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Circular Economy

What is the definition of a circular economy?

A circular economy is an economic system where products and services are traded in closed loops or ‘cycles’. A circular economy is characterized as an economy which is regenerative by design, with the aim to retain as much value as possible of products, parts and materials. This means that the aim should be to create a system that allows for the long life, optimal reuse, refurbishment, remanufacturing and recycling of products and materials. Kraaijenhagen, Van Oppen & Bocken. 2016Ellen MacArthur Foundation, 2016

Closing Loops

In a circular economy material cycles are closed by following the example of natural ecosystems, therefore toxic substances are eliminated and there is no waste, because all residual streams are valuable as resource. Moreover, products are taken back after use for repair and remanufacturing in order to reuse the products a second, third or fourth time, and residual streams are separated in a biological and technical cycle (Ellen MacArthur Foundation, 2015a).

System thinking

Circular economy asks for system thinking. All actors (businesses, people, organisms) are part of a network in which the actions of one actor impact other actors (Ellen MacArthur Foundation, 2015a). In a circular economy, this is taken into account in the decision making processes by including both short- and long-term consequences of a decision, considering the impact of the complete value chain, and aiming for the creation of a more resilient system which is effective at every scale.

Decoupling economic growth

The Goal of a circular economy is to decouple economic growth form resource consumption by focusing on value retention. In order to secure the ecosystems and natural capital on which we rely, more than financial capital is of value.

Social capital and natural capital play a role in the stability of our systems as well. In a circular economy, these values are reflected in the costs of products and services. Therefore, the energy required to fuel this cycle should be renewable by nature as well (Ellen MacArthur Foundation, 2015a).

Towards a definition of circular economy

Although the amount of publications on circular economy is growing, there is no real definition yet. By comparing the definitions that are used in literature, Kirchherr, Reike & Hekkert. 2017 found that most scholars describe circular economy by referring to the 3Rs: Reducing materials need and waste, Reusing products en product parts and Recycling materials. Many definitions consider a system change as a fundamental part of reaching a circular economy. These are the most important aspects of a circuclar economy.

Other aspects

Few definitions mention the potential of business models and consumers as enablers for the circular economy, while these are key to changing the economy in a circular way.

The role of circular design for a circular economy is often not mentioned, while it offers many opportunities for businesses.

Read more on this research on defining the circular economy here:Kirchherr, Reike & Hekkert. 2017

Measuring circularity

The lack of a definition that is agreed upon means that there are no official standard on how to measure circularity yet. This is related to the fact that in different sectors different indicators are important. For example, producing and service sectors will have other possibilities and opportunities to create a circular business model. Read further on the benefits for business, education, governments and finance on this knowledge map.