For decades, the world economy has been built on a simple linear structure that can be summarized in four steps: extract a material, make it into a product, sell it, and then throw it away. This process, often referred to as „take, make, use, throw away,“, is increasingly reaching its ecological and economic limits. The circular economy, on the other hand, represents a systemic transformation that aims to preserve the value of products, materials and resources in the economy for as long as possible while minimizing waste. The Ellen MacArthur Foundation defines it as a system in which „materials never become waste.“.

Climate change and resource depletion are now forcing governments and businesses to accelerate this transition. Currently, around 60 % of global greenhouse gas emissions come from materials such as iron, steel, cement and plastics. Implementing circularity principles is estimated to reduce total municipal waste generation by 34 % by 2030.

From the linear model to 10 R-strategies

In order for the economy to move from a linear to a circular approach, it is necessary to apply so-called R-strategies (from the English terms), which cover the entire life cycle of products:

• Upstream phase (Extraction and production): It focuses on narrowing material flows through strategies with the highest degree of circularity. This includes refusal unnecessary materials (e.g. ban on single-use plastics), rethink consumption models (shared mobility, products as a service) and reduction material footprint.
• Midstream phase (Consumption and use): The goal is to slow down flows by extending the life of products. These include strategies such as reuse, repair, renovation, remanufacture a repurpose. These practices reduce the need for mining primary raw materials.
• Downstream phase (Waste treatment): The lowest level of circularity only applies when the product becomes waste. It includes recycling a energy recovery. These steps require additional energy and materials to return resources back to the economy.

The EU's geopolitical and economic imperative

The drive to develop a circular economy is not only driven by environmental imperatives, but also by a strong geopolitical imperative. The European Union is heavily dependent on imports of key commodities. For example, up to 100 % of rare earth heavy metals are imported from China and 71 % of European platinum consumption comes from South Africa. Overall, the EU imported 47.2 % of its metals and 73.3 % of fossil energy materials in 2023. The current geopolitical environment, including supply chain constraints caused by military conflicts, has caused commodity prices to skyrocket.

In response, the European Commission plans to adopt Circular Economy Act (CEA), which should help the EU achieve its goal of becoming a world leader in this field by 2030. The ambition is to double the EU's circularity rate from current levels to 24 % and create a strong single market for secondary raw materials. As Carsten Wachholz of the Ellen MacArthur Foundation said, this law represents a "critical opportunity to transform circular solutions from a marginal offer to a mainstream market choice". According to him, rules created on EU soil could define global supply chains and standards, reduce the risks of protectionism and unlock investment around the world.

The circular economy is also a lucrative market. It is already worth around $700 billion globally today and could grow to several trillion in the next decade. It also offers stability: as Thomas Marinelli of Signify notes, when oil prices rise, the price of conventional plastics rises, but the price of recycled plastics remains stable.

The key role of cities and regions (3P Framework)

The transformation will not happen only at the national level; cities and regions play a central role. The world’s cities consume approximately 75 % of global energy, generate 70 % of greenhouse gas emissions, and are responsible for a huge share of waste generation and food consumption. The OECD has introduced the 3P framework (People, Policies, Places – People and Businesses, Policies, Places), which emphasizes the need for an integrated approach:

1. People and companies: They are at the centre of a cultural shift towards new consumer and business models. 79% of 491 manufacturing executives surveyed now believe that circularity is absolutely key to their business. The circular economy also promises to create up to 2.5 million new jobs in the EU alone by 2030 in sectors such as recycling and repair.
2. Policies: The transition requires a systemic approach, linking environmental policies with green public procurement (GPP) and tax incentives.
3. Places (Localities): Cities are not isolated. They function as a space for the inflow and outflow of materials. The connection of urban consumption and rural production is essential to close the cycles. Many European cities already have their own strategies in place – for example, Amsterdam plans to be a 100% circular city by 2050, also using the so-called „Doughnut Economics“ model.

Circular business and innovation in practice

Many multinational companies and local governments are already showing that the circular economy brings real results:

• Signify (lighting): This company applies a life extension and remanufacturing model. Instead of constantly producing new lights, they take back old lighting systems (some up to 10 years old) and modernize them. This saves material waste and reduces emissions, which is often cheaper than buying new products. The products are rented to companies, eliminating the need for large initial investments. Marinelli explains circularity simply: „It’s like children’s Lego. You put the bricks together, you can take them apart again and create something new.“
• Carrefour (retail): They installed 3D printed lighting fixtures made entirely from recycled plastic bottles in their Belgian store. This system can be completely dismantled at the end of its natural life and used to make new lights, significantly reducing energy costs and carbon footprint.
• Tuborg Havn (Copenhagen): In Denmark, the benefits of renovation have been demonstrated in historic public lighting. Instead of throwing away 80 old street lamps, the city decided to clean, repair and integrate high-efficiency LEDs into them. The lamps are now 3.5 times more efficient, allowing the district to reduce energy consumption while preserving its historic character.

Overcoming obstacles to full deployment

However, the path to a fully circular economy faces several legislative and financial barriers. The Ellen MacArthur Foundation has initiated an open letter to the European Commission, signed by 12 global brands including LEGO Group, H&M and Philips. The signatories call on lawmakers to simplify EU-wide rules, create tax incentives and support the infrastructure the sector needs to scale up.

One of the main problems, for example, is the current value added tax (VAT) rules, which mean that second-hand goods are taxed multiple times during their lifetime. Another obstacle is not a lack of capital, but rather the misaligned risk profile of circular projects, which means that many innovative technology companies get stuck in the pilot phase and never reach industrial scale. This is why the introduction of secondary raw material platforms to improve price transparency and digital product passports to track material flows is necessary.

The transition to a circular economy is not just an ideological step to protect the planet; it has become a necessity in terms of security of supply, cost reduction and resilience building. New European policies and products are gaining traction from companies that see the advantage of independence from volatile oil prices and primary raw materials. A future in which circularity is fully embedded in society will require strong support from governments to overcome regulatory barriers and develop secondary raw materials markets. However, all signs indicate that this important transition is already unstoppably underway. JRi&CO2AI