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4 Key Benefits of the Circular Economy

Updated: Mar 8

Why is the shift from a traditional, linear way of consumption to the circular economy necessary? What are 4 key benefits of the circular economy?

We'll focus on the following benefits of the circular economy.

  1. Using Waste as Raw Material

  2. Reducing CO2 Emissions

  3. Extending Product Lifetime Value

  4. Redefining Consumption and Payment Models

By the way, you should also check out our blog post about 9 huge drivers of the circular economy.

circular economy graph

What Is the Circular Economy?

Before we jump in... Let's remind what does the circular economy mean.

The circular economy breaks the traditional, linear consumption cycle by producing, consuming, reusing, and recycling products.

Whereas the linear economy entails producing, consuming, and using products. A sustainable way of getting rid of or properly recycling products is unorganised. That's why this model doesn't serve the environment nor conscious consumption.

Product reuse and recycling are the main aspects of the circular economy. They solve the key issue that the majority of products don’t even get another chance on the secondary market.

Many industries affecting our daily lives, from consumer electronics, home appliances, micromobility, gardening, or even fashion and baby products, lack a viable, circular solution.

Comparison of a Linear and Circular Economy
Comparison of a Linear and Circular Economy

#1 Benefit of the Circular Economy: Using Waste as Raw Material

Mining raw materials has a major impact on the environment. Let’s see an example.

Producing one smartphone requires 82.3 m3 of water and 281 kg of raw materials, while generating 86 kg of CO2 and 199 g of e-waste. However, a smarter way of production and consumption can change this.

pile of smartphones
Impact of Producing a Smartphone
In a circular economy, raw materials and products are reused over and over again.

So, how does that work?

An important benefit of the circular economy is that it flips the waste generation cycle on its head. Products are initially designed to be reusable, and waste is treated as the new raw material.

Products and devices are already built in a way that makes refurbishing easier, and enables brands to use old products as raw materials or spare parts. This applies well to recycling plastic into pellets for making new products, or using components of broken phones as spare parts in refurbishing or producing new ones.

#2 Benefit of the Circular Economy: Reducing CO2 Emissions

Continuously producing new products increases energy consumption and CO2 emissions. Circular economy principles such as waste prevention, ecodesign, and reuse can save resources and reduce greenhouse gas emissions.

Why does it matter?

Production is the most energy-consuming phase in a product's life cycle - it can add up to 95% of a smartphone's ecological footprint.

Production of materials we use daily accounts for 45% of CO2 emissions in the EU. Therefore, circulating products reduces this massively as product lifetime value is extended, and the need for new products is decreased.

smartphone reuse

Consider that a smartphone’s average life cycle is 2-3 years and 86 kg of CO2 is created upon production. If its life cycle is extended by at least one consumption round, it doubles the useful lifetime and cuts annual CO2 emissions by half.

#3 Benefit of the Circular Economy: Extending Product Lifetime Value

A major benefit of the circular economy is extended product lifetime value. This means that the demand for new products and harm on the environment are lower.

The key in the circular economy is circulating products for longer.

Especially consumer electronics have a short life span. Imagine that a new smartphone is bought by the same consumer every 2-3 years. What happens to the old one? Where does it end up?

The circular economy enables us to create repeatable consumption cycles to extend product lifetime value. If the first product usage cycle is over, it will get a new owner. If a product is broken, it will be repaired. So, instead of ending up in someone's drawer, or worse, in a landfill, the product gets a new purpose.

Circular Economy = Zero Waste Economy

This cycle is repeated to the point where a product no longer brings value and experience to the user. In that case, it is dismantled and recycled in an eco-friendly way. New products are made out of it.

#4 Benefit of the Circular Economy: Redefining Consumption and Payment Models

So far, the prevailing option has been to buy more new products. Product reuse and circulation has been everyone's and no one's responsibility. That model hasn't worked.

In fact, consumer are seeking for more responsible ways of buying.

74% of consumers prefer the experience of using instead of owning products.

As a result and benefit of the circular economy, new types of payment models emerge. These endorse using rather than owning and buying products outright. Hence, supporting sustainable changes in consumer behaviour.

people using smartphones

70% of consumers are willing to pay more for sustainable products, and a whopping 73% of Millennials prefer to buy from sustainable brands.

These consumers leave the brands they’ve been loyal to, because they're left empty-handed when it comes to sustainability. On the other hand, consumers who haven’t been able to afford new products now get a chance to use second-hand products at more accessible prices.

Merchants who offer sustainable payment models, drive a new kind of consumer demand and market.

This new kind of demand includes merchants' existing customers, as well as new customers who seek sustainable payment options. That allows merchants to grow and expand into new market segments.

The Time to Act Is Now

Eco-friendly consumption is on its way to top, driven by a generation of conscious consumers.

If you want to catch this market trend, it's time to take the first step.

The circular economy is exactly what drives Fairown’s sustainable payment model. This enables us to help merchants endorse product reuse, manage product renewal cycles, and extend product lifetime value.

If you want to grow your business sustainably and get more loyal customers, get in touch!

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