On track for a circular economy?

The circular economy has the potential to solve many problems, but the hurdles are high and the road ahead is long. We look at which countries are already diligent recyclers, what gets thrown away the most and how the market might develop.

Raw material shortages, environmental pollution, fragile supply chains – these are some of the major problems of our time, for which the circular economy has sustainable solutions. The idea behind the circular economy is to reduce waste to a minimum by extending the useful life of products as much as possible, which includes promoting their shared use, repair and recycling.

The circular economy is the opposite of the traditional, linear economic model, which is sometimes also branded a "throw-away economy." While it is still relatively cheap to mine raw materials, the hurdles to switching to a circular economy and circular business models remain comparatively high.

In 2021, humans consumed about 100 billion tonnes of raw materials such as oil, metals and gas. According to the Circularity Gap Report, only 8.6 percent of this was reused. In other words, more than 90 percent was not. With rising geopolitical tensions, however, the resource availability is becoming an ever-greater risk.

This is one of the reasons why companies from a wide range of industries are scrutinising new business models that are committed to resource efficiency and the circular economy – a move that could thus trigger a boom for this type of business.

How the market might develop

In 2020, the global circular economy market volume amounted to 148 billion euros, according to a study by the German Federal Ministry for the Environment and the consulting firm Roland Berger. Based on their 2021 findings, they also anticipate market growth up to 263 billion euros by 2030 – an increase of 78 percent.

In Germany, the market volume may increase from 24 billion euros to 32 billion over the same period. However, according to the forecast, the circular economy will not grow as strongly as other markets in the environmental technology sector. One of the reasons is said to be comparatively long innovation cycles, especially for new recycling processes such as those for plastics and batteries.

The pioneers

When it comes to recycling, Slovenia and South Korea are the leaders in an international comparison, as the statistics portal Statista shows. At least when it comes to municipal waste, ie. the everyday waste that local authorities collect and treat and that is mainly generated by households. Slovenia recycled 58.5 percent of its municipal waste in 2021, while in South Korea the figure was 56.5 percent in 2020. Bringing up the rear in the ranking were Chile, which recycled 0.4 percent of its municipal waste in 2018, and Costa Rica, which recycled 3.9 percent in 2021.

The EU has set a target of reusing and recycling 60 percent of municipal waste by 2030. Municipal waste accounted for just over a quarter of the total waste generated in the EU in 2021. On average, the proportion of recycling and composting in the 27 member states is around 50 percent.

What gets thrown away most often?

A look at the development of the amount of waste also shows how important these recycling efforts are. According to the World Bank, in 2016 the world produced around two billion tons of waste, but according to estimates it could be as much as 2.6 billion tons by 2030 and 3.4 billion tons by 2050! In their report “What a waste 2.0”, the authors of the World Bank assume that by 2050 waste could increase by twice as much as population growth.

It is especially tragic to learn that food accounts for the largest share of waste. According to the World Economic Forum, 40 percent of food produced worldwide is thrown away. Food lost on farms alone could feed every undernourished person in the world four times over.

Electromobility – is recycling a new mine?

A functioning circular economy can also be extremely valuable when applied to industrial processes and thus foster economic growth. Take electromobility for example: up to now, raw materials have been extracted on a large scale for the batteries required and then transported over long distances. The resulting dependencies could be reduced if the materials were recovered from used batteries.

The CEO of European battery cell conglomerate Automotive Cell Company, Yann Vincent, even goes as far as hailing recycling "the new mine" in an interview with the German Newspaper Handelsblatt. He is convinced that we could recycle more than 95 percent of our key raw materials from cells we already own. At the moment, this does not play a major role, he says. However, when the batteries currently in use reach the end of their life cycle in 15 years, very large quantities would be available.

Start-ups as pioneers?

Innovations are often created by start-ups; this is just as true in the circular economy as it is in IT or other areas. In Germany, 171 start-ups are considered "circular economy start-ups" according to an analysis by the Munich center for innovation and business creation UnternehmerTUM. That is the most in Europe. In second and third place are France and the Netherlands.

Investment in these circular economy start-ups has risen sharply in recent years according to the analysis. Globally, it was about 5.4 billion US dollars in 2022. Another interesting observation is that the investments per start-up increase significantly over time, from one financing round to the next – which speaks for the success of the young companies.

According to the analysis, these start-ups also score well on the topic of diversity. While the proportion of women in newly founded companies is generally 20 percent, it is 50 percent higher there. This is particularly true for start-ups that specialise in recovering materials and using renewable or recycled resources. Here, almost half of all founders are women.

Georg Berger

… is interested in the opportunities the circular economy offers and in how it might benefit companies in a wide range of industries.

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