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The circular economy in commercial waste

The circular economy keeps products and materials in use for as long as possible. It underpins the waste hierarchy and the new recycling and packaging rules that are reshaping commercial waste management in the UK.

This guide explains what it is, how it compares with a linear economy, how circular waste management works, what circular businesses are, and how to measure performance.

Contents:

What is a circular economy?
The difference between a circular and linear economy
How does the waste hierarchy support a circular economy?
How does circular waste management work for businesses?
How circular are UK businesses?
What are the benefits of adopting a circular economy?
How should a business measure circular waste performance?

What is a circular economy?

A circular economy is an economic model in which products and materials are kept in use for as long as possible. It’s the opposite of a linear economy, where raw materials are continually extracted to make products that are discarded when no longer needed.

The aim of a circular economy is to reduce waste from the start through better design, allowing products and materials to be reused, repaired, remanufactured or recycled to retain as much of their value as possible.

In the UK, the circular economy is increasingly applied through commercial waste regulations. Businesses have a legal duty to follow the waste hierarchy, prioritising prevention, reuse and recycling over disposal.

Other rules, such as packaging Extended Producer Responsibility and, in England, Simpler Recycling, are designed to keep more materials in circulation rather than sending them to landfill or incineration.

A fully circular economy is an ideal rather than a reality, since cost, commercial recycling technology and material quality limit how much can be recovered. In practice, the goal is to get as close to it as possible.

The difference between a circular and linear economy

Linear and circular economies take a different approach at every stage of a product’s life, from how it’s designed to what happens at the end of it:

Aspect	Linear economy	Circular economy
Approach	Materials are extracted, made into products, used and then disposed	Materials are kept in use through reuse, repair and recycling
Raw materials	New materials are extracted for each product	Used materials are recovered to replace new materials
Product design	Products are made to be used and then discarded	Products are made to last, be repaired and be taken apart
Use	Users buy products and replace them when they fail	Users share, lease, repair or refurbish products
End of life	Products go to landfill or incineration	Products are reused, remanufactured or recycled
Waste	Waste is a cost	Waste is a resource
Recycling	Recycling is not part of the product design	Recycling is the last step, after reuse and repair
Business model	Businesses earn from new sales and replacements	Businesses earn from sales, repair, leasing and services
Environmental impact	High material use, emissions and waste	Low material use, emissions and waste

How does the waste hierarchy support a circular economy?

The waste hierarchy ranks waste management options from the most to the least environmentally preferable.

Each step up the hierarchy keeps materials in use for longer, making it the main framework for putting circular economy principles into practice:

Prevention: Avoiding waste in the first place, for example by buying less packaging or choosing durable products. This is the most circular option, since no resources are lost.
Preparing for reuse: Checking, cleaning or repairing items so they can be used again, such as refurbishing furniture or IT equipment.
Recycling: Reprocessing waste into new materials or products, such as turning cardboard into new packaging.
Other recovery: Recovering energy from waste that can’t be recycled, for example through incineration with energy recovery or anaerobic digestion.
Disposal: Sending waste to landfill or incineration without energy recovery. This is the least circular option and the last resort.

Businesses in the UK must take all reasonable measures to apply the hierarchy when handling their waste, and confirm they have done so on the waste transfer note each time waste is collected.

How does circular waste management work for businesses?

Circular waste management applies the circular economy to the materials a business uses and the waste it produces. In practice, it means working through the waste hierarchy in a systematic way:

1. Waste audit

The first step is to identify what waste the business produces, how much of each type, and which part of the business it comes from through a waste audit.

This shows which waste can be reduced, reused or recycled, and which collections the business needs.

2. Reduction at source

Prevention sits at the top of the waste hierarchy, so most businesses start by looking at their purchases. For example, a business can minimise waste with these actions:

Bulk purchases: Larger orders use less packaging for each item.
Return and refill: Refillable containers, such as for cleaning products, drinks or ink, replace single-use packaging.
Supplier take-back: Some suppliers collect their used packaging, pallets or products from their customers.
Eliminating unnecessary items: Removing single-use products, such as disposable cups or cancelling magazine subscriptions, prevents the waste entirely.

