the circular economy: the original manufacturer (or brand
owner), a circular service provider (dealing with products for a range of
brands), or, for the simpler loops, the users themselves.
Most products flow through four typical loops:

● Reuse, resell and share – ways to keep the original product in use, such as
reselling it, returning it after use for someone else to use it, or sharing it,
so more people can use it.

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 THE CIRCULAR ECONOMY 35

● Maintain and repair, to keep the product working efficiently and

effectively for longer.
● Refurbish and remanufacture, which needs deeper levels of intervention.
Refurbishing involves cleaning, surface-level repairs and maintenance,
perhaps repainting and polishing the product or equipment. Remaking,
or remanufacture, involves rigorous inspection, repair and replacement
of worn materials and components, aiming to make the product as good
as new. In the US, legislation means that remanufactured products have
the same level of warranty as a ‘new’ product. In the UK, there is a British
Standard BS 8887-2:2009 for remanufacturing terminology.
● Recycling is the outermost and least effective loop. Recycling requires
lots of energy and may need expensive labour or equipment to sort and
separate different materials. There are different ‘levels’ of recycling too.
Ideally, we want to recycle materials to use them again in the same kind
of application; and avoid ‘downcycling’ them into a lower-grade, lower-
value material with inferior functional specifications.

We prioritize the ‘tightest’ (inner) loops: because they retain more of the
value (the materials, energy, water, labour and design input) that we ‘embed-
ded’ in the product during design, manufacture and the supply chain. It is
easy to think about how the loops apply to finite, technical materials.
However, biological materials (food, fibres, timber, etc) and products flow in
similar loops, for example in the food sector, in furnishings and textiles.

Circular economy framework

I have blended these approaches into a generic ‘circular economy frame-
work’, shown in Figure 1.7. The framework includes business models, the
‘design and supply chain’ (design for durability and recovery, safe and sus-
tainable inputs, process design and recovery flows), enablers and accelera-
tors. We look briefly at each of these here and then explore them in detail in
Chapters 2, 3 and 4.

BUSINESS MODELS
Business models and commercial options can encourage and support longer
lifetimes, more intense use and successful circulation of the product, parts or
materials. These include service models to replace ownership, ‘pay per use’,
lease and hire, sharing and exchange systems. Repairing, manufacturing,
recycling or reselling can also form the basis of a business model, and we’ll
explore these in more detail in Chapter 3.

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 36 AN OVERVIEW OF THE CIRCULAR ECONOMY

FIGURE 1.7 Circular Economy Framework 2.0

Business
Business models
models

Design
Designfor
for
durability &&
durability  Sustainable,

Sustainable,
safe
safeinputs
inputs
recovery
recovery 

Process
Process
End-of-use
End-of-use
recovery
recovery
recirculaon
recirculation
&&reuse
reuse

Enablers
Enablers Accelerators
Accelerators

SOURCE: © Catherine Weetman

DESIGN FOR DURABILITY AND RECOVERY

Good design should aim for durability, enabling the product to last longer
for its first and subsequent ‘lives’ (or use cycles) and to be used again. Is it
easy to disassemble and repair? The design should enable and encourage
circular flows to keep the product, parts and materials circulating at the
highest level of usefulness (and hence ‘value’), for the longest period. The
design should simplify disassembly at the end of each use cycle, giving easy
access to future resources.

SAFE AND SUSTAINABLE INPUTS

This means designing the product to use sustainable resources in its bill of
materials. These should be safe, non-toxic, renewable or recycled, and recy-
clable. Specifying sustainable materials reduces the risk of future supply
shortages, thus improving the long-term security of supply.

PROCESS DESIGN
The manufacturing process aims to to recover resources, including chemi-
cals, additives, water and energy (‘nutrients’) for future use. We should
minimize resource use, both for materials in the product itself and for all
the various process inputs we use. We should convert ‘waste’ – including
offcuts, production rejects, end-of-batch excesses and so on – into resources.
Can you create or develop by-products and co-products? Could you set up
mutually beneficial, or symbiotic, flows to or from other industries?

