Resource use is growing worldwide and expected to continue to rise. Waste generation as well as environmental impacts associated with resource extraction, in particular emissions of greenhouse gases (GHG), biodiversity loss and water stress, are also set to increase.

Key drivers for skyrocketing resource extraction encompass a growing world population with increasing income and changing consumption patterns. Further, infrastructures, value chains, institutions and governance systems rooted in linear thinking produce path dependencies. For example, a  continued increase in natural resource use and its associated environmental impacts put at risk reaching both the Paris climate target and the Sustainable Development Goals (SDGs) and is not compatible with planetary space.

Therefore, action on reducing humankind's resource use and the associated ecological footprint is paramount. The Circular Economy constitutes a promising avenue for such a needed reduction.

The circular economy (CE) stands for an economy, which maintains the value of materials for as long as possible while minimising waste generation and emissions as well as generating employment by closing material loops along life cycles of products and services. The CE concept's life-cycle thinking helps to implement the waste hierarchy laid down in the European Waste Framework Directive by focusing on waste prevention (e.g. by designing out waste) as well as re-use and repair, and subsequently also recycling. For the CE to work, it needs to integrate actors and value chains from design to processing and production to consumption and after-use. Only then, can the CE exploit its potential to reduce the quantities of natural resources used and associated environmental impacts while maximizing well-being and utility. The CE holds promising potential to help achieve international climate targets in a cost-efficient way. Around one quarter of global GHG emissions are directly linked to industrial production of materials, with production of steel, cement, aluminum and plastics constituting the main source of industrial GHG emissions. Here, CE approaches can support decarburization via dematerialization. For instance, using secondary materials and designing products with alternative, low-carbon or renewable feedstock materials could reduce global CO₂ emissions. Hence, the CE can be considered a key strategy to help achieving climate targets and the SDGs.

Overall, there is progress towards the CE. There are trends of diverting waste from incineration and landfilling, as the least circular and bottom-most approaches of the waste hierarchy to recycling. However, only a small fraction of material use in the European economy is sourced from secondary materials. Hence, in order to stay within planetary boundaries a system transition to mainstream and scale-up CE approaches is needed.

Implementing the CE concept systemically requires a shift from linear to circular systems, thus calling for system transformation in production, consumption and governance systems as well as in society. Hence, transitioning to the CE necessitates institutional, organizational, policy, social and technological innovation to go hand-in-hand. This presents a formidable challenge to existing systems and their (re-)design for transformation. Therefore, we need to improve our understanding of the potential economic, environmental and social (co-)benefits and impacts of such a transition. It is necessary to develop promising interventions in order to facilitate and trigger this transformation.

On the European level, and on the level of most of the EU member states, there exists a well-established and partly long-standing landscape of policies and legislation that aims at fostering the CE. However, a systemic, integrating and coherent policy seems lacking and horizontal policy integration between different policy areas is in its infancy.

Ecologic Institute focuses on analyzing trends, drivers and policies affecting the transition to a circular economy.