Circular Economy
Suggested Citation: Camilleri, M.A., Sheehy, B. & Fraser, K. (2022). Circular Economy, In: Idowu, S., Schmidpeter,
R., Capaldi, N., Zu, L., Del Baldo, M., Abreu, R. (eds), Encyclopedia of Sustainable Management, Springer, Cham,
Switzerland. https://doi.org/10.1007/978-3-030-02006-4_399-1
This is a pre-publication version.
This contribution features the submission of one of the most important sustainability keywords to
Springer's Encyclopedia of Sustainable Management. It provides a definition and an introduction
to the circular economy (CE). It describes key policies and regulatory interventions that are meant
to promote the CE agenda. In conclusion it identifies implications to practitioners and other
stakeholders.
Definition
A circular economy is a clean production system designed to minimise the use of resources in
production systems and to reduce unwanted externalities from manufacturing processes including
waste, emissions, and energy leakages. Such a sustainable approach differentiates itself from linear
economic approaches that are built on the premise of “take‐make‐consume and dispose” actions
(Camilleri, 2019; EU, 2014), that presume that resources are abundant, available, and cheap to
dispose of.
The circular economy can be achieved by repairing, reusing, remanufacturing, refurbishing, and
recycling resources that were already use during production, whilst safeguarding the natural
environment through long-lasting closed loop and product service systems (EMF, 2013). This
system balances the economic development with environmental and resource protection. It leads
to higher operational efficiencies through responsible production and consumption behaviours
(UNEP, 2006).
Keywords: Circular Economy, Sustainable Production, Sustainable Consumption, Resource
Efficiency, Recycling, Closed Loop Systems, Product Service Systems.
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Introduction
Prior to the industrial revolution, business and industry would hardly dispose of their waste and
by-products. In many cases, they reutilized and recycled their waste as it was too costly for them
to dispose of unwanted materials and/or to convert them into reusable goods. However, over the
years, particularly in the last century, several manufacturers have changed their manufacturing
approaches and resorted to large scale production of disposable items. As a result, they created
demand for the world's resources, caused pollution problems and generated more waste.
The growing populations and their increased wealth lead the exhaustion of the world’s resources,
to greater demands for products or materials, that have to disposed once they have been used. Most
of the unwanted items will inevitably finish in landfills and could pose serious health risks to flora
and fauna.
In addition, the incineration of waste products increases the concentrations of residual toxic metals
which may in turn contaminate air and seep into groundwater, thereby contaminating such a critical
resource for living ecosystems, including for humanity. The burning of fossil fuels, petroleum,
coal and natural gas are undermining the ability of the eco-systems to support human life.
Simultaneously, other anthropogenic causes including industrial and consumption practices have
led to greenhouse gas emissions, the warming of the earth's climate, on-going land degradation
and to the disappearance of arable land and desertification.
For example, plastic waste dumped into the oceans has formed a large plastic island in the Pacific
Ocean. A specific area known as “Great Pacific Garbage Patch” is responsible for the deaths of
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millions of tonnes of fish, seabirds and sea mammals (NOAA, 2022). These are some of the
detrimental effects resulting from industrial activities.
In the light of these latest developments in the natural environment, the circular economy systems
could help to restore our planet. The idea of a circular economy is essentially based on three
principles: the elimination of waste and pollution, the circulation of products and materials (at their
highest value), and the regeneration of nature (Ellen MacArthur Foundation, 2013). Hence, it
requires a transition to renewable energy and to the recycling of materials.
A circular economy system aims to decouple economic activity from the consumption of the
planet’s finite resources and to using resources more efficiently. Therefore, it requires better eco-
designs, waste prevention measures and the reutilisation and recycling of materials. Not only will
such improved design and recycling result in better environmental outcomes but could also
improve the businesses financial performance (Camilleri, 2020; Stahel, 2016; Van der Linde,
1995).
Key policies and regulatory interventions
In the last twenty years, a number of intergovernmental institutions including the United Nations
Environment Program (UNEP) and the European Union (EU), among others, as well as a number
non-governmental organizations and academia, among other stakeholders, started raising
awareness on sustainable production and consumption of resources (Camilleri, 2020; EMF, 2013;
Lieder and Rashid, 2016).
