Ecological Economics 143 (2018) 37–46

Contents lists available at ScienceDirect

Ecological Economics

journal homepage: www.elsevier.com/locate/ecolecon

Circular Economy: The Concept and its Limitations

Jouni Korhonen a,⁎, Antero Honkasalo b, Jyri Seppälä c
a
KTH Royal Institute of Technology, Department of Sustainable Production Development, Stockholm, Sweden
b
Government of Finland Professor Emeritus, Finland
c
Finnish Environment Institute, Helsinki, Finland

a r t i c l e i n f o a b s t r a c t

Article history: Circular economy (CE) is currently a popular concept promoted by the EU, by several national governments and
Received 10 January 2016 by many businesses around the world. However, the scientific and research content of the CE concept is superfi-
Received in revised form 26 June 2017 cial and unorganized. CE seems to be a collection of vague and separate ideas from several fields and semi-
Accepted 29 June 2017
scientific concepts. The objective of this article is to contribute to the scientific research on CE. First, we will define
Available online xxxx
the concept of CE from the perspective of WCED sustainable development and sustainability science. Second, we
Keywords:
will conduct a critical analysis of the concept from the perspective of environmental sustainability. The analysis
Circular economy identifies six challenges, for example those of thermodynamics and system boundaries, that need to be resolved
Business strategy for CE to be able to contribute to global net sustainability. These six challenges also serve as research themes and
Scientific research objectives for scholars interested in making progress in sustainable development through the usage of circular
Global net sustainability economy. CE is important for its power to attract both the business community and policy-making community
Thermodynamics to sustainability work, but it needs scientific research to secure that the actual environmental impacts of CE
System boundaries work toward sustainability.
Six limitations
© 2017 Elsevier B.V. All rights reserved.

1. Introduction the economic system with an alternative flow model, one that is cyclical
(see EMAF et al., 2015; EMAF, 2013; EMAF, 2012; CIRAIG, 2015). The
Circular economy (CE) is a concept currently promoted by the EU, by idea of materials cycles has been around since the dawn of industrializa-
several national governments including China, Japan, UK, France, tion. The idea has also been practiced accompanied by the argument
Canada, The Netherlands, Sweden and Finland as well as by several that it reduces negative environmental impacts and stimulates new
businesses around the world. The European Commission recently esti- business opportunities already during the birth of the industrialization
mated that circular economy-type economic transitions can create 600 (Desrochers, 2004; Desrochers, 2002). But the linear throughput flow
billion euros annual economic gains for the EU manufacturing sector model has dominated the overall development causing serious environ-
alone (COM, 2014; EMAF, 2013; see also CIRAIG, 2015 and COM, mental harm. Unlike traditional recycling the practical policy and busi-
2015). Finland's Independence Celebration Fund (FICF, SITRA) and ness orientated circular economy (hereafter CE) approach emphasizes
Mckinsey (2014) jointly estimate 2.5 billion euros annual gains for the product, component and material reuse, remanufacturing, refurbish-
national economy of Finland through circular economy. The global ment, repair, cascading and upgrading as well as solar, wind, biomass
economy would benefit 1000 billion US dollars annually (FICF and and waste-derived energy utilization throughout the product value
Mckinsey, 2014; see e.g. EMAF, 2013). China, as the first country in the chain and cradle-to-cradle life cycle (EMAF, 2013; Rashid et al., 2013;
world, adopted a law for the circular economy in 2008 (CIRAIG, 2015). Mihelcic et al., 2003; Braungart et al., 2007).
Circular economy is recommended as an approach to economic growth However, the concept of CE and its practice have almost exclusively
that is in line with sustainable environmental and economic develop- been developed and led by practitioners, i.e., policy-makers, businesses,
ment (see EMAF et al., 2015; EMAF, 2013; EMAF, 2012; CIRAIG, 2015; business consultants, business associations, business foundations etc.
COM, 2015; COM, 2014). (see e.g. EMAF, 2013; COM, 2014; CIRAIG, 2015). The scientific research
The current and traditional linear extract-produce-use-dump mate- content of CE remains largely unexplored. Ecological economics may be
rial and energy flow model of the modern economic system is unsus- the most fruitful source from which the new practical, policy and busi-
tainable (Frosch and Gallopoulos, 1989). Circular economy provides ness orientated concept of CE could find scientific and theoretical sup-
port and guidance. Ecological economics has a long tradition in
⁎ Corresponding author at: KTH Royal Institute of Technology, Department of
recycling and other CE-type concepts on the macroeconomic level al-
Sustainable Production Development, Mariekällgatan 3, 151 81 Södertäje, Sweden. though not presented under the CE term. Also on the microeconomic
E-mail address: [email protected] (J. Korhonen). level, CE-type papers have been published in ecological economics, e.g.
38 J. Korhonen et al. / Ecological Economics 143 (2018) 37–46

