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Facts about Circular Economy

 Financing the circular economy

  • According to the Ellen MacArthur Foundation, the circular economy “can scale fast across industries to create value and jobs, while increasing the resilience of supply chains and delivering massive economic growth potential, estimated at 1.8 trillion euros a year in Europe alone”.
  • Lack of funding has slowed down the development of the circular economy, but the barriers are coming down. Leading multilateral development banks announced in July 2023 they would tighten their collaboration to accelerate the circular economy.
  • In July 2018, several Dutch banks and other stakeholders came together to develop the first circular economy finance guidelines as “voluntary process guidelines that recommend transparency and disclosure and promote integrity in the debt and equity market for the circular economy”. They suggest the following definition for circular economy finance: “Circular economy finance is any type of instrument where the investments will be exclusively applied to finance or re-finance, in part or in full, new and/or existing eligible companies or projects in the circular economy”.
  • A broad number of banks, financial institutions, consultancy companies and others continue to develop analyses, reports and studies about the challenges and opportunities of financing the circular economy. The UNEP Finance Initiative published Financing circularity: demystifying finance for circular economies in October 2020, stating:

    “Redesigning economies to embed circularity can change the way we produce and consume, addressing issues ranging from greenhouse gas emissions to plastics, resource scarcity, waste management and use of hazardous chemicals, while increasing resilience. This report offers emerging evidence of the potential to scale up finance to accelerate the shift away from a take-make-waste model of resource use and pollution to a circular economy, and practical steps to embed circularity into financing. The insights in this report can guide financial institutions to address the opportunities and threats offered by the transition, providing recommendations for policymakers for frameworks to accelerate financing for a circular economy, with examples of measures that have proven effective around the world.”

Circular economy policies

Finland was the first country in the world to create a national road map to a circular economy. The road map, published in 2016 and subsequently updated in 2019, outlines the circular economy measures to which Finnish state administration, municipalities and businesses have already committed themselves.

Since then, many countries and regions all over the globe have created their own road maps and started implementing them. An up-to-date overview of circular policies in different countries can be found on the Chatham House website: Policies | circulareconomy.earth | Chatham House

Sitra has compiled a guide based on what has been learned from Finland’s circular economy road map process. The guide features tools, guidelines and inspiration for countries that want to move towards or are already taking their first steps towards a circular economy.

The circular economy, youth and job creation

Please note: Estimates about the impacts of a circular economy on employment depend on the kind of definition applied to the circular economy, as seen by the following differing evaluations.

According to the International Labour Organization (ILO), changes in energy production – including the generation of renewable energy, greater efficiency, adoption of electric vehicles and increasing efficiency in buildings – can create a net gain of 18 million jobs throughout the world economy.

Of 163 economic sectors analysed by the ILO, 14 show employment losses of more than 10,000 jobs worldwide, and only two (petroleum refining and the extraction of crude petroleum) show losses of one million jobs or more.

According to the Club of Rome, a full adoption of a circular economy would create more than 75,000 jobs in Finland, 100,000 in Sweden, 200,000 in the Netherlands, 400,000 in Spain and 500,000 in France by 2030.

The Global Climate Action Summit estimates the creation of over 65 million new low-carbon jobs by 2030.

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The circular economy and climate change

  • Climate and biodiversity impacts from material extraction and processing greatly exceed targets based on staying within 1.5 degrees of climate change and avoiding biodiversity loss.
  • According to the Ellen MacArthur Foundation, energy efficiency and switching to renewable energy is only half the story of mitigating climate change. By adopting a circular economy approach in the products, services and systems we design, we can also start to tackle the remaining 45% of emissions associated with industry, agriculture and land use that the energy transition can’t address.
  • According to a Material Economics study commissioned by Sitra, switching to the circular use of the four largest materials in terms of emissions – steel, plastics, aluminium and cement – is indispensable to cutting global greenhouse gas emissions and achieving the Paris Agreement. A more circular economy could cut EU industrial emissions by more than half by 2050.
  • The study explores a broad range of opportunities for steel, plastics, aluminium and cement and two large use segments for these materials (passenger cars and buildings). The measures identified could reduce EU industrial emissions by 56% (300 Mt) annually by 2050, more than half of what is necessary to achieve net zero emissions. Globally, the reductions could be 3.6 billion tonnes per year in the same period.

