The circular economy is now an economic and industrial strategy. Here's why

The circular economy is entering a period of renewed salience. Once framed predominantly as an environmental imperative, circularity has matured into an economic and industrial strategy that now belongs in the boardroom.

Today, nearly 80% of business leaders say that circularity is important or very important to their organizations – up from 36% three years ago.

That figure is expected to rise to 95% within the next three years, according to the Circular Transformation of Industries: The Art of Scaling Circular Supply Chains white paper, which saw the World Economic Forum and Bain & Company survey nearly 500 global executives across 10 manufacturing-centric industries.

This shift signals an inflection point. Circularity is no longer only about doing less harm; it is about doing better business.

At the World Economic Forum’s 2026 Annual Meeting in Davos, business and government decision-makers reinforced circularity as an industrial strategy that can simultaneously strengthen resilience and resource security, enhance competitiveness and growth, and advance environmental sustainability.

The conversation has moved decisively beyond awareness of circularity’s strategic relevance. The focus is now on implementation: concrete pathways to scale, coordinated action across value chains and measurable economic returns. Three dynamics explain this renewal moment.

First, circularity strengthens resilience and resource security in a more fragmented and volatile global economy. Supply chain disruptions, material concentration risks and commodity price volatility have exposed structural vulnerabilities in linear systems.

In the current context of geopolitical fragmentation and intensifying competition over critical inputs, dependence on primary resource extraction is increasingly viewed as a strategic risk.

Geopolitical realignments and shifting trade patterns are reshaping corporate and national priorities. Circular approaches that expand the use of secondary materials reduce exposure to external shocks while strengthening regional and national capabilities.

The World Economic Forum’s The Global Risks Report 2026 ranks natural resource shortages and concentration among the top global risks over the next decade. Against this backdrop, circularity has emerged as a geoeconomic strategy that enhances resilience, strategic autonomy and resource security.

Second, circularity has become an economic competitiveness and growth strategy. Circular business models are unlocking new revenue streams, strengthening margins through material efficiency, and building deeper customer engagement models.

In sectors facing constrained volumes and margin pressure, circular approaches enable recurring revenues across services and secondary markets while extending product lifecycles. More than 70% of manufacturing executives expect circular solutions to boost revenues by 2027, according to the Forum and Bain.

This momentum is mirrored in global policy shifts. The European Union’s forthcoming Circular Economy Act and China’s 15th Five-Year Plan position circularity and resource efficiency as central to industrial competitiveness.

What was once framed primarily as cost avoidance is increasingly viewed as value creation. According to estimates from the International Labor Organization, the transition to a circular economy could generate 7-8 million new jobs globally through expanded reuse, recycling and refurbishment activities.

Third, environmental sustainability remains a core rationale for circularity and becomes more powerful when integrated into economic and industrial strategy.

The annual Earth Overshoot Day – marking the day when humanity’s demand for ecological resources and services in a given year exceeds what Earth can regenerate in that same year – underscores the widening gap between global resource demand and planetary capacity, highlighting the urgency of systemic change.

Pollution is ranked among the top global risks in both the near term and over the next decade in The Global Risks Report 2026. Circular models are among the most effective levers to reduce emissions, minimize waste and pollution, and lower material and energy intensity across value chains.

Aligning economic value creation with planetary boundaries is no longer a trade-off but a strategic imperative. Scaling circular solutions offers a pathway to move Earth Overshoot Day closer to December 31 by reducing resource extraction and extending material lifecycles.

The European Environment Agency estimates that doubling Europe’s material use rate could cut climate-related impacts from material production by roughly 50%. In this way, circularity bridges environmental stewardship with long-term resilience and economic competitiveness.

Circular ambitions are well-established, yet scaling these economic models has proven operationally complex.

Advances in artificial intelligence (AI), digital twins and traceability technologies are beginning to shift this equation. AI enables end-to-end asset tracking and lifecycle visibility, improves matching between supply and demand for secondary materials, and optimizes predictive maintenance, refurbishment and asset utilization.

Leading companies are already demonstrating measurable results. One global industrial technology company deploys AI and digital twins across more than 190 factories and hundreds of thousands of product units to manage circular flows, achieving waste recovery rates above 99% at many sites. In East Asia, a large metals and materials company uses AI-enabled robotic sorting systems that reach over 99% accuracy at high processing speeds across plastics, metals, and electronic waste streams.

Technology, however, is an enabler rather than a silver bullet; durable outcomes still require aligned incentives, interoperable standards and supportive policy frameworks.

Across multiple industries, circular initiatives are advancing – from redesigned products and service-based models to recovery and reuse systems.

Yet much of this progress remains localized, concentrated in specific business units or pilot programmes rather than embedded across entire value chains. As circularity moves from experimentation to industrial transformation, regulatory clarity, economic incentives and operational integration become increasingly important.

In some markets, momentum around producer responsibility, recycled content and eco-design standards has slowed, while prevailing cost structures can make circular models harder to scale.

Within firms, established performance metrics and incentive systems often remain optimized for linear throughput rather than long-term value retention. These dynamics reflect the transitional nature of circular transformation rather than the lack of feasibility.

The next phase therefore requires coordinated alignment. Policy clarity and certainty, capital deployment, shared infrastructure, interoperable standards, digital integration and scaled secondary material markets must converge to shift the market economics at sector level.

Embedded in executive accountability and treated as core industrial strategy rather than peripheral sustainability, circularity can drive the transformation of industries, strengthening competitiveness and resilience within planetary boundaries.

The World Economic Forum has a number of initiatives working to advance circularity. The Forum’s Centre for Nature and Climate (CNC) works to secure shared prosperity and resilience within planetary boundaries. Within CNC, the Circular Transformation of Industries brings together more than 60 global companies and public sector leaders to accelerate the adoption of circular practices across value chains. The Global Plastic Action Partnership (GPAP) mobilizes governments, businesses, and civil society through 25 national partnerships to turn commitments on plastics circularity into coordinated action and system change.