Why consider a circular economy?
A circular economy is defined as an upgraded model for goods production, consumption and disposal that ensures sustainable growth over time. Right now, the world operates in what is called a linear economy*; a model that can have significant negative impact on our world. Follow along below to learn more about how we operate today, how we can operate tomorrow and the potential investment opportunity a circular economy offers investors.
Consequences of a linear economy
These are the consequences of our current linear economy, which operates on a framework that is resource intensive and not sustainable.
The circular economy wants to change this by designing and producing goods in a way that creates no waste or pollution in the first place, keeps them in use for longer, provides for efficient recycling and regenerates the natural environment. This sustainable economic system could yield enormous environmental, social and economic benefits across the world.
The Circular Economy Action Agenda identifies five major opportunities associated with the shift to a circular economy:⁵
How can we make circular economy a reality?
Investing in the circular economy
Opportunities to invest in the circular economy are also growing rapidly as more companies, governments and consumers are motivated to find new business models, policies, and consumption patterns that support a more circular economy.
The public equity markets offer the opportunity to invest directly in funds targeting environmental solutions or in investment strategies that take sustainability or environmental, social and governance (ESG) factors into consideration. Public debt markets offer municipal bonds that finance infrastructure supporting water, recycling and waste, as well as Green bonds, which support sustainability-related projects.
In the private sector, venture capital helps fund early-stage companies that are developing innovative technologies or services to advance the principles of a circular economy. Private equity funding is critical as companies mature from early-stage entrepreneurship and need to scale their products or services offerings.
Redefine waste
The current linear economy leaves a long trail of waste, starting with byproducts and emissions from the manufacturing process itself, carried on by single‑use packaging and ending with a discarded, often underutilized, finished product in a landfill. Roughly 80% of a product's environmental impact is influenced by decisions made at the design stage, so the circular economy seeks to design out waste from the start and create “closed loops” to keep materials flowing through the system6. A closed‑loop system reuses byproducts as future inputs, runs on renewable energy and sources from recycled materials. The shorter or tighter a loop, the better, because it typically yields the most savings by reducing costs, such as labor and energy.
In a circular economy, many industries will transition to service-oriented/sharing models from the prevailing asset ownership models. In the case of autos, this shift could significantly increase the efficient use of resources (fewer cars per capita need to be produced, saving raw materials and fuel) while also reducing pollution.
The environmental benefits are significant - relative to production, remanufacturing products can save potentially 60% electric energy and 70% metallic materials, as well as potentially decrease approximately 80% of air pollutants7.
Retaining value from repairing to recycling
Extending the useful life of products also combats underutilization. To that end, there is a push to have producers and consumers:
- Repair: Figuring out ways to maintain products, rather than quickly discarding them or even recycling them, offers the highest value.
- Reuse: Product reuse and redistribution is viewed as the next best option to maintaining existing products.
- Refurbish: Repair and/or replace failed parts so a product can remain in use.
- Recycle: Investment in innovative technologies and processes is helping many companies incorporate recycling and recycled materials into their production.
Talk to your J.P. Morgan Team to learn more about Sustainable Investment
Life in a circular economy
Perhaps the best way to describe what a circular economy might look like and why it would be beneficial is through a few examples. In this section, we take a look at the principles of a circular economy applied to the fashion and food industries.
Plastics, Fashion and Food
Circular City
Cities have tremendous power to drive change toward more circular, closed-loop systems. Some of the ways cities can improve their efficiency and quality of life are to:
Electric-powered vehicles
Reduce the need for vehicles (and shift to electric-powered ones) by improving public transportation and bicycle infrastructure within cities.
Circular building kit
Adopting circular economy principles in building construction can significantly reduce carbon emissions by minimizing waste, maximizing material reuse, and extending the lifespan of structures. By implementing strategies like deconstruction and material recovery, the industry can drastically reduce its reliance on new materials and associated emissions, potentially cutting carbon emissions by as much as 75%.19 The Circular Building Toolkit recommends a number of strategies, including build nothing, build long-term value, build efficiently and build with the right materials.20
Renewable energy
Use renewable energy, including bioenergy that can be recycled from food and other organic waste in Amsterdam found that using biorefineries, waste separation and return logistics could lead to added value of 150 million, as well as 900,000 tons of material savings, add up to 700 additional jobs in the building sector and 1200 aditional jobs in the agriculture and food processing industry.21
Water conservation
Improve water conservation and treatment systems to conserve water within city limits. Recovering energy in the wastewater sector can actually offset the energy required for treatment: A Hungarian-based company, Biopolus, has created a modular urban water treatment system to harness clean water, energy, nutrients and minerals from wastewater and organic waste.22
While the obstacles to a transition to a circular economy are numerous, so are the opportunities and potential benefits to our world.
