Embed Circularity into Business Operations Embed Circularity into Business Operations

Circular Economy: What is it & Its Working Principles

The concept of circular economy involves repurposing the waste generated by commercial activity from using finite resources. The transition to a circular business model will disrupt the supply chain as we know it. Through methods such as leveraging renewable energy sources and recyclable or reusable material, businesses can effectively transition from cradle-to-grave to the cradle-to-cradle (C2C) concept. In this new paradigm, waste can become new material for a new product cycle. As companies seek to eliminate their negative environmental impact, it is logical that they should build a robust circularity strategy.

What is a Circular Economy?

Circular economy definition: The World Economic Forum defines it as an industrial system that is restorative or regenerative by intention and design. It replaces the end-of-life concept with restoration and shifts toward the use of renewable energy and elimination of waste.

Moving Toward Circular Economy and Sustainable Development

In addition to environmental benefits, the transition to a circular economy can also tackle social inequities and socioeconomic crises. It will support a more balanced utilization of resources, which benefits disadvantaged communities, and will help generate new and quality jobs. Additionally, it will discourage the release of pollution into the environment that can be harmful, especially for vulnerable populations. Thus, adopting circularity principles, can be vital for sustainable development that will not only help conserve the environment, but also support communities around the world.

Working Principles of Circular Economy

Circular Economy aims to imitate nature, where no waste is generated and what is created is absorbed back into the environment without causing harm. The noteworthy Circular Economy Principles are as follows:

Energy and Resources are Gold

In the Circular Economy, waste is seen as valuable material. Therefore, the appropriate methods and technology are leveraged to transform waste into revenue streams. For instance, electronic scrap could be mined for gold, or waste materials that can't be recycled could be used to generate energy. The principle is to maintain materials in use and then reuse them as raw materials for some other product when they are no longer fit for their original function.

Biodegradable materials can be cycled back into the environment — through procedures like composting and anaerobic digestion — promoting a circular economy cycle.

Design Out Waste and Pollution

A key design requirement in the Circular Economy is that materials should be reused rather than go to waste. Many products could be traded, repaired, refurbished, remade, shared, and as the last option – recycled. Thus, with sustainability at its core, Circular Economy focuses on doing away with the idea of waste and pollution by designing products upfront such that they have extended value after the initial use.

Mapping the Potential Circular Economy Benefits

Transitioning to a Circular Economy has immense potential for helping the world because it produces less waste and pollution, extends the lifespan of products and resources, and provides opportunities for economic growth.

Circularity involves shifting products such that they can be reused and have an expanded lifespan. For example, companies are increasingly shifting business models such that products can be pooled, like bike and car sharing. Additionally, they are providing services that ensure that product lifespan is expanded by providing care, refurbishment and design that has extended use in mind.

Why is it Important to Adopt Circular Economy Business Models?

Embracing a Circular Economy is key to ensuring that future generations are able to thrive. This is achieved through numerous benefits:

  • Creates an overall positive impact: Impacts the environment positively and ensures better governance of limited resources – land, soil, water, and raw materials – is achieved, thus, conserving biodiversity and natural ecosystems.
  • Benefits the society: Because of the robust design, consumers can reuse and recycle more. Maintaining a flow of scarce resources across the economy boosts the secondary market for goods and services in every region. This generates new jobs and satisfies the push for more durable products.
  • Long-term profitability: With this model, businesses become more adaptable and better equipped to manage disruptions, such as erratic raw material prices and availability, geopolitical crises and natural calamities.


Sustainability goes beyond tracking CO2 emissions. Businesses are increasingly expected to report KPIs and set ESG targets aligned with a comprehensive sustainability approach — one that ensures clear tracking of the progress toward circularity adoption.

Businesses must embed circularity into every area of their operations, including their vision, mission and values for the future, overall strategy, extended value chain, pricing, and sales and marketing channels. They will need to collect actionable insights about their resource utilization and waste, movements of materials, ineffective processes, and how value can be delivered in a more sustainable way to customers. These insights will be key to applying circularity principles and helping companies become more sustainable.


Frequently Asked Questions

A Digital Circular Economy leverages data to design and implement circular solutions efficiently.

1. Convenient and effective biodegradable products cannot yet replace nonbiodegradable products used as packaging materials such as plastics.

2. In most economies globally, circular economy and sustainability are not yet a necessity as government regulations are not followed with proper implementation.

3. Poor infrastructure for waste treatments.

4. Efficient and cost-effective recycling technology is required.

Recycling is the final option for a product at the end of its lifecycle. Circular economy encourages optimal waste management techniques and recycling whatever possible to create new items.

The main objectives of Circular Economy are to minimize the use of nonrenewable resources and to reduce waste generation through methods like repurposing of raw material waste and promoting the regeneration of natural ecosystems.