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The circular economy offers a fresh approach to how we produce and consume, focusing on reducing, reusing, recycling and recovering. It moves us away from the traditional “make, use, discard” model, creating a more sustainable system to balance the needs of the economy, society and nature. Living within the planet’s limits is vital if we are to fight climate change, biodiversity loss and the twin crises of waste and pollution.
But that’s not all the circular economy is important for. In promoting resource efficiency and reducing dependency on finite materials, it can also encourage innovation and job creation.
Advances in biomaterials, for instance, are providing durable and recyclable alternatives to plastic packaging. And innovative approaches to textiles are enabling manufacturers to make fibres from agricultural waste.
But all this comes at a cost – and raises the question of who should pay. While the circular economy offers promising solutions to environmental and economic challenges, the transition raises critical questions about equity. It’s vital to include the workers and communities from developing countries at every stage of the transition.
Despite the potential of a circular economy to bring long-term benefits to both society and the environment, access to resources is uneven. There are also economic disparities. A lack of funding, insufficient investment and skills gaps make the shift towards a circular economy challenging for some developing countries.
And power dynamics are shifting across industries and regions. The circular transition can hit utility companies (electricity, gas and water) as demand from other firms falls. At the same time, in some countries it can bring significant gains to sectors such as construction – possibly driven by manufacturing firms investing in new buildings after saving money on material and energy costs.
In a recent review of 167 studies of the circular economy, we found that there was limited focus on democratic planning. Communities were not involved enough in decision-making about the transition to a circular economy – especially in low-income countries. Local workers and communities being shut out of decision-making and excluded from opportunities, such as green jobs in renewable energy or sustainable design, could worsen inequalities. This is particularly the case in low-income areas with limited resources and economic resilience.
In developing countries, persistent problems including low wages and poor working conditions can continue even as circular practices gain momentum, unless these concerns are integrated into the model. In the fashion industry, for example, workers face the same precarious working conditions regardless of whether they are working with virgin or recycled materials.
And new tensions are emerging over who benefits and loses in the transition to a circular economy. For example, a textile factory owner in the Tamil Nadu region of India voiced concerns that slower fashion cycles – promoted by circular initiatives in wealthier countries – could threaten jobs and livelihoods, making the case (in the words of one interviewee) for “much faster fashion”.
Among textile manufacturers, secondhand clothing was seen in a negative light as it might decrease the need for new products. The recycling industry on the other hand was booming in the same area and was seen as a positive thing. This was reflected in the words of a textile factory manager: “It’s my message (to not) reuse, we can recycle so that we get some work in the future.”
Nevertheless, even recycling was not considered to be a purely positive thing. Many cotton farmers dependent on traditional production face disruption to their livelihoods as recycled textiles gain popularity.
This is in stark contrast to the narrative in the developed economies, where circular strategies advocating “buy nothing” or slow fashion cycles are championed for their environmental benefits.
A path forward
To ensure the circular economy benefits everyone, it is crucial to address its social dimensions. Policies and strategies often overlook marginalised voices, particularly in developing countries. Inclusive circular economy models must be rooted in local contexts, reflecting the unique socio-economic realities of these regions.
Grassroots entrepreneurs in places where resources are scarce are well positioned to create innovative, locally tailored solutions. Supporting their efforts can lead to practices that address the challenges of their communities while contributing to broader circular goals. Recognising and nurturing this local capacity is essential for a sustainable and fair transition.
International organisations, national governments, and businesses play a pivotal role in driving inclusivity. Initiatives should be judged not only on environmental and economic outcomes but also for their impact on jobs, livelihoods, education, equity and justice. Businesses must engage with local communities to share knowledge, resources, costs and profits equitably between developing and developed nations.
This could be funding local innovators, supporting small enterprises or promoting cross-border collaboration on circular practices. For example, circular economy finance and international partnerships can help develop affordable energy solutions for low-income communities and engage developing countries in circular value chains to collect and process e-waste components. International frameworks, such as the EU’s Just Transition Mechanism, must ensure that no one is left behind. And businesses should guarantee living wages in global circular supply chains.
There’s a risk the circular economy could perpetuate inequalities. That’s why it is vital to reach people at even the far end of supply chains to ensure they are included in decisions and transitions. An equitable circular economy is not just an environmental or economic necessity – it’s also a moral imperative.
Anna Kristiina Härri receives funding from the Strategic Research Council of Finland. She is affiliated with the Greens in Finland.
Jarkko Levänen has received funding from the Research Council of Finland and Business Finland.
Sukyung Park does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.
