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How European businesses can contribute to a circular economy

How European businesses can contribute to a circular economy
By Raghu Kasavan
Feb 17, 2023

The global economy is on a pathway to consume natural resources at an unsustainable pace. By 2050, people will consume minerals, ores, fossil fuels, and biomass at a speed three times faster than the Earth can replenish them, according to the UN Environmental Programme. We will create more waste too—up to 70% more by mid-century. The pollution created by this consumption will contribute a significant share of the greenhouse gas (GHG) emissions that contribute to climate change.

The European Union has made the circular economy—an economy based on reuse and regeneration of materials—a key element of the Green Transition and its goal to become carbon neutral by 2050. While policies will play an important role in advancing the vision for a circular economy, mobilizing the private sector and European citizens can further accelerate progress toward this goal.

What is a circular economy?

Traditional economic models are based on a "take-make-consume-throw away" pattern. Materials and energy that are made available at a cheap price are key to this. Applying "planned obsolescence"—which was banned by the EU in 2018—has accelerated the consumption cycle by deliberately making some products and appliances fail to work.

In contrast, a circular economy is one in which materials are retained within the economy for as long as possible. There are many ways to transition to a circular economy—through re-using where possible, upcycling, recycling, being more efficient with resources, and creating circular processes that all contribute to cutting consumption and waste. An example of this is the "cradle to cradle" concept, in which all products and their component parts can ultimately either biodegrade, feed a biological process, or act as fuel for a technical process.

The benefits of a circular economy

Aside from the principal benefit of helping to reduce GHGs, one of the most important considerations for businesses is that adopting a circular economy model could also actually save them money. Preventing waste; re-using products; and designing products, services, processes, or systems with the environment, society, and the economy in mind (ecodesign) should all help to cut costs for companies.

There are other benefits of a circular economy as well. According to the European Parliament:

“Moving towards a more circular economy could deliver benefits such as reducing pressure on the environment, improving the security of the supply of raw materials, increasing competitiveness, stimulating innovation, boosting economic growth (an additional 0.5% of gross domestic product), creating jobs (700,000 jobs in the EU alone by 2030).” (European Parliament)

The European Parliament also outlines the benefits for consumers, noting that the products they buy will last longer, be more innovative, improve the quality of their lives, and save them money.

The EU’s approach to a circular economy

The European Commission has already moved to proactively promote more sustainable product design, reduce waste, and empower consumers through its Circular Economy Action Plan. These measures focus on the most resource-intensive sectors first (for example, the textile industry). The Plan is a key element of the ongoing journey towards the Green Deal and includes many different pieces of proposed legislation, such as introducing "right to repair" legislation. Other measures include:

  • The Sustainable Products Initiative
  • An EU strategy for sustainable and circular textiles
  • Proposals for revised construction products regulation
  • Proposals for empowering consumers in the Green Transition
  • Updates of EU rules on industrial emissions
  • Legislative proposals for substantiating green claims made by companies
  • A review of requirements on packaging and packaging waste in the EU
  • A new policy framework on bio-based, biodegradable, and compostable plastics
  • The establishment of "Recycled in the EU" as a global benchmark
  • Measures to reduce the impact of microplastic pollution on the environment

In addition, the EU is helping to reduce waste through the Packaging and Packaging Waste Directive with a particular focus on extended producer responsibility. The European Parliament has also set targets on recycling and binding targets for materials use and consumption by 2030—identifying measures that will move us towards a circular economy by 2050.

In fact, 45% of CO2 emissions across the EU come from the private sector’s production of materials that EU residents use every day.

The role of the private sector

Businesses are a key contributor to the traditional economic model.

If Europe is to succeed in its plans for a Green Transition, and meet the targets of the Paris Agreement, the private sector will play a role in transitioning to a circular economy. Their actions and their business models can help drive consumer behavior to change in ways that will also contribute to achieving the targets of the Paris Agreement.

The European Strategy for Plastics offers just one potential model for mobilizing the private sector to contribute to the circular economy. The strategy has set a target of 11 million tons of recycled plastics to be used to make products in the EU by 2025. In its initial stage, the strategy calls for voluntary pledges from companies to use more recycled plastics. However, it reinforces this ambition to create meaningful change by saying that legal measures would then follow if plastic reduction and recycling rates do not improve.

The role of stakeholder engagement

In addition to stimulating the private sector, engaging civil society, citizens, educators, governments at all levels, and the scientific research community can help advance the circular economy. ICF’s recent experience implementing the Low Carbon and Circular Economy Business Action in Canada Project (LCPA) provides some important insights and learnings around how to make the most of stakeholder engagement to build a circular economy.

Commissioned by the EU and supported by ICF's expertise, this three-year project brings small- and medium-sized companies from the European Union into the environmental technology and circular economy space in the Americas.

The project aims to bring private sector green technology companies together to promote innovative solutions to low-carbon and circular economy challenges. This includes SMEs on the EU side and buyers of all sides on the Canadian side. This initiative involves defining key challenges faced by different industries in Canada and identifying relevant, innovative solutions to these challenges from the EU market. The idea behind this process is to:

  • Move Canada towards low emission and resource use efficient practices
  • Increase trade through green tech and circular economy suppliers
  • Encourage the uptake of state-of-the-art cleantech and circular economy technology innovations and services
  • Create awareness of the potential opportunities for partnership between the EU and Canadian markets

Examples of circular economy solutions that have been pitched by EU businesses to the Canadian market include everything from sustainable in-flight packaging solutions to valorizing waste products from lumber milling.

The project has highlighted the value of effectively engaging stakeholders in the project by:

  • Using a "challenge pitch" methodology. The project invites EU businesses to pitch their innovative clean technology solutions directly to the Canadian market. Defining Canadian demand in the form of challenge statements makes it easier to match demand with supply.
  • Implementing a multi-faceted communication strategy. Reaching out broadly via social media, the project website and interactive platform, and through intermediaries like the Enterprise Europe Network (EEN) has helped establish LCBA as a brand in both the Canadian and EU markets.
  • Supplementing our communications strategy with targeted recruitment of EU companies through partners that specialize in market research. This helped to ensure that the best available EU technology innovators were made aware of the opportunities to participate and do business.

This approach holds important lessons for future endeavors in looking to promote international trade in clean and circular economy technologies, and in shaping the future European economy.

You can discover more insights and find out more about ICF’s work in this area here.

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Meet the author
  1. Raghu Kasavan, Consultant - International Development