The Article: Circular-ESG Model for Regenerative Transition is available for download here.
The Circular-ESG Model: A Smarter Approach to Sustainability
We’re living in a world where economic progress and environmental sustainability often seem at odds. Countries with high human development—longer life expectancy, better education, and stronger economies—are usually the biggest polluters. Meanwhile, sustainability efforts are fragmented, with companies either focusing on Environmental, Social, and Governance (ESG) factors or Circular Economy (CE) principles, but rarely both. The Circular-ESG Model proposes a solution: a framework that brings these two approaches together, creating a smarter way for businesses, governments, and individuals to navigate the complexities of sustainable development.
Why We Need a New Model
The problem with today’s sustainability strategies is that they don’t always align. ESG is great for tracking corporate responsibility—whether a company treats workers fairly, follows ethical governance, or reduces its carbon footprint. But ESG alone doesn’t tackle the root problem: the wasteful, “take-make-dispose” economic model that has driven industries for decades. On the other hand, the Circular Economy focuses on reducing waste, recycling materials, and creating products that last—but it often ignores governance and social responsibility.
This creates a gap. A company could adopt a circular business model—recycling plastics, reducing waste, using sustainable materials—but still engage in unethical labor practices or greenwashing. Likewise, a firm could have a great ESG rating but continue to rely on non-renewable resources. The Circular-ESG Model eliminates this divide, pushing businesses toward a fully regenerative approach that benefits both people and the planet.
How the Circular-ESG Model Works
Imagine a graph with four quadrants, where businesses can be plotted based on their impact on both natural systems (the environment) and socio-economic systems (people and governance). Companies fall into one of four categories:
1. The Worst Offenders – Linear Open-LoopThese companies extract resources, generate waste, and don’t care about sustainability or social impact. Think fast fashion brands that exploit workers and pollute rivers, or fossil fuel giants with no carbon offset plans.
2. The ESG-Only Players – Linear-ESGThese companies have strong corporate governance and social policies, but they’re still operating in a wasteful, linear economy. A large retailer that reports on carbon emissions but still uses single-use plastics would fit here.
3. The Circular-Only Companies – Closed-Loop CircularThese businesses adopt circular economy principles like recycling and waste reduction but don’t emphasize governance or worker rights. A company that produces biodegradable packaging while paying unfair wages would be an example.
4. The Gold Standard – Circular-ESGThese companies integrate both circularity and ESG, creating a fully regenerative business model. They eliminate waste, operate ethically, and have strong governance policies. Think of a company that runs on 100% renewable energy, pays fair wages, and ensures zero waste production.
The goal of this model is to help businesses transition from Quadrant 1 (linear open-loop) to Quadrant 4 (circular-ESG).
The circular-ESG model advances sustainability science and management, contributing to the discourse on measuring and implementing sustainable practices across sectors and scales.
Tariqullah Khan
A Roadmap for Businesses to Get There
Most companies don’t go from polluter to sustainability champion overnight. The transition happens in stages:
- Start by Complying – Companies begin by adopting basic ESG policies, like reporting emissions or increasing workplace diversity.
- Reduce Waste – They cut down on resource use by reusing materials or adopting cleaner production methods.
- Think Circular – They redesign products and supply chains to minimize waste, use renewables, and promote recyclability.
- Go Fully Regenerative – In the final stage, companies commit to long-term sustainability, making sure both their environmental and social impact is positive.
A company like Patagonia—which uses recycled materials, pays fair wages, and actively works to repair and resell products instead of promoting overconsumption—is a great example of a business that operates at the highest level of the Circular-ESG Model.
Why Businesses Need to Care
Transitioning to a Circular-ESG model isn’t just about saving the planet—it’s also smart business. Governments are introducing stricter environmental regulations, investors are demanding more sustainable portfolios, and consumers are voting with their wallets, choosing brands that align with their values.
Companies that ignore sustainability risks are setting themselves up for failure. They may face hefty fines, lawsuits, or consumer backlash. On the other hand, those who adopt a Circular-ESG approach can attract more investment, strengthen their brand, and future-proof their operations.
The biggest opportunities lie in:
- Renewable Energy – Companies investing in solar, wind, and hydrogen will outperform fossil fuel firms in the long run.
- Circular Product Design – Businesses that create long-lasting, repairable, and recyclable products will reduce costs and increase customer loyalty.
- Sustainable Supply Chains – Companies that ensure ethical sourcing and fair wages will avoid scandals and regulatory trouble.
The Role of Governments and Investors While businesses play a key role, governments and investors also need to step up. Policymakers can incentivize circular business models by introducing tax breaks for sustainable companies and penalties for wasteful ones. Investors, meanwhile, must look beyond traditional ESG ratings and demand real commitments to circularity. Right now, some companies greenwash—claiming to be sustainable while barely making any real changes. To prevent this, we need better transparency and reporting standards that measure a company’s true impact on both natural and social systems. A Smarter Way Forward The Circular-ESG Model isn’t just another sustainability buzzword. It’s a practical, data-driven framework that helps businesses, policymakers, and investors make smarter decisions. By combining ESG principles with circularity, companies can achieve long-term profitability while also protecting the planet. It’s not just about doing what’s right—it’s about doing what makes sense. A business that eliminates waste, operates ethically, and invests in renewables isn’t just helping the world—it’s positioning itself for long-term success in an economy that’s rapidly shifting toward sustainability. So, the real question isn’t “Should businesses adopt Circular-ESG?”—it’s “How soon can they make the transition?” Because those who don’t may not survive the next wave of economic change.
