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With circular practices, such as recycling, remanufacturing, and product redesign, industries can mitigate greenhouse gas (GHG) emissions and curb environmental degradation. Circular economy not only fosters sustainable production and consumption patterns. It also promotes resilience in the face of climate change impacts. Since adopting the Paris Agreement, European Union (EU) institutions and companies have embraced the transition to a circular economy. However, they are far from a complete transition. The following policy statement highlights the imperative of integrating circular principles into EU policy frameworks and business strategies to accelerate the transition to a low-carbon, regenerative economy, essential for achieving 2030 global climate goals.
Addressing the Urgency
According to studies conducted by the United Nation Development Program (UNDP), we are using more than the available amount of Earth’s natural resources. If current trends continue, we would need three planets by 2050. While the amount of natural resources, such as gas, oil, water and aluminum, is limited, the demand for products is increasing daily. Global material consumption has risen by over 65% over the past two decades, reaching 95.1 billion metric tons by 2019 (UNDP). This emergency requires governments and companies to adopt more sustainable solutions for implementing the reuse of products and reducing the amount of waste. For this purpose, transitioning to a circular economy is crucial.
The recycling process, which characterizes a circular economy, gives a new life to products and reduces waste to a minimum. Carbon emission and pollution, which are the consequences of creating goods and the main cause of climate change, drop drastically as recycling increases. The UNDP asserts that, through efficient and more circular use of materials, circular economy strategies can help reduce global GHG emissions by 40% by 2050 and help us reach the United Nations Framework Convention on Climate Change (UNFCCC) goal of a 43% reduction in carbon emissions by 2030.
In this contest, EU institutions and companies must integrate circular economy and waste reduction into their policies. Indeed, implementing waste management policies and taking the corresponding measures to reduce GHG emissions creates benefits for the environment and for citizens. It also represents a business opportunity. However, the EU is not there yet. Many are the challenges and the barriers that prevent member states and companies from being more practical: the inclusion of circular economy actions are underrepresented in national climate policies and measures due to their cross-sectoral nature and the challenge of quantifying impacts. At the same time, so few are the subsidies that governments give to companies to start this green transition. As a result, a full circular economy remains distant.
This policy statement aims to show the benefits that transitioning to a circular economy can generate both for the environment and companies and the tools that can be used to help EU member states reach the Paris Agreement goal.
EU Circular Economy Challenges and Solutions
In contrast to the linear economy model that has dominated since the industrial revolution and is based on a take-make-consume-throw away pattern, a circular economy focuses on reinventing products and giving them a new life. This minimizes waste and pollution. It also decreases the use of virgin materials. Currently, only 7.2 percent of used materials are cycled back into our economies. Reusing and recycling products reduces the use of natural resources, reduces landscape and habitat disruption, and limits biodiversity loss. Indeed, studies have shown that switching to greener strategies can help reduce global GHG emissions by 40% by 2050, and, if we also include circular approaches within the food system, we could achieve as much as 49% reduction in global GHG emissions overall.
With a predominantly linear economy, every European consumes on average 14 tons of raw materials and produces 5 tons of waste annually. The European Environment Agency asserts that industrial processes and product use are responsible for 9.10% of EU GHG emissions, while the management of waste accounts for 3.32%. Also, the International Resource Panel (IRP, 2019) highlights that the extraction and processing of materials (fossil fuels, biomass, metals and non-metallic minerals) account for around 50% of global GHG emissions. At the same time, more than 90% of biodiversity loss and water stress come from resource extraction and processing. This data shows how the industrial process of creating new goods has a huge and harmful impact on the environment.
In practice, a circular economy is essential to solve the climate change crisis.
The EU transition to a circular economy, in particular recycling and waste regulation, is an important and valuable solution to the problem. In addition, recycling material leads EU countries to be less dependent on other countries for raw materials. According to Eurostat, the EU imports about half of the virgin materials used in industrial production, and the value of trade between EU and other states has tripled since 2002.
After the Paris Agreement was adopted in 2015, EU member states started to implement their national policies to limit the global surface temperature increase to 1.5 degrees by 2050. As a part of this commitment, in March 2020 the European Commission presented the Circular Economy Action Plan (CEAP). It promotes more sustainable product design and reduced waste by boosting sustainable products, empowering consumers for the green transition, reviewing construction product regulation, and creating a strategy for sustainable textiles. The EU has been even more active in recycling and repair. Indeed, one of the main CEAP projects is the Right to Repair which makes repairs more attractive and encourages more sustainable consumption by making it easier to repair defective goods, reducing waste, and supporting the repair sector. In the recycling sector, several member states, including Italy, have shown a particular engagement. Italy has the highest recycling rate among European Union member states, recycling more than 80% of its waste annually.
Despite these successes, the EU has made very little overall progress in its transition to a circular economy. Between 2015 and 2021, the average circularity rate for all 27 EU member states increased by only 0.4%. It is expected that the new Commission, which will be formed after the EU Parliament election in June 2024, will take the circularity challenge more seriously. In particular, instead of spending only on managing waste, it must invest more on circular design.