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 THE CIRCULAR ECONOMY 37

RECOVERY FLOWS
Here, we aim to recover the product, parts or materials without losing value
in the reverse flows, regenerate them, and get them back into circulation.
This means setting up effective and efficient circular flows for end-of-use
products, components and materials, including:

● resale and reuse options, where the product is resold or rented to another
user, perhaps with maintenance and repair to prolong its useful life;
● remanufacturing so that the product matches ‘as new’ performance for a
second life;
● recycling to use the materials or components in another product.

ENABLERS AND ACCELERATORS

‘Enablers’ and ‘accelerators’ can support circular approaches, and we exam-
ine these in more detail in Chapter 4. Enablers include scientific approaches
and other ways to think differently, for example: ‘green chemistry’ to improve
material choice or help develop by-products, biomimicry approaches for
product design and material selection, open-sourcing and systems thinking.
Enablers also include new types of materials and technologies that improve
resource utilization or provide information about how a product is used,
such as the Internet of Things, big data, 3D printing, mobile apps and shar-
ing platforms.
Accelerators include legislation, policy levers, product stewardship
approaches, collaborations and standards. Examples include product life-
cycle assessments, ethical standards and certifications, and tools to help us
understand resource footprints and sustainable sources of materials.
Collaborative industry sector initiatives, such as Make Fashion Circular
or How2Recycle, can help to accelerate more sustainable, regenerative
approaches. Policy and legislation measures include extended producer
responsibility rules or taxing externalized costs such as pollution and waste,
or incentives for repairs, remaking and recycling.
The circular economy approach is supported by approaches based on
resource- or eco-efficiency, sustainability, corporate social responsibility
(CSR), the triple bottom line and so on, but these are not as systems-focused
and can probably be classed as encouraging strategies that are ‘less bad’,
rather than ‘more good’.

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 38 AN OVERVIEW OF THE CIRCULAR ECONOMY

Summary
We have looked at some of the drivers for the circular economy concept and
how it evolved, together with a few examples of businesses and organiza-
tions investing in it. How should we sum up a circular economy? Here is the
European Commission’s definition in 2019:

A circular economy aims to maintain the value of products, materials and

resources for as long as possible by returning them into the product cycle at the
end of their use, while minimizing the generation of waste. The fewer products
we discard, the less materials we extract, the better for our environment. This
process starts at the very beginning of a product’s lifecycle: smart product
design and production processes can help save resources, avoid inefficient waste
management and create new business opportunities.46

There are wide-ranging benefits from ‘closing the loop’, for business cus­
tomers and consumers:

● Swapping from finite, potentially risky or under-pressure resources to

safe, sustainable materials helps to support resource security and price
stability.
● Expanding your offer to include repairs, remanufacturing, reselling and
sharing can generate new revenue streams. Repairable products need
supplies of spares, consumables and even special tools. Similarly, new
by-products from your recovered waste converts cost into profit.
● Collecting and recovering your own end-of-life products, components
and materials ‘closes the loop’ in your supply chain, helping regenerate
future resources. Designing for easy disassembly makes this more cost-
effective.
● Negotiating contracts for performance can deliver win-win outcomes for
both customer and supplier. Avoiding waste disposal costs, import tariffs
and long-distance, high-inventory supply chains can save money.
● Circular, regenerative and win-win strategies can strengthen and deepen
relationships with suppliers, employees, local communities and share­
holders. Circular economy approaches build stronger brand reputations,
by doing things better and doing better things.
● Many benefits of closing the loop strengthen the core of your business,
reduce risks and help it become more resilient.

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 THE CIRCULAR ECONOMY 39

Companies like Nike, IKEA and HP and organizations around the world see
the circular economy as the best tool we have for resilient, competitive, sus-
tainable business.47

And so we call it ‘cradle to cradle’. Our goal is very simple. This is what I
presented to [President Bush in] the White House. Our goal is a delightfully
diverse, safe, healthy and just world, with clean air, clean water, soil and power
– economically, equitably, ecologically and elegantly enjoyed, period.
William McDonough (2005)48

