The Circular Economy vs Recycling: Understand the Definition and Difference
Volt News
- Experts claim that the circular economy is the solution to our throwaway culture since it supports the repeated use of resources in a closed system without its disposal.
- The demand for pioneers in the circular economy system is increasing, because recycling does not offer a sustainable answer.
- Investors have diverse opportunities to support companies that participate in this process.
Mining raw materials, manufacturing as well as selling products and throwing them away at the end — the linear economy burdens the planet by using fees. Recycling is also reaching its limits; plastic in particular is emerging as a problem child. Hopes for sustainable economic growth now lie in the circular economy.
A Planet Full of Mountains of Waste
The world generates around 2 billion tons of municipal waste every year. This includes garbage that comes from households, public administrations and smaller companies. The World Bank estimates, very conservatively, that at least one-third is not disposed of in an eco-friendly manner. Almost half of the world's waste is plastic. The situation is especially alarming in the oceans: 5 to 14 million tons of plastic end up in the sea every year. By far the largest part is carelessly discarded, not only on the beach but also on land, where rivers transport the plastic to the sea.
Consuming 1.7 Earths
The human-induced pressure on natural resources is significant. The latest National Footprint Accounts results show that humanity is currently consuming 1.7 Earths. What does this mean? From deforestation to water consumption, we are currently using nature 1.7 times faster than the planet's ecosystems can regenerate.
Therefore, the implementation of the circular economy is becoming increasingly important for the preservation of our planet. This is not limited to replacing the current throwaway culture of consumer goods, or their transport and packaging methods. Rather, companies should reduce emissions throughout the entire value chain. For this purpose, they can use cleantech.
While the use of clean technologies is necessary, it requires more of a circular concept that grips across the board. This is because cleantech, or clean technologies, often rely on energy from solar cells and wind, or use scarce raw materials such as lithium and silicon: And such raw materials are too valuable to be squandered. To ensure their preservation in the long-term, and that companies can also use clean technologies sustainably, it is necessary to move away from the linear economy in energy generation as well - and thus also to implement the circular economy.
What Is the Circular Economy?
The circular economy is often promoted as the solution to our throwaway culture and efficient use of resources, and for good reason. By definition, the circular economy is an economic system in which resources are used and reused for as long as possible in a closed loop, rather than being thrown away or burned. Nature, which progresses in cycles, serves as a model: Everything is recycled, nothing is superfluous. For example, fallen leaves are turned into nutrients for new plant growth.
Companies start to consider at the beginning of the product cycle how goods and their individual parts can remain in the system for as long as possible. How can the product be designed to ensure an easy repair and the separability of the individual parts? Which materials have a high recyclability?
Benefits for the Environment and Companies
However, this approach does not only protect the environment, but also offers several benefits for companies. For example, when companies switch to recycled materials, they can save on the cost of new materials. Furthermore, circular processes such as repair are good opportunities for companies to tap into new revenue streams. The improved environmental footprint resulting from the adoption of the circular model also bodes well with consumers, who are increasingly concerned about sustainability.
What Is Recycling and What Are Its Drawbacks?
Recycling is the recovery of materials from used products to make new goods. This process typically involves shredding or melting down the waste piece by piece. The resulting material, also called secondary raw material, can then be reused for plastic packaging.
Recycling is rightly claimed as a measure to reduce waste and protect the environment, but it also has its downsides. Reusing many recycled items such as glass and plastic bottles requires energy and uses water. In some cases, more than if the products were made from scratch. If recycled materials are not properly sorted or cleaned, they risk ending up in landfills. Despite these problems, recycling helps conserve limited resources.
Recycled Material in the EU
This graph shows the percentage of total material consumption in the EU and each Member State that is recycled and returned to the economy.
Plastic Recycling Quickly Reaches its Limits
Criticism of plastic recycling is on the rise – and the problem already starts with the material: There are thousands of different types of plastic, which cannot be separated efficiently. According to Beyond Plastics, an environmental organization at Bennington College in Vermont, USA, the recycling rate in the USA in 2021 was only 5 percent.
Plastic can also contain toxic additives and absorb chemicals. In addition, recycled plastic costs more than the new material because collecting, sorting, transporting and reprocessing plastic waste is expensive. For other materials, the two experts acknowledge that recycling is an effective way to recover natural material resources. For example, the recycling rate of paper in the U.S. is about 70 percent.
A Packaging Manufacturer Internalizes the Circular Economy
An example for one of the world’s leading manufacturers of paper-based packaging solutions and part of volt’s “Cleantech” investment component (as of June 9, 2022) is Smurfit Kappa. The Irish company places circular economy principles at the heart of its operations. It produces packaging from recycled (secondary) and primary raw materials, making a decisive impact on the value chain of packaged goods. The company demonstrates its commitment to the circular economy by using 100 percent renewable, sustainable primary raw materials to produce packaging. And 75 percent of that, or 6.2 million tons, is made from recycled fibers.
Demand for sustainable packaging is expected to increase over the long term. Paper-based solutions are still more expensive than plastic, but regulatory measures could put the economic aspect into perspective. For example, the EU has introduced a tax of €800 per ton on non-recycled plastic packaging, which could provide an incentive for companies to switch to other materials. Moreover, Smurfit Kappa's continuous development of new solutions is encouraging a growing number of wholesalers to switch to sustainable packaging, despite the price.
Conclusion: The Circular Economy Will Grow
Introducing the circular economy into a company is no easy feat. It requires a systemic view of the product life cycle and long-term planning. The linear economy still dominates. According to With the Action Plan for a Circular Economy, adopted in 2020, the European Commission intends to promote the paradigm shift. Products placed on the market in the EU are to be designed to have a longer service life, be easier to reuse, repair and recycle, and contain the greatest possible proportion of recycled materials. In addition, the use of disposable products should be limited to ensure the recovery of the environment in the long run.
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