Explained: How a circular economy could transform the world

Some argue that switching to a "circular economy" is crucial when it comes to climate protection and sustainability.

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Whether it's islands of trash in the ocean or the 40 million used tires in the Kuwait desert visible from space, signs that the world is choking on trash are not hard to find. And this has devastating consequences for the climate, ecosystems and human health.

We currently live in a linear economic system "designed to extract raw materials, process them into usable goods, and then ultimately either dump them in a landfill or incinerator, recycle them, or dispose of them in nature," said Leyla Acaroglu, a designer and sustainability expert. A circular economy aims instead to create a system that avoids waste as much as possible and reuse resources for new products.

The life cycle of a product

Achieving this requires a complete rethink in how design can extend the life cycle of a product. Take disposable coffee cups: Although made from cardboard, they are often covered with a layer of plastic, which makes recycling challenging, and sometimes impossible. And, when it comes to electronic devices, it is often more straightforward and affordable to buy an entirely new product than repair or replace parts in an old one. A circular economy makes sure these considerations are embedded into the entire design and production process.

Circular economy means more than recycling

At least 1 billion used tires are thrown away every year. Because the rubber is made from crude oil that is very difficult to recycle, tires are usually burned, or processed into low-quality rubber mats. However, the goal of a circular economy is to preserve the value of the product and avoid so-called downcycling.

The German company Pyrum Innovations has spent the past few years developing a technology that almost completely recovers the oil from used tires. They say the demand for this process is now increasing. "I can think of almost no country in the world from which we haven't had an inquiry," said Pascal Klein, co-founder of Pyrum. By 2025, the company plans to build 50 plants in Europe and supply 100,000 tons of oil to chemical giant BASF.

The role of technology

Ninety-two million tons of old textiles end up in the trash every year, only 1 per cent of which is recycled. Furthermore, products in the fashion industry that are recycled often lose their value. A key missing aspect of textile recycling is detailed information about the materials involved. That is why the Berlin-based start-up circular.fashion is working on technology that automatically recognizes and sorts textile fibers and gives them a "circular ID." "This allows us to quickly calculate whether reuse or recycling is best for this product," said Mario Malzacher, co-founder of the company.

The concept of the circular ID, known at the European level as a "product passport." is an essential aspect of the European Union's Circular Economy Action Plan for a resource-saving economy. The identification label contains information on the origin, composition, repair instructions and end-of-life options for a product.

Circular economy: No silver bullet

A study into the circular economy concept by Yale University warns of the possibility of a "rebound" effect, in which more efficiently designed and cheaper products could lead to more, rather than less, consumption. Key to recycling is that it uses fewer resources than extraction and disposal — otherwise, it adds to, rather than reduces, the carbon footprint. To prevent that from happening, they argue research needs to continue and curricular approaches need to be carefully implemented.

Yet the transiation to a circular economy is still in its early stages. Today less than 9 per cent of the global economy reflects circular principles, according to the Circular Economy Gap Report. Resources are being depleted with increasing intensity, consumption is rising, and little progress has been made in dealing with products at the end of their life cycle.

Research suggests that the benefits of overcoming these challenges could be significant. According to the World Economic Forum, the switch to a circular economy could have an annual global financial benefit of $4.5 trillion (€3.8 trillion). Research from the Ellen MacArthur Foundation states that it could also reduce global greenhouse gas emissions by one-fifth, making it a crucial tool in tackling the climate crisis.