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The circular economy and biodiversity

  • Circular economy interventions in four key sectors – agriculture, construction, textiles and forestry – can halt global biodiversity loss and help the world’s biodiversity recover to the same levels as in the year 2000 by 2035, according to a study by Sitra.
  • Circular interventions can have the largest positive impact in food and agriculture. Merely by shifting to more alternative proteins and regenerative agriculture, and by reducing food waste by half, biodiversity loss could be halted by 2035.
  • In practice, the transition to a circular economy in the food and agriculture sector will make it possible to produce the food humanity consumes on a much smaller area of agricultural land and with fewer inputs such as fertilisers, leaving more room for nature to thrive. According to the study, which captures the impacts on biodiversity from changes in land use, the circular interventions examined could, for example, free up agricultural land corresponding to as much as 1.5 times the size of the European Union for other uses by 2050.
  • Many circular interventions that tackle biodiversity loss also reduce greenhouse gas emissions, not least those solutions that give us more value from our biomass. Substituting alternative proteins for meat and reducing food waste are the two solutions in the study with the most impact and are also practices that people can easily adopt. In the food and agriculture sector, the transition to a circular economy would reduce methane emissions from agriculture by as much as 90% by 2050.

Source: Tackling root causes – Halting biodiversity loss through the circular economy

The circular economy, materials and waste

High-income countries use six times more materials per capita and are responsible for ten times more climate impacts per capita than low-income countries. Material use has increased more than three times over the last fifty years. It continues to grow on average over 2.3% per year. (Source: Global Resources Outlook 2024 by IRP – to be published)

Mainstreaming circular solutions is essential to living within the safe limits of the planet. Effectively adopting the circular economy across key global systems could allow us to fulfil people’s needs equitably, with only 70% of the materials we now use. (Sources: Circularity Gap Report 2023 & Circularity Gap Report 2022 by Circle Economy Foundation)

The world generates 49 Mt of electronic waste worth 63 billion dollars per year; only 20% is collected and recycled under appropriate conditions. (Source: https://ellenmacarthurfoundation.org/topics/cities/overview )

Surprising facts about the circular economy

  • Today, our economies are using about 1.6 Earths; this means that we’re using about 60% more of the earth’s resources than it can regenerate every year. By 2050, with an increased global population and a resulting rise in consumption, that “overshoot” could get to 3-4 Earths, which is clearly unsustainable.
  • Today, the world produces over 2 billion tonnes of solid waste, and that’s expected to grow to 3.4 billion tonnes by 2050. About one-third of that waste is not managed properly. By volume, global waste includes 44% food and organics, 17% paper and 12% plastic – all valuable commodities.
  • We’re throwing away over 50 million tonnes of electronic and electric goods, worth 63 billion dollars, every year, including rare earth minerals, gold and copper.
  • Why are landfills especially insidious? In addition to taking up otherwise productive land, this explanation from Waste Dive is especially helpful: “When trash is packed into a pile, the oxygen-free environment supports bacteria that thrive in those conditions. As the microbes degrade the waste, they release carbon dioxide and methane. The latter is… 84 times more potent of a global warming agent than carbon dioxide in the first 20 years of its release.”
  • Many of us waste food every day. About 22% of global emissions and 30% of energy consumption come from the food sector. At the same time, nearly one-third of all food produced is wasted, and food waste continues to be the top product found in landfills.
  • Humanity will throw away 148 million tonnes of clothing each year by 2030. Approximately 500 billion dollars in value is at stake by adopting circular fashion solutions, keeping valuable materials out of landfills and reducing our reliance on virgin commodities.

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