As an economic model that emphasizes the continual use of resources by rethinking waste and product design and promoting a shared economy mindset, the “circular economy” (CE) now resonates across a wide range of stakeholders—including key players in the private sector, major environmental groups, individual countries, multilaterals, and donors. Yet progress in adopting CE among developing nations has been slow and uneven.

Some countries like Bangladesh stand out, however.  It has adopted a 10-year national program to boost sustainable practices and efficiency. The aim is to make its highly profitable, but environmentally damaging, ready-made garment (RMG) industry more circular by reducing textile waste, increasing material reuse and life cycles, and curbing overproduction.  

The hope is that after being seen as a “side hustle” for many developing countries, the circular economy will go mainstream. With a lens on foresight one detects a growing CE shift in  developing nations like Vietnam, Uganda, and Indonesia (which are projected to be among the fastest-growing economies over the next 5 to 7 years). Africa is also well positioned to become a future global supply chain leader.

Overcoming “Impediment Clusters”

The circular economy rejects the commonly held view that there is an infinite planetary resource base from which products and materials can be continuously and endlessly produced. Established concepts like composting, recycling, product repair and refurbishment are valuable CE components but the main focus is adoption through a more integrated, cross-sectoral, and national level approach. For instance, CE’s foundation is innovative product and material design that can extend usage, serve multiple production and manufacturing processes, and offer fresh input to other manufacturing processes. In short, the goal is for each product or material to be used through more than one life cycle. 

Production capability has made European Union (EU) countries and China a focal point of CE discussions.  The EU issued its CE action plan in 2020 and China’s CE action plan was unveiled a year later. (China also leads the world in terms of manufacturing output followed by the United States, Japan, Germany, and South Korea.)

Yet many developing countries, especially middle-income ones, will become future production hubs. One must keep in mind that their current comparative advantage, like  low production labor costs, may be at risk in any transition. But developing countries are expected to play a prominent manufacturing role over the next 10 to 15 years in addition to acquiring significant supply chain engagement. (AI and other technologies may slowly chip away at their sizable supply chain prospects, however.)

Speed bumps in highly developed countries have plagued even the most advanced adopters, and nations such as Sweden, the Netherlands, and Finland have struggled to meet their goals. So it is  no surprise that developing countries will face even stiffer barriers. Indeed, a landmark study of potential barriers confronting CE adoption in developing countries pointed to four major impediment clusters—which will inevitably vary in manner and degree that will invariably vary across these nations.

First, developing countries face a number of institutional capacity shortfalls. These include regulations and enforcement mechanisms which are nonexistent, weak, or poor. Substandard manufacturing processes and housing construction at poor standards to meet only temporary needs are another barrier, The prospect of becoming a dumping ground for hazardous end-use materials banned from more developed countries also is a possibility.

A second factor is financing. In the recent past, donors and multilateral banks have focused more  funding on GDP-raising projects and goals including job creation, expanding exports, building infrastructure, and providing health assistance. These priorities have meant less money for circular economy promotion—or formulating policies to advance it. Funding the innovative technologies at the heart of CE—or exploring new untested business models—has not been a top donor or private sector aim.

Thirdly, developing countries continue to take advantage of the latest digital and related technologies such as AI, GPS, machine learning, and blockchain. Yet in many of the poorest countries, large segments of the population still lack access to the internet. Therefore, there are limits to a greater use of these innovations in manufacturing, agriculture, and efficient waste management that CE favors. Informal sector workers play an outsized role in developing countries, with many low paid workers engaged in the task of “unofficial” waste management. More systematic CE-friendly waste management systems often cannot compete with them.

A final impediment centers on the reality that natural resource extraction and agriculture production are often mainstays in developing countries’ economic growth. As a result, nations that seek to make CE a priority often confront other stakeholders who see it as a threat to continued natural resources and agriculture-dependent growth.

These barriers will take time to overcome in developing countries. Yet the circular economy can offer them paths to conserve limited natural resources, curb environmental degradation, foster social empowerment by promoting decentralized and inclusive business models and create millions of new jobs.  

A Growing Traction

The impediments discussed above will not disappear overnight—or even over the next few years. Yet CE is gaining attention from more multilateral banks and donors. For example, the World Bank recently released a report outlining CE action plans for Central Asia with a focus on Kazakhstan’s construction value chain, Uzbekistan’s agricultural value chain, and the urban ecosystem in Almaty—one of the largest cities in Kazakhstan, with a population exceeding two million.

Last year, the UK announced the world’s first United Nations-backed International CE Centre of Excellence on Sustainable Resource Management to explore how metals, construction, critical minerals, and the latest technologies along with innovative finance models can facilitate CE adoption in the UK and globally.  

And USAID offers another example of this heightened focus on CE among donors. The agency launched its Scaling Up Renewable Energy project (SURE) to assist developing countries better plan for CE adoption. The implementation of  SURE will provide a range of customized country-specific services that include training tools along with policy and regulatory support. The project’s 2023 report highlights work in Columbia, Egypt, Guatemala, El Salvador, and across Africa.

The increasing prominence of these promising efforts sheds more light on the growing importance of CE to donors and multilateral institutions. That alone will help developing nations jump the barriers to join the circular economy at last.