EK blog: Circular Economy – what’s behind the buzzword?

Market forces are a powerful accelerator for circular economy, argues Tellervo Kylä-Harakka-Ruonala, member at the European Economic and Social Committee (EESC).

Tellervo Kylä-Harakka-Ruonala, member at EESC, considers circular economy as a business opportunity.

Circular economy is one of the words being used ever more often when new megatrends are listed. Many people rightfully ask what the true meaning of this new concept is.

Just recycling or completely new economy?

By definition, circular economy is a matter of economy. Its basic objective is to generate economic growth – but in a way that prevents the decrease and loss of natural resources.

Circular economy is often understood narrowly to be a matter of only waste or recycling. Instead, it covers the whole ”value circle” of products – from product design and production to consumption and the utilization of the material content of the products over and over again.

Consequently, product development is of key in circular economy. Moreover, collaborative consumption patterns – often supported by digital services – are also considered as elements of circular economy.

Circular economy is sometimes referred to as a new economic model. To my mind, it is a perfect fit with market economy and thereby not a “new” economic model. Accordingly, the core question is how to get market forces to work for circularity in the most effective way.

Best ways to boost circular economy?

Producers, consumers, workers and other civil society partners are all circular economy actors. Decisions on circular economy are thus made in myriads of entities. Increasing regulation cannot be the right way of boosting it. Otherwise you should control all the material flows and circles, which is impossible in practice. Instead, it is better to make use of the creativity and cooperation of the different market actors.

In an ideal situation, market mechanisms would be utilized as a tool for the decision-makers to advance their political objectives, as is done in carbon dioxide pricing. Finding innovative economic instruments for circular economy is, however, far more complicated, even though definitely worth striving for.

Fortunately, market forces already contribute to boosting circular economy. For companies, circularity makes an excellent business case as far as improved resource efficiency, better productivity and new opportunities are concerned. This requires, however, that the business environment is favorable for innovations, investments and trade. Open markets – both internal and external – and a level playing field are essential for the growth of circular economy.

I firmly believe that circular economy provides huge opportunities – partly unknown today – to generate new kinds of sustainable businesses and consumer experiences. Now it’s time for the political decision-makers to give the market players the necessary room to act, and refrain from excessive and detailed regulation and interference. I also hope that the European businesses make use of the rising opportunities and turn them into successful business cases.