The circular economy is a production and consumption model that aims to keep products and materials in use for as long as possible, minimizing waste. It is the alternative to the linear model, in which raw materials are extracted, products are manufactured, used, and then thrown away.

The figures explain why there is so much talk about it. In 2023, the European Union generated 79.7 million tons of packaging waste, almost 178 kilos per inhabitant. According to Eurostat, an average of 120 kilos per person was recycled: the rest was recovered in other ways, for example as energy, or disposed of.

What is the circular economy

The European Parliament defines it as a model of production and consumption that involves sharing, lending, reusing, repairing, refurbishing, and recycling existing materials and products for as long as possible. When a product reaches the end of its life, its materials remain within the economy instead of becoming waste.

The Ellen MacArthur Foundation, the international organization that has contributed most to spreading the concept, describes it as a system where materials never become waste and nature is regenerated.

It is called circular because the path of materials forms a circle: from resource to product, and from product back to resource. The foundation distinguishes between two cycles. The biological cycle concerns materials that can return to nature, such as vegetable waste or compost. The technical cycle concerns materials that remain in circulation without entering the biosphere, such as metals and plastics, through reuse, repair, and recycling.

Difference between linear and circular economy

The linear economy follows the "take, make, dispose" pattern: raw materials are extracted, goods are manufactured, consumed, and thrown away. The circular economy replaces this with another pattern, which the Ellen MacArthur Foundation summarizes in three verbs: eliminate, circulate, regenerate.

Who invented the circular economy

There is no single inventor and the origin of the term itself is debated. Its roots are usually traced back to a 1966 essay by economist Kenneth Boulding, The Economics of the Coming Spaceship Earth, which compared the Earth to a spaceship with limited supplies of resources. In 1972, the Club of Rome report on the limits to growth raised the same issue.

The term “circular economy” explicitly appears in 1990, in the book Economics of Natural Resources and the Environment by British economists David Pearce and R. Kerry Turner. Widespread adoption came after 2010, with the founding of the Ellen MacArthur Foundation, and with European policies: the new Circular Economy Action Plan, published by the Commission on March 11, 2020, is one of the pillars of the Green Deal.

The three principles of the circular economy

The Ellen MacArthur Foundation bases the circular economy on three principles, all guided by design and supported by the transition to renewable energy. These are also the three key actions to start from.

1. Eliminate waste and pollution. A large part of a product's impact is decided when it is designed. Choosing materials, shapes, and processes that do not generate waste is more effective than managing them afterwards.

2. Circulate products and materials at their highest value. First, the product is kept in use through maintenance, repair, and reuse. When that is no longer possible, components are recovered, and only at the very end are materials recovered through recycling or, for biological materials, composting.

3. Regenerate nature. The third principle goes beyond reducing harm: giving back useful resources to nature, such as compost returning to the soil, and improving the state of natural systems instead of merely exploiting them less.

The keyword is design. A company that wants to become more circular begins by asking itself how its product is made and what its end-of-life will be, even before considering waste.

The R's of the circular economy: 3, 4, 5, or 9?

When looking for the R's of the circular economy, one finds different lists, and not because anyone is wrong: they are different models, developed at different times, describing the same idea with increasing levels of detail.

The 3 R's are the most well-known formula: reduce, reuse, recycle. They also indicate an order of priority: first you reduce, then you reuse, and only at the end do you recycle.

The 4 R's usually add "recover," which recalls the European waste hierarchy: when a material cannot be recycled, its energy is at least recovered.

The 5 R's do not have a single version. Depending on the source, refuse, rethink, repair, or recover are added to the basic three. Therefore, it is best to be wary of lists presented as "official."

The 9 R's are the most complete model. It was proposed in 2017 by the Netherlands Environmental Assessment Agency (PBL) in a study by José Potting and colleagues. Despite the name, it counts ten strategies, from R0 to R9, ordered by degree of circularity and divided into three groups: smarter use and production, extending product life, and material recovery.

The study is clear on priorities: manufacturing and using products smarter, from R0 to R2, comes before extending their life, from R3 to R7. Recycling and energy recovery, R8 and R9, have the lowest priority. In short, recycling is the last resort before incineration, not the first.

Advantages and obstacles of the circular economy

According to the European Parliament, the transition to a more circular economy reduces pressure on the environment and greenhouse gas emissions, secures the supply of raw materials, and stimulates innovation. It also has an effect on employment: an estimated 700,000 new jobs are expected in the EU by 2030. For consumers, it means more durable and repairable products.

The obstacles are equally tangible, especially for small and medium-sized enterprises. Alternative materials and new processes are perceived as too expensive, and production flexibility is limited when changing a material means changing machinery or suppliers. Furthermore, there is a design culture still tied to "use and throw away," insufficient infrastructure for composting or advanced recycling in some areas, and greenwashing, which creates confusion and distrust among customers.

On the latter point, the rules have changed. As of September 27, 2026, Legislative Decree 30/2026 applies in Italy: generic environmental claims are prohibited without proof of excellent and recognized performance, and every environmental claim must be supported by verifiable data. For a circular company, this is an advantage, because it rewards those who can prove what they do.

How to measure the circular economy

The most widely used indicator in Europe is the circular material use rate, also known as the circularity rate. It measures what share of the materials used by an economy comes from recycled materials.

