Running head: CIRCULAR ECONOMY: KEY PRINCIPLES, CONCEPTS AND BUILDING

BLOCKS 1

Circular Economy: Key Principles, Concepts and Building Blocks

Name

Professor

Course

Institution

Date
CIRCULAR ECONOMY: KEY PRINCIPLES, CONCEPTS AND BUILDING BLOCKS 2

In the contemporary world of business, the models of consumption is shifting from the

linear economy to a circular economy. The concept of circular has become prevalent in both the

public and private sector. Basically, a circular economy accentuate on the sustainable utilisation

of resources and at the same time taking actions that augment social responsibility. Additionally,

circular economy denotes the strategies adopted in the business sector to protect resources for the

industry, and thus it is assumed to be a longstanding necessity. Keeping resources in the

dominant cycle requires an addition of value. As such, the role of the circular economy is

indispensable, considering its incessant emphasis on benefits to the wider society. In particular,

this paper provides an in-depth exploration on the concept of circular economy, fundamental

principles, building blocks and ultimately the associated shifts.

According to Geissdoerfer et al. (2017) circular economy involves a progressive

decoupling of the economic operations, and most importantly, configuring waste out of the

system. In such an economy, economic operations structure and restructure the whole system.

Again, this concept endorses the vitality of working at par in all levels that is, small, medium and

large enterprises, corporates and individual, internationally and at the local level. In a similar

fashion, Ghisellini, Cialani, and Ulgiati (2016) asserts that transitioning to a circular economy is

not only exemplified by the adjustments made to mitigate the impacts of a linear economy. But,

it embodies the paradigm shift that forms a long-term suppleness, creates limitless opportunities,

and yield environmental as well as societal paybacks. Preston (2012) confirms that with the ever-

emerging technology, it is becoming easier to complement the transition from a linear economy

by thoroughly augmenting virtualization, dematerialization, pellucidity, and response motivated

acumen.
CIRCULAR ECONOMY: KEY PRINCIPLES, CONCEPTS AND BUILDING BLOCKS 3

The circular economy is based on a dynamic feedback perspective with a continuous need for the

revitalization of the loop. The feedback system works on sharing the economy, extending the

product’s lifespan and changing the supply chains and disrupt the conventional systems. This

implies that the feedback is a prerequisite for the circular economy, grounded on the caradle to

cradle aoprpach (Ning, 2001). These system serves to ensure that the flow of resources is done

over and over again (Tukker, 2015). Another benefit accrued from the dynamic feedback system

is that it help to enabling an efficient use of materials while diminishing the necessity for non-

used materials.

While the conventional linear model was largely based on throughput, the circular economy

serves to rethink the throughput model by establishing a multidimensional approach of utilizing

the available resources. In providing the goal for a circular economy, Costanzo and Daly (2012)

adopts various core pillars, which help in providing hands-on as well as climbable opportunities

to diminish the impacts of carbon footprint. One, he avers that a circular economy prioritise on

regenerating resources, which involves ensuring that materials are utilised productively. Then,

this economy aims at preserving and extending what has been made, and reusing the waste as

valuable materials (Andersen, 2007). Designing for the protracted use in the future is another

fundamental aspect of the circular economy, which commensurate transformation of the business

model. Developing an effective business model in an economy helps in crafting circularity and a

favourable system for supplementing and reinforcing system thinking. Collaborating and crafting

joint values is grounded on improving transparency and strengthening the supply chain. Finally,

this new economy incorporate the modern technologies with the aim of tracking and optimizing

the use of resources, and creating a linkage between the various players in the supply chain

(Webster, Bleriot, and Johnson, 2013). This, along with creativity helps in matching the
CIRCULAR ECONOMY: KEY PRINCIPLES, CONCEPTS AND BUILDING BLOCKS 4

demands of the changing situation in the business world, and hence strengthening the circular

economy.

In Sauvé, Bernard, and Sloan (2016) perspective, he asserts that the growth of an economy, if

wisely managed, can provide greater benefits to the environment. On the other hand, Boulding

argues that economic growth can have serious ramification to the environment (Yuan, Bi, and

Moriguichi, 2006). In this perspective, economic growth is seen as a detriment to the

environment and not as a benefit. While the tradition linear economy had primary emphasis on

the energy, materials and resources, the circular economy goes beyond that. It utilises metaphors

and analogies that help in engaging a paradigm shift to a multi-dimensional approach on the

overall system (Webster, Bleriot, and Johnson, 2013). Mores so, the use living system and

analogies is helpful in recognising that although the linear system is still in dominance, it will

soon fade away. (Su et al. 2013) argues that the prevailing economy of disposal portends the

stability of economies and survival for humanity by interfering with the reliability of the

ecosystem. In contrast, circular economy adds clearly to reconcile the fundamentals, based on its

core rationale, which is entrenched in the environment, economic and political aspects of the

business.

