Climate Change
Can the circular economy win over big business?
This could be a big year for the circular economy.
In autumn, the European Commission is due to adopt the Circular Economy Act (CEA), aimed at supporting the EU in its stated aim to become a world leader in circularity by 2030.
There is a clear environmental imperative behind the legislation, but also a geopolitical one. Europe imports the vast majority of all its critical raw materials; for example, 100% of its heavy rare earth metals come from China and 71% of its platinum from South Africa.
The bloc is seeking to reduce its dependency on imports of key commodities, energy and materials, and as a result achieve greater self-sufficiency. Circular products are one route to achieving that.
Circular ambitions
Whether the EU’s aim is achievable, or not, brings into sharp relief the current state of the circular economy. According to the European Environment Agency, in 2024, secondary recovered materials made up 12% of total material use across Europe. This was only 1.5% higher than in 2010.
But, by some estimates, the global circular economy is already worth around $700 billion and could reach several trillion within the next decade. This rate of growth would take considerable support from national governments, starting with something akin to the CEA, which aims to double the EU’s circularity rate to 24% and create a single market for secondary raw materials. The hope is that this will stoke demand from businesses to adopt more circular practices.
Carsten Wachholz, business-policy engagement lead at the Ellen MacArthur Foundation, described the forthcoming act as “a critical opportunity to turn circular solutions from a niche proposition into a mainstream market choice,” adding that by harmonising rules across the single market the EU can allow the circular economy to “scale across borders”.
From there the argument runs that rules created in Europe will be copied in other markets, shaping global supply chains and standards elsewhere. “The EU can work towards shared international ambition, reducing protectionism risks, and unlocking large-scale investment globally,” he added.
Making two ends meet
Raising awareness of what is meant by circularity, and being able to identify and treat circular products correctly, is one of the challenges the sector faces.
The global economy has been built on a simple linear structure where we source a material, create something out of it, sell it on and then throw it away. This process, sometimes called ‘take, make, use, dispose’ is the opposite of the principles of circularity.
The Ellen MacArthur Foundation defines the circular economy as a system where “materials never become waste”. In such a system, products and materials are “kept in circulation through processes like maintenance, reuse, refurbishment, remanufacture, recycling and composting”.
Circularity is about the whole life cycle of a product, seeing how it can be used for longer, upgrading when possible, and then potentially using that product to create something else afterwards. The intention with circularity is to increase the use of non-virgin materials, reducing the need to extract more from the ground.
Signify: “We believe resilience is becoming more important to businesses right now”
Thomas Marinelli, head of sustainable innovation and design at Signify, a global lighting company, said: “I once explained it to a child with Lego. You put Lego blocks together and you can pull them apart again and make something new.”
Circular practices also lead to more products – phones, washing machines, lighting – being leased instead of created from scratch. These services cut the need for large upfront investments and reduce environmental impacts.
How business is responding
The next step is to convince businesses it is the right thing to do, from a financial, environmental and product perspective.
“Using products for longer and using less material and energy is a topic of interest in our markets,” added Marinelli, while at the same time acknowledging that part of the challenge is “awareness creation”.
“We need to prove that products made from non-virgin, or bio-circular materials are at least as good. And that a business’s environmental footprint is much lower when you use non-virgin materials,” he said.
Part of the awareness-raising piece is showing that older products can be repaired, refurbished and remanufactured, depending on their condition. Signify takes lighting systems that are up to 10 years old, and makes them new again, saving on material waste and cutting emissions, often at a lower cost than buying a new product.
A growing number of companies are already sold on the benefits of going circular. A recent survey from the World Economic Forum found that out of 491 manufacturing executives, 79% said circularity is crucial to their business, and 95% said it will be important within three years.
Carrefour, the French retail giant, has adopted circular practices in some of its stores as a way of driving down energy costs and cutting carbon emissions. In one of its Belgian stores, the company installed 3D-printed light fixtures made from recycled water bottles. Lighting systems were made from recycled materials that can be fully dismantled and used to make new ones after they reach the end of their natural life.
A separate example comes from Denmark where the area of Tuborg Havn in Copenhagen chose to upgrade its historic street lamps with efficient LEDs instead of replacing them. More than 80 light fixtures were cleaned, upgraded and reinstalled as part of the new initiative, and the new lights will be 3.5 times more efficient than the old ones. The initiative has allowed the harbour to retain its historic character while reducing energy consumption and modernising the area.
Overcoming barriers
The Ellen MacArthur Foundation recently coordinated an open letter to the European Commission – signed by 12 global brands including The LEGO Group, H&M and Philips – calling for lawmakers to support new reforms that address common barriers facing circular products.
These include simplifying EU-wide rules, creating tax incentives and stronger financial support for the burgeoning sector. Current VAT rules, for example, can mean secondhand goods are repeatedly taxed across their lifetime, something the charity is seeking to change.
“Capital is not lacking,” said Wachholz, “but the risk profile of circular economy projects keeps too many ventures stuck at pilot scale rather than reaching industrial deployment.”
The letter calls for the creation of a secondary materials platform to improve price transparency, digital product passports to track material flows, and the creation of new industrial hubs to provide the infrastructure and technology the sector needs in order to scale up.
Those measures, coupled with fossil energy price spikes, will help circular products compete on cost with the extractive economy, experts say. “Using recycled materials or non-virgin alternatives can become competitive in the long run,” said Marinelli, pointing to the volatility in the price of raw materials. “If you look at plastics, when oil is a problem, the price of plastics goes up. But recycled plastic stays at the same level.”
“And it’s not only about materials but production as well. When volumes of recycled materials go up, then the price remains stable or goes down,” he added.
Opportune moment
The current geopolitical environment could serve to support growth in the circular economy. Supply chain constraints caused by the war in Iran have caused commodity prices to skyrocket. This has led many companies – and countries – to seek ways to protect themselves against future shocks.
In that context, new circular policies and products could receive a favourable hearing from businesses looking to build resilience, cut costs and protect nature. A future where circularity is fully embedded across society will need time and support to grow, but may well be on its way.
Adam Wentworth is a freelance journalist based in Brighton, UK
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