Leading EU businesses say preparation for a circular economy needs supportive policy framework

Leading European businesses are making the transition to more resource efficient business models to deliver greater resource productivity and reduce waste and are desperate for EU Member States to do more to implement policy that supports and accelerates the move and maximises the potential economic benefits, according to a new report from The Prince of Wales’ Corporate Leaders Group (CLG).

The report, ‘European industry in the 21st century: New models for resource productivity’, is based on interviews with senior members of staff from 14 participating companies, including Coca-Cola European Partners, GlaxoSmithKline and IKEA Group, and presents the ways in which these companies are changing how they operate, moving from a linear to a circular model, through re-designing products to use fewer materials and last longer, choosing bio-based inputs, and reusing or recycling waste.

In a context of diminishing natural resources, increasing supply chain vulnerability and environmental degradation, the report finds that these companies have deemed these changes necessary and have identified other business benefits such as cost savings, enhanced reputation and consumer loyalty derived from switching to a more sustainable business model.

It adds that for the companies to make these changes they need supportive policy, with next Spring’s EU Industrial Strategy seen as an opportunity to see how much EU member states are willing to get on board.

The report suggests that such policy is required to: clean up the overly restrictive and unharmonised web of policies posing a barrier to the adoption of a more circular business approach; overcome insufficient demand or knowledge on the part of consumers; get consumers, policymakers and businesses to think circular; and shift the focus to see waste as a resource.

Leading EU businesses say preparation for a circular economy needs supportive policy frameworkThis shift in approach is underlined by Seppo Parvi, Chief Financial Officer at participating company Stora Enso, which develops renewable materials, who said: "For businesses looking to reduce their exposure to supply risks, enter new markets and reduce their carbon footprint, developing new business models based on renewable materials and circular economy principles can bring very real economic and brand benefits.

“However, stricter policies - for example new ´eco-design´ and public procurements requirements - that drive the prioritisation of materials and services with a low carbon footprint are much needed to catalyse a further market pull and consequently achieve wider societal benefits."

Recycling not enough

Participating businesses are beginning to recognise the need to take a supply chain approach to sustainability, as opposed to just recycling a product once it has reached the end of its life. The European Commission estimates that European companies could benefit from net savings of around €600 billion (£526 million) and a two to four per cent reduction in CO2 emissions through waste prevention and eco-design.

Companies are cottoning on to the need to design waste out of the system, and that that should be reflected in policy decisions and frameworks, with Mat Roberts, Group Director of Sustainability Strategy at Interserve, saying: “70 per cent of circular economy policy is currently on end life, maybe 15 per cent on input, and the other 15 per cent on the design phase. Ideally, it should be nearer five per cent responsibility left for end of life decisions.”

In order to reduce inputs and waste, some companies are moving away from selling a product to selling a function or level of performance, incentivising resource efficiency, while others are investing in ‘industrial symbiosis’, using outputs from one industrial process as inputs for another, saving costs and resources.

For example, renewable energy company ACCIONA’s renewable electricty by-products used to go to landfill, but are now sold on as fertiliser additives, avoiding 27,000 tons of landfill each year and saving $1.4 million (£1 million) every year.

Commenting on the need for coherent and supportive policy, Natasa Sbrizaj, Public Policy & Government Affairs Manager for 3M said: “We would like the EU and its Member States to be more progressive and less voluntary in their approach if public procurement is to really bite across the EU. Additionally, if the EU is serious about driving a circular economy, it needs to provide legislation that prompts and enables companies to change current behaviour.”

Jill Duggan, Director of the CLG added: “There are many reasons to make more efficient use of our resources. Alongside the environmental impact of extracting resources, there are those associated with their disposal at end of life.  Smart businesses are rejecting the traditional linear model of production, consumption and waste, and pursuing greater resource productivity - and responsibility.

“But legislation is needed to shift incentives, remove obstacles, and support these initial moves. The EU has recently watered down its proposals on this issue. The new EU Industrial Strategy next spring is their chance to correct course.”

The full report can be downloaded from the Corporate Leaders Group website.