HBR On Strategy: The Promises, Pitfalls, and Trade-offs of the Circular Economy

Episode Overview

In the June 18, 2025 episode of HBR On Strategy, Harvard Business Review delves into the concept of the circular economy with systems scientist and Illinois Institute of Technology Professor Weslyn Ashton. The discussion explores how businesses can transition from traditional linear models of "take, make, dispose" to more sustainable, regenerative practices. Ashton provides insights into the benefits, challenges, and necessary trade-offs inherent in adopting a circular economic strategy, supported by real-world examples and case studies.

Understanding the Circular Economy

Professor Weslyn Ashton opens the conversation by contrasting the conventional linear economic model with the circular economy framework. She emphasizes the ubiquity of cycles in natural and business processes, noting, “Circles and cycles are everywhere in the world around us” (02:17). Ashton argues that humanity has drifted away from these natural patterns towards a linear approach characterized by resource extraction, processing, and disposal. This shift has driven significant economic growth and improved material well-being globally but has also resulted in substantial environmental and social costs that are often unaccounted for.

Quote Highlight:
“As we modernized the ways of caring for each other... the global economy has operated in a linear fashion of take, make and waste.” – Weslyn Ashton (02:17)

The Environmental and Social Costs of a Linear Economy

Ashton details the negative repercussions of the linear model, including climate change, loss of biodiversity, pollution, and social inequalities. She cites the fashion industry as a prime example, where “more than 80% of the clothes that we create ends up in landfills” (05:30). Such practices lead to environmental degradation and place undue burdens on marginalized communities, exacerbating issues like inequality and human rights violations within supply chains.

Resilience Through Traditional Practices

Highlighting resilience, Ashton points to practices from indigenous and low-income communities that inherently align with circular principles. She references Mumbai's Dharavi district, where over 15,000 micro-enterprises manage to recycle more than 80% of the city's waste, contributing significantly to the local economy. This example underscores the potential of circular practices to not only mitigate environmental impact but also drive economic growth.

Implementing the Circular Economy

Ashton outlines three primary strategies for integrating circular economy principles into business operations:

1. Developing New Materials:
   Companies are innovating by creating renewable, bio-based materials or developing technologies to convert waste into substitute materials. Ashton shares the example of Dr. Legina Henry from Barbados, whose company, Rum and Sargassum, combines sargassum seaweed with rum distillery waste to produce bio-based compressed natural gas. This initiative aims to replace gasoline imports and reduce carbon emissions on the island (09:15).

2. Adopting New Business Models:
   Circular business models emphasize sharing, reuse, and resale. Ashton discusses Reaply, an asset management platform founded by Dr. Gary Cooper Jr., which facilitates the sharing and selling of equipment within organizations. With over one million items listed, Reaply has generated approximately $2.5 million in savings for its users (12:19). Additionally, multinational companies like Hitachi are leveraging AI-powered platforms to manage and remanufacture their products internally.

3. Enhancing Organizational Collaboration and Governance:
   Circular economy initiatives often require extensive collaboration across supply chains and the establishment of new governance models. Ashton highlights Urban Growers Collective in Chicago, co-founded by Erica Allen, which transforms food waste into resources like heat for greenhouses and compost. This model not only recirculates materials but also fosters community wealth and repairs historical injustices by involving community members in ownership and decision-making (17:00).

Trade-offs and Challenges

While the circular economy offers numerous advantages, Ashton acknowledges significant challenges. Transitioning to circular models involves considerable energy, capital, and operational costs. Additionally, there are inherent trade-offs; for instance, increasing efficiency to reduce carbon footprints may be offset if it leads to higher product sales and, consequently, greater overall consumption. Ashton states, “We can't circularize our way to sustainability” (19:45), emphasizing that circular practices must be part of a broader, more holistic approach to sustainability.

Addressing Historical Harms and Building Equity

Ashton urges businesses to confront and address the historical harms caused by exploitative practices. She advocates for investments and partnerships that rebuild wealth and opportunities in underinvested communities. This approach not only aligns with circular principles but also promotes social justice and equity.

Quote Highlight:
"We have to think about those trade-offs... what we need to do to repair those harms and restore opportunities for wealth building and well being in those places through investment and partnership." – Weslyn Ashton (20:30)

Leadership for a Sustainable Future

Concluding the episode, Ashton calls for purpose-driven leadership that prioritizes long-term social and environmental value over short-term financial gains. She encourages business leaders to rethink their definitions of success, advocating for strategies that regenerate resources and invest in neglected communities. “What do you want to be remembered for?” she asks, urging leaders to consider their legacy in shaping a sustainable and equitable future (21:00).

Final Thought:
"The circular economy provides many opportunities, but we can't circularize our way to sustainability. We need to transform the understanding of the value that we are creating as well as the value that we're destroying through our actions." – Weslyn Ashton (21:15)

Conclusion

This episode of HBR On Strategy provides a comprehensive exploration of the circular economy, highlighting both its transformative potential and the complexities involved in its implementation. Professor Weslyn Ashton’s insights, supported by diverse case studies, offer a roadmap for businesses aiming to adopt sustainable practices that benefit both the environment and society. As industries worldwide face increasing pressure to operate responsibly, the circular economy emerges as a viable framework for achieving long-term resilience and success.

Further Engagement

Listeners are encouraged to share their thoughts and suggestions for future episodes by visiting hbr.org/podcastsurvey.

This summary captures the essence of the episode, presenting key discussions and insights to inform and engage those interested in the circular economy and sustainable business strategies.