Defining the circular economy: what is it (and how does it work)?
Posted on: 2 June, 2025
Embracing the circular economy could help the built environment address its role in the climate crisis and bring the sector on board with a net zero future. Here’s how.
The last several hundred years have seen a period of growth and prosperity like never before in human history. However, this incredible development has also brought with it new challenges and disastrous consequences for the environment and much of the world’s population that we’re now being forced to address.
With countries around the world pledging to achieve net zero in the coming decades, the question of how we decarbonise whilst maintaining the vital economies and systems that support our communities and societies has prompted discussion and debate.
The circular economy is one potential solution to this problem that could help us achieve a more sustainable balance. But what is it? How does it work? And how does this concept translate to the built environment?
What is the circular economy?
The circular economy is a system that encourages the minimisation of waste and the regeneration of nature and natural resources.
Addressing the entire lifespan of a product, this method of thinking encourages creating items, materials or assets that are durable and designed with reuse or recycling in mind. Longevity is also prioritised, as well as the sustainable use of materials in a way that minimises both environmental impact and reliance on finite resources.
Where does the circular economy come from?
The origin of the circular economy can be found in the formation of other concepts and schools of thought, such as cradle-to-cradle design, industrial ecology and biomimicry.
While it has gained prominence in recent years, it’s not a new development in sustainability thinking. As Dr Ankit Singh, Director of Sustainability at Waterman Building Services Ltd, part of Waterman Group, stated on an episode of the BE Sustainable podcast:
“The concept of the circular economy has been around for years. It’s not a new concept. It’s the fact that we’re moving away from the take-make-break cycle to a circular cycle that looks at maximising the value of any material – its use potential and its lifespan – that has brought this concept to the fore.”
Circular economy vs linear economy
The linear economy – otherwise known as the take-make-break or take-make-dispose model, is our traditional system where a product is purchased, used and then discarded.
The circular economy strategy has been positioned as an alternative to the linear model, and instead promotes reuse and regeneration.
What are the main concepts of the circular economy?
The Karo Sambhav Foundation, an environmental organisation in India, defines the 4 primary concepts of the circular economy as:
1. Reuse
A core aim of circular thinking is to promote the reuse of materials and products through repair and refurbishment.
2. Recycling
Recycling can transform waste that was previously discarded into new products, closing the loop of our production-consumption-disposal cycle.
3. Waste reduction
Alongside pollution from manufacturing, waste is another area the circular economy addresses by promoting the use of reusable materials and reducing the amount of packaging.
4. Product redesign
Changing the way our products are designed and manufactured can produce more sustainable alternatives that prioritise reusability and recycling in their conception.
Learn more: A guide to reversible building design (with 4 examples)
The R framework of the circular economy
The ‘Rs’ of the circular economy are another common framework for explaining this concept. Initially it consisted of just three Rs, but many definitions now expand it to 10:
- Refuse
- Rethink
- Reduce
- Reuse
- Repair
- Refurbish
- Remanufacture
- Repurpose
- Recycle
- Recover
The circular economy and the built environment
As a sector responsible for around 40% of global greenhouse gas emissions, the concept of circularity is particularly pertinent to the built environment.
Embodied carbon – the emissions that are created in the construction process before a building becomes operational – accounts for 10% of global energy-related CO2 emissions.
With an estimated 600-756 million dwellings needed to achieve the UN’s 2030 goal of universal housing access, this contribution is likely to increase exponentially if we don’t consider innovative construction methods that adopt a circular approach. In short, we can’t continue with the take-make-break model.
80% of the building stock that we need by 2050 already exists, meaning that existing buildings can and will likely play a pivotal role in delivering the infrastructure we need. Through retrofitting, adaptive reuse, reversible building design, material passports, material banks and other new concepts designed with circularity and sustainability in mind, there’s a chance we could deliver the housing and infrastructure the global population needs without having such a devastating impact on the environment.
As Dr Ankit Singh notes, this challenge is helping to shift the way the built environment looks at both existing building stock and materials:
“Resources are expensive, so the industry has started to look at existing buildings as material banks, and explore ways to start to reuse materials rather than buying new. This has caused the market to start to look at buildings from a material value view, rather than just as an asset value in traditional financial metrics.”
Learn more: Material banks, explained: could they be the path to a circular future?
7 benefits of the circular economy
There are a wide range of benefits that circular thinking offers, including:
1. It protects and preserves the environment
Going circular incentivises organisations, developers and professionals to choose alternative materials that don’t necessitate the destruction of our natural environment, ecosystem and habitats.
2. It reduces emissions, waste and pollution
Circular economy approaches have the potential to cut our global greenhouse gas emissions across all sectors by 39%. This can go a long way to slowing down climate change and some of the devastating consequences we’ve experienced over the last several decades.
3. It can protect human health
It’s not just nature that’s at risk of pollution – it’s humans, too.
Air pollution is a significant threat to human health. The World Health Organization estimates that it causes up to seven million premature deaths every year. There’s also water pollution, which can spread infections like cholera, diarrhoea and typhoid and lead to 1.4 million premature deaths annually.
The circular economy’s emphasis on minimising waste and resource extraction means cleaner water and air, which can drastically reduce the number of premature deaths resulting from pollution.
4. It removes our dependency on raw, natural materials
Circular economy strategies have the potential to significantly reduce our dependency on limited natural resources and raw materials.
By promoting reuse, recycling and regeneration, these models aim to maintain the value of resources as long as possible, alleviate the pressure on finite materials and foster a more sustainable consumption model.
