But the practice of circularity is decreasing
The promise of a circular economy is an attractive one. It’s right there in the middle of the phrase: Reduce, Reuse, Recycle.
A circular economy minimizes waste and maximizes the efficient use of resources. The aim is to reuse materials, keeping them in circulation as long as possible to reduce the need for new resources entering the system. The ultimate goal is to get to a less resource-intensive economy that can help reduce environmental impacts and help rejuvenate nature.
According to the recently published Circularity Gap Report 2024, the circular economy has reached megatrend status. The volume of discussions debates and articles on circularity has about tripled over the past five years. However, the share of secondary materials consumed by the global economy has decreased from 9.1% in 2018 to 7.2% in 2023, or a 21% drop in the last five years. At the same time, consumption accelerates. Over that same five-year period, humanity has consumed over 500 gigatons of materials. To put that in perspective, 500 gigatons is 28% of all the materials humanity has consumed since 1900.
The report notes that successful systemic change that moves to a circular economy will rely on governments, financial actors, and society alike. The report stresses the need to introduce policies and legal frameworks that incentivize circular practices while penalizing harmful ones. This likely also involves adjusting fiscal policies to create prices that are higher for non-circular items, while ensuring that circular solutions are well funded. Societies also need to do a better job of building circular expertise and skills by ensuring that crucial workers are empowered, and most circular opportunities are fairly distributed across societies.
The report separates countries into three different categories.
Shift countries - These countries are generally affluent, with comfortable lifestyles, and perform well on social indicators. However, they consume far more than their fair share of materials and must focus on reducing material extraction and use to lighten their environmental burden.
Grow countries - These are middle-income countries and will likely remain manufacturing and industrial hubs. These countries need to shift to make their growth sustainable.
Build Countries - Lower-income build countries often struggle to meet the basic needs of their populations. For these countries, the primary goal is to use materials to improve living standards.
The circular economy isn't a cure-all. There will always be a need for the extraction of newer resources, but every percentage point of circularity increase puts less strain on our natural systems. Our planetary boundaries are already overstretched. It is a bit troubling that the circularity of our global economy is headed in the wrong direction.
More demand for circular products from society can help policymakers, companies, and investors focus on the opportunities more circular solutions provide.
For example, the fashion industry uses a lot of material, much of it natural, for clothing that is often worn a few times and discarded. A move away from a fast fashion culture to a more reusable focus can lower the throughput of the fashion industry. A focus on more durable materials, reuse, and repurposing of clothing can have a profound impact. Such a move can lessen the need for natural fibers as well as plastics and other synthetic fibers that go into our clothes and damage the environment if they are overused. However, this will likely need to include incentives from policymakers and consumers to increase the demand for durable fashion and decrease the demand for fast fashion.
Investors and companies alike should explore how they can make their businesses more circular, therefore reducing costs and throughput. Business models are changing. In a world of constrained resources - especially when policymakers and society are taking more interest in protecting those scarce resources - companies that can use resources best and reuse resources best, will have a distinct advantage.