Circular Economy and Doughnut Economy: what’s the difference?
With Global Donut Day (GDD) coming up in less than two weeks, it feels like a good time to share my thoughts and perspectives on two concepts that go hand-in-hand with GDD: Circular Economy and Doughnut Economics. What’s actually the difference between the two? Little Teaser upfront: On Wednesday, Nov 6th we’ll start hosting the first GDD in Wolfsburg at the institut für zukünfte. Starting from 10 AM we’ll broadcast the livestream and are warmly inviting everyone who’s into regenerative and positive futures. The day will be focused on purposeful impact creation for communities and cities. On Thursday, Nov 7th, together with the Denkraum Braunschweig, we’ll be hosting a more business orientated evening, sharing insights and toolkits on how to become regenerative through business and organisational design.
The two intriguing concepts of circular economy and the doughnut economy are reshaping our understanding of economics and sustainability.
While both concepts, circular economy and doughnut economy, are essential to create a regenerative future for all, they are not the same but rather complementary. You might have come across these terms before or looking to take action. Here, I’ll share a bit more context about their meanings and differences. More importantly, share advice how they contribute to a better world for us and future generations. If you don’t know the answers already, don’t worry—I’m here to break it all down in an easy-to-understand and engaging way. Let’s jump in!
What is the Circular Economy?
In contrast to the linear economy, which follows a take-make-waste approach that depletes resources and generates harmful emissions, the circular economy offers a more sustainable alternative. Here, products are designed to be durable, repairable, reusable, and recyclable. Materials are recovered and reintegrated into manufacturing processes, while organic waste is composted or converted into energy. The circular economy benefits not just the environment, but also the economy and society by creating new jobs, reducing costs, fostering innovation, and enhancing overall well-being.
“Through design, we can eliminate waste and pollution, circulate products and materials, and regenerate nature, creating an economy that benefits people, business and the natural world.” – Ellen Macarthur Foundation
The circular economy is a production and consumption model designed to eliminate waste and keep resources in use for as long as possible. It operates on three key principles:
- Design out waste and pollution
- Keep products and materials in circulation
- Regenerate natural systems
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The Ellen MacArthur foundation is one of the leading drivers accelerating the circular economy – a non-profit organisation that creates evidence-based original research on the benefits of a circular economy, and how it can contribute to solving global challenges like climate change and biodiversity loss.
What is the Doughnut Economy?
First published in 2012 in an Oxfam report by Kate Raworth, the concept of the Doughnut rapidly gained traction internationally, from the Pope and the UN General Assembly to Extinction Rebellion. Kate’s 2017 book, Doughnut Economics: seven ways to think like a 21st century economist, further explored the economic thinking needed to bring humanity into the Doughnut, drawing together insights from diverse economic perspectives in a way that everyone can understand.
“For over 70 years economics has been fixated on GDP, or national output, as its primary measure of progress. That fixation has been used to justify extreme inequalities of income and wealth coupled with unprecedented destruction of the living world. For the twenty-first century a far bigger goal is needed: meeting the human rights of every person within the means of our life-giving planet.”
― Kate Raworth, Doughnut Economics
The doughnut is a simple but powerful visual tool that shows the minimum and maximum boundaries that humanity needs to respect in order to thrive. The inner ring of the doughnut represents the social foundation, which includes 12 dimensions of human well-being, such as food, water, health, education, equality and peace. These are the basic needs that everyone should have access to. The outer ring of the doughnut represents the ecological ceiling, which includes nine planetary boundaries that define the safe operating space for humanity on Earth, such as climate change, biodiversity loss, ocean acidification and land use change. These are the environmental limits that we should not exceed.
When I was reading Doughnut Economics for the first time in 2017, I felt like this was a big missing piece in all 101 economic classes I’ve been in before. A missing link and bridge between social innovation concepts and business models and explanation how such much of what we have been doing could go wrong. One of my favourite parts in the book which I like to talk about in my workshops as well is the story of how Newton invented gravity: Sitting down under a tree in the garden of Trinity Colleagues, he saw an apple falling down the tree and invented his famous theory about gravity based on how the apple fall down the tree into the grass. The missing piece though, he didn’t consider was how the apple could come onto the tree, how did it grow, how did it blossom, the bees and rain needed to make the system work. This is one of my favourite stories, explaining the relevance of system theory. It is not that today’s calculations are wrong, it is that they often only focus on a certain bit while leave out other crucial factors.
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Here’s a great video from Kate Raworth sharing deeper insights into the concept of Doughnut Economics and the shift from a linear to circular economy.
How do Circular Economy and Doughnut Economy differ?
Circular economy and doughnut economy are distinct yet complementary frameworks for reimagining our economic systems. Both approaches emphasize the importance of incorporating environmental health and human well-being into economic decision-making, but they each have unique focuses and scopes that set them apart.
The circular economy primarily concentrates on transforming the methods of production and consumption. Its goal is to apply circular principles across various sectors and industries, aiming to create a more sustainable approach to resource management. This model is practical and operational, offering tangible strategies and solutions to minimize environmental impacts and enhance resource efficiency. By redesigning products and processes, the circular economy encourages practices such as recycling, reuse, and waste reduction, effectively redefining how we view materials and their life cycles.
