Circular Economy

Defining the circular economy

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The new EU proposals on circular economy regulation, if they are properly ambitious, could have real positive impact on how business operates

Jean-Claude Juncker: Kingmaker for Circular Economy ‘Package’

What will the circular economy look like in practice? That, in effect, is what the European commission is asking in a public consultation published on 28 May. The results will be used in preparing a European Union circular economy package of legislation and other measures that, according to the commission, will be published by the end of 2015.

These EU-level developments, which could ultimately include binding regulations that will apply throughout the 28-country bloc, will potentially have wide-ranging effects on many sectors and companies.

At the very least, companies will need to look at their production and waste management processes to ensure they are not putting themselves at a disadvantage by ignoring resource efficiency concerns.

Thinking change 

The consultation marks a change in thinking among EU regulators. Until now, EU proposals related to the idea of the circular economy have focused on waste and recycling. In July 2014, the commission published draft legislation that would have instituted requirements for 70% of household waste to be recycled by 2030, 80% of packaging to be recycled also by 2030, and sending recyclable waste to land fill to be prohibited after 2025.

However, those proposals were subsequently withdrawn. They would have put the emphasis squarely on the public and private waste management industry to more rigorously collect and manage waste. They would have required companies to more closely pay attention to waste materials from production processes and post-consumer waste.

But they would essentially have been a tightening up of current practices.

More ambition?

With its new approach, the commission claims to be more ambitious. The circular economy package, when it appears in the second half of 2015, will cover sourcing of raw materials, product design, production processes and the lifecycle of products, as well as waste management. In this sense, the impact on companies could be far greater than the original package of waste targets.

The consultation takes it for granted that the circular economy is the way to go. It would “promote competitiveness and innovation, a high level of protection for humans and the environment, and bring major economic benefits, thus contributing to job creation and growth,” according to the consultation paper.

Useful insights

What is at stake therefore is not so much what should be done, but how. Take product design. Better, more reusable and recyclable products can be achieved through regulation, such as mandatory standards for durability, reusability and repairability, or companies can be encouraged and cajoled through voluntary schemes.

Voluntary vs mandatory 

Many companies already understand the rationale for moving towards more circular business models. They might prefer a largely voluntary approach. Environmental groups, meanwhile, are sure to call for tougher mandatory requirements.

One idea put forward by groups such as the European Environmental Bureau is that the previously-proposed recycling targets should be kept and augmented with a “preparation for reuse” target, meaning that a minimum proportion of used products should be repaired and reconditioned, rather than recycled or discarded.

This could have implications for product design, the information that companies provide about their products and intellectual property, as well as waste management.

What looks certain is that the previous target-based approach will be supplemented with a broader suite of measures covering a wider range of company operations. How intrusive these measures will be and which sectors will initially be most effected are yet to be decided.

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