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What is a closed-loop economy?

Have you ever heard of this term and wondered what kind of loops could possibly be ‘open’ in an economy, and how we can close them to save our planet? This article aims to define an often-used, but sometimes misunderstood term with examples relevant to today’s most pressing environmental issues, with a view to introducing ways in which we can promote a closed-loop economy.

In essence, it’s a business model that ‘completely reuses, recycles, or composts all materials’, according to sustainability site This definition goes on to mention that the term ‘can also be used to refer to corporate take-back schemes, where companies that produce a good are also responsible for its disposal’. As an aside, I have issues with the word ‘disposal’ meaning ‘throwing away’ - there is no such place as ‘away’ - but I prefer to see it as having recyclable materials at our disposal, ready for their next life.

Highlighted by William McDonough and Michael Braungart in an article in The Atlantic in 1998, a closed-loop economy was their proposal to combat the problems caused by prioritising ‘eco-efficiency’ over ‘eco-effectiveness’ - we’ll come back to these terms shortly.

A closed-loop economy has 3 core principles as defined by the Ellen MacArthur Foundation: eliminate waste and pollution, circulate products and materials, and regenerate nature.

What’s the opposite? Well, the traditional linear system involves taking the earth’s resources, using energy to transform them into products sold to consumers, either for single-use or that eventually wear out, and are then disposed of with no thought given to capturing the energy released during this process or the long-term effects of the waste on the environment. Does this sound familiar?

The conventional approach to reducing the impact of industry on our planet has been coined ’eco-efficiency’; using processes that ultimately still have negative consequences and generate waste, but by using more efficient methods that aren’t quite so damaging to our environment. This is in opposition to ‘eco-effectiveness’, the concept of businesses working to eliminate environmental damage at source and actively promoting the regeneration of resources and spaces harmed by traditional industry. Think of the approaches as damage limitation or mitigation versus actively seeking recovery. A real-life example to illustrate an open loop, eco-efficient economy versus a closed-loop, eco-effective economy is the production of beef and meat substitutes respectively, as explained helpfully on this page here.

How does recycling fit into a closed-loop economy? It’s often assumed that all recycling is closed-loop. However, traditional methods of recycling products made from finite resources (e.g. plastic, made from crude oil) - using non-renewable energy sources - typically results in a material that is less useful than the original, with degradation in quality meaning it is typically only suitable for single use, and with no energy being recuperated during the product’s life cycle. This approach is known as downcycling or ‘cascaded recycling’. I would argue that it shouldn’t really be considered recycling at all, as the ‘re-’ prefix suggests that the recycled material has equal market value and identical physical properties to the starting material, which couldn’t be further from the truth.

Recycling in a closed-loop economy, however, might involve using sustainable materials like wood offcuts being transformed, using energy from renewable resources, into multi-use products that can either:

a) be recycled into materials of equal (recycling) or higher value (upcycling) with no degradation in material quality, or

b) that can easily biodegrade, with the energy released from this being harvested and put back into the system for the next life cycle of the product.

Re- and up-cycling represent just one part of a closed-loop economy; other aspects worth mentioning are switching to 100% renewable energy sources, composting, ‘product life extension’ schemes (a.k.a. repairing and reconditioning, reducing our need to replace consumer goods in the first place!) and business models that promote sharing or hiring products like environmentally-friendly vehicles or clothing. You can read more about all the processes involved in a circular economy here.

“How can we transition to a closed-loop economy, though?” might be your next question - thankfully, there are small things we can do as individuals that through the ‘butterfly effect’ will hopefully change the economy as we know it!

First, remember the first step of the familiar phrase “reduce, reuse, recycle”. We create less work for future selves if we reduce our consumption in the first place. However, we also need to be realistic; we can’t all be aspirational lifestyle Instagrammers with a *perfect* minimalist aesthetic and pretty glass jars to store our dried goods in immaculate, plastic-free cupboards. It’s a fact of life that we are going to need to acquire some necessities for comfortable living but we can just be more thoughtful about the purchase process. Try heading straight to a second-hand clothing shop or used furniture marketplace, rather than defaulting to your nearest fast fashion store or ordering straight from online retailers with sketchy sustainability policies.

Accept that it won’t always be possible to buy used goods, but in this case, we can still contribute to a closed-loop economy by opting for products made from re-/upcycled or compostable materials from companies that have a transparent recycling programme and that prioritise product life extension over sales.

Targeting the main offenders is also essential, namely products made from a mix of materials that are hard to separate (think padded envelopes or takeaway cups) or that are very easily contaminated, such as cardboard. Avoiding plastic packaging is a crucial step that many companies are now taking, something absolutely critical to tackling the planet’s plastic waste problem. For every person born since the 1950s, one tonne of plastic has been produced and less than a tenth of this has been recycled, according to a report by the Institute of Development Studies in 2019.

And the most important thing? Doing what we can, when we can, with the resources we have access to, with the hope that everyone can embrace the benefits of a closed-loop economy in the future.


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