The principle of optimizing the overall system reflects the holistic approach manifested in the

circular economy. It is recognising the interconnected of the subsets in the system, and thus

disregarding the interdependence will definitely affect the overall objective. In this standard, the

man-made systems are obligated to take reach the edges and appreciate the role of the other

systems (Haro, and Krueger, 2008). Further, the metaphorical view on waste helps in changing

the subsisting view on the circular economy. In other words, what was previously regarded as

non-beneficial is now viewed as critical resources in the business model. In support of this, the
CIRCULAR ECONOMY: KEY PRINCIPLES, CONCEPTS AND BUILDING BLOCKS 5

concept of cradle-to-cradle shows the level of positivity in the circular economy (Chiodini,

2012).Circular economy, in a border sense, is supportive as it appears to focus on eluding

limitations or reductions. This implies that there is no incompatibility between the economy and

environmental as they work harmoniously. The system change as described by Webster, Bleriot,

and Johnson (2013) denotes that the “circular economy is radical in nature and robust enough to

oppose the prevailing system”. Therefore, a failure in the subset system can often leade to the

breakdown of the larger circular economy.

By shifting to the renewable, the circular economy is propelled to a point of addressing any form

of incompatibility in the system. This implies that the emphasis on the renewable ensures that the

needs of the overall system of the circular economy are addressed. Besides gaining profit, the

circular economy demands an innovative strategies .This is a critical aspect of improving access

to resources, more opportunities for values establishment, and adopting approach towards the

projected needs in the future.

Webster, Bleriot, and Johnson (2013) notes that “Instead of focusing on the creation of materials,

the point is shifting the global technologies, which is accomplished differently from the

conventional business models”. Similarly, the circular economy demands a transition for the

standards of the individual consumption to a collaborative consumerism, which match the radical

orientation toward a proactive and regenerative business model grounded on the improved

efficiency. Yonder the current model of production and consumerism, circular economy fosters

optimization by changing from the open to closed cycles of resources or inputs (Mentink, 2014).

Enterprises (small, medium and large) are acting as an excellent players in rethinking the

business models or strategies. According to Stahel (2016) business performs substantial function
CIRCULAR ECONOMY: KEY PRINCIPLES, CONCEPTS AND BUILDING BLOCKS 6

in elevating the circular economy, often distracting the entries into the market. He adds that

multinational organizations are providing the stretch and stimulus required to catalyse a great

revolution on a large scale. Equally, Preston (2012) gives an example of Dell Company, which

has been advocating for proficiency in the supply chain, abating the effects on the environment

and inventive packaging, specifically through recycle and reprocesses. The SMEs are connecting

the split between the unequivocal and the prevalent espousal of circular models, easing reach and

agility.

In the circular economy, business focuses on integrating different principles of creating value of

the resources. This model has an emphasis on generating impacts rather than the conventional

continuity of business as well as maximizing of profit (Planing, 2015). Again, in this economy,

provision of service is significant than the possession of products that makes these services

available. The circular business affirms that the success is based on cost benefit analysis,

integrating from monetary and non-monetary financial benefits of the overall stakeholders

(Mentink, 2014). The new business model is rooted in the knowledge based society, where

constant flow of information between players and other stakeholders is imperative. Cash flow is

a critical element of the circular economy, often emphasising on the pay-per-use imbursement

models. As such, the conventional nature of financial flow changes from instant handling of cash

into a continuous mode of payment in regard to product preference (Mathews, and Tan, 2011).

Further, the optimization of the path in which cash move is being integrated in the financial

models of the circular economy.

Finances from the government, banks and other lending institutions is being used to stimulate

circular economy for start-up business. With that, start-ups are equipped to drive innovation in

all areas of its operation and work at par with the aims of the circular business model. On the
CIRCULAR ECONOMY: KEY PRINCIPLES, CONCEPTS AND BUILDING BLOCKS 7

other hand, markets are operating as the platforms for engaging a paradigm shift from cross-

selling and upselling to the provision of acumens, commendations and resources for the circular

economy (Su et al. 2013). Also, players in the market are encouraging the consumer to prioritise

on quality and value of products and services, demonstrating the need for using re-marketed

products.

In the recent studies on circular economy, Tukker (2015) observes that natural capital is

becoming an accumulative critical issues, considering the probable loss of the ecosystem.

Companies have been augmenting the financial capital at the expense of the natural capital. The

restoration of the natural capital in the circular business models is increasing resilience among

coportaion. In the same measure, it is viewed as an effective investment culminating to the

considerable economic as well as social benefits. Now, the focus is on enhancing the ecosystems

as well as restoration of the corrupted regions.

Social capital is playing in an indispensable role in the circular business models. This perspective

denotes that products and service serves to complement the collective gain. Similarly, every

activity in a circular economy is marked by a sense of trust, cooperation as well as reciprocity.