It will take a strong partnership between individuals, businesses and governments to make the circular economy a reality. If successful, this transition could be a multi trillion dollar opportunity that brings a 40% reduction in greenhouse gas emissions, generate nearly 2 million jobs, and become a US $2-3 billion market in the coming years.23⸴24
↓ 40%
reduction in greenhouse gas emissions
All companies referenced are shown for illustrative purposes only, and are not intended as a recommendation or endorsement by J.P. Morgan in this context..DEFINITIONS
*Linear Economy - The linear economy, sometimes referred to as the take-make-waste economy, is a system where resources are extracted to make products that eventually end up as waste and are thrown away.
1The Circularity Gap Report 2024, https://www.circularity-gap.world/2024#download
2European Commission, https://environment.ec.europa.eu/news/eu-calls-agreement-global-rules-end-plastic-pollution-2023-05-26_en 2023
3World Food Programme, https://www.wfp.org/stories/5-facts-about-food-waste-and-hunger, 2024.
4Ellen Macarthur Foundation, https://www.ellenmacarthurfoundation.org/topics/fashion/overview
5The Circular Economy in Detail: Deep Dive, Ellen Macarthur Foundation, Available at: https://www.ellenmacarthurfoundation.org/the-circular-economy-in-detail-deep-dive, 2019
6BCG https://www.bcg.com/publications/2023/six-strategies-to-lead-product-sustainability-design, 2023
7The energy saving and GHG mitigation benefits assessment of product remanufacturing from a multi-life cycle perspective: A case study of spark blug, Science Direct, Available at: https://www.sciencedirect.com/science/article/abs/pii/S0195925522002840#:~:text=According%20to%20automotive%20engine%20remanufacturing,et%20al.%2C%202020. 2023
8The SEE® Impact Report, Available at: https://www.sealedair.com/sustainability/corporate-responsibility-esg?secureweb=WINWORD#:~:text=Commit%20to%20design%20or%20advance,and%20infrastructure%20all%20by%202025, July, 2024.
9https://www.fortunebusinessinsights.com/recycled-plastic-market-102568, 2025
10https://www.closedlooppartners.com/what-is-chemical-recycling-why-does-it-have-so-many-different-names-and-why-does-it-matter/ 2023
11https://www.lyondellbasell.com/en/news-events/corporate--financial-news/cyclyx-exxonmobil-and-lyondellbasell-advance-first-of-its-kind-plastic-processing-facility-in-houston/ 2022
12https://content.ellenmacarthurfoundation.org/m/519c4d9a808b843f/original/Insights-summary-Unlocking-a-Reuse-Revolution-Scaling-Returnable-Packaging.pdf?_gl=1*1fvi5x2*_gcl_au*OTc0NTM0MTY4LjE3NDYwOTA4OTY.*_ga*MTg4NjQxNzQxNC4xNzQ2MDkwODk1*_ga_V32N675KJX*MTc0NjA5MDg5My4xLjEuMTc0NjA5MjQzMi41Ny4wLjA. 2023
13 https://www.mckinsey.com/featured-insights/mckinsey-explainers/what-is-fast-fashion, 2025
14https://www.ellenmacarthurfoundation.org/fashion-and-the-circular-economy-deep-dive#:~:text=By%20moving%20to%20a%20circular,keep%20safe%20materials%20in%20use. (from 2019)
15https://www.forbes.com/sites/rosecelestin/2023/07/10/shein-and-prettylittlething-fast-fashion-backlash-how-to-build-trust-through-esg/, 2023
16https://www.patagonia.com/hidden-cost-of-clothes/
17https://www.nike.com/sustainability/services
18https://www.closedlooppartners.com/wp-content/uploads/2023/03/Closed-Loop-Partners-Impact-Report-2022.pdf, 2022
19https://www.circularonline.co.uk/news/circular-economy-could-reduce-construction-emissions-by-75-by-2050/#:~:text=Circular%20economy%20could%20reduce%20construction%20emissions%20by%2075%25%20by%202050, 2024
20d.Hub Circular Buildings Toolkit, ARUP & Ellen Macarthur Foundation, Available at: https://ce-toolkit.dhub.arup.com/ , 2025.
21Circle Economy, 2024 https://www.circle-economy.com/news/developing-a-roadmap-for-the-first-circular-city-amsterdam
22Biopolus, 2025. https://www.biopolus.net/about/
23https://www.closedlooppartners.com/10-years-of-building-the-circular-economy-the-opportunity-of-catalytic-capital/, 2024
24https://www.deloitte.com/global/en/about/press-room/global-circularity-still-in-decline-circular-economy-megatrend.html, 2024
