What is circular economy?

The need to transition from a linear to a circular model

Linear production systems, currently dominating the global economy, have proven limited in relation to resources and have resulted in serious environmental and social impact. Improved efficiency obtained by reducing the use of resources and fossil fuels will not be enough to counter current environmental challenges. Linear models are exposed to fluctuating prices and access to raw materials (supply responding to economic and geopolitical reasons) and contribute to environmental degradation while challenging ecosystemic services that are central to development.

The Circular Economy suggests a radical systemic shift geared to ecodesign, industrial symbiosis, economy of functionality, reuse, refurbishing, remanufacturing and recovery. This approach furthers innovation and long-term resilience and allows for new business models.

Restorative and regenerative by design

According to the Ellen MacArthur Foundation: The circular economy is one that is restorative and regenerative by design and aims to keep products, components, and materials at their highest utility and value at all times, distinguishing between technical and biological cycles. This new economic model seeks to ultimately decouple global economic development from finite resource consumption. It enables key policy objectives such as generating economic growth, creating jobs, and reducing environmental impacts, including carbon emissions. (Delivering the Circular Economy: A Toolkit for Policymakers, EllenMacArthur Foundation 2015)

It focuses on capital reconstruction -financial, manufacturing, human, social or natural capital-, securing a greater flow of goods and services. The butterfly diagram illustrates a continuous flow of technological and biological materials from a value-chain approach.

Circular Economy and Sustainable Development Goals

There is extensive bibliography at present on the potential of the circular economy to achieve the goals of economic growth, job creation, and reduction of environmental impact, issues that concern political leaders today.

These aspects are directly connected to the Sustainable Development Goals of the 2030 Agenda proposed by the United Nations Member States. There are direct links to Goals 7 (Affordable and Clean Energy), 8 (Decent Work and Economic Growth), 9 (Industry, Innovation and Infrastructure), 12 (Responsible Consumption and Production), 13 (Climate Action), and 15 (Life on Land) as well as indirect links to some of the other goals.


Global context

On a global level, the circular economy is at the core of discussions and new strategies of governments worldwide. Some of the specific steps taken highlight the relevance of this approach:

  • In 2016, the government of Finland launched its strategy towards a circular economy: “Leading the cycle – Finnish road map to a circular economy 2016-2025”.
  • The European Commission adopted its Circular Economy Package in December 2015 seeking a transition towards a circular economy in the European Union. This package includes legislative proposals relative to waste and the increase of recycling and reuse rates, as well as an Action Plan to promote circular economy throughout the different value chains.
  • In June 2017, the First World Circular Economy Forum was held in Finland, with the participation of over 1,500 attendees and more than 100 countries. The event was organized by SITRA, the Finnish innovation agency.
  • Some other cities are already working to prepare their own circular economy strategies, as is the case of London, Vancouver, Helsinki and Rio de Janeiro, to name a few.

Relevance to Uruguay

Uruguay has developed a series of strategies and has taken consistent steps to improve citizen livelihood with a clear view to transitioning into a green economy through innovation, technology and the adoption of specific public policies, namely:

  • The Uruguayan energy grid has become a highly renewable-energy matrix. In 2015, over 90% of its electrical energy and over 50% of the primary-source energy mix generated came from renewable sources while during the 2001-2006 period, 60% of energy sources had to be imported.
  • The Uruguayan government, through its different State departments, has been confirmed to join the Partnership for Action on Green Economy (PAGE) and was selected as eligible to receive funds and promote this initiative.
  • Under the leadership of its Ministry of Housing, Land Use Management and Environment (MVOTMA for its acronym in Spanish), the country is encouraging new national legislation on waste, with a clear approach to prevention, reduction and recovery of waste as well as social inclusion aspects. The law will bolster the recovery of waste through different instruments.
  • In February 2017, a Memorandum of Understanding on cooperation in Bioeconomy and Circular Economy was signed between the Governments of Uruguay and Finland.
  • The Biovalor Project (which leads the organization of this forum) an initiative of the Uruguayan Government implemented through three of its Ministries (Ministry of Industry, Energy and Mining - MIEM, Ministry of Livestock, Agriculture and Fisheries - MGAP, and Ministry of Housing, Land Use Management and Environment - MVOTMA) seeks to promote waste recovery in national agribusiness industries. From the outset, the project was approached from a circular economy perspective and was geared to finding sustainable business models to transform waste into raw material for new production processes.