Between you and I: A portfolio theory of the circular economy

9 Pages Posted: 27 Aug 2021

See all articles by Frank Figge

Frank Figge

ESCP Business School

Andrea Thorpe

KEDGE Business School

Siarhei Manzhynski

Umea School of Business and Economics

Date Written: August 24, 2021


By using resources more circularly, individual resources users hope to contribute to a more eco-efficient and sustainable resource use. Whether resources are used sustainably is decided at the macro-level, raising the question if, as well as how, the efficient and circular use of resources at the micro-level adds up to their efficient and circular use on the macro-level. Currently, the link between the circular use of resources at micro- and macro-levels is under-theorized. The symbiotic relationship between individual resource users enables a reduction in the resource use at the macro-level. In this conceptual paper, we argue that an analogous link exists in finance where desirable investment return is linked to undesirable investment risk, and that via the generation of efficient portfolios, individual risks are at least partially diversified away. As our main contribution, we theorize the circular economy, both in its perfect and imperfect forms, using modern portfolio theory. Our theory identifies the drivers of circular resource use and shows under which conditions individual resource use con-tributes to the circular use of resources.

Keywords: Circular economy, eco-efficiency, portfolio theory

Suggested Citation

Figge, Frank and Thorpe, Andrea Stevenson and Manzhynski, Siarhei, Between you and I: A portfolio theory of the circular economy (August 24, 2021). Ecological Economics, No. 190, 2021, Available at SSRN:

Frank Figge (Contact Author)

ESCP Business School ( email )

79 avenue de la République

Andrea Stevenson Thorpe

KEDGE Business School ( email )

Domaine de Luminy - BP 921
BP 921
Marseille, PACA 13288

Siarhei Manzhynski

Umea School of Business and Economics ( email )

Biblioteksgränd 6
Umea, 901 87

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