According to Eurostat, in 2024, 12.2% of the materials used in the European Union came from recycling: the highest value ever recorded, but only one percentage point higher than in 2015. Italy is third in Europe with 21.6%, after the Netherlands with 32.7% and Belgium with 22.7%. The 2020 European Action Plan aims to double the Union's rate by 2030, to 23.2%.

The circular economy is also part of the United Nations 2030 Agenda. Goal 12 calls for ensuring sustainable production and consumption patterns, and one of its targets, 12.5, is to substantially reduce waste generation by 2030 through prevention, reduction, recycling, and reuse.

For a company, the indicators are more immediate: how much recycled or waste material goes into products, how much waste comes out of production and where it ends up, how long a product lasts, and whether it can be repaired. These are also the data points needed to communicate in a verifiable way.

Examples of circular economy in companies

Italy has several well-known cases in very different sectors. Three examples show different strategies on the R's scale.

Aquafil: nylon that becomes nylon again

Since 2011, the Trentino-based company Aquafil has produced ECONYL yarn, obtained entirely from nylon waste such as fishing nets, fabric scraps, and old carpets. The waste is chemically broken down into its original components and transformed into new nylon, with the same performance as fossil-based nylon. It is recycling that preserves the quality of the material, which is the opposite of downcycling.

Favini: paper made with agri-food waste

The paper mill Favini produces Crush paper using agro-industrial by-products, such as residues from citrus fruits, kiwis, coffee, hazelnuts, and olives, which replace up to 15% of the cellulose derived from trees. According to the company, these are residues that would otherwise be used in livestock farming, burned for energy, or sent to landfills. One industry's waste becomes another's raw material.

Orange Fiber: fabric from oranges

The Catania-based company Orange Fiber has patented a process to extract cellulose from *pastazzo*, the residue from citrus juicing, which accounts for about 60% of the original fruit. That cellulose is used to create fabrics for fashion: the first brand to use them for a collection was Salvatore Ferragamo.

How to start in the company

You don't need to start with a patent. The most accessible actions are three.

1. Map waste. Knowing what comes out of production, in what quantities, and where it ends up is the first step to turning it into a resource, for yourself or for another supply chain.

2. Rethink packaging. It is often the easiest part of the product to change: less material, recycled or waste-based materials, clear instructions for end-of-life, even with a QR code that tells the story of the supply chain.

3. Choose circular suppliers. Partners that use waste or recycled materials and can document it, as required by new regulations on environmental claims.

We explore the difference between recycling, upcycling, and downcycling in the article Upcycling: what it means and why it's not recycling.

Packaging as a first step: the example of mycelium

There is a reason why we propose mycelium. Mycelium packaging applies multiple principles together: it comes from straw and wood waste, protects the product, and at the end of its life, can return to the biological cycle.

Production occurs through bio-fabrication: mycelium, the network of mushroom filaments, grows inside a mold on a substrate of vegetable waste, binding it together into a solid material.

The L-ife modular system consists of a customizable outer cellulose box, FSC-certified and printed with water-based inks, and soft, resistant inner mycelium chips that protect the product.

• No fixed costs: no initial cost for mold creation.

• Automatable: chips can be handled with pick-and-place machines or robots.

• Customizable: it adapts to special formats, spare parts, and fragile objects.

• Protection: it absorbs shocks during transport and reduces condensation, a risk especially for electronic products.

• End-of-life: the mycelium chip can be composted.

If you want to bring the principles of the circular economy to your company's products, packaging can be the first step: discover our custom mycelium packaging or write to us.

 

Frequently asked questions about the circular economy

What is the circular economy in simple words?

It is a way of producing and consuming in which products and materials remain in use for as long as possible, through sharing, reuse, repair, refurbishment, and recycling. When a product reaches the end of its life, its materials return to a new cycle instead of becoming waste.

Why is it called the circular economy?

Because the path of materials forms a circle: from resource to product and back to resource. It contrasts with the linear economy, which follows a straight line: extract, produce, use, and dispose.

What are the three principles of the circular economy?

According to the Ellen MacArthur Foundation, there are three, all guided by design: eliminate waste and pollution, circulate products and materials at their highest value, and regenerate nature.

What are the 5 R's of the circular economy?

There is no single list. In addition to the 3 basic R's—reduce, reuse, and recycle—different sources add refuse, rethink, repair, or recover. The most complete model is that of the 9 R's, proposed in 2017 by the Netherlands Environmental Assessment Agency, which orders ten strategies from most to least circular.

Which Italian companies apply the circular economy?

Among the best-known examples are Aquafil, which produces ECONYL nylon from used fishing nets and carpets; Favini, which produces Crush paper using agro-industrial by-products instead of a portion of cellulose; and Orange Fiber, which creates fabrics from the cellulose of citrus juicing residues.

What is the separate waste collection rate in Italy?

According to the 2025 Urban Waste Report by ISPRA, in 2024, separate waste collection in Italy reached 67.7%: 74.2% in the North, 63.2% in the Center, and 60.2% in the South. The municipal waste recycling rate was 52.3%.

What are the disadvantages of the circular economy?

More than disadvantages, there are obstacles to the transition: initial costs perceived as high, machinery and suppliers that need to change, and recycling and composting infrastructure that is not adequate everywhere. For small and medium-sized enterprises, the transition requires investment and time.