Could a “circular economy” envelop the world?

The world has suffered numerous crises in recent years. These include geopolitical instability, the Covid-19 pandemic, the pandemic’s enduring economic and political fallout, and a cavalcade of atypically severe storms and natural disasters that is projected to worsen.

The UN Sustainable Development Goals (SDGs) were introduced to foster global collaboration on these and other challenges, but halfway through progress has been intermittent. At national and local levels, many governments are struggling with fiscal stress, infrastructure deficits, and frustration from constituents.

No single policy framework or paradigm can simultaneously address this perplexing mix of crises. However, the concept of the circular economy provides a potentially new way of structuring industrial production and shaping its broader impacts.

In a scholarly article published last year, Kirchherr et al. defined the circular economy as “a regenerative economic system which necessitates a paradigm shift to replace the ‘end of life’ concept with reducing, alternatively reusing, recycling, and recovering materials throughout the supply chain.”

Contrary to popular perceptions among those casually familiar with the term, a circular economy is more than just recycling; it involves numerous activities that help reduce material waste across the product life cycle (see, for example, the ‘9R’ framework). 

At a broader scale, circular economy principles accord with progressive policy objectives in several ways. First, less extraction of raw materials reduces the resource exploitation that perpetuates historical power imbalances (for example, wealthy countries profiting from mining in low-income countries).

Second, the R&D-driven chase towards circularity can generate innovation spillovers—as, for example, the “space race” did for telecommunications. Third, circularity creates new markets (principally for processing and trading material waste), thereby creating new job opportunities.

Finally, as circularity functions more efficiently at smaller scales, it can strengthen regional trade integration, regularising economic and political interactions among countries experiencing diplomatic tensions. 

Despite these potential benefits, circularity also raises some troubling prospects. While down-scaling supply chains makes operational sense, it can also be politically co-opted to support economic isolationism and, in extreme scenarios, toxic nationalism.

The spectre of toxic nationalism bears particular significance at a time when economic malaise and inequality have fomented populist anger and hateful rhetoric against migrants and people with non-mainstream identities.

One must not dismiss the prospect that a seemingly progressive industrial or ecological framework can, by turn, become a regressive political framework—as history shows. In this way, technological progress or ecological paradigm shifts may indeed outpace socio-political evolution. This is not an inevitability, but in this turbulent political era, it is one scenario to consider. 

Given such concerns, it is useful to take a broader view of circularity. At a time when climate and environmental data alert us to a crisis that threatens the continuity of global economic and production systems, transformational or broadly encompassing concepts like the circular economy can be alluring. Closing the resource loop has potentially significant benefits in minimising waste and natural resource extraction.

However, circularity should not be seen as the single catalyst for industrial transformation. Industrial systems are embedded in economic, political, and social systems, all of which have their own inertia.

In research that colleagues and I conducted about the textiles industry in the Netherlands, we identified numerous barriers to circular transition—including outdated regulations, limited technology and skills, skittish markets that favour virgin materials, and reluctant or sceptical culture among companies and consumers.  

Circular transformation should be seen less as flipping a switch and more as a slow, costly, and messy slog towards some ambiguous concept of success that will surely be challenged in the political arena. In other words, the circular economy is a process rather than a destination. Further, as argued by Figge et al. (2023), perfect circularity is not possible.

Nevertheless, the chase for circularity may have ancillary benefits through technological innovation, changes in business practices, and—ultimately—more progressive attitudes about the balance between economic gain and environmental exploitation.    

In closing, it is important to consider the “moral hazard” of technological and technocratic solutions (like circular economy or smart cities) to deep-seated challenges like the sustainability crisis and climate change. Will these solutions always bail us out? Will innovation outpace the increasing unsustainability of our consumption and production choices?

At no point in history has society had greater capacity to produce and scale innovations. For example, the global community in the modern era has made substantial progress forestalling hunger despite historically high population growth—but poverty and deprivation endure.

Out of the twentieth century’s fabulously rapid industrialisation have emerged a massive middle class and a small number of astonishingly wealthy individuals, but economic inequality is worsening and gathered additional pace during the post-pandemic economic recovery.

Multilateral agreements and summits abound, but climate change remains an imminent threat. We celebrate narrow measures of progress like national GDP growth and higher returns on “sustainable investments,” but natural and human systems are still mired in multi-dimensional crises.  

The quality of technology matters as much as how we use it. Currently, technology and innovation seem mostly to support faster and cheaper ways of doing the same old wrong things. Innovation does not excuse us from the unpalatable task of critically examining our unsustainable choices and attitudes. As with any innovation, circularity will be only as beneficial as the social, political, and economic context allows it to be. 

This article was published by the Australian Institute for International Affairs.