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What is the circular economy definition and what are its benefits?

The circular economy includes keeping resources in use for as long as possible, extracting the maximum value from them, and then recovering, renewing and reusing products and their components when they are no longer serviceable. The circular economy replaces a linear take-make-waste economic model with a closed loop model that minimizes waste, emissions and pollution. The definition of circular economy shows that this process starts at the very beginning of a product’s life cycle: circular product design and production processes can help save resources such as water, metals and other raw materials, avoid inefficient waste management, and create new business opportunities and jobs, according to the EU.

Benefits of circular economy include tackling challenges such as biodiversity loss, waste disposal, and pollution. 

Linear versus circular economy: meaning and what are the differences

Circular and linear economy have different models. The linear economy is based on a “take-make-waste” model that has brought us to where we are now: our oceans choking in plastic detritus, our city air filthy, and facing a climate emergency that threatens to sweep away our way of life.

Instead, the circular economy seeks to compensate for our impact right from the start of the process of making goods or selling services, rather than at the end, when it is probably too late to act. In other words, the circular economy tries to reuse and repurpose items whenever possible, with sustainability built into a product or process from its design phase.

These sustainability differences between a linear and circular economy are inspiring individuals, companies and governments to move from a linear to a circular economy model. 

Circular Economy

The Circular Economy

A new model for creating value

What are the circular economy principles?

In the circular economy, sustainability is designed into a product or service right from the start. The goal is to reduce waste as much as possible. The key principles of circular economy are:

  • Use renewable energy sources and materials
  • Design the product as a service, thereby cutting down on the need for ownership
  • Create sharing platforms
  • Extend the useful life of products
  • Reusing and regenerating products or components


These five principles of a circular economy are becoming more and more common as companies and individuals respond to the challenges of climate change, like the need to rescue carbon emissions.


The growing awareness of the problems of plastics disposal has been another big driver of adopting circular economy principles and practices.


These principles are guided by the three Rs: Reduce, Reuse, Recycle:

  • Reducing the amount of natural resources or raw materials used to make a product calls for innovation in production processes to squeeze out waste.
  • Reusing a product by extending its useful life avoids having to send it to landfills or, worse, being dumped into the environment. The reused object can also be transformed into something totally different
  • Recycling, which means turning waste and discarded materials into new goods and providing them with a new life, saves energy, prevents pollution, reduces the amount of waste that ends up in incinerators and landfills. This in turn provides economic benefits by creating jobs, and safeguards natural resources.
video of circular economy

What are the benefits of circular economy?

The circular economy is a realistic solution to address environmental challenges such as global warming, resource scarcity, protection of biodiversity and waste management by reducing the use of non-renewable resources and CO₂ emissions, while at the same time creating new business opportunities and jobs through innovation.

Circular economy benefits are environmental, economic and social. They include:

  • Reducing pressure on the environment and CO₂ emissions by reducing use of raw materials and resources
  • Accelerating speed to reach carbon neutrality by switching from fossil fuels to renewable energy, thereby contributing to the energy transition
  • Improving resource and waste management by recycling and extending the useful life of products, such as electric vehicle batteries
  • Economic benefits of the circular economy could reach €1.8 trillion by 2030, according to a 2018 McKinsey report
  • Developing the new technologies needed for a circular economy delivers industry-wide innovation
  • Savings for consumers from product re-use
  • Protecting human health and biodiversity from reduced levels of pollution and waste

What are the opportunities for people when adopting circular economy models?

Circularity Score​

Circularity Score​

Our methodology to assess the circularity of your products and services

Thanks to circular economy principles, consumers can choose to buy more durable, versatile and innovative products that can reduce environmental pollution and resource waste, provide savings, and improve quality of life. Production and consumption processes designed to achieve circularity in the fashion, food, and automotive industries, for example, could result in savings that could be passed on to consumers in the form of lower prices.

What are the opportunities for businesses when moving to a circular economy model?

For businesses, circular economy business models are an opportunity to improve competitiveness, innovation and employment, creating value for the business and its customers. In a world where more and more consumers base their buying decisions on how a product is manufactured, packaged, transported, consumed and disposed of, companies that adopt circular economy models perform better than traditional ones.

Circular economy companies consume a small amount of virgin raw materials (or maybe even none), their inputs are fully recyclable and waste is transformed into materials that can be fed back into the value chain, generating additional revenue streams. 

Client Report

Client Report

A cutting-edge tool to help you rethink energy in a sustainable way

These circular economy business opportunities may require an initial investment that is recovered in cost savings going forward. To measure a company's degree of circularity, Enel X has devised the Circular Economy Report, a detailed assessment of the entire production cycle, from design and procurement policies to the way products are handled at the end of their life cycle. The Report is a tool that points out possible improvements on how to use recyclable or biodegradable materials, a shift to renewable resources, and product sharing. 

What are the opportunities for cities when moving to a circular economy model?

A circular city is one that produces no waste, uses renewable energy flexibly, and where shared resources such as cars, buildings, and machinery constantly operate at their maximum capacity of use. It has less congestion, less garbage, and improved air quality. As a result, a circular city is a more liveable city where residents enjoy a better quality of life. 

The circular economy is an opportunity for cities to adopt a new model for managing services like:


With their high concentration of resources, capital and people, cities are uniquely positioned to lead the way on introducing circular business models. To assess the degree of circularity of a city, Enel X offers Public Administrations a specific Circular Economy Report, which measures the level of maturity and diffusion of sustainability and circular economy principles within an urban area, assessing key aspects such as transportation, emissions, waste disposal and energy efficiency, and defines a roadmap of steps to improve it. 


The Circular Economy Factbook

The Circular Economy Factbook describes what Enel X can do to help businesses, municipalities and customers go circular.

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