5. It can save organisations money
Being more selective with material choices and choosing products with sustainable qualities can sound prohibitive at first. After all, for much of the world sustainability is still an ideal when there’s so much demand for infrastructure, deadlines are tight and budgets are limited.
However, choosing these materials can actually reduce operational costs in the long term. It can lower their spending on raw materials and minimise waste which, coupled with sustainable processes that reduce energy expenditure, results in financial benefits.
Learn more: 16 sustainable and cost-effective building materials
6. It can create new jobs
As has already happened around much of the world with the shift from coal power and mining, the green transition will simultaneously render some roles obsolete and create new opportunities for the global workforce.
According to the European Environment Agency, the circular economy is already a significant driver in employment increases in the EU. It estimates that more than 4 million people were employed in circular economy sectors – just in 2021. This is only likely to increase in the coming years, as demand for sustainability literacy and expertise grows.
7. It can give businesses a competitive advantage
Sustainability can be framed as a commercial initiative as much as an environmental one, and circularity is no exception.
The financial potential of circular economy principles isn’t just limited to cost savings. When you consider how much emphasis Gen Z and the incoming marketplace of consumers and employees place on sustainability, being an early adopter of these practices is a way to set a business apart from the rest of the marketplace and improve its reputation.
Learn more: 5 circular business models (and how they can give you a competitive advantage)
The challenges of implementing the circular economy
It requires investment
There’s no getting away from the fact that realising the benefits of circularity requires an upfront investment. These costs can be off-putting for clients and developers alike, even when they can deliver financial savings in the long term.
It’s not always an option for emerging economies
The aforementioned costs of innovative building materials, modernised construction processes and technologies like digital twins and building information modelling (BIM) that can help developers achieve circularity throughout the building lifecycle likely won’t be an option for developing countries.
Implementation is complex
There’s still much to be done to implement circularity. Concepts like material banks require significant coordination and logistics work, and the systems to deliver this at scale for the construction industry don’t currently exist.
There are still plenty of barriers
A huge obstacle to the circular economy becoming a reality, particularly in the built environment, is the role of regulation and legislation. Current legal frameworks aren’t drawn up with circular practices in mind, and they’ll require changes before these ideas can be brought into the sector.
Consumers and businesses need to buy in
Like any change initiative, adopting a circular economy requires buy-in from stakeholders – whether that’s employees and board members in your organisation or consumers and the public in your town, city or country.
For all of the challenges regulatory frameworks and legislation are likely to offer, people remain the biggest and most significant barrier to a circular economy. Changing deeply ingrained attitudes, behaviours and mindsets can be a long and challenging process.
What does the circular economy look like in practice?
Here are some examples of how circular thinking is being implemented into our products, infrastructure and economic models:
1. Circular business models
Organisations are adopting circular business models as a way to capitalise on the commercial benefits it can offer.
Some examples of these circular models include:
- Circular inputs
- Sharing economy
- Product-as-as-service
- Product use extension
- Resource recovery
2. Sustainable fashion
The fashion industry has a poor reputation for its impact on the environment, but through the implementation of circular concepts, it’s hoped this could change.
Recycling of materials, resale and rental are growing in popularity, particularly as the average consumer appears to be more environmentally-conscious and discerning. In fact, PwC research found that consumers are willing to spend a 9.7% premium on average for sustainability produced or sourced goods,
3. Buildings as material banks
Traditionally when a building reaches the end of its life, it’s demolished, with much of the components that made it consigned to the landfill.
In the built environment, the concept of the material bank has started to gain traction, with entire buildings being treated as a repository of materials from which new structures can be produced. This can reduce the embodied carbon resulting from construction, as in essence the carbon footprint of these materials has already been emitted.
In London, a construction project at 100 Fetter Lane – commonly referred to as Edenica – is a trailblazer for what this could look like on a grand scale.
[EMBED EDENICA VIDEO]4. Reversible building design
The built environment could do more to take inspiration from other industries, but with concepts like reversible building design, this appears to be happening.
This circular concept encourages reuse of materials to be factored on as early on in the design process. It essentially takes Design for Manufacture and Assembly (DfMA) and includes the decommissioning and deconstruction into this process, to allow materials, modules, and structures to be easily reused.
Learn more: Modular construction 101: here’s how it’s making buildings sustainable
5. Circular cities
Circular thinking is being actioned on a citywide scale around the world. The likes of London, Seattle, Singapore and Sao Paulo are adopting circular practices in an attempt to reduce waste, minimise carbon emissions and improve health and wellbeing. These circular cities can help preserve our natural environment and reduce the use of natural resources on a massive scale, whilst also delivering social benefits for their residents.
Final thoughts
The circular economy is a promising alternative to traditional methods of manufacturing, production and consumption, but it’s still some way off reaching the mainstream.
Like any innovation, it needs more than just ideation – individuals and change agents need to not only drive the adoption of these practices, but also bring other people along with them on the journey.
With the pressures facing the built environment to deliver more infrastructure, it will take some work for us to move away from our take-make-break approach to the building lifecycle. But with examples like Edenica bringing this to life and the commercial benefits of sustainability becoming more widely accepted, there’s hope that this can become a reality.
Sustainability isn’t a passing trend – it’s here to stay and is constantly evolving. If you want to inspire and action change in your career, UCEM’s MSc Innovation in Sustainable Built Environments will give you the skills you need, both now and in the future.
Find out more: MSc Innovation in Sustainable Built Environments – University College of Estate Management
