What is the circular economy?
The circular economy is a regenerative economic system that replaces the linear “take-make-waste” approach with closed loops. Materials, products, and components are kept at their highest value level for as long as possible.
The concept, shaped significantly by the Ellen MacArthur Foundation, is based on three core principles: eliminate waste and pollution, keep products and materials in use, and regenerate natural systems. The circular economy is therefore far more than recycling—it requires a fundamental rethink in business model design.
Principles of the circular economy
- Design for Circularity: Design products from the outset for durability, repairability, and recyclability
- Reduce: Minimise material use—produce lighter, more efficiently, and with fewer resources
- Reuse: Reuse products and components—second-hand, refurbishment, sharing
- Repair: Repairability as a design principle—the right to repair is being strengthened across the EU
- Remanufacture: Recondition used products to like-new quality
- Recycle: Recover materials at the end of the life cycle—as the last step, not the first
The R-strategies follow a hierarchy: avoid before reuse before recycle. The higher up the hierarchy, the greater the environmental and economic benefit.
Circular business models
The circular economy enables entirely new business models:
- Product-as-a-Service: Instead of selling products, their use is offered as a service—a classic case of servitization
- Sharing platforms: The platform economy enables shared use instead of individual ownership
- Refurbishment & recommerce: Refurbished products as a more affordable alternative—a growing market
- Resource recovery: Extract and reuse valuable materials from end-of-life products
- Industrial symbiosis: One company’s waste becomes another’s raw material
The Business Model Canvas and the Business Model Navigator help to systematically develop circular business models.
Opportunities for companies
- Cost reduction: Lower material consumption and more efficient resource use reduce production costs
- New revenue streams: Refurbishment, take-back programmes, and service models create additional income
- Customer retention: Service-based models create long-term customer relationships instead of one-off transactions
- Brand positioning: Sustainability becomes a differentiator—especially for younger target groups
- Regulatory advantages: Be prepared early for upcoming requirements instead of having to react
- Supply chain resilience: Less dependence on raw material imports through material loops
Implementing the circular economy
The transition to the circular economy requires a systematic approach:
- Analyse the status quo: Examine the value chain for material flows, waste, and inefficiencies
- Identify potential: Where are the biggest levers? Product design, take-back, recycling, new services?
- Adapt the business model: Integrate circular elements into the existing model or develop new models
- Involve partners: The circular economy requires collaboration—with suppliers, customers, and recycling partners
- Measure and communicate: Define circular KPIs and report progress transparently
For SMEs, a step-by-step approach is recommended: start with a pilot project, learn, and then scale.
Regulation and EU requirements
The EU is driving the circular economy forward through regulation:
- EU Circular Economy Action Plan: Comprehensive strategy for sustainable products and business models
- Ecodesign for Sustainable Products Regulation: Requirements for durability, repairability, and recyclability
- Digital Product Passport: Transparency on materials, origin, and recycling options
- Extended producer responsibility: Companies are made responsible for the entire life cycle of their products
Companies that adopt the circular economy early turn regulatory pressure into competitive advantages.
We analyse your value creation for circular-economy potential and develop sustainable business models with you.
Frequently asked questions about the circular economy
What is the difference between the circular economy and recycling?
Recycling is only one element of the circular economy—and in the hierarchy, the last step before disposal. The circular economy starts much earlier: with design, extending use, sharing, and repair. The goal is to make recycling necessary as rarely as possible.
Is the circular economy only relevant for manufacturing companies?
No. Service companies can also apply circular principles: through resource efficiency in the office, sustainable procurement, digital instead of physical services, and by offering circular-economy consulting as a business field.
How do I get started with the circular economy as an SME?
Start with a material flow analysis: Where does waste occur? Where are resources being wasted? Begin with a pilot project—such as a take-back programme or switching to more durable materials. Use funding programmes and industry networks for support.
Is the circular economy financially worthwhile?
Yes—studies show that circular business models are more profitable in the long term: through lower material costs, new revenue streams (refurbishment, services), and stronger customer retention. The initial investment in design and processes typically pays for itself within 2–4 years.