There are also new rules aimed at making suppliers use less packaging, and packaging that is easier to recycle. These rules apply mainly to producers and importers, but have a direct effect on consuming businesses:

Packaging Extended Producer Responsibility (EPR): Larger UK businesses pay a fee for the packaging they use (e.g., cardboard boxes, plastic bags, foam), and harder-to-recycle packaging costs more. This pushes them to use less packaging or switch to more recyclable materials.
Plastic Packaging Tax: Manufacturers and importers pay this tax on plastic packaging that contains less than 30% recycled plastic.
Deposit Return Scheme (DRS): This scheme for drinks containers will start in October 2027 in England, Scotland and Northern Ireland.

3. Reuse, repair and redistribution

The next priority is to keep items in use for as long as possible, so they don’t become waste. For example:

Repair and refurbishment: Equipment, furniture and machinery can be repaired or refurbished rather than replaced. IT equipment must have all data securely erased first.
Pallets, crates and IBCs: The business returns them to the supplier, or sends them to a company that repairs them for reuse.
Redistribution: Surplus food can be donated to charities and food redistribution organisations, while unwanted furniture can go to reuse networks.
Resale: Surplus stock, used equipment and office furniture can be sold through specialist resellers or online marketplaces.
Industrial symbiosis: Finding usage for waste products, such as spent grain from a brewery used as animal feed, or offcuts from a manufacturer used by another business.

4. Separation at source

The next priority when items cannot be reused is to recycle as much as possible. If they cannot be recycled, the next best thing is to recover energy from them, and as a last resort, dispose of them.

For this to be done effectively, waste needs to be separated at source, to prevent the contamination of each stream and maximise how much can be recycled.

Waste separation is a legal requirement in all of Great Britain. The rules are different in each nation:

Commercial Waste in England: Since 31 March 2025, the Simpler Recycling rules apply to businesses with 10 or more full-time equivalent employees. These businesses must separate dry recyclables, food waste and general waste. Smaller businesses must follow the same rules from 31 March 2027.
Commercial waste in Wales: Since April 2024, the Workplace Recycling Regulations apply to all workplaces. Workplaces must separate food, paper and card, glass, metal, plastic and cartons.
Commercial waste in Scotland: All businesses must separate paper, card, glass, metal and plastic. Food businesses that make more than 5 kg of food waste each week must also separate their food waste. Some rural areas have an exemption.

5. Waste collections

Each waste stream needs to be collected by a registered waste carrier and taken to the right facility for reuse, recycling, composting or energy recovery.

Waste that cannot go in standard recycling collections needs a specialist collection service, including hazardous waste, clinical waste, waste electrical and electronic equipment (WEEE), batteries, fluorescent tubes, textiles and construction waste. also comes with extra legal requirements.

The business must keep a waste transfer note for every collection for at least two years, or a consignment note for hazardous waste for three years.

A waste broker can arrange the right carrier and bin sizes for each stream after a business chooses amongst various commercial waste collection quotes.

Since separated recyclables often cost less to collect per tonne than general waste, a well-planned setup can also reduce costs.

6. Treatment after collection

Once collected, recyclables are sorted at materials recovery facilities and turned into secondary raw materials, such as paper pulp, plastic pellets and glass cullet, which manufacturers use in place of new resources.

Food waste is usually sent to anaerobic digestion, which produces biogas for energy and fertiliser for farms.

7. Review and improvement

Tracking waste volumes and recycling rates over time shows whether changes are working and where further reductions are possible.

Many waste contractors and brokers provide this data in regular reports, which can also support sustainability reporting.

How circular are UK businesses?

UK businesses have made significant progress, but most materials are still not kept in use, and the UK lags behind much of Europe.

The UK is undergoing a continuous transition

The UK’s approach to waste has changed dramatically since the Environmental Protection Act 1990, with measures such as the landfill tax and widespread commercial recycling shifting waste away from landfill.

Some streams now perform strongly. 73.2% of UK packaging waste was recycled in 2024, helped by long-standing producer responsibility rules. We cover the current state of other streams in separate guides:

A circular waste management gap remains

Despite this progress, the volume of business waste remains high. England’s commercial and industrial sectors generated an estimated 32 million tonnes of waste in 2024, with the commercial sector accounting for 22.7 million tonnes.

