A circular economy is much more than recycling

By Jamie Morton

What exactly is a circular economy? Picture a loop, in which the goods we buy never become waste: they’re designed to stay in circulation, through repair, reuse or being re-made again and again.

Think buildings that last longer, supply chains that minimise materials, and business models that prioritise access over ownership.

What’s no longer needed becomes new material within this system. That could be food by-products being turned into nutrient-rich foods, known as nutraceuticals, or organic waste being converted into the sustainable fuel biomethane.

Having taken shape in the mid-20th Century, the circular economy is hardly new thinking.

But it holds the potential to flip on its head the linear, “take-make-dispose” model that New Zealand and other nations have built on the back of fast consumption and cheap materials.

The idea of circularity rests on three key principles: designing waste and pollution out from the start; keeping materials and products in use; and regenerating the natural systems economies rely on.

“Most people think circular economy is mainly about recycling, but it’s so much broader than that,” explains Professor Saeid Baroutian, of the University of Auckland’s Faculty of Engineering and Design.

“It’s about thinking how we keep waste and pollution out of the system itself, keeping materials in the loop for as long as possible, so that we can help the economy to grow and the environment to recover.”

How far is New Zealand from this ideal?

We might trade on being clean and green, but Aotearoa operates one of the most linear and wasteful economies in the developed world.

Research commissioned by the Ministry of Business, Innovation and Employment noted that less than one percent of materials flowing into our economy are recovered through recycling. Aotearoa generates one of the highest per-capita waste volumes in the OECD. The equivalent of 700kg-750kg per person goes to municipal landfills in New Zealand each year.

Sector studies tell a similar story.

An Auckland University of Technology-led study into six major food manufacturers found businesses are beginning to embrace a circular approach, but there is still a long way to go.

Most activity centres on reducing, reusing and recycling, but recovery of materials or energy remains the weakest link.

Companies reported they still lack “a working knowledge of circular processes”, and the traditional linear model still holds sway.

Construction is responsible for about half the country’s total waste. According to PricewaterhouseCoopers, 80 percent of waste is determined before a building leaves the drawing board.

Despite emerging circular design guides, most of the sector still operates within traditional procurement, design and demolition models.

Quantity surveyors and procurement teams often aren’t trained in circular sourcing, and demolition crews lack the infrastructure and space to store salvageable materials.

This is the kind of fragmented picture Baroutian, who leads his university’s Waste and Resource Recovery research group, sees across the wider economy.

“Transitioning into a circular economy requires multiple sectors, groups, governments, community groups, industry, and businesses to come together and clearly understand the benefits,” he says.

“All of these groups must be on the same page, and one of the largest challenges right now is the lack of a clear strategy.”

The gaps become even starker when we look at how quick progress is in other parts of the world.

Where do we sit in a global context?

In short: at the beginning of the curve, lagging behind other nations.

The European Union has been rolling out sweeping circular-economy requirements since 2018.

They include eco-design rules, right-to-repair legislation, digital product passports, and stringent reporting obligations under the Corporate Sustainability Reporting Directive.

Across Asia-Pacific, many countries have introduced extended producer responsibility schemes that make manufacturers answerable for their products’ full life cycle.

New Zealand has taken some steps, such as product stewardship for tyres and e-waste, plastic phase-outs, a higher landfill levy, and circularity signals in emissions-reduction and infrastructure plans.

A University of Waikato-led analysis of 194 documents from the Ministry for the Environment and Ministry for Business, Innovation and Employment shows how the idea of circularity has expanded since 2017.

Circular economy ideas now sit across waste strategies, bioeconomy plans and industry transformation documents. On paper, it has become an overarching framework for more sustainable production and waste systems.

But the same study concludes that, in practice, central government has mostly adopted what it calls a “weak” model of circularity. It’s focused on end-of-pipe waste, recycling programmes and voluntary collaboration, but has left the deeper structures of a linear economy largely untouched.

Responsibility is pushed toward businesses and consumers, rather than being driven by strong regulation, standards and long-term investment.

Since the 2023 election, the authors argue, even this modest agenda has come under pressure.

They point to backtracking on environmental policies linked to circularity, including withdrawal of funding for the Circular Economy and Bioeconomy Strategy, renewed oil and gas exploration, and a growth narrative that treats environmental protections as barriers.

Baroutian has also observed a loss of momentum.

“Before 2022 or 2023, we saw some good progress towards circularity and emissions reduction,” he says.