Further resources
Braungart, M and McDonough, W (2008) Cradle to Cradle: Remaking the way we
make things, Vintage Books, London
Circle Lab Knowledge Hub: open-source digital platform with over 1,000 case
studies and examples, articles, reports, and other resources on the circular
economy. www.circle-lab.com/ (archived at https://perma.cc/9NBM-VXG3)
[accessed 22 September 2019]
Circular Economy Club: not-for-profit, free to join global network of people and
organizations interested and involved in the circular economy
www.circulareconomyclub.com/ (archived at https://perma.cc/TER8-7G36)
[accessed 22 September 2019]
Ellen MacArthur Foundation (2012) [accessed 15 August 2016] Towards the
Circular Economy: Economic and Business Rationale for an Accelerated
Transition [Online] https://www.ellenmacarthurfoundation.org/news/towards-
the-circular-economy (archived at https://perma.cc/RBN3-HPFE)
Ellen MacArthur Foundation, Resources and Project Mainstream [Online]
www.ellenmacarthurfoundation.org (archived at https://perma.cc/897Z-STJN)
European Commission Circular Economy portal ec.europa.eu/environment/
circular-economy/index_en.htm (archived at https://perma.cc/MQ2Q-DRQY)
[accessed 22 September 2019]
Hawken P, Lovins AB and Lovins HL ([1999] 2010) Natural Capitalism,
Earthscan, London
Podcast: Circular Economy Podcast, www.circulareconomypodcast.com (archived
at https://perma.cc/35XJ-STQ5)
Podcast: Getting in the Loop https://intheloopgame.com/podcasts/ (archived at
https://perma.cc/G973-SQ68)
TU Delft with Ellen MacArthur Foundation (2016) [accessed 12 February 2016]
CircularX Circular Economy: An Introduction, 1.2 Principles of the Circular
Economy [Online] https://courses.edx.org/courses/course-
v1:Delftx+CircularX+1T2016/courseware/ (archived at https://perma.cc/
JYR9-JRQ9)

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 40 AN OVERVIEW OF THE CIRCULAR ECONOMY

World Economic Forum Platform for Accelerating the Circular Economy (PACE)
www.weforum.org/projects/circular-economy (archived at https://perma.cc/
285H-3MBW) [accessed 22 September 2019]

Notes
1 Drucker, PF (1992) The post-capitalist world, Harvard Business Review,
September–October
2 Stahel, WR (23 Mar 2016) [accessed 1 June 2016] The Circular Economy,
Nature News, Nature Publishing Group [Online] www.nature.com/news/
the-circular-economy-1.19594 (archived at https://perma.cc/62RW-VW7P)
3 IRP (2017) Assessing global resource use: A systems approach to resource
efficiency and pollution reduction [Online] www.resourcepanel.org/reports/
assessing-global-resource-use (archived at https://perma.cc/6BCG-ZGW3)
4 De Wit, M et al, The Circularity Gap Report (2018) [accessed 2 December
2019] Circle Economy www.circle-economy.com/the-circularity-gap-report-
our-world-is-only-9-circular/ (archived at https://perma.cc/P3RR-APH8)
5 Ellen MacArthur Foundation, McKinsey Center for Business and Environment
(2015) [accessed 28 March 2019] Growth Within: A Circular Economy Vision
for a Competitive Europe [Online] www.ellenmacarthurfoundation.org/news/
circular-economy-would-increase-european-competitiveness-and-deliver-better-
societal-outcomes-new-study-reveals (archived at https://perma.cc/
VRN3-A5ZM)
6 Carson, R (1962) Silent Spring, Houghton Mifflin, Boston
7 Stockholm Resilience Centre [Online] stockholmresilience.org/21/research/
research-news/1-15-2015-new-planetary-dashboard-shows-increasing-human-
impact.html/ (archived at https://perma.cc/Z9VP-6VP3)
8 Schumacher, EF (1973) Small is Beautiful: A Study of Economics as if People
Mattered, Vintage, London, p 44
9 Boulding, EK (1966) [accessed 15 August 2016] The Economics of the Coming
Spaceship Earth [Online] www.ub.edu/prometheus21/articulos/obsprometheus/
BOULDING.pdf (archived at https://perma.cc/R2H7-2DBV)
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 THE CIRCULAR ECONOMY 43

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