Across the economy as a whole, only around 7.5% of the materials used in the UK are reused. The biggest gaps are in difficult-to-recycle materials, such as electronic waste and composite plastics, and in products designed for single use.

How the UK compares to Europe

There’s no up-to-date figure comparing the UK directly with other countries, as the main international measure, the circularity rate, has only covered EU countries since Brexit.

In 2024, 12.2% of the materials used in the EU came from recycled sources, ranging from 32.7% in the Netherlands to 1.3% in Romania. Globally, the figure is just 6.9%.

The latest UK estimate, from 2022, puts the share of reused materials at around 7.5%. It’s calculated differently, so it isn’t directly comparable, but it suggests the UK remains well behind Europe’s leading circular economies.

What are the benefits of adopting a circular economy?

For businesses, a circular approach to materials and waste brings practical advantages beyond its environmental impact:

Lower commercial waste costs: Producing less waste and separating more of it for recycling reduces collection costs, since general waste carries the highest charges, including landfill tax.
Lower material costs: Reusing, repairing and refurbishing equipment, and buying less packaging, cuts spending on new materials and products.
Easier compliance: Following circular principles aligns a business with legal requirements such as the waste hierarchy duty, Simpler Recycling and Extended Producer Responsibility, reducing the risk of penalties.
Supply chain resilience: Relying less on new raw materials reduces exposure to price rises and supply shortages.
New revenue streams: Selling surplus stock, offering repair or refurbishment services, or supplying waste materials to other businesses can generate income.
Stronger reputation and tender prospects: Customers, investors and public sector buyers increasingly expect evidence of sustainable practices, and circularity can support sustainability reporting and certifications.
Lower environmental impact: The higher up the waste hierarchy that materials are managed, the lower their footprint on the environment.

How should a business measure circular waste performance?

There’s no single official measure of circularity for businesses, but a few core calculations, tracked over time, give a clear picture of performance.

Most of the data comes from waste transfer notes and the collection weights reported by the waste contractor or broker.

Measuring waste reduction

Comparing waste against business activity shows whether reductions are genuine, rather than the result of the business shrinking:

Waste intensity = Total waste (tonnes) ÷ Activity measure

The activity measure could be the number of employees, units produced or £ of turnover. Comparing it with a baseline year then shows progress:

Waste reduction (%) = (Baseline intensity − Current intensity) ÷ Baseline intensity × 100

Benchmark: Aim for a reduction of around 3% a year, in line with England’s target to halve residual waste per person by 2042.

Measuring how much waste is kept in use

This is the closest measure to a business’s own circularity rate:

Circularity rate (%) = (Reused + Recycled + Composted) ÷ Total waste × 100

A related measure, the landfill diversion rate, also counts waste sent for energy recovery, so it will always be higher. The gap between the two shows how much waste is being incinerated rather than kept in use:

Landfill diversion rate (%) = (Total waste − Waste sent to landfill) ÷ Total waste × 100

Benchmark: Aim for a circularity rate above 45%, the UK household recycling rate, working towards England’s 2035 target of 65%, with no more than 10% sent to landfill.

Measuring how well waste is separated

Contaminated recycling is often rejected and treated as general waste, which undermines the circularity rate:

Contamination rate (%) = Rejected recycling ÷ Total recycling collected × 100

Benchmark: Aim for zero rejected collections, since any rejection signals that separation needs improving.

Measuring cost of waste and carbon emissions

Tracking cost and carbon per tonne shows the financial and emissions impact of the business’s waste, and whether improvements are paying off.

The cost of waste is:

Cost per tonne = Total waste costs ÷ Total waste (tonnes)

Carbon emissions:

Carbon emissions (kg CO₂e) = Tonnes of each waste stream × Government conversion factor for that stream and treatment route

The conversion factors are published annually by the government, and the results can be included in sustainability reporting.

Benchmark: Both should fall year on year, as separating more waste reduces the amount of general waste, which is usually the most expensive and carbon-intensive stream.

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