Circular Economy

What is the Circular Economy?

The circular economy is closed loop system wherein the focus is on eliminating waste by reusing, recycling and refurbishment of equipment, products, machinery and infrastructure for a longer duration.

Circular Economy Examples

  • One of the best examples of a closed economy is that of collaborative consumption. Uber is a technology-based company that aggregates the cabs nearby and helps in meeting the commutation demands of the nearby riders for a given location. As a product offering, it offers Uber Pool to its customers or riders.
  • The Uber pool allows the riders to reduce their traveling costs. Additionally, for the driver, it locates nearby travelers which get added up to the active trip of the active pool rider.
  • Therefore, within the limited usage of resources for both cab owners and the rider, it saves huge costs as well as time, and at the same time, it saves a good amount of fuel which could be further re-utilized for any further planned travel.
  • Such innovative product offerings and concept focuses on reuse and recycling of available resources with limited usage of fuel. The rider reaches its destination and saves on huge travel costs.

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The circular economy is based on and comprises of 3R concept. The 3R concept can be described as reducing or least usage of raw materials, reuse or reutilization of the products and services, and finally recycle high durable raw materials and components. The 3R concept relies on the closed ecosystem, usage of renewable products and energy, and innovations into existing systems.

Why Switch to a Circular Economy?

  • The global population has appreciated drastically and exponentially. This factor has negatively impacted the resources that are available across the globe. Since resources are limited, so is the availability of raw materials for processing various types of finished products. Additionally, the extraction of raw materials has led to an increase in the levels of carbon emissions across the globe and adversely impacts the environment.
  • Therefore, to lower carbon emission and to promote recycling and efficient usage of raw materials, the world has to switch to a circular economy.

Principles of Circular Economy

  • It promotes the recycling of waste as resource and input to create more finished goods.
  • The materials that are biodegradable automatically decompose and become part of nature.
  • However, this is not the case for the non-biodegradable resources and such items have to reintroduced into the system of production and be reused to re-engineer new products.
  • Use the wastage to repair partially or fully damaged products. In such scenarios, the scope of repairs should be analyzed.
  • If the waste can’t be recycled, then valorize it to harness energy for the community.
  • Ensures that all products are eco-friendly in nature.


The circular economy is important as it promotes sustainable development. It advocates the use of waste as an input for producing new finished goods. It advocates for creating reserves of raw materials and to adopt innovative methods to eliminate any steps that reduce the cost and time to produce new finished goods.

Circular Economy vs Linear Economy

Both types of economies are quite the opposite.

  • A traditional economy is never circular in nature rather it is a linear system. A linear system of the economy generally performs the task of procurement of raw materials followed by the creation of end output and usage of output to optimum levels followed by decomposition of the item after full utilization. On the other hand, a circular economy focuses on utilizing the already decomposed item and recycle it to produce a new output or refurbish the existing item with the intent for further usage.
  • A linear economy is never closed-loop whereas the circular economy is a closed loop. The traditional economy does not understand the importance of all elements utilized in production whereas the closed economy believes towards the importance of each element involved in the production cycle.

Circular Economy Benefits

  • It reduces waste as it promotes the recycling of finished goods.
  • It offset any potential price rise of the commodity.
  • Its adoption helps in achieving efficiency and effectiveness as resources are recycled to get new products.
  • It promotes rental business as it advocates to reuse an economic entity rather than purchasing a new entity.


Normally it is difficult to inculcate the policies of circular economy among vast populations. Additionally, this creates huge interdependence among several processes that create finished goods, and the unavailability of one input can impact the creation of other finished goods which in turn cause value erosion for the interdependent businesses.


The circular economy is termed as the closed-loop economy which promotes sustainable development. It is a system that does not have any relation with the traditional economic system which is of linear nature. It advocates reuse and refurbishing of resources.

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