What is the Circular Economy?

The circular economy is a fundamental shift in our economic system. It transfers value from a market-based economy to a values-based economy. The value and integrity of materials, access to products and services over ownership, and cooperation over competition. While it may seem a utopian dream, the simple fact is that our current economic system cannot be maintained. 

The circular economy focuses on

(1) Design – How products are designed and made – the resource efficiency of the whole system from design, sourcing and types of materials, manufacturing, energy, and delivery to market.

(2) Resource management, resource efficiency and materials – Currently, we do not live within our planetary boundaries. We use more primary raw materials than what the planet can replenish within any given time. When the products we use reach the end of their use-cycle, we treat them as waste. Instead, we need to dispose of all end-of-use-cycle products responsibly so they can become secondary raw materials. There will be limits, we shall always be constrained by the laws of physics and chemistry. It is imperative that the usage, disposal and collection of materials innovate and evolve into scaleable systems.

(3) Closed-loop systems – A system that focuses on technical efficiencies, such as material utility, resource-use optimisation, and end-of-use-cycle elimination. Technical efficiency is not a single solution, as it can allow for several solutions that are based on systems thinking, science, and technology rather than market forces.

(4) The Circular Rs – The economic functions of the circular economy. The Circular Rs are the economic activities that make up the circular economy. Over time some or all of the Circular Rs may apply to you as an individual or company as you delve deeper into circular economy principles of design, resource management and closed-loop systems.

The Linear Economic Model

Since the Industrial Revolution (around 1760) the economic model has progressed along, what is called, a Linear system. The diagram below shows the three stages of the Linear Economy:

(1) Taking finite natural resources [in the diagram it is oil to produce a plastic bottle]

(2) Make or manufacture into products for consumption;

(3) Becomes waste after use or end-of-life.

This economic model is not sustainable as, eventually, we shall use up all the natural resources we have and there will be nothing left for future generations.

In the circular economy, nothing is wasted. Products are made from natural (biological) or human-made (technical) materials or resources. They are recovered for reprocessing into new products, materials or alternative resources such as compost or bio-energy. To get to a point where nothing is wasted requires a major overhaul of our entire system of production, and for this, we need to explore how Design will provide the innovation for change.

The Linear Economic Model

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The Circular Economy Model

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Different Approaches to the Circular Economy

There are two ways of understanding the circular economy. The first is the popular Butterfly Diagram conceived by Michael Braungart and William McDonough from Cradle-to-Cradle Design. The Butterfly Diagram demonstrates how natural (biological) and human-made (technical) materials or resources circulate in infinite production cycles facilitated at the design and manufacturing stage of products – see Design.

Technical materials: As fossil fuels, plastics, metals, glass etc., come from finite natural resources, these primary raw materials cannot be renewed. In the technical cycle, it is important we design and manufacture products that are ‘future-proof’. Products should be designed for repair, reuse, remanufacture, disassembly and reprocessing of product materials. The aim is to keep all technical materials or resources in use for as long as possible.

Organic materials: Food, all organic materials from agricultural activity, water etc. are part of a biological ecosystem. In this bio-cycle, it is important to ensure that the ecosystem and biological processes can function properly. Consumption may occur in this cycle (food, water, fertilizer) as long as the material flows are not contaminated with toxic substances and ecosystems are not overloaded. When the ecosystem is balanced, organic materials are renewable.

The basic premise of the Butterfly Diagram is in assigning which circular economy function provides the most value. For example, maintaining a product’s use-cycle through repair extends the resource and economic value instead of discarding the product for recycling. Extending a mobile phone use-cycle has greater economic and resource value than if it is taken apart for scrap. In addition, scrap materials may not result in them being reprocessed into secondary raw materials for reuse by manufacturers. 

The second circular economy framework is the Circularity Diagram, developed by the UN Environment Programme (UNEP). This diagram directs more attention towards the role of the user or consumer in a circular economy. It illustrates that the circular economy is about sustainable production and that sustainable consumption is integral to it.

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Fact Sheets

These Fact Sheets provide insights, trends and ideas on the circular economy in Asia and across the world. They are created for our #CircularOctober campaign. For the complete list, visit the Fact Sheets page; click on the image to download. 

Knowledge Centre

In this section there an extraordinary amount of information, including research and reports covering finance, ideas, legal, metrics & monitoring, policy, presentations, social value, systems thinking, tools and publications from Walter Stahel, plus images and infographics. 


  • The images of the Linear Economy and Circular Economy are from “Eriksen M, Thiel M, Prindiville M, Kiessling T 2018. Microplastic: what are the solutions? in Freshwater Microplastics – Emerging Environmental Contaminants (Eds Wagner M, Lambert S), The Handbook of Environmental Chemistry 58. Springer”. Note: Both images have been modified to reflect the Circular Economy in easier terms.
  • ‘Markets and the Future of the Circular Economy’ by Thomas Siderius and Trevor Zink, published in Circular Economy and Sustainability, 2022
  • Butterfly diagram – Source unknown
  • Economy Concept – UN Environment Program / Circularity