addressing eco-efficiency (Huppes and Ishikawa, 2009) or industrial ecology

(Kenneth Korhonen and Snäkin, 2005). Nicholas Georgescu-Roegen (1971),
Boulding (1966), Herman Daly (1996) and Robert Ayres (1999; see also
Moriguchi, 2007) among others have debated the macroeconomic potential
in cyclical material flows or the so called “fourth law” coined by Georgescu-
Roegen (hereafter GR).
This paper has two research objectives. They are motivated by the
fact that the scientific research content of the currently popularized
business community originated circular economy concept remains su-
perficial and lacks critical analysis. First, we will construct the concept
of CE from the perspective of WCED sustainable development and sus-
tainability science including the three dimensions of economic, environ-
mental and social sustainability. Second, we will analyze the CE concept
from the perspective of environmental sustainability. In the analysis, we
will identify six challenges that need to be resolved for CE to be able to
contribute to global net sustainability. These six challenges also serve as
research themes and objectives for scholars interested in making prog-
ress in sustainable development through circular economy. Although
the definition we will present for CE includes the economic, environ- Fig. 1. Linear materials and energy flow in the shrinking world. Linear (one way)
mental and social dimensions of sustainability, we will leave the further throughput flow of matter and energy resulting in the current unsustainable
analysis of economic and social dimensions for future work. In other development of the global economy. The economic subsystem operating within the
words, it is beyond the scope of this paper to more thoroughly analyze parent ecosystem uses physical flows of materials and energy in a linear fashion.
Resources and energy are extracted from the parent system, produced and consumed
economic and social sustainability in light of CE. The basic idea of the
within the human economic subsystem and wastes and emissions are dumped back to
paper is to provide the reader with an initial attempt for conducting crit- nature in harmful concentrations. The life supporting parent ecosystem that used to be
ical research analysis of CE. fixed/constant in its size is now shrinking in terms of physical scale. Deserts are
The next section will consider the existing CE concept definition. expanding and sea level is rising reducing the life-supporting physical scale of nature. As
After this, we attempt to produce a more scientific definition for CE the human economic subsystem is growing, development is encountering a head-
collision. Overwhelming scientific evidence shows that the linear flow is unsustainable
from the perspective of sustainability science. The fourth section iden- in terms of all the three dimensions of sustainable development; economic, ecological
tifies six limitations of CE when analyzed against environmental sus- and social.
tainability that we perceive as fruitful research objectives for CE
scholars. Conclusions are made in the fifth section.
the volume of livestock and cattle is growing and biodiversity is deplet-
2. Background: On the Current Concept of Circular Economy ing at ever faster rates. The shrinking is best illustrated by advancing de-
serts and rising sea levels that work inwards in Fig. 1 toward the
2.1. The Main Challenge economic system, which in, turn is expanding outwards. This process
is leading to a head-collision.
In this section the new business community popularized concept of A simple and logical answer to the problem of the linear flow model
circular economy is considered from the perspective of the concept of is its reverse; a cyclical flow of materials and energy. Although, by defi-
and scientific research on sustainable development. In particular, sus- nition, energy cannot be recycled, only cascaded for extended use on
tainability science (Kates et al., 2001; Rockström et al., 2009; Broman lower temperature and pressure levels, one can speak about materials
et al., 2017; Broman and Robért, 2017; Robért et al., 2013) and the and energy cycling for the purpose of simplification.
WCED (1987) three-dimensional concept of sustainable development
are used as the main philosophy of the approach adopted in our discus-
sion. Sustainable development (WCED, 1987) was originally defined as 2.2. The Currently Proposed Circular Economy Solution
development that meets the needs of the present without compromis-
ing the ability of future generations to meet their own needs. There ex- The answer to the question of unsustainable global linear flow econ-
ists a common consensus on this broad qualitative definition. It is omy would seem to come from the physical flow concept in which the
beyond the scope of this paper to contest or discuss various diverging flows are reverse; the concept of circular economy. In this paper, the
perspectives on this basic definition of sustainable development or sus- CE concept is considered in scientific terms. The CE vision is here con-
tainability science. The planetary boundaries of Rockström et al. (2009) structed from the viewpoint of the WCED definition of sustainable de-
are also widely accepted as the direction of environmentally sustainable velopment and from the perspective of planetary boundaries on
global development (see, e.g. Robért et al., 2013). environmental sustainability (Rockström et al., 2009; Robért et al.,
In Fig. 1, the main challenge of sustainable development is depicted 2013).
from the perspective of physical flows of materials and energy. The key The current practitioner and business world formulated CE concept
issue in global sustainable development is the linear (one way) is given in Fig. 2. The CE message is that the inner circles of Fig. 2, prod-
throughput flow of materials and energy between nature and human uct reuse, remanufacturing and refurbishment, demand less resources
economy. The throughput flow is “running down” the system in and energy and are more economic as well than conventional recycling
which it operates, from which it sources and to which it releases its of materials as low-grade raw materials. The time the value in the re-
wastes and emissions. Brown (2006) shows that the global ecosystem sources spends/lives within the inner circles should be maximized. Ma-
is becoming smaller. The global natural ecosystem is shrinking in size terials should first be recovered for reuse, refurbishment and repair,
and volume. The shrinking is clear if measured simply in quantitative then for remanufacturing and only later for raw material utilization,
terms, but very apparent also in the sense of the qualitative potential which has been the main focus in traditional recycling. According to
of the earth's ecosystems to provide life-sustaining functions. Measured CE, combustion for energy should be the second to last option while
by the land area that can support human habitation, the earth is shrink- landfill disposal is the last option. In this way, the product value chain
ing, and at an accelerating pace. Deserts are expanding, the sea level is and life cycle retain the highest possible value and quality as long as
rising, the population is growing, per capita consumption is increasing, possible and is also as energy efficient as it can be.