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What are the definitions, origins and measurement of circular economy?

In this article, we want to find out the concept of Circular Economy: What does it mean? What is its origin? And how can it be measured?
Circular Economy Definition Origins And Measurement
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Definition and frameworks of Circular Economy

In a linear economy, production unfolds with one paramount direction: factory inputs stem from natural resources, and after being processed to goods and purchased, products are often disposed of after a single-use. This economic model of linear production and consumption consisting of “take-make-use-dispose” phases, is not sustainable in the long term. Moving towards a Circular Economy is necessary, also because it is a building block of sustainable development, bearing significant potential to contribute to environmental quality, economic welfare, and social equity for current and future generations. So far, only 8.6 % of the world economy is considered circular. The most used definition of Circular Economy builds on the 3R framework: reduce, reuse and recycle. Others extend it to a 4R framework by adding ‘recover’ to these principles of circular economic activities. According to the European Commission’s Circular Economy Action Plan, Circular Economy is described as the preservation of product value, materials, and resources in the economy for a long time period with decreasing production of waste. According to Kirchherr and colleagues (2017), Circular Economy is an economic system that substitutes the concept of “end-of-life” with reducing, reusing, recycling, and recovering materials in the processes in which products and services are produced and consumed. These authors explain that Circular Economy operates at three levels: the micro level, which refers to single customers or companies; the meso level, which refers to eco-industrial parks; and the macro level, which captures anything between cities and nations. Later in this week, you will learn more about how Circular Economy is implemented at these three different levels.

The aim of a Circular Economy is to maximize products and services that are already in use. This includes all phases of a life cycle of a product. Simplified, life cycle phases of a product are:

  • the extraction of natural resources;
  • the conversion of natural resources into products; and
  • the reconversion of unused materials, as well as waste, into sources of resources for new products.

The framework by Elia and colleagues (2017), shown in Figure 1, can be used to support the measurement of the adoption of Circular Economy. According to this framework, there are four action components involved that support Circular Economy adoption:

  • Circular product design and production, which includes, for example, eco-design that takes place at the planning phase of production. Eco-design aspires to consider the environmental impacts of a product right from the start and facilitates the reuse of a product and its materials.
  • Business models for Circular Economy are alternative modes of production and marketing of goods, for instance, by providing product-service systems rather than ownership of a product, and considering collaboration and transparency through the value chain of a product. You will hear more about business models for Circular Economy in the third week of this course.
  • Furthermore, there are cascade and reverse cycle skills: The first type, cascade cycle skills, refers to versatile reuse of materials through the value chain. For example, when the cloth is reused first as second-hand clothing, then utilized in the furniture industry, and the material is later reused for another purpose—thus, substituting the use of virgin materials in each case. In the end, it is safely returned to the biosphere. The second type, the reversed use of materials and products, is based on the assumption that the materials have to be collected and brought back after their use to become part again of value-adding activities. Reverse cycle skills can be implemented, for example, to the value chains of washing machines, where quality and material losses, caused by inappropriate collection channels for old machines, can be avoided by manufacturer-controlled collection systems. Such control and collection of washing machines by manufacturers become feasible if they lease products to their customers, and thus retain the ownership of their products.
  • Finally, there is the cross cycle and cross-sector collaboration, which are about the building of co-operation throughout the value chain to prevent by-products to end up as residual waste.

There are some main characteristics of Circular Economy that can be defined, even though they can also differ for different types of products and materials. For example, food that is consumed and metals that can be recycled involve different characteristics of a Circular Economy, but similar principles apply to both of them. As they are main characteristics, they can also be considered as key requirements of Circular Economy to be measured (figure 1). These key characteristics include:

  • Reducing input and use of natural resources: here, the main goal is to reduce the erosion of ecosystems resulting from linear production and consumption, as well as to create more from less, meaning more value from the number of used materials over their life cycle;
  • Reducing emission levels, which includes both direct and indirect emissions;
  • Reducing losses of valuable materials, meaning to prevent waste production, minimize burning and landfilling, and reduce energy and material losses.
  • Increasing the share of renewable and recyclable resources: the goal is to cut emissions through the full material cycle by using fewer raw materials and more sustainable procurement;
  • Increasing the value durability of products: this can be achieved by a product’s lifetime extension, using business models founded on user-oriented services (such as product leasing, as suggested for washing machines), and re-using products and components.

Requirements to be measured, Processes to monitor, Actions involved, Implementation levels: micro, meso and macro. The Circular Economy framework (Click to expand)

Source: Elia et al. 2017

As we can see, there are diverse elements that make up the concept of Circular Economy, and we have now explored some of them. The concept of circularity has also diverse historical and philosophical origins, which we will explore next.


The concept of Circular Economy does not have a single starting point or author, but rather a several authors from different schools of thought have participated in its development. Examples of authors are Michael Braungart and William McDonough, whose book “Cradle to Cradle: Remaking the Way We Make” was published in 2002, and Janine Benyus, whose book “Biomimicry: Innovation Inspired by Nature” was published in 1997. The development of CE is, amongst others, related to the following schools of thought:

  • Cradle to Cradle, which is a design philosophy that perceives all materials in industrial and commercial processes as nutrients. Nutrients are either technical or biological.
  • Biomimicry, which is a concept with three key principles: (1) nature as a model template, which encourages to study of natural models to solve human problems; (2) nature as a measure of ecological standard, to judge the sustainability of innovations; and (3) nature as a mentor; which is based on the thought that nature should be viewed and valued in terms of what we can learn from it.
  • Industrial Ecology, in turn, comprises studies that focus on material and energy flows through industrial systems. Industrial Ecology assesses connections between units in the industrial system and aims to create closed-loop processes that consider the waste of one unit as an input of another.
  • Natural Capitalism: Here, “natural capital” refers to the world’s resources, such as soil, air, water, and everything that is living. Natural capitalism follows principles like increasing the productivity of natural resources and reinvesting in natural capital.

How can CE be measured?

Similar to its definitions and origins, there are nowadays also various approaches to the measurement of Circular Economy. The measurement of circularity performance is becoming more and more critical, because the circularity of cities, regions, and firms needs to be transparent for stakeholders, in particular for policymakers to make adequate decisions on Circular Economy frameworks. The multiplicity of approaches to interpreting Circular Economy, and what relevant circularity criteria are, has also affected the development of means to measure Circular Economy. There is, so far, a shortage of adequate and standardized measurement tools. However, as interest in the Circular Economy is growing by the day, also a range of industry stakeholders came up with new approaches to the measurement challenge. In Week 4, you will learn about two emerging tools for measuring circularity: the Circular Scan Tool, which attempts to measure the circularity of cities and regions and which was developed by Circle Economy, as well as Circulytics, designed by the Ellen MacArthur Foundation to assess the circularity of firms, cities and other institutions.

© University of Helsinki
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