Will the circular economy transition also boost resilience?

New analysis by Circle Economy confirms the mutually reinforcing nature of the two concepts, but advises caution around some of the circular economy practices, trends, and prerequisites that–if not managed properly–could weaken a system’s resilience. Circle Economy launches the first structural analysis of the relationship between the circular economy and social-ecological resilience. Amid the social and economic fallout caused by the covid-19 pandemic , calls to ‘build back better’ often couple the need to increase the resilience of our systems with the circular economy. Our research now provides the necessary analytical support for the relationship between the two concepts, but warns that, if not managed effectively, some circular economy trends may compromise resilience. Governments and businesses are advised to carefully integrate resilience thinking into their transition plans. ‍

Circular practices that boost resilience

Two circular economy practices in particular build resilience. First, the use of secondary and renewable resources boosts resilience by increasing the diversity of feedstock available to industry. Second, decentralised value chains—a growing trend in circular economy developments—are less vulnerable to global shocks and support localised and therefore swift decision making.‍

Prerequisites for the transition that further boost resilience

For a circular economy to succeed, the labour market also needs to change. In particular, transferable skills among workers will be necessary to enable the transition to new business and service models, and a culture of lifelong learning will be crucial when the types of skills that are needed continuously change. If promoted, these two characteristics of the labour market could make for a mobile and agile workforce that is less vulnerable in the face of shocks as it can quickly adapt to change. ‍

Circular trends that could compromise resilience

The paper also highlights two potential trade-offs between circularity and resilience that could compromise resilience in the transition if they are not aptly addressed. First, the circular economy’s propagation of resource efficiency could backfire when regular activities are interrupted, such as during the covid-19 pandemic. By designing out redundancies, circular strategies reduce the amount of materials and products available to act as buffers when supply chains are disrupted. Second, flexible labour contracts, which are rising in prominence in the circular economy through peer-to-peer marketplaces, business-to-consumer services or on-demand manufacturing, could increase individual workers’ vulnerability. ‍

Key recommendations for business and governments

Based on these insights, the paper provides key recommendations to help governments and businesses ensure their circular transition also strengthens their resilience.

For example, to manage the potential trade-offs of resource efficiency, businesses are advised to strike an effective balance between redundancy and efficiency. This requires a mindset shift from scarcity to abundance, searching for alternative or more highly available resources, and the standardisation of components. Governments should support and facilitate circular value chains by creating networks between regions, countries and industries, supporting the establishment of the required infrastructure through innovation and incentives. Both should develop impact indicators and measurements that move beyond measuring only overall efficiency and take resilience into account.

Ways forward

As we continue to navigate uncertain times, reshaping our systems to be resilient to ongoing and future shocks is imperative. Our paper highlights the need to carefully evaluate how circular economy trends and resilience thinking will impact one another in practice. Governments and businesses need to integrate the two concepts across circular economy strategies such as the EU’s Circular Economy Action Plan. Applying resilience thinking to shape the transition towards circularity ensures the creation of positive value for both society and planet.

This project was made possible thanks to the support of the Goldschmeding Foundation.

Download the report (pdf, on request)

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