Consumers increasingly want to know where their goods come from and who is benefiting

If things are used many times before they are reused, shared, repurposed and eventually recycled there is an economic benefit as more people gain from each exchange

What is an economy? Not many people ask this question. Most people just go about their lives buying things or paying for experiences and exist inside an economy defined by where it is and how many things are exchanged.

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If the economy was a person, the continual increased exchanges of goods and services may indicate increasing financial wealth but that has nothing to do with the health of that person. When we ask a person how they are we don’t expect to hear the person give us a figure indicating the number of financial exchanges they have had.

We expect a type of answer about the quality of their life at that moment.

Increasingly, there is a growing number of people (consumers and producers) who want to know about the quality of their economy.

They want to know more about where the stuff comes from, how to maximise the social benefits to other people both locally and far away and how to minimise impact on their environment.

The circular economy is an economy constructed to maximise the materials and energy benefits of economic exchange through adopting cyclical materials flows using renewable energy sources and cascading-type energy flows.

A more circular economy limits the linear throughput of materials and energy and thus more closely links economic cycles to ecological cycles. In other words, an economy more like nature.

Leadership for a circular economy needs a collective approach according to Dr Rob Hales

Most people think of recycling when the circular economy term is used. But recycling is the last resort in keeping materials in the circular system of production and consumption.

Some other terms for it are industrial ecology, closed-loop production or cradle-to-cradle design.

So what are the economic benefits of a circular economy? If things are used many times before they are reused, shared, repurposed and eventually recycled there is an economic benefit as more people gain from each exchange.

So the value of the thing is increased. Increasing the number of times things are used has economic benefits. There is reduced costs for raw materials extraction and lower energy costs. Jobs are created through reuse, sharing, repurposing and recycling.

There is a reduction in waste costs. Carbon emissions are reduced. With growing green consumer sentiment there are new markets for green products.

Circular approach to business activity from a firm’s point of view is a smart business strategy. It can save money.

If the circular economy is a much better way of doing business for the people and the planet, why isn’t this type of economic activity more common?

It’s difficult for an individual company to be economical so businesses with similar supply chains and groups of local businesses need to collaborate to create more circular systems. Government incentives and policies can facilitate more collaborative businesses. Leadership for a circular economy needs a collective approach.

Dr Rob Hales is the Director of Griffith Centre for Sustainable Enterprise.