There are plenty of myths about the circular economy, one being that it benefits the environment at the cost of social and economic growth. However, experts say it offers endless opportunities for businesses and consumers.
Another common misconception is that circularity is just about recycling, when it actually involves so much more.
In a linear economy, raw materials are extracted, transformed into products then disposed of. The circular economy, on the other hand, focuses on designing durable, high-quality and recyclable goods, while improving waste and recycling infrastructure.
“We often think of recycling and other classical means first, such as remanufacturing and refurbishing,” said Martin Geissdoerfer, Associate Professor of Circular Economy Transitions at the Monash Sustainable Development Institute.
“But we can also achieve these outcomes through digitalisation, clever maintenance or sturdy, long-lasting product design.”
“It’s about going back to the source and designing products that are healthy and useful,” said Lisa McLean, CEO of Circular Australia. “We need to make sure what’s coming out of the tap can go around and around in the economy, like highly purified recycled water.”
The production and disposal of goods and food not only produces huge amounts of waste, it also emits carbon. Adopting circular economy principles could cut global greenhouse gas emissions by 39% by 2050 and slash primary material consumption by 32% by 2030.
But importantly, circularity isn’t about deprivation, McLean said.
“Circularity allows us to create jobs industries across the entire economy. By creating systems that design out waste – new sustainable products and services – we can get what we need without waste, contamination or biodiversity loss.”
Global progress
In recent years, the world has rapidly advanced toward circularity, with Europe at the forefront.
Amsterdam committed to becoming a 100 per cent circular economy by 2050, implementing measures like zero-emission government buildings and maximising recycled materials. France mandates the donation, reuse or recycling of unsold non-food products instead of disposal.
Portugal has enhanced resource management by supporting recycling and sustainable farming practices, while Spain has prohibited single-use plastics and encourages textile recycling.
Additionally, EU policies include Design for Disassembly (DfD) criteria, ensuring that products can be broken down for repair and reuse without intellectual property barriers.
Australia catching up
The CSIRO estimates only 3.7 per cent of Australia’s economy is circular, around half the global average.
Federal environment minister Tanya Plibersek said Australia has work to do.
“Australia has the third highest material footprint per capita in the OECD, and the fourth lowest rate of materials productivity,” she said.
“The transition to a circular economy clearly requires economy-wide changes, with innovative thinking and reforms from governments and businesses.”
McLean said if Australia doesn’t keep up with other nations in circularity, we will lose out.
“Once we sell our critical minerals to nations with sophisticated circular economies, they won’t give them back to us. They’ll be making sure that anything made out of those resources will be made to last.”
But Australia is “quickly catching up”, she added.
In 2022, state and federal environment ministers agreed to work with the private sector to design out waste and pollution, keep materials in use, and foster markets to achieve a circular economy by 2030.
The Circular Economy Ministerial Advisory Group (CEMAG), of which McLean is a member, advises the government on this transition and will release a final report by the end of 2024.
It has also proposed a Productivity Commission (PC) inquiry into circularity, with a report due in mid-2025, examining economic, environmental and consumer benefits.
Commissioner Alison Roberts, involved in the inquiry, said the PC has asked businesses operating in circular ways to share successful examples and identify roadblocks.
“The government has asked us to explore mechanisms that can play a role in enabling the circular economy, including legislation and regulatory harmonisation.
Opportunities for businesses
The PC said potential opportunities for businesses in the circular economy include reduced production costs, increased sales, enhanced access to finance, supporting the environment and meeting ESG goals.
However, challenges could include upfront investment costs, higher production costs, and significant business model changes, requiring greater collaboration across supply chains.
Many companies have already set ambitious circularity targets, including IKEA’s aim to become circular and climate positive, Unilever’s commitment to recyclable packaging, and H&M’s goal for 100 per cent circularity by 2030.
Moving from a manufacturing model to an as-a-service model is one way to embrace circularity, McLean said.
She cites equipment manufacturer Caterpillar, which leases equipment and encourages returns for reuse, as a prime example.
“They break it down like Lego and create a new model. They’ve designed out waste, and they’ve got a highly lucrative business model.
“There are endless opportunities for businesses. And it’s really up to each organisation to understand the framework and assess how it applies to their own business model,” she said.
For circularity to become widespread, Australia will need robust regulations, leadership and support to help companies design out waste, she said. Strict policies and trade agreements banning toxic chemicals will also be essential.
Experts agree that innovation has a huge role to play in determining how we can break products down and recycle the materials.
“Take solar panels – they contain silicon, silver, aluminium and glass, but often end up in landfills,” McLean said.
“We want to design out waste and pollution and regenerate natural systems.
“We don’t have a choice.”
Visit the IPA’s Submission to the Productivity Commission: Opportunities in the circular economy here.
