by Elisa Casazza

Circular economy is a great business opportunity to improve economic growth, produce substantial net material cost savings, create more jobs and increase innovation (click here to know more). Still, many barriers persist. Some companies managed to overcome them to take practical steps towards the transition.

What is the circular economy?

The circular economy is a system in which products, components and materials are kept at their highest value and utility. This is achieved by extending the life of products and materials to prevent the over-generation of waste and recover the full value of natural resources.

The circular economy is also one of the key priorities of the European Commission, that in 2015 established a concrete and ambitious Action Plan to boost global competitiveness, foster sustainable economic growth and generate new jobs in the EU. This will help Europe to face the current environmental and social challenges (global warming, natural disasters, etc.) and meet global goals such as the SDGs and COP21.

However, contrary to popular belief, the circular economy does not concern only recycling, it implies changing the whole product’s lifecycle (production, consumption/use and end-of life), such as, for instance:

  •  designing products that last longer and are easier to repair,
  • using materials that can be easily dismantled and recycled,
  • adopting sharing models and service packages rather than owning goods.

Therefore, the transition to a circular economy implies a systemic change, in which companies, consumers and public authorities need to substantially change their way of thinking and leave behind the current linear models based on produce – use – throw. This linear pattern is not sustainable anymore and needs to be replaced by circular systems.

Which are the top five challenges for companies?

To identify the main enablers and barriers of the transition towards a circular economy, CSR Europe organised a stakeholder dialogue on January 17–18 to gather insights from a wide range of actors (companies, sector associations, EU representatives, local policy-makers, etc.).

This discussion highlighted the main commons challenges faced by the private sector, as the following:

1.    Difficulty in creating economic value out of circular products due to the very low price of virgin materials.[1]

Current circular business-models aren’t profitable. For this reason, policy-makers need to address this issue by discouraging the use of virgin materials and promoting a market for secondary raw materials.

Recommended solution:

  • Fiscal incentives (e.g. carbon tax on virgin materials or lower VAT on recycled/remanufactured goods, etc.) could be a good instrument to correct the current market distortions.

2.    Trade-off between performance and circularity.

Current recycled materials aren’t always able to meet the quality standards of virgin ones. Consequently, achieving compatibility requires changes in the production line, which are associated with additional costs.

Recommended solution:

  • More investment in research and innovation is needed to solve the technical limitations of products recyclability.

3.    Lack of harmonisation/enforcement of the EU regulatory framework.

To date there is no single definition of waste across the EU and this creates serious obstacles for the functioning of a common secondary raw material market.

Recommended solution:

EU policy-makers should:

  • remove legislative inconsistencies across EU Member States;
  • eliminate regulatory barriers preventing the use of circular resources.

4.    Lack of demand from the consumer side (especially if circular products are more expensive than “regular” products). Demographic trends have dual impact: on the one hand, younger people are more open to new ways of consuming (e.g. using services rather than owning products) but on the other hand, they often lack skills on how to repair/properly take care of products to extend their durability. In addition, there are still many negative stereotypes around second-hand merchandise and materials.

Recommended solution:

  • Implement awareness campaigns to encourage circular consumption patterns.

5.    Lack of financial resources and safe spaces where to demonstrate the product validity beyond the pilot phase.

Recommended solution :

  • Provide access to finance, especially for SMEs, through EU funding (Horizon 2020, structural funds, etc.) and national investments.
  • Encourage local policymakers – who have the power to support the diffusion of circular business models through the use of green public procurement – to create a demand-driven market and support the upscaling of pilot projects.

3 companies taking steps towards circularity

Even though circularity is not a goal per se (but rather a vehicle to provide useful and sustainable products to customers), some companies are already taking big steps towards making it a reality.

For instance:

[1] Virgin materials: Materials sourced directly from nature in their raw form, such as wood or metal ores. Manufacturing products using virgin materials uses more energy and depletes more natural resources, as opposed to producing goods using recycled materials (click herefor source).

*The Writer is a Project Manager at CSR Europe, one of the project’s partners- the article was originally published here.