On the other hand, the doughnut economy shifts the focus toward rethinking the overarching purpose and goals of economic activity. It employs a holistic and systemic approach to address economic, social, and environmental challenges at various levels, from local communities to global systems. As a conceptual and normative framework, the doughnut economy presents a vision for achieving social justice and ecological balance. It challenges traditional economic metrics and encourages us to prioritize human flourishing within the planet’s ecological limits.
In summary, while the circular economy provides practical tools for sustainable resource use, the doughnut economy invites us to redefine what economic success in the 21st century looks like. Together, these models offer a comprehensive path forward for creating an economy that serves both people and the planet.
Where can we experience Circular Economy and Doughnut Economy in Action?
Circular economy and doughnut economy are far more than just theoretical concepts; they are dynamic practices taking root in various locations worldwide. Here are some compelling examples of how these models are being implemented in real life for businesses and cities:
Circular & Doughnut City Cases:
Numerous urban areas are adopting circular strategies to enhance their resilience, inclusivity, and innovation. For instance, Amsterdam has crafted an ambitious circular strategy aimed at halving its consumption of new raw materials by 2030, with the ultimate goal of achieving full circularity by 2050. The city is rolling out circular initiatives across multiple sectors, including construction, mobility, food, and biomass, showcasing a commitment to sustainable urban living. I’ve also written an article how Amsterdam has adapted the City Doughnut model – the city is a great example how to leverage both concepts.
The Doughnut Economics Action Lab, founded by Kate Raworth, is a social enterprise that helps bring communities into the doughnut’s ring. It is working with local governments and communities across 70 cities, from Nanaimo on the west coast of Canada to Ipoh in Malaysia, to put the principles of doughnut economics into practice. Cities like Copenhagen leverage the doughnut framework to inform their policymaking and interventions. The city stands out as an example of integrating the doughnut model into its climate action plan, which aims for carbon neutrality by 2025. By evaluating its social and environmental performance against doughnut indicators, the city has pinpointed critical areas for improvement, ensuring that its policies address climate change and enhance community well-being.
Circular & Doughnut Business Cases:
Many companies are embracing circular business models to generate value for customers, stakeholders, and society as a whole. A notable example is Vaude, a German outdoor clothing and gear manufacturer, who has successfully implemented circularity in several impactful ways: focusing on using recycled and renewable materials, modular product design, repair and take-back-programs. Vaude explores alternative business models, such as rental services for outdoor gear, which encourage reuse and reduce the overall demand for new products. Through the use of recycled materials and modular designs, Vaude has significantly lowered its carbon footprint while growing their revenue stream.
Overall, Vaude’s commitment to circular business design not only enhances its growth prospects but also plays a vital role in reducing emissions, demonstrating that sustainability and profitability can go hand in hand.
Certain enterprises are aligning their missions and values with the principles of the doughnut economy. A crucial part here is to look at the organisational design and how it is driving positive impact throughout the company. Patagonia is a standout example of doughnut design for business for several reasons, aligning closely with the principles of the doughnut economy, which emphasises balancing social equity and environmental sustainability within a framework that respects planetary boundaries. While Patagonia is deeply committed to minimising its ecological footprint and popular for their circular repair initiatives, the company also added mother nature as a board member. By considering the well-being of the Earth in their strategies, Patagonia promotes long-term sustainability over short-term profits. This aligns with the doughnut economy’s focus on ensuring that economic activities do not exceed ecological limits.
Creating regenerative futures are not mere utopian dreams
The circular economy and doughnut economy are not only distinct models; they also complement each other in ways that can help us forge a more sustainable, equitable, and prosperous future. By integrating these frameworks, we can unlock a multitude of benefits.
- Reducing Greenhouse Gas Emissions: By promoting resource efficiency and sustainable practices, these models help mitigate climate change.
- Preserving Biodiversity: They encourage practices that protect ecosystems and promote biodiversity restoration.
- Enhancing Resource Security: By fostering circularity, we can ensure a more resilient supply of materials and resources.
- Improving Human Health and Well-Being: The focus on sustainability and equity can lead to healthier communities and improved quality of life.
- Fostering Social Inclusion: Both models prioritise social equity, promoting cohesion and community empowerment.
- Driving Innovation: The shift towards sustainable practices encourages creativity and innovative solutions across sectors.
- Generating Economic Opportunities: By creating new markets and business models, these approaches can drive a healthy economy and create meaningful jobs.
To conclude: Circular and doughnut economies are not mere utopian dreams; they represent achievable pathways to a better future. Implementing these models requires us to rethink our assumptions, challenge existing paradigms, and transform our systems. They invite us to collaborate, experiment, and learn from one another while inspiring us to act with courage, compassion, and curiosity.
Wrapping up with a futures movie
I’d like to wrap-up with an inspiring movie recommendation that will take you on a visual tour of what you’ve just been reading about. A future in 2040 where the ideas and technologies of today have been implemented and leveraged to create a regenerative future.
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Now, are you ready to join the circular and doughnut movement? I hope you are, because I certainly am! Let’s work together to make this vision a reality!
I’m facilitating Doughnut Design for Business Workshops for companies and am an Author for the DEAL (Doughnut Economic Action Lab) business cases, inspiring stories showcases positive impact and economic, social and environmental balance. You can explore more via the workshops section here. 😉