Despite the initial enthusiasm and efforts to transition towards circular models, recent data reveal a concerning decline in the global circularity rate. From 9.1% in 2018, the circularity rate has fallen to 7.2% by 2023. In 2024 a further decline is expected.

This shift highlights the urgent need for reflection, re-evaluation, and renewed commitment to accelerate the adoption of circular economy principles ‒ especially given the potential for the circular economy to provide strategies and answer for the crises we currently face. 

Especially through the Ukraine war, a heightened risk of increasing fragmentation through growing trends in deglobalization and geopolitical conflict have become more apparent ‒ in times of crisis sustainability and related topics seem to take a back seat. 

Several factors have to my mind contributed majorly to the decline in the circularity rate over the past few years. 

First - Lack of Consistent and Coordinated Policies

The progress is constant, but too slow. Globally over 50 individual national roadmaps or strategies have been launched in recent years, with the EU Circular Economy Package Nr. 2 (2020) as a real important contribution. However consistency and ambition are missing at national and global levels. While some countries have made significant strides in implementing circular practices, there is a patchwork of approaches and regulations worldwide.

This lack of uniformity hampers the scalability and impact of circular initiatives, making it challenging for businesses to navigate the complex regulatory landscape. To overcome this challenge, it is crucial for governments to collaborate and harmonize policies, enabling a seamless transition to a circular economy.

Second: Limited Investment and Financial Support 

Just at the beginning of 2023 at the Holland Circular Economy Week, which on a yearly basis is bringing together the key stakeholders of the circular transition, it has been lamented that still the “circular business case is weak” and bigger flows of capital are absent; albeit the fact that it is slowly changing.

Transitioning to a circular economy requires innovative (public-private) investment initiatives, into research and development, technological advancements, and infrastructure upgrades. However, many businesses, particularly smaller enterprises, struggle to access the necessary funding to implement circular practices.

Additionally, traditional financing mechanisms often fail to recognize the long-term economic and environmental benefits of circular models. To address this, governments and financial institutions must prioritize funding mechanisms that support circular economy projects and provide incentives for businesses to adopt circular practices.

Third: Limited Consumer Awareness and Demand 

Many of us wish for the circular economy to be the new consumerism for the future. However, this is still a dream; many consumers still prioritize convenience and price over sustainability. Limited awareness about the benefits of the circular economy, coupled with a lack of easily accessible information, contributes to this consumer behaviour.

To address this challenge, education and awareness campaigns must be intensified, emphasizing the positive impact of circular practices on the environment and individual well-being. Businesses also play a vital role by actively promoting and offering sustainable alternatives to consumers, fostering a shift in demand towards circular products and services.

What urgent action is needed in 2024 to take the right turn?

As we are standing at this crossroad, there are promising signals emerging that indicate the circular economy transition is poised to happen at an accelerated pace. We currently have about 50 countries in the world that have circular economy roadmaps or are working on them. This ‒ as a starter urgently has to change ‒ 100% of countries shall have them soon!

On the one hand, I am excited about the potential for AI to accelerate the transition. Its potential lies in optimizing resource use, enhancing recycling processes, and enabling the design of products for longevity and reuse. Just imagine: In the food sector, the potential value unlocked by AI in helping design out waste with circular strategies is up to USD 127 billion a year in 2030. However, currently we still face a “pattern recognition” challenge for potential investors: the capability to identify promising opportunities is still evolving.

On the other hand, “Everything as a Service” (XaaS) models are another billion EUR investment opportunity, creating a win-win:  XaaS enables consumers to use what they need and only what they need, on-demand. For producers, XaaS brings reduced costs and better resource optimization. This model encourages the design of durable, repairable, and recyclable products, fostering a more sustainable relationship between consumers and goods. Smart policy making could super charge the transition from pilots to full-fledged business models that revolutionize the consumerism who we know it to date.

And finally, as we move towards an economy increasingly dominated by supply constraints ‒ be it raw materials or energy ‒ the circular economy offers an integral solution. It emphasizes the efficient use of resources, minimizing dependency on raw material extraction and imports, and reducing the strain on supply chains. By embedding circular principles into the core of our economic systems, we can build resilience against supply-side shocks and contribute to a more stable and sustainable economic landscape. Let’s hope we indeed take the right turn in 2024!

This article is also available in Italian / Questo articolo è disponibile anche in italiano

Image: Rodrigo Kugnharski, Unsplash