Dutch
How do we make the sectors circular?
8
 
KNOWLEDGE MAP Back to overview

Circular Economy

What are the economic benefits of the circular economy?

Circularity has several advantages for the economy. Globally, the economy would benefit $2 trillion a year from more effective resource management. This is because the cost of raw materials will decrease substantially, while promoting employment and innovation.

For specific numbers of benefits for the Netherlands and Europe, see the pages:

Substantial resource savings

While the attention for the circular economy is increasing, the extraction and prices of primary raw materials are still increasing (see figure 1). According to Circle Economy calculations, 9% of all raw materials were fully recycled by 2019. In 2018, this percentage was slightly higher at 9.1% (Circle Economy, 2019). In theory, in the circular economy, 100% of all raw materials are fully recycled, and no new virgin raw materials are needed. It will take a very long time for this scenario to be achieved, because methods will have to be found to fully recycle materials that are currently used in products (Fellner, Lederer, Scharff, and Laner, 2017).

Figure 1: Sharp increases in commodity prices since 2000 have erased all 20th century price declines, following the McKinsey Commodity Price Index (WE Forum, 2017).

Economic growth

An important principle of circular economy is to decouple economic growth from the consumption of raw materials. As a result, the economy is not hampered by the shortage of raw materials to grow. It is assumed that a move towards the circular economy will promote economic growth. The United Nations Environmental Plan (UNEP) calculated that in 2050 the global economy would benefit from more effective resource use by $2 trillion a year (UNEP, 2017). In a circular economy, this gain would certainly be achieved. On the one hand through increased turnover from new circular activities and on the other hand through the creation of more functionality from the same number of materials and means of production. The development, production and maintenance of these circular products requires a specialised workforce, which will increase these jobs. On the other hand, there will be less demand for the extraction and processing of raw materials, which will reduce the number of less specialised jobs. This will increase the value of labour, which is good for employment and GNP (WE Forum, 2017).

Growth of employment

As explained above, in a circular economy, labour is valued more than raw materials. As a result, employment is growing. These jobs will expand for labour-intensive recycling and high-quality repairs; jobs in the logistics sector through local product take-back; new enterprises through innovation, service economy and new business models (WE Forum, 2017).

Innovation stimulus

Circular economics challenges innovative solutions based on a new way of thinking. That means thinking about circular rather than linear value chains and striving for optimizations for the entire system. This results in new insights, interdisciplinary cooperation between designers, producers and recyclers and therefore also in sustainable innovations (Kraaijenhagen, Van Oppen & Bocken, 2016).

Changing demand

A final important factor in the economic benefits of circular economy is the change in and better understanding of the demand side. How companies deal with their customers and the role they play throughout their lives ultimately leads to less use of raw materials, less waste generation and changing production (WE Forum, 2017).