Long-term policies can help business capture €324bn circular economy opportunity

The Beyond the Circular Economy Package report was published today (14 December) by the Aldersgate Group. The report compiles case studies that highlight the economic business case for championing resource efficiency and backing it with effective long-term policy support.

The report notes that businesses are facing numerous barriers and “regulatory obstacles” when trying to embed closed-loop practices. Notably, the report found that a lack of clear market signals made it difficult for businesses to drive innovation.

The Aldersgate Group’s executive director Nick Molho said: “The Circular Economy Package is delivering welcomed progress on some of the barriers that are slowing down business action on resource efficiency.

“However, an economy-wide shift to much greater resource efficiency will take time. To invest in new business models, more resource efficient processes and new supply chains, businesses need the assurance that the resource efficiency agenda will remain a priority for the EU in the long term.” 

The 2008 Waste Framework Directive sets the overarching legislative framework for EU waste policy. The Directive sets binding targets to be achieved by 2020: preparing for reuse and recycling of 50% of certain waste materials from households and similar sources, and preparing for reuse, recycling and other recovery of 70% of construction and demolition waste.

The Circular Economy Package aims to build on the directive. In March 2017, MEPs rejected a ”watered-down” version of the package. The plenary vote advocated to reinstate a 70% target for municipal waste recycling, strengthening current proposals by 5%. Meanwhile, a 2030 target for packaging recycling was voted to be 80% – higher than the 75% previously backed by the Commission. 

Despite the ambitious framework, the Aldersgate Group report argues that the transition to a circular and competitive economy will require long-term policy support. Specifically, the report calls on institutions to publish resource efficiency design criteria in product standards, improve financial and technical support for business innovation and to expand the criteria of the circular economy into public procurement and other product ranges.

The report also encourages Member States to develop pricing mechanisms that support material reuse. Between 2000 and 2016 EU resource productivity increased from €1.47/kg to €2.07/kg but household waste levels continue to rise and recycling rates are flatlining in certain countries.

To counteract these trends, the report recommends that Member States set consistent implementation actions that are holistic across the EU. This would require improved definitions of waste, and that materials that can be re-used are no longer identified as waste.

The recommendations are based on numerous EU circular economy pilot projects. Companies involved in the REBus project have delivered financial benefits of €5.62m, material savings in excess of 62,000 tonnes and a reduction in emissions of nearly 2,000 tonnes.

The projects were carried out across key market sectors worth €350bn to the EU economy. Research carried out off the back of these projects suggest that they could increase the EU economy’s gross value added by up to €324bn by 2030.

The European Commission’s vice-president Jyrki Katainen, responsible for jobs, growth, investment and competitiveness, added: “The transformation towards more resource efficient business models is not a matter of choice but a necessity for retaining competitiveness. The move to a more resource efficient economy calls for an ambitious policy framework beyond the Circular Economy Package, which will require the active engagement of all stakeholders, from policymakers and businesses to consumers.”

Brexit implications

It is anticipated that the measures set out in the Circular Economy Package will be completed before the UK leaves the EU, so the UK will be obliged to give effect to them until its departure in 2019. Aspects of the package, such as minimum recycled content in certain products, will likely still apply as the UK will trade with EU members.

However, Brexit does enable the UK to rewrite its waste legislation and circular economy ambitions. Policy Exchange has warned that British businesses would lose as much as £2bn over the next 20 years through the package.

Elsewhere, the Environmental Industries Commission (EIC) claimed that the UK should consult on new recycling targets for 2025 to boost investor confidence in the waste sector. But the Aldersgate Group report does shed some insight into how closed-loop systems can boost performances for businesses.

The use of retreaded tyres in the UK have become a common practice in recent years. Around 80% of civil airliners are fitted with the tyres, while 25,000 UK buses and 70% of supermarket delivery vehicles also run on retreads.

The report notes that 95% of these tyres are produced in the UK, creating an economic incentive to promote growth in this area. Compared to 2012, an estimated 500,000 additional end-of-life truck tyres now appear in the UK every year. It is estimated that this has avoided the release of 160,000 tonnes of CO2 every year.

Matt Mace