“But, in the past couple of years, several of those initiatives have slowed down.”

He sees a real risk of New Zealand falling behind its international counterparts, including our closest neighbour.

“Even Australia is moving much faster than us.”

International requirements are also tightening for exporters.

New sustainability standards in Australia and the EU include recycled-content requirements, packaging rules and life-cycle disclosures. New Zealand companies risk higher trade costs or reduced market access if we don’t align.

MBIE’s analysis warned that ignoring these signals would “make it harder and riskier for New Zealand businesses in the global marketplace”.

What is stopping New Zealand from going circular?

One of the clearest barriers to a circular economy is capability, Baroutian says.

“Some industries are struggling to find experts or professionals with the circular economy mindset, while the workforce isn’t developing at the pace the transition requires.”

Construction firms, manufacturers and food producers all describe similar gaps: a lack of technical knowledge, design expertise, and staff trained to work within circular systems.

Policy settings are another major hurdle. Multiple studies highlight the absence of strong national direction, and businesses frequently point to “regulatory barriers” and a lack of rebates, subsidies or clear frameworks to support long-term investment in circularity.

The University of Waikato research argues central government has mostly leaned on soft tools, such as education campaigns, voluntary schemes and calls for collaboration.

Harder measures, such as regulation, standards, taxes, and subsidies that would put more onus on producers and the state have been largely avoided.

Much of the current focus remains on downstream waste and recycling, rather than upstream interventions that would shift product design, procurement rules, durability requirements, and material flows.

The result, the authors suggest, is that circular economy talk risks becoming a kind of green gloss on business as usual.

Baroutian echoes this point: “A circular economy should be treated as an industrial strategy, not just environmental or waste policy.”

Fragmented systems and supply chains compound the challenge.

Aotearoa still lacks the domestic infrastructure needed to recycle, remanufacture or reprocess many materials.

Construction sites often have nowhere to store or sort reusable components.

And for food exporters, key overseas markets – particularly China and Japan – continue to favour plastic packaging, making it harder to shift away from linear materials even when companies would prefer to.

Consumer expectations also remain a barrier.

Many New Zealanders are still driven primarily by price, not environmental impact, and businesses say this limits their ability to change.

As one food-sector participant told the AUT researchers: “Despite our best efforts … we still distribute thousands of [single-use] cups every year. Changing their mindset around it is still difficult.”

Business culture is shifting slowly as well. Many firms continue to operate on traditional assumptions: buying new, discarding old, and measuring success by throughput rather than resource value.

What do we stand to gain by making this shift?

The potential gains from adopting circular systems – economically, environmentally and socially – are significant.

A major one is emissions reduction.

MBIE’s analysis shows circular interventions across construction, manufacturing and food could cut between 1.5 million and 1.9 million tonnes of CO2-equivalent each year, roughly three percent of New Zealand’s net emissions.

Designing buildings to last a century instead of 50 years could avoid another 1.5 million tonnes annually.

Circularity boosts productivity and competitiveness. Using materials more efficiently lowers costs, shields businesses from global supply shocks, and builds far stronger domestic resilience.

There are sizeable opportunities for new industries and jobs.

MBIE has identified about 30 high-potential niches in the bio-economy, offering renewable products from natural materials. These range from nutraceuticals and marine bio-actives to pet food and bio-cosmetics. Value-added bio-exports rose from $1.5 billion in 2003 to $8.3 billion in 2023.

Circular processes expand this potential by feeding recovered materials, energy and by-products into new value chains.

Reducing waste and pollution remains one of the most immediate benefits.

Whether through recovering energy from organics or extending a building’s life through repair rather than demolition, circular systems keep materials in circulation and cut pressures on ecosystems. And at the widest level, circular economies support long-term economic development.

As trading partners demand lower-carbon and more transparent supply chains, New Zealand’s competitiveness increasingly depends on aligning with those expectations.

Baroutian emphasises that realising these benefits rests heavily on one thing: innovation.

“We need to invest more in local innovation and solutions,” he says.

“Simply importing those technologies here won’t necessarily work. We need to have our own homegrown innovation.

“If New Zealand backs that innovation with clear direction, strong policy and real investment, a circular economy could become one of our biggest strengths and competitive advantages, not just a buzzword in strategy documents.”

• The world is facing unprecedented environmental challenges. Planetary Solutions, an initiative of the Sustainability Hub at Waipapa Taumata Rau, University of Auckland, and Newsroom, explores these issues – and the practical ways we can all be part of the solution.