Is the circular economy losing momentum?

The circular economy gained traction as a business topic in the 2010s, partly thanks to work of the Ellen MacArthur Foundation, launched in 2010, and the World Economic Forum.  Companies across sectors started developing and testing circular business models, sometimes successfully, sometimes running into operational challenges or regulatory barriers. Now, a decade later, concepts like circular business models and the waste hierarchy have become established ideas in business management.

Over the past years, however, momentum has stalled. The 2024 Circularity Gap Report shows a drop in the use of secondary materials used by the global economy fell from 9.1% in 2018 to just 7.3% in 2023.¹ Once hailed as a ‘megatrend’ status, circularity is now declining.

This slowdown reflects a structural issue. Virgin materials remain cheaper and secondary materials are often inconsistent in quality. Reuse and product-as-a-service models face regulatory and business model barriers.

Governments have introduced policies aimed at supporting the circular economy. Many policy initiatives focus on addressing practical barriers. Frameworks such as the EU Circular Economy Package have helped lay important foundations, while consumer-focused measures — including the EU’s Right to Repair legislation has made strides in improving access to repair and extending product life.²

While important, they do little to shift the economic drivers in favour of circular business practices. Deeper reforms, such as taxing resource use instead of labour or internalising environmental costs remain largely absent. Without these changes, circular models will continue to compete on an uneven playing field, limiting the pace and scale of transition.

Many companies are still willing to adopt circularity, but they are constrained by markets that still reward linear ‘take-make-waste’ models.

How can companies integrate circular practices in ways that also strengthen their financial resilience and competitiveness?

The answer lies in taking a systematic, phased approach, anchored around three key steps:

1. Mapping material flows and analysing hotspots

The starting point is for companies to understand their current material footprint. Mapping inflows and outflows helps identify hotspots including areas of high resource dependency, risk exposure, or inefficiency.

While virgin resources may still be cheaper, commodity prices are expected to rise over the next decade, driven by resource depletion, geopolitics, and regulations including carbon pricing.³ Concrete mechanisms such as internal carbon pricing can help companies account for future price risks today.

In action

Between 2021 and 2023, Unilever raised its internal carbon price to $70 per tonne of CO₂ to align with evolving regulatory expectations and the UN Global Compact’s Business Leadership Criteria on Carbon pricing.⁴ The company has also begun embedding the price directly into capital allocation and investment decisions, making it a core factor in operational planning.⁵ By doing so, carbon pricing helps quantify the hidden risks associated with greenhouse gas emissions, ensuring these costs are factored into capital expenditure decisions to improve long-term business resilience.

2. Selecting and designing circular business models

Once hotspots are mapped, companies must choose the circular business models that best fit their activities and products. This involves an iterative innovation process of gathering inspiration from what others are doing, understanding customer needs and expectations, and assessing feasibility within existing operations.

Key factors influencing the choice of model include:

• Product characteristics: whether a product is consumable or durable, the material value embedded within it, and its modularity and reparability.
• Consumer expectations: attachment to product ownership, frequency of use, and whether the product targets a premium or basic market segment.
• Sector context: the concentration or fragmentation of players, the maturity of collaboration practices, and the sector’s familiarity with circular principles.

Frameworks such as the Ellen MacArthur Foundation’s circular business model typologies can guide this selection.⁶

3. Implementing circular business models

Even the best-designed circular business models rely on broader market support and collaboration within the business ecosystem. Most effective circular business models extend beyond traditional company boundaries, so scaling requires coordination with suppliers, customers, peers, and policymakers.

Key enablers and company examples can be seen below:

Capturing the circular advantage

The circular economy is not failing because of a lack of vision — it is struggling because it remains trapped within a system optimised for waste, short-term gains, and unchecked resource use. To move forward, businesses must align circular strategies with long-term financial resilience.

The pathway is clear: map material risks, design business models that preserve value, and invest in collaboration to reshape the market landscape. Companies that act now will not only future-proof themselves but will lead the next wave of competitive advantage.