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The UN Report of the World Summit on Sustainable Development in 2002 added reference to
unsustainable patterns of production and consumption. In the report, UN member states were urged
to manage their natural resources in a sustainable manner, with lower negative environmental
impacts. They were urged to promote conservation, biodiversity and sustainable use of ecosystems,
while reducing waste (WSSD, 2002, p. 13). In another resolution entitled; “The future we want,”
the General Assembly reaffirmed its commitment to green economy policies in the context of
sustainable development.
In voting in favour of that resolution, governments committed to continuing to promote and to
integrate policies supporting sustainable management of ecosystems, including their conservation,
regeneration, and restoration of resources (UNCSD, 2012). In 2015, a General Assembly
Resolution 2015 titled “Transforming our world: the 2030 Agenda for Sustainable Development,”
was put to the floor. World leaders adopted this latest iteration of the development policy, the
Sustainable Development Goals (‘SDGs”), which replaced the Millennium Development Goals of
2000. In the context of production and consumption, Sustainable Development Goal 12
“Sustainable Consumption and Production” noted a need to shift policies and practices for business
and industry to change in order to increase sustainability through changes to production and
product design, as well as noting the potential economic gains to be had by resource and energy
efficiencies.
The United Nations SDGs also raised awareness about the potential of sustainable infrastructure.
It urged member states to address air, water, and soil pollution to minimise their countries’ impact
on the environment (UNDP, 2015). The later greenhouse gas focused Paris Climate Agreement
(COP 21), along with Resolutions 1/5 and 2/7 on chemicals and waste, and Resolution 2/8 on
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sustainable production and consumption, of June 27, 2014 and May 27, 2016 respectively, are also
important policy instruments relating to the circular economy agenda.
These international, intergovernmental commitments to sustainable development, consumption
and production have generated increased regulatory pressures on governments to regulate their
industries and to improve corporate environmental practices. Indeed, in 2014, the European Union
(EU) Commission anticipated that, “new business models, eco-designs and industrial symbiosis
can move the community toward zero-waste; reduce greenhouse emissions and environmental
impacts” (EU, 2015).
Eventually, in March 2017, the EU Commission and the European Economic and Social
Committee organised a Circular Economy Stakeholder Conference, where it reported on the
delivery and progress of some of its Action Plans. It simultaneously established a Finance Support
Platform in collaboration with the European Investment Bank (EIB) and issued important guidance
documents to Member States on the conversion of waste to energy.
There have been several other EU Communications on this subject, including:
• "Innovation for a sustainable future - The Eco-innovation Action Plan";
• "Building the Single Market for Green Products: Facilitating better information on the
environmental performance of products and organisations";
• "Green Action Plan for SMEs: enabling SMEs to turn environmental challenges into
business opportunities";
• "Closing the loop –An EU action plan for the Circular Economy" and the report on its
implementation, and
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• "Investing in a smart, innovative and sustainable Industry - A renewed EU Industrial Policy
Strategy", among others (EU, 2017).
More recently, the EU Commission adopted a set of measures focused on the use of plastics. These
include the document a “Strategy for Plastics in the Circular Economy” which stipulated that all
plastic packaging must be recyclable by 2030. It has further released a communication on the
interaction among chemical, product and waste regulations. In support of these policy initiatives,
the EU Commission launched a Monitoring Framework to be used to assess the progress of its
member states towards the circular economy. This framework comprises ten key indicators: 1) EU
self-sufficiency for raw materials; 2) Green public procurement; 3a-c) Waste generation; 4) Food
waste, 5a-b) Overall recycling rates, 6a-f) Recycling rates for specific waste streams, 7a-b)
Contribution of recycled materials to raw materials demand, 8) Trade in recyclable raw materials,
9a-c) Private investments, jobs and gross value added, and 10) Patents.
Conclusion
Many actors including national governments to inter- and non-governmental organizations as well
as industry associations have formulated policies and recommendations on sustainable
development and on responsible production and consumption (Camilleri, 2015; Camilleri, 2020;
UNDP 2015; UNCSD 2012). Nevertheless, potential challenges remain for the implementation of
the circular economy’s closed loop and product service systems.
The economic implications of the development and implementation of circular economy systems
pose a distinct challenge to industry practitioners and to many governments. As a result, there are
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significant calls for contributions from government to provide economic support through subsidies
and tax breaks to businesses, to help them invest in circular economy systems.
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