The EU’s Circular Economy Action Plan is coming into effect. At the end of March 2022, the EU Commission presented several proposals to make sustainable products the norm in the EU, boost circular business models, and empower consumers for the green transition. The announcement’s timing came fortuitously, during the geopolitical crisis that has emphasized the vulnerability of Europe as a continent scarce on natural resources and with a high level of dependency on imports. In this blog, we dive into the details of the proposals and share some ideas from early adopters of circular business models.
Gaurav Sharma, Lead of Circularity Consulting Practice, Schneider Electric
As Circularity Consulting Practice lead, Gaurav leads the delivery of Schneider Electric’s circularity consulting capabilities to our customers, supporting them to meet their business and sustainability goals using circularity as a lever.
The EU’s resources problem
Have you heard about the Mercator projection? It’s the way we usually design our world maps that distorts places in global North and South — especially all of Europe — to appear to be way larger than they are. In reality, Europe is the second-smallest continent on the planet, occupying about 2% of the world’s surface area. In terms of natural resources, the figures get even smaller. For example, Europe produces only 1% of the world’s iron ore and 4% of its copper, even though it uses a much larger share of these materials in manufacturing and construction. Notably, in terms of its share of global GDP, the EU is no small player as the world's third-largest economy. However, it lacks the raw materials to meet its basic needs and must resort to importing them.
Geopolitical disruptions have put a spotlight on the risks the EU faces from energy and resource dependency. Consequently, EU member states aim to drastically accelerate the clean energy transition and the move to a truly circular economy. A circular economic system in Europe would decouple the continent from energy and resource dependencies, making it more resilient to external shocks and respectful of natural resources.
Towards truly sustainable products
The Circular Economy Action Plan is a core building block of the European Green Deal, Europe's agenda for sustainable growth. With the regulatory proposal published recently, the Commission is now taking the next steps to enforce it, with the goal to make almost all physical goods on the EU market more friendly to the environment, more circular, and more energy efficient. The Action Plan will cover the entire product lifecycle, from design through to daily use, repurposing, and end-of-life. The package of new rules includes the following pieces of regulation:
- a proposal for a Regulation on Ecodesign for Sustainable Products,
- an EU Strategy for Sustainable and Circular Textiles
- a revision of the Construction Products Regulation
- an Ecodesign and Energy Labelling Working Plan 2022-2024
Ecodesign is not new in EU regulation: the more than 15-year-old Ecodesign Directive (EDD) is a key instrument of the EU’s policy framework, though its focus was more on the energy side. It worked by setting minimum energy efficiency and environmental requirements for household and industrial products, using labels to provide information to consumers to help them make informed decisions. The EU claims that existing ecodesign requirements saved consumers €120 billion per year as of 2021 and led to 10% lower annual energy consumption by the products in scope.
The recent proposal extends the existing ecodesign framework to cover the broadest possible range of products and to expand the scope of the requirements with which products must comply. It aims to increase energy and resource independence and reduce pollution, with new criteria for circularity and an overall reduction of the environmental and climate footprint of products. In detail, the new proposal covers the following wider range of requirements and products:
- product durability, reusability, upgradability, and reparability
- presence of substances that inhibit circularity
- energy and resource efficiency
- recycled content
- remanufacturing and recycling
- carbon and environmental footprints
- information requirements, including a Digital Product Passport
New “Digital Product Passports” are intended to strengthen consumers' impact on sustainable products. They will provide information about product environmental sustainability, while helping consumers and businesses make informed purchasing choices. These passports shall also contain relevant information to facilitate repairs and recycling and improve transparency about a product’s lifecycle impacts on the environment.
As a transitionary measure until the new regulation enters into force, the accompanying Ecodesign and Energy Labelling Working Plan 2022-2024 aims to cover new energy-related products and increase the ambition for products that are already regulated. It will lead to short-term changes, particularly in consumer electronics (smartphones, tablets, solar panels), the fastest growing waste stream.
These new rules are expected to have the positive side effects of market development and job creation in remanufacturing, maintenance, recycling, and repair. As such, the regulation is expected to bring innovation and economic opportunities in line with the Green Deal’s objective to foster economic growth decoupled from resource use.
How to prepare for the circular economy
The EU clearly states that the upcoming regulation aims to provide multiple benefits for businesses. At a minimum, the clear structure of the rules shall reduce administrative and compliance costs, effectively leveling the playing field for all businesses to take part. However, the main benefits lie in businesses adapting their products and business models to spearhead a sustainable and circular product and service transformation. For these businesses, the regulation claims to create a competitive edge globally.
Circular economy principles can generate both environmental impact and competitive advantage for businesses that choose to innovate the way they work. One of the key benefits that allows circularity to drive business growth is the emphasis on customer relationships, moving from a transactional one-way relationship to a full lifecycle, long-term engagement. For Schneider Electric, a circular approach has driven numerous benefits and has forced the company to think in new ways. Following our experience, we can share some recommendations to help outline your circularity playbook:
- Clarify the expectations of circular objectives
- Establish a baseline and set goals
- Get your team on board
- Implement governance and policies
- Engage the right partners
Importantly, support is there for you if you seek it. Don’t hesitate to engage trusted external partners to understand the upcoming regulation, leverage best practices, and avoid reinventing the wheel. Schneider Electric has extensive experience in implementing circularity practices throughout our own value chain, and we have been recognized for our progress. We channel this experience in our Circularity Consulting Practice, in which we apply real-world understanding to help companies identify and capture the value of the circular economy throughout their value chain.
On May 19th, Schneider Electric’s Circularity Consulting Practice Lead will be joined on a webinar by experts at Interxion and the Ellen MacArthur Foundation to share some of these best practices and discuss circularity as means to transition to a net-zero future. Click here to register and join the discussion.