Karoliina Rasi: Let’s create a real circular economy market in the EU!

The circular economy is advancing, but more encouraging examples of its business models are needed. Achieving a true circular economy requires well-functioning markets, writes Karoliina Rasi, Senior Adviser at the Confederation of Finnish Industries in Brussels.

The European Commission adopted the EU’s new Circular Economy Action Plan in 2020. It was one of the key plans of the Green Deal, which aimed to improve the efficiency of raw material resources use through the circular economy, stop climate change and biodiversity loss, and reduce pollution.

The Circular Economy Action Plan set out legislative and non-legislative measures to enable the transition to a resource-wise economy. The proposals focus on the way products are designed, promote circular economy processes, encourage sustainable consumption, and lessen waste generation. The goal is to reduce global competition for natural resources and to keep products and materials circulating in the economy as long as possible.

A recent report by the European Environment Agency assesses the transition to a circular economy in the EU. It notes that circular economy activities have increased in Member States. However, despite progress, Member States continue to operate mainly in a linear economic model, where raw materials are turned into goods, used, and consumed and then disposed of, and products have a short life cycle.

The report estimates that there are too few good examples of circular economy business models and robust case studies, especially for repair or remanufacturing operations. There are no examples that would contribute to the breakdown of established operating models and cause large-scale changes. Achieving a truly circular economy requires well-functioning markets, but markets for secondary raw materials for many recycled materials are not yet functioning.

The efficient creation of secondary raw material markets in the EU is slowed down by, among other things:

• a patchwork of national rules on the transport of waste,
• the different national waste classifications under the Waste Framework Directive,
• fragmentation of environmental legislation and other obligations, (national recycling schemes, limited reuse of end-of-life waste),
• extended producer responsibility obligations for textiles and waste management policy;
• the lack of harmonised classification and transfer rules for waste lithium-ion batteries and battery production waste, and
• the lack of a harmonised waste classification in EU Member States as a barrier to shipments of waste.

As a positive step forward, 23 EU Member States already have their own national circular economy strategies, and they are being implemented at national level. A United Nations working group on the other hand is preparing to respond to the challenges of measuring the circular economy globally. Its task is to find a widely accepted definition of the circular economy and develope harmonised terminology and methods for measuring the circular economy.

The circular economy is also a major business opportunity for Finnish companies. A well-functioning single market for the circular economy is one of the key messages of the Confederation of Finnish Industries for the next Commission Work Programme.