The concept of a circular economy is gaining significant attention as a transformative approach to sustainability. At its core, the circular economy advocates a shift from the traditional linear economic model, where resources are extracted, used, and discarded, to a more regenerative system where materials are reused, remanufactured, and recycled. This shift can revolutionise industries, mitigate environmental impact, and promote economic resilience. This article will explore the circular economy, its relationship to Sustainable Development Goal (SDG) 12, and how businesses can embrace circular economy business models to turn waste into wealth.

Understanding the Circular Economy

The circular economy is defined as an economic system aimed at minimising waste and making the most of available resources. Unlike the traditional linear model, which follows the “take, make, dispose” process, the circular economy promotes a closed-loop system where products, materials, and resources are kept in use for as long as possible. This involves recycling, reusing, repairing, remanufacturing, and refurbishing.

In a circular economy, waste is considered a resource rather than something to be discarded. This model is aligned with nature’s way of operating: in ecosystems, there is no waste because everything is reused, transformed, or repurposed. Emphasising sustainability, the circular economy reduces environmental footprints, optimises resource use, and fosters profitable, environmentally, and socially responsible business models.

The Link Between Circular Economy and SDG 12

The United Nations’ 2030 Agenda for Sustainable Development includes 17 Sustainable Development Goals (SDGs) that aim to address global challenges, including poverty, inequality, environmental degradation, and peace. One of the most pertinent goals in the circular economy context is SDG 12: Responsible Consumption and Production.

SDG 12 seeks to ensure sustainable consumption and production patterns. This involves reducing waste generation through prevention, reduction, recycling, and reuse. The circular economy directly supports SDG 12 by promoting these sustainable practices across industries, encouraging businesses and individuals to consume more responsibly and to rethink how products and services are designed, produced, and consumed.

The circular economy plays a pivotal role in helping achieve several targets under SDG 12, including:

• 12.3: Halving per capita global food waste at the retail and consumer levels and reducing food losses along production and supply chains.
• 12.4: Achieving the environmentally sound management of chemicals and all wastes throughout their life cycle.
• 12.5: Substantially reducing waste generation through prevention, reduction, recycling, and reuse.
• 12.6: Encouraging companies to adopt sustainable practices and to integrate sustainability information into their reporting cycle.

Circular Economy Business Models

To transition to a circular economy, businesses must adopt new business models that promote reusing materials, products, and resources. Below, we explore several circular economy business models that can turn waste into wealth.

Product Life Extension

One of the most straightforward circular business models is extending the life cycle of a product. Rather than disposing of products at the end of their useful life, businesses can explore ways to extend their lifespan through repair, refurbishment, and upgrades.

For example, companies in the electronics sector can offer repair services, refurbished products, and spare parts. A well-known example is the tech giant Apple, which allows customers to trade old devices for credit toward new ones. This reduces the volume of e-waste and enables companies to retain customer loyalty while extracting value from products that might otherwise be discarded.

Product as a Service (PaaS)

The “product as a service” model focuses on leasing products rather than selling them. Instead of purchasing a product outright, consumers pay for its use or functionality over time. When the product reaches the end of its useful life, the company returns it to be refurbished, reused, or recycled.

An example of PaaS is the car-sharing industry, where customers pay for access to a vehicle rather than owning one. Companies like Zipcar and Car2Go offer short-term rental services that reduce the need for individual car ownership, decreasing the demand for new cars and cutting down on car-related waste. The same model can be applied to electronics, textiles, and machinery industries.

Resource Recovery and Recycling

Resource recovery involves extracting valuable materials from waste, which can then be reused, recycled, or remanufactured into new products. Businesses can reduce reliance on virgin resources and lower environmental impacts by focusing on recovering materials such as metals, plastics, and paper.

For example, TerraCycle, a global leader in recycling hard-to-recycle materials, has created business models to recover materials from consumer goods packaging and divert waste from landfills. This model supports the circular economy by transforming what would have been waste into valuable resources for new products.

