Circular guide

The principles of the Circular Economy

Didactic Units 2

The principles of the Circular Economy support the goal of Sustainable Development. The renewal of matter generates new economic opportunities with increased corporate social responsibility. 

The principles of the Circular Economy arise from the realization that the current economic model of development, is no longer able to sustain certain rates of production without damaging tangible and intangible values of today’s society. 

This model has also found strength and inspiration from the broader concept of Sustainable Development promoted by governments for several years, which aims to give future generations the same opportunities for economic, social and environmental development as the current one. 

On Sept. 25, 2015, the United Nations General Assembly adopted the 2030 Agenda for Sustainable Development, accompanied by a list of 17 goals (Sustainable Development Goals, SDGs in the English acronym) and 169 subgoals, covering all dimensions of human life and the planet and to be achieved by all countries in the world by 2030, some of them even by 2020. 

The concept of Sustainable Development is highlighted in three main dimensions: economic prosperity, environmental compliance and social development.

The SDG’s of the Circular Economy 

The 17 Sustainable Development Goals of the 2030 Agenda examine all dimensions of the planet and human life, dealing with issues such as agriculture, respect for the earth’s ecosystem, education and improved health, to combating all forms of poverty. Overall, the SDGs aim to achieve that global balance represented by the sustainability of the whole system. 

The Circular Economy’s main goal is to support businesses in changing their economic model from a linear to a circular production approach. 

Of the 17 goals listed, the Circular Economy is represented in 6. 

Businesses should take into consideration and try to comply with the 6 goals listed in ANNEX UNIT 2 to this article, not only to make their own contribution to global Sustainable Development, but more importantly to have clear guidelines in their own corporate sustainable path and transition to circularity. These goals can be used as principles to adhere to when creating a new business model with the CIRCULAR BUSINESS MODEL CANVAS,  or to create a new strategic sustainability plan or as a reference point for drafting the NON-FINANCIAL STATEMENT (Sustainability Report) . 

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The Principles of the Circular Economy 

The Circular Economy in its theorization, takes up the three principles of Sustainable Development, placing greater emphasis on the environmental aspect, particularly that of matter recovery and decreasing resource consumption. The principle of “renewing matter” is the driving pillar of the Circular Economy, which consequently generates new economies by creating different opportunities for the social fabric in which this economy is located. 

The goal of recovering as many resources as possible in a production process implies a change of mindset and the adoption of a new business model by the company, generating economic benefits that were not possible to achieve with the previous model. In addition, new economic and supply chain paradigms can generate a different relationship with the territory with greater corporate responsibility, generating positive externalities within the society in which the company is located and new development conditions for workers and for the industrial sector itself. The Circular Economy is thus an important building block to succeed in meeting the principles of sustainable development, with concrete application in most industrial supply chains, especially those with a high rate of resource waste and raw material consumption (mining, textiles, construction, packaging, electronics, to name a few).

1. The Renewal of Matter 

As already anticipated, one of the most important goals of the circular economy is the protection and enhancement of the environment with a special focus on the renewal of matter. 

Renewal of matter refers to all optimizations in product planning and design, optimization of industrial and supply chain processes that manage to reduce consumption and use of raw materials during production/construction, use of recycled materials (END OF WASTE) or reconditioned goods, reduction of production waste, reduction of waste generated, and recycling of the same. 

Since the current trend of extracting our planet’s resources is unsustainable (in the last 30 years we have consumed 1/3 of the Earth’s resources), as we consume more raw materials than we can use at a rate greater than their own regeneration (Figure 1), the circular economy may be the key to succeeding in reducing our environmental impact on the planet.

Figure 1 – Global resource extraction by product type (European Commission) 

2. Economic benefits 

The circular economy presupposes a change in the business models that characterize most businesses worldwide from linear to circular production. 

This implies the adoption of new goals and tools right from the design phase (ECO-DESIGN), the reuse of recycled material in production (CIRCULAR GAP), the use of renewable energy or the redistribution of responsibilities within a supply chain (EPR). 

 For example, it is estimated that thanks to the circular economy, raw material savings for European industry in 2025 could be at least 14 percent for the same output, a percentage that is equivalent to about 400 billion euros. For Italian industry this could be worth at least 12 billion euros saved. 

Another major goal of the Circular Economy that links the first and second pillars is decoupling, that is, decoupling economic growth from resource consumption.

3. Corporate responsibility 

The first two pillars stated above, cannot work without the company also paying attention to the social aspects of the circular economy. 

Every company must make itself a participant in the sustainable change of the area to which it belongs in order to respond to the problems and needs of the society in which it is located. New business models can generate value for certain categories of disadvantaged people, create new jobs, and generate economic and social integration opportunities that were previously unseen. 

The relationship with the territory can generate opportunities for INDUSTRIAL SYMBIOSIS and generate investment, as well as reduce the company’s ecological footprint by responding to problems that are not only local but of global interest (glocal), such as climate change or land consumption. Providing also for a BUSINESS ETHICS attentive to circular economy principles can help increase corporate welfare by increasing productivity and quality of work.

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