The circular trilemma

As global supply chains face rising pressure from volatile material costs, stricter regulations, and growing market pressure for transparency, circular business models are emerging as a strategic must-have. Shifting away from the traditional linear model, both public and private sectors recognise that circularity is key when establishing a more resilient, efficient and risk-aware approach to managing materials. Yet circularity is not a straightforward optimisation exercise, it demands the navigation of complex trade-offs between resource security, environmental & social responsibility and economic viability. This strategic tension is what we refer to as the "circular trilemma."

Much like the well-established energy trilemma, which requires balancing energy security, affordability and sustainability, the circular trilemma offers a strategic lens through which companies and policymakers can address competing priorities in sustainable materials strategy. This article explores the components of the circular trilemma, illustrates the tensions between them and proposes approaches to navigate these trade-offs for long-term business resilience and value creation.

Pillar 1 - Resource security

The first element of the circular trilemma concerns the reliable and sustainable supply of materials critical to industrial production, infrastructure, and clean technologies. Modern economies depend heavily on a finite set of raw materials, including metals and minerals. For example, the green energy transition requires vast quantities of copper, lithium, and rare earth elements for batteries, wind turbines, and solar panels.

Securing access to these materials is increasingly complex. Geopolitical tensions, trade dependencies, and supply chain disruptions pose significant risks. Countries and companies alike are now reassessing their material dependencies and considering strategies such as reshoring, diversification of supply sources, and the development of secondary material streams. Moreover, national strategies on critical raw materials and mineral security, such as those introduced by the EU and the U.S., are raising the stakes for companies to future-proof their access to essential inputs.

At the company level, resilience in material sourcing now requires a deep understanding of input dependencies, exposure to high-risk geographies, and lifecycle impacts of material choices. Strategic tools such as supply chain mapping, criticality assessments, and material flow analysis are becoming indispensable for procurement and sustainability teams. Companies are increasingly investing in scenario planning and partnership models that allow for collaborative sourcing or shared resource loops across industries.

In this context, circular strategies such as design for disassembly and material recovery become essential tools to reduce virgin material demand and enhance supply resilience. Industrial symbiosis, component standardisation, and modular product architectures further enable businesses to retain material value and reduce exposure to market volatility.

However, implementing these strategies at scale presents technical, economic, and regulatory challenges that must be carefully managed, including quality consistency, system interoperability, and access to reverse logistics infrastructure. Ultimately, ensuring resource security in a circular economy is not just about raw material access, it is about transforming how businesses understand, value, and manage materials as strategic assets, integrating circular thinking into design, sourcing, operations, and long-term risk planning.

Pillar 2 - Environmental and social responsibility

The second dimension of the trilemma is the imperative to minimise environmental degradation and uphold social responsibility throughout the material lifecycle. Material extraction and processing are among the most environmentally damaging industrial activities, contributing significantly to greenhouse gas emissions, biodiversity loss, water pollution, and toxic waste generation.

The impacts are compounded by poorly regulated extraction practices in regions with weak environmental governance, leading to ecosystem collapse, deforestation, and contamination of local water sources. Simultaneously, the growing demand for critical raw materials has escalated pressure on ecologically sensitive and socially vulnerable areas.

Furthermore, material supply chains often intersect with complex social issues, including labour rights violations, unsafe working conditions, child labour, land use conflicts, and the displacement of indigenous communities. The lack of transparency and traceability in global supply chains makes it difficult for companies to assess and address these issues effectively. As a result, reputational, legal, and operational risks are increasing. In response, governments and investors are introducing more stringent regulations and frameworks. These frameworks require companies to proactively map, manage and disclose their environmental and human rights impacts across their value chains.

Businesses must therefore adopt circular approaches that not only reduce material footprints but also ensure ethical sourcing and inclusive practices. This includes integrating environmental and social impact assessments into procurement decisions and investing in transparent supply chain monitoring systems. Beyond compliance, forward-looking companies are embedding human rights due diligence, biodiversity conservation and climate adaptation into their sourcing strategies, aligning material use with stakeholder values and future-proofing their licence to operate.

Additionally, stakeholder engagement, particularly with affected communities, is becoming central to building legitimate and effective responsible sourcing programs. Ultimately, circularity must be grounded in justice recognising the human and ecological context of material flows and embedding respect for both into the core of business operations.

Pillar 3 - Economic viability and competitiveness

The third dimension of the trilemma is economic performance. Circular economy strategies must be not only be environmentally and socially sound, but also economically viable and scalable. Businesses need to maintain cost-effectiveness, deliver on performance expectations, and compete in markets driven by price, quality and innovation.

For many companies, shifting from a linear to a circular model requires up-front investment in R&D, retooling of production systems, and changes to business models such as transitioning from product sales to service-based offerings. These changes can come with uncertainty around return on investment, market acceptance and regulatory clarity. In industries with thin margins and legacy infrastructure, even small capital shifts can create significant operational friction.

To bridge this gap, companies are increasingly using financial modelling tools to evaluate the trade-offs of circular strategies. For instance, cost-benefit analyses of reuse versus recycling, lifecycle costing for material substitution, or abatement cost curves for emissions reductions can inform better decision-making. Total cost of ownership models are also being used to justify circular products and services to customers who might be sensitive to higher upfront costs but benefit over the long term. In parallel, new business models are emerging that combine circular principles with economic scalability. Digital tools, such as IoT sensors and blockchain traceability, are lowering operational barriers and making circular performance more measurable and monetisable.

However, to realise these opportunities, companies must also invest in internal capabilities. This includes upskilling finance and procurement teams, embedding circularity into capital allocation processes, and integrating non-financial performance metrics into strategic planning. Forward-looking organisations are tying executive incentives to circular KPIs, driving internal alignment between sustainability and business performance.

Ultimately, economic viability is not a constraint to circularity, it is a prerequisite for scaling it. The most successful companies will be those that design circular strategies not as add-ons to compliance, but as core levers for innovation, efficiency, and growth.