The Business Approach
Alongside government institutions, companies play a significant role in climate mitigation. The industrial process is the main cause of air pollution and biodiversity loss. With circular practices, such as recycling, remanufacturing, and product redesign, industries can mitigate GHG emissions and curb environmental degradation. Furthermore, switching to a circular economy generates benefits and profits for the companies. Consumers increasingly value sustainable business practices and prefer brands that demonstrate care for the environment.
Resource efficiency is one of the main reasons for business recycling: by reusing materials and products, companies optimize their resource usage, reduce waste, and cut down on the need for virgin materials. Additionally, it can lead to significant cost reduction, because recycling and remanufacturing processes often require less energy than producing goods from scratch, resulting in reduced operational expenses. Studies (e.g. Waste Mission) show that aluminum recycling saves up to 92% of the energy needed compared to manufacturing from bauxite ore. Similarly, iron recycling can save up to 70% of the energy required to extract and process the metal from its ore.
Extending the lifespan of products through repair and refurbishment also can decrease the amount of waste generated, enabling companies to sell their recyclable waste for alternative use, thus generating income. There are some practical examples of businesses that completely embrace this policy: Too Good To Go, is a mobile app which empowers and inspires people in the fight against food waste, allowing its customers to buy directly from store meals and products at a lower cost than the market value that is otherwise wasted. This is a perfect example of how waste management can be integrated into business policy and create value. National governments and EU institutions must promote such activities and support them more economically to foster more innovation.
As governments worldwide tighten regulations on resource consumption, waste management, and carbon emissions, and foster corporate social responsibility, especially with respect to sustainable choices, businesses which embrace circular economy principles will avoid the risk of liability and penalties. In turn, shareholders will be legally bound to comply with the Environmental, Social and Governance (ESG) criteria when setting and following corporate objectives. The European Commission adopted a proposal for a Directive on Corporate Sustainability Due Diligence (CSDDD) to increase managerial awareness in sustainability choices. However, this proposal has been under negotiation in the EU Parliament since March 2022 and it has still not been adopted due to uncertainties about the legal liability of businessmen for their strategy decisions. Indeed, this Directive would have a critical impact on the conduct of businesses and, for the same reason, adopting the Directive would be a significant step forward the circular transition.
Next Steps
Recycling is more than just a waste management and recycling strategy: it holds considerable potential for mitigating climate change. By adopting circular practices, the consumption of natural resources and the amount of carbon emissions produced will decrease drastically, and, at the same time, the competitiveness and reputation of businesses will increase. The EU must lead the way, and the chance to do it seems to be upon us. Indeed, the election of the new European Parliament in June 2024 could represent the turning point and increase the attention on climate mitigation, especially with regards to the integration of sustainability issues into the company’s strategies.
The first issue that we must address to the new Commission is related to the transition to a circular economy, particularly where the circular design of products and manufacturing processes are concerned, as until now the EU ambition of doubling its share of recycled materials has made very little progress. An important step forward, which would help Europe to achieve its goals at least by 2040, would be to make the two Circular Economy Action Plans legally binding for the EU member states. These two CEAPs, one issued in 2015 and the other in 2020, set more than 50 specific actions which will drastically increase the EU circularity rate by far. However, setting specific actions is not enough: investments are needed, and this is why the new European institutions should oblige EU member states that receive funds from Europe (especially after the pandemic) to allocate part of them to the ecologic transition.
Finally, a crucial step, which would increase the chances of reaching the Paris Agreement goal within the established timeframe, is the approval of the Corporate Sustainability Due Diligence Directive. It is time to foster sustainable and responsible corporate behavior and to anchor human rights and environmental considerations in business operations and corporate governance. The new rules will ensure that businesses address the adverse impacts of their actions, including in their value chains inside and outside Europe. With the June 9th European Parliament Elections on deck, voting for the right candidates now is, now more than ever, a powerful tool for real change. Completing the transition to a circular economy by 2040 rests in the balance.
Sources
Clean River (by Christina Lafferty): https://cleanriver.com/resource/blog-why-recycling-important-for-business/
Corporate Sustainability Due Diligence: https://commission.europa.eu/business-economy-euro/doing-business-eu/corporate-sustainability-due-diligence_en
European Commission: https://environment.ec.europa.eu/strategy/circular-economy-action-plan_en
European Court of Auditors: https://www.eca.europa.eu/en/news/NEWS-SR-2023-17
European Environmental Agency: https://www.eea.europa.eu/publications/capturing-the-climate-change-mitigation
European Parliament:
https://www.europarl.europa.eu/topics/en/article/20151201STO05603/circular-economy-definition-importance-and-benefits
https://www.europarl.europa.eu/topics/en/article/20220331STO26410/right-to-repair-eu-action-to-make-repairs-more-attractive
MeuResiduo: https://www.meuresiduo.com/blog-en/the-importance-of-recycling-targets-for-companies/
United Nation Development Program: https://climatepromise.undp.org/news-and-stories/what-is-circular-economy-and-how-it-helps-fight-climate-change
Waste Mission: https://wastemission.com/blog/benefits-of-recycling-businesses/
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