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Definition

circular economy

A circular economy is an industrial system in which the potential use of goods and materials is optimized and their elements returned to the system at the end of their viable life cycles.

Supply chain sustainability and product life cycle sustainability are integral to the circular economy. Materials and products have a closed-loop life cycle and, ideally, all elements that go into the creation of a product are reused, recycled or remanufactured rather than discarded.

The philosophy is based on a holistic perspective of processes and technologies that goes beyond the focus of delivery, inventory and traditional views of cost. The underlying principle is that responsible products and practices are not only good for the environment, but are also important for long-term profitability.

The circular economy is in direct opposition to consumerist culture, which is considered a linear structure that is sometimes expressed as take, make, dispose. Waste is an integral element of consumerism because its emphasis is on promoting the purchase of new goods -- which often translates to disposing of older but still viable products.

The concept of built-in obsolescence originated in the 1950s as a response to perceived consumer demand for new and improved products. In a historical context, that demand may have arisen as a reaction to the privations suffered during and immediately after World War II. The business response was to begin to manufacture items that don't last very long or don't satisfy user demands for very long.

Similarly, the glut of consumer items of more recent decades may have stimulated desire for a more sustainable and less exploitative way of life. Proposed means to satisfy that desire include the circular economy, the sharing economy and collaborative consumption.

This was last updated in December 2015

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