The social value of products and services is attached through a consideration of the relationship

between the different resources(Tukker, A., 2015). Additionally, circular economy is rooted in

the ethos of the social gardening, with an aim of joining and intensifying the collective

ambitions.

Geng and Doberstein (2008) describes the key enablers and system in circular economy. One,

digital technologies is one of the primary enabler of various circular models of businesses. Some
CIRCULAR ECONOMY: KEY PRINCIPLES, CONCEPTS AND BUILDING BLOCKS 8

of these technologies are helping in the sharing of resources among community and more so,

recycling materials. As an example, 3D printing has the capability to print products or parts from

recycled materials. Still, the transistion to the circular models of business will increasing help the

conventional financial model to adapt in the new system, and hence provide multiple

alternatives. (Tukker, 2015). Regulations are getting increasing developed in favour of the

circular economy, necessitating ambitious collaboration to identify the bottleneck in the business

and at the same time, utilising safe and sustainable resources. The development of infrastructures

such as recovery and recycling structures helps in standardizing resources, contributing to the

improvement of the circular economy.

Taken together, it is evident that the circular business models is playing a critical role in the

modern world. While the linear economic concentrate on the optimization of profit, the circular

economy is calling for a holistic approach when dealing with issues relating to social,

environmental and economic aspects. It is becoming easier to complement the transition from a

linear economy System thinking is quintessential to the higher interdependence of the system,

meaning the different of circular economy complement one another. Failure in the subset system

can often lead to the breakdown of the larger circular economy. Hence, it is imperative to ensure

that the various elements of the circular economy are consolidated. This kind of economy will

offer limitless benefit in respect to the environment and corporate productivity.

CIRCULAR ECONOMY: KEY PRINCIPLES, CONCEPTS AND BUILDING BLOCKS 9

References

Andersen, M.S., 2007. An introductory note on the environmental economics of the circular

economy. Sustainability Science, 2(1), pp.133-140.

Costanza, R. and Daly, H.E., 2012. Natural capital and sustainable development. Conservation

biology, 6(1), pp.37-46.

Geissdoerfer, M., Savaget, P., Bocken, N.M. and Hultink, E.J., 2017. The Circular Economy–A

new sustainability paradigm?. Journal of Cleaner Production, 143, pp.757-768.

Geng, Y. and Doberstein, B., 2008. Developing the circular economy in China: Challenges and

opportunities for achieving'leapfrog development'. The International Journal of Sustainable

Development & World Ecology, 15(3), pp.231-239.

Ghisellini, P., Cialani, C. and Ulgiati, S., 2016. A review on circular economy: the expected

transition to a balanced interplay of environmental and economic systems. Journal of Cleaner

Production, 114, pp.11-32.

Mathews, J.A. and Tan, H., 2011. Progress toward a circular economy in China. Journal of

industrial ecology, 15(3), pp.435-457

Ning, D.U.A.N., 2001. Cleaner production, eco-industry and circular economy [J]. Research of

Environmental Sciences, 6(000).

Preston, F., 2012. A Global Redesign?: Shaping the Circular Economy. London: Chatham

House.
CIRCULAR ECONOMY: KEY PRINCIPLES, CONCEPTS AND BUILDING BLOCKS 10

Sauvé, S., Bernard, S. and Sloan, P., 2016. Environmental sciences, sustainable development and

circular economy: Alternative concepts for trans-disciplinary research. Environmental

Development, 17, pp.48-56.

Stahel, W.R., 2016. The circular economy. Nature News, 531(7595), p.435.

Su, B., Heshmati, A., Geng, Y. and Yu, X., 2013. A review of the circular economy in China:

moving from rhetoric to implementation. Journal of Cleaner Production, 42, pp.215-227.

Tukker, A., 2015. Product services for a resource-efficient and circular economy–a

review. Journal of cleaner production, 97, pp.76-91.

Tukker, A., 2015. Product services for a resource-efficient and circular economy–a

review. Journal of cleaner production, 97, pp.76-91.

Webster, K., Blériot, J. and Johnson, C. (editors) (2013) A New Dynamic: Effective Business in

a Circular Economy. Cowes: Ellen MacArthur Foundation.

Yuan, Z., Bi, J. and Moriguichi, Y., 2006. The circular economy: A new development strategy in

China. Journal of Industrial Ecology, 10(1‐2), pp.4-8.

Planing, P., 2015. Business model innovation in a circular economy reasons for non-acceptance

of circular business models. Open journal of business model innovation, 1, p.11.

Mentink, B., 2014. Circular business model innovation: a process framework and a tool for

business model innovation in a circular economy.

Tukker, A., 2015. Product services for a resource-efficient and circular economy–a

review. Journal of cleaner production, 97, pp.76-91.