How regulations have an influence on the deployment of circular economy in Europe?

Circular economy in Europe deployment
August 2nd, 2023
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Repairing used products, buying and selling second-hand clothes, recovering heat from wastewater, etc., circular economy is an economic model that consists of producing goods and services in a sustainable way. Its objective is to reduce waste (raw materials, water, energy) and the production of waste in order to support the ecological transition. Based on sustainable resource management and on new methods of production and consumption, the circular model challenges the linear "throw-away" model. As circular economy gains ground in Europe, it is worth considering the influence of regulations on strategic business decisions.

European regulations: a level playing field

First and foremost, regulations lay the foundations for this new model. They make it possible to share a vision and an economy action plan, as well as to open up a dialogue between the various stakeholders.

A shared vision

By establishing long-term rules that are the same for everyone, regulations are a real lever for change. Today, the view of what is expected in terms of European regulations is clearer.

As part of the Paris Agreement, the European Union is committed to achieving climate neutrality by 2050 and has launched its Green Deal. The European Climate Law, which came into force in March 2020, transformed this commitment into a binding obligation and set an intermediate target of reducing greenhouse gas emissions by at least 55% by 2030 (compared to the 1990 level).

It is in this context that the European Commission has proposed its first package of measures to accelerate the transition to the circular economy in Europe. The idea is to make the vast majority of goods and resources on the European market more circular, eco-friendly, and energy-efficient.

The programme includes:

  • Promoting sustainable products;
  • Holding producers accountable;
  • Harmonisation of collection systems;
  • Increased use of recycled materials.

All companies will therefore have to work on their roadmap towards achieving these objectives and reducing their carbon emissions (scopes 1, 2, and 3).

The importance of a collaborative approach

In this approach, discussions are key to defining European action plans and identifying documented exceptions for certain product categories. Regulations require finding a real balance between several issues, so that one issue does not create a second one and add to the problems that need to be solved. 

As Stéphan Arino, Western European Public Affairs Director at Tomra, a key player in the implementation of regulations throughout his career, explains: "Dialogue is key. Discussions with stakeholders to build a commitment, a truly constructive law, together. Each time, it took a long time, but we came up with systems that are now robust and long-lasting."

It is important to consider all the challenges and issues. This does not mean that we should not be ambitious, on the contrary. But it is important to be realistic and to define a 10- or 20-year objective that is achievable, while respecting one another.

Regulations: a real lever for the development of a circular economy in Europe

In a linear economy, we extract, we produce, and we sell. The whole production and distribution system is organised to be a profitable model. Many of the habits of businesses and consumers are built around this system and are therefore difficult to deconstruct, despite environmental awareness. The direct consequence is that today, many circular economy models are not yet profitable or are in the testing phase. This is why regulations play a key role in supporting the development of these environmentally friendly approaches in Europe.

Supporting sustainable initiatives

Regulations have a key role to play, as does the government, through subsidies. These financial aids boost world innovation and attract a larger number of key players. It is a way of structuring the economic model of the future so that it can become more productive. At first sight, circular economy is not necessarily the most profitable solution, but it is the social contract at the national (and European) level that will ultimately decide what can and cannot be done.

Imposing what makes sense

There are also restrictive regulations that prevent absurdities. Faced with the French ban on the destruction of unsold goods, many brands are launching invitations to tender to find new solutions, since they have historically had service contracts with destruction companies. This could have continued indefinitely without this ban. These players are now building a global network of sustainable suppliers in order to comply.

Promoting sustainable solutions

Regulations can also introduce a positive distortion of competition for the environmental solution. It can force an economic player, beyond the ecological conviction, to transform itself from within, if it does not want to lose a market. Inspired by the AGEC law (Anti-waste for a circular economy), the European Union wants Europe to follow a green public procurement strategy. The idea is to ask public buyers and local authorities to invest in sustainable infrastructures and to favour sustainable procurement (sustainable products and/or products from the circular economy) to support the ecological transition.

Introducing a new mindset

There is also the impact of classifications that sometimes prevent progress, such as the notion of waste for electronic products, for example. Historically, once a product was no longer in use, it was classified as waste. Everyone agreed on this fact and products were written off in the accounts. In addition, it was a lucrative business for the recyclers. Now, Directive 2018/851 of the European Parliament and of the Council of the 30th May 2018 (amending Directive 2008/98/EC on waste) stipulates the hierarchy of waste treatment methods and allows, in certain cases, an "exit from waste status".

Defining a framework for development

Finally, regulations must serve to cover legal vacuums, as Stéphan Arino points out: "When you are a distributor and you sell second-hand products, are you then liable for defective products? Who checks the products, a handler or the after-sales service? Can I resell it? How is it possible to guarantee a service life of 10, 15, 20, 25 years?" Clear regulations also open up a field of possibilities and provide a framework for circular economy action in Europe.

Given these many reasons, it is essential to keep up to date with the existing and forthcoming environment regulations on the circular economy in your sector of activity, as well as to instil and follow them broadly within each company. In 5 or 10 years, a company should know its business plan and be able to look ahead by integrating these circular issues into its growth development

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