McArthur foundation more than two decades ago started spreading news that linear economy is bringing concerns and whole world should think about how to join two important things into one – economics and ecology.

The Circular Economy is viewed as a feasible way to achieve sustainable development by closing the flow of materials and energy without switching off the global economy. The idea of it is to replace production with sufficiency: reuse what you can, recycle what cannot be reused, repair what is broken, remanufacture what cannot be repaired.

Circular Economy requires a more creative approach towards business, because companies have to overthink their processes of production and sometimes even services. As we can see, businesses are not in a hurry to start changing their business model towards circular approach. For instance, the European Green Deal has to be accomplished in part by 2030 and fully by 2050, so enterprises feel like they have a lot of time to do those changes and generate new business ideas. On the other hand, this non-willingness to change in some sectors is related to preferences to keep profits the same and last with existing profitability as long as possible. The possibility to fasten business changes is the pressure from existing customers and governmental requirements for more sustainable and circular business activities.

Education of consumers and the same time businesses might be very helpful. The circular economy aims to redefine traditional linear economic models (where resources are extracted, transformed into products, consumed, and then discarded as waste) by promoting the continual use, recycling, and regeneration of resources. The economic return of the circular economy refers to the financial benefits and opportunities that arise from adopting and implementing circular economy principles and practices. This approach presents several economic advantages:

-     Cost savings. Adopting circular economy practices can lead to cost savings throughout the production and consumption cycle. By reusing materials and products, businesses can reduce their reliance on virgin resources and avoid the expenses associated with extraction, processing, and disposal. Additionally, designing products for durability and recyclability can reduce maintenance and replacement costs.

-     (Environmental) cost savings. The circular economy helps mitigate the environmental costs associated with resource extraction, production, and waste generation.

-     Job creation. Transitioning to a circular economy can lead to the creation of new employment opportunities. The shift towards recycling, remanufacturing, and repair activities requires skilled labour and specialized expertise. Additionally, the development of innovative technologies and systems to support circular practices can stimulate job growth in sectors such as renewable energy, waste management, and sustainable transportation.

-    Development of new scientific programs/courses aimed to prepare qualified/skilled workforce to operate in circular economy.

-     New business opportunities. The circular economy fosters innovation and the development of new business models. Companies can create value by offering products and services that enable resource efficiency, such as product leasing, sharing platforms, and waste management solutions. These new avenues for revenue generation can contribute to economic growth and job creation.

-     Improved competitiveness and market access. Embracing circular economy principles can enhance the competitiveness of businesses and economies. As sustainability becomes increasingly important to consumers, companies that adopt circular practices can differentiate themselves in the market and attract environmentally conscious customers. Moreover, the circular economy can open up new export opportunities by meeting the growing demand for sustainable products and services globally.

-     Resource security. Traditional linear economic models are dependent on finite resources, and their extraction often involves geopolitical risks and price volatility. By embracing circular economy principles, countries and businesses can reduce their reliance on scarce resources, promote resource diversification, and enhance their resilience to supply chain disruptions.

Overall, the economic return of the circular economy arises from its ability to generate cost savings, foster innovation, create jobs, enhance resource security, improve business competitiveness, and reduce environmental impacts, etc. By transitioning to a circular economic model, societies can achieve both economic prosperity and environmental sustainability, creating a win-win situation for businesses, individuals, and the planet.

Author: Henrika Ruginė, PhD Candidate, MA IM Instructor at LCC International University

Additional notes on Henrika Ruginė

Henrika teaches sustainability in the MA IM course NGO Leadership, Philanthropy, and Sustainability. She also teaches a variety of courses relating to economics in the International Business Administration Department at LCC. She is a PhD Candidate studying economics at Klaipeda University. Henrika has a special interest in circular economics and shares her extensive knowledge with students.