“Shifting to a circular economy, which is nature-positive by design, can build prosperity while tackling climate change and other global challenges.” – The Ellen MacArthur Foundation, ‘Building Prosperity: Unlocking the potential of a nature-positive, circular economy for Europe’ (2024)
As the global community confronts the escalating climate crisis, innovative economic models like the circular economy offer a promising path forward. A nature-positive, circular economy has the potential to dramatically reduce greenhouse gas (GHG) emissions while building economic resilience.
The connection between the circular economy and climate action is clear when we consider how much of the world’s GHG emissions are tied to the way we produce, use, and dispose of materials.
In support of Climate Week NYC, this blog delves into how the circular economy offers not only a vision for more sustainable and economically prosperous businesses and societies, but also a powerful tool in the fight against climate change.
The circular economy addresses both environmental and economic challenges by addressing many of the core drivers of climate change.
The production of goods using virgin materials is energy-intensive, contributing significantly to global emissions. By reducing the demand for virgin materials, the circular economy helps cut down on the emissions generated by resource extraction from initial production.
In a new report Building Prosperity: Unlocking the potential of a nature-positive, circular economy for Europe, the Ellen MacArthur Foundation outlines how a comprehensive shift to circularity across industries can support prosperity while reducing environmental harm. According to the report, it is estimated that circular strategies like material reuse and recycling could reduce GHG emissions in Europe by 45% by 2050. This reduction comes from a combination of lowering the need for new materials and utilizing more efficient, low-carbon production techniques.
Similarly, the Canadian Climate Institute’s report, How Circularity Can Contribute to Emissions Reductions in Canada, found that increasing material efficiency in key sectors could play a major role in Canada’s climate strategy, particularly in industries such as construction, transportation, and manufacturing.
Landfills contribute significantly to GHG emissions; particularly methane, which is a potent greenhouse gas. By adopting circular practices, the amount of waste sent to landfills can be reduced, mitigating these emissions. Composting, recycling, and repurposing organic materials can contribute to lowering the emissions associated with decomposition.
As highlighted in Ivey Business School’s report, Scaling the Climate Smart Circular Economy, while some circular practices reduce GHG emissions, the circular economy is not inherently net-zero. However, their research found that the majority of their focus group of circular entrepreneurs had net emissions reductions, demonstrating a clear win-win potential of the climate-smart circular economy. Thus, when circular activities are carefully implemented to drive outcomes that are both circular and “climate smart”, they can lead to significant GHG emissions reductions.
The UNEP Finance Initiative’s report, Circular Economy as an Enabler for Responsible Banking: Circular Solutions to Achieve Climate Targets, emphasizes the financial sector’s role in supporting circular practices that reduce GHG emissions, especially in waste management. The report highlights opportunities for banks to finance circular solutions in sectors like agriculture and waste processing, contributing to quantifiable reduced methane emissions and more sustainable waste systems.
A key principle of the circular economy is extending the life of products through repair, refurbishment, and remanufacturing. This approach not only conserves resources but also reduces the need for more energy-intensive production of new goods, thereby potentially lowering GHG emissions.
In the UNEP Finance Initiative’s report, Circular Economy as an Enabler for Responsible Banking: Circular Solutions to Achieve Climate Targets, the authors outline how circular business models, particularly in sectors including textiles, agrifood, construction, electronics, and consumer goods, can reduce carbon footprints by extending product lifecycles. They point to businesses that have successfully adopted circular practices, from leasing models for electronics to repair services for fashion items, reducing the demand for new materials and lowering overall GHG emissions.
A circular economy promotes not just material reuse, but also the transition to renewable energy sources and low-carbon materials. By powering production processes with renewables and utilizing materials that sequester carbon—like plant-based bioplastics or timber for construction—businesses can lower their carbon footprint and support broader decarbonization efforts.
The Ellen MacArthur Foundation emphasizes the role of bio-based materials in its six strategies for a circular and nature-positive built environment. By replacing fossil-fuel-derived products with renewable, regenerative alternatives, industries can lower GHG emissions and help restore natural ecosystems. Additionally, the UNEP Finance Initiative’s report advocates for financial institutions to support the transition to renewable energy and sustainable materials, pointing out how banks and investors can catalyze climate-positive outcomes through circular financing.
Achieving the transition to a circular economy requires collaboration across industries and sectors. The circular economy encourages innovation in product design, business models, and systems thinking, all of which are necessary to drive large-scale GHG emission reductions.
As outlined in the Ivey Business School’s Scaling the Climate Smart Circular Economy report, scaling the circular economy relies on innovation and cross-industry partnerships. By adopting circular practices, businesses can unlock new revenue streams while reducing their environmental impact. The report highlights how companies across Canada are partnering with research institutions, NGOs, and government bodies to explore circular solutions that can significantly contribute to national emissions reduction goals.
The circular economy offers a powerful tool to address the climate crisis by dramatically reducing GHG emissions, fostering innovation, and creating new economic opportunities.
Incorporating circular practices across industries—whether by reducing waste, extending product lifespans, or supporting renewable energy—can help achieve the deep GHG emissions cuts required to meet global climate targets.
Embracing circular principles will be essential for achieving net zero, allowing for opportunities that not only reduce environmental impacts, but also build more climate-resilient, nature-positive economies. For governments, businesses, and individuals alike, the time to act is now. The circular economy isn’t just a strategy—it’s a solution for climate action.
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