In industries like construction, companies can reuse materials such as concrete, steel, and timber, reducing the need for new raw materials. Recycling textiles and repurposing materials for new collections in the fashion industry can help create a more sustainable supply chain.

Sharing Platforms

The sharing economy, which focuses on the shared use of products and services, fits naturally within the circular economy framework. Instead of individuals or companies buying and owning products outright, they can share access to products or services with others, reducing demand and extending product life.

Sharing platforms like Airbnb and Uber enable the sharing of underused resources like property and vehicles. In addition to reducing resource consumption, these models allow businesses to generate income from products or assets that might otherwise sit idle.

A recent example is the rise of clothing rental platforms like Rent the Runway. These platforms allow consumers to rent high-end fashion items for special occasions rather than purchasing them. This model helps reduce textile waste while providing consumers access to luxury products without the commitment of full ownership.

Closed-Loop Supply Chains

Closed-loop supply chains focus on keeping materials and products in the supply chain for as long as possible. This model encourages businesses to take responsibility for a product’s entire lifecycle, from design and manufacturing to disposal or reuse.

A prime example of a closed-loop supply chain is the approach taken by Interface, a global leader in modular carpet tiles. The company implemented a closed-loop model for its carpet tiles, in which used tiles are collected, cleaned, and reused to manufacture new tiles. This reduces the waste sent to landfills while allowing the company to maintain a steady supply of raw materials for its products.

By creating closed-loop systems, businesses can optimise their supply chains, reduce costs, and ensure products are made from sustainable and recyclable materials.

Design for Sustainability

Designing products with sustainability in mind is essential to building a circular economy. This involves creating products that can be easily disassembled, recycled, or reused and using materials with a low environmental impact throughout their lifecycle.

For example, the Swedish furniture giant IKEA has introduced products made from recycled materials and is working toward a circular business model. IKEA is committed to designing products that can be reused, refurbished, and eventually recycled. By focusing on sustainable design, businesses can help reduce the volume of waste generated while creating products that align with circular economy principles.

Another example is the fashion industry, where companies adopt “cradle-to-cradle” design principles. Clothing brands like Patagonia and Stella McCartney are in charge of creating products designed with their end-of-life disposal in mind. This encourages using recyclable, biodegradable, or repurposable materials in product design, ensuring that garments can be given a second life after their initial use.

Biological Cycles

Some businesses are turning to biological cycles to create a more circular model. In this system, products are made from biodegradable materials that can safely return to the environment after use. These materials break down naturally, avoiding pollution and reducing the need for disposal or landfill.

One notable example of a biological cycle is the production of biodegradable packaging. Companies like EcoCeres are developing bio-based plastics made from renewable plant materials that break down over time and leave no harmful waste behind. In addition to packaging, the biological cycle model can also be applied to agriculture, where organic waste is composted or turned into biogas, closing the loop on waste management.

Overcoming Challenges to Circular Economy Adoption

Despite its potential, adopting circular economy models presents challenges for many businesses. One of the primary obstacles is the initial investment required to implement circular practices, which can be expensive. For example, developing a closed-loop supply chain or investing in new sustainable product designs may require significant upfront capital.

Additionally, greater collaboration across industries is needed, as the circular economy is not just about individual companies but the broader ecosystem. Business leaders must work with suppliers, consumers, and competitors to build shared infrastructure, logistics, and systems supporting circular models.

Moreover, businesses must overcome a lack of awareness and understanding of the circular economy. Many companies continue to operate within traditional linear business models, prioritising short-term profits over long-term sustainability.

Conclusion

The circular economy offers a pathway to a more sustainable future, where waste is minimised, resources are optimised, and businesses operate within planetary boundaries. By adopting circular economy business models, companies can reduce their environmental footprint, tap into new revenue streams, and enhance their resilience in a rapidly changing world.

As businesses continue to embrace the principles of SDG 12 and incorporate circular practices into their operations, the potential for turning waste into wealth becomes increasingly apparent. The transition to a circular economy may present challenges, but the long-term benefits—both environmentally and economically—are profound. It is time for businesses to recognise that waste is not the end but merely the beginning of a new cycle of opportunity in a circular economy.