The Role of Policy in Driving Circularity: Government Initiatives and Regulations
Resource extraction has tripled since 1970 and is projected to grow by another 70% by 2050. Companies extract more than 60 billion tons of raw materials per year, or 22 kg per person per day, to support economic activities. According to a WWF estimate, we will need 1.5 Earths to sustainably support our current resource use. A rapid shift to a more circular economy could dramatically cut resource extraction. It reduces waste and creates a second life for products and new value from reusing goods and materials. Besides the environmental benefits, a circular economy helps protect human health, boosts the economy, creates jobs and new business opportunities, and advances social and environmental justice. Realizing these benefits will require ambitious action. Governments, businesses, civil society, finance institutions, research organisations—everyone has a role to play.
Effective policies provide the roadmap and the blueprint to circularity. They can help accelerate and scale up circular actions in the economy. Government regulations can mandate people to source segregate, for instance; and not only direct businesses to implement sustainable practices but also support them in overcoming hurdles. Policies can stimulate innovative projects; facilitate collaboration and partnerships; ease trade of recycled materials and thereby drive economic and social growth.?
According to the Ellen MacArthur Foundation, “As many circular economy opportunities have a sound underlying profitability, businesses are driving the shift towards the circular economy. Yet there are often non-financial barriers limiting further scale-up or holding back development pace. Policymakers therefore can play an important role in enabling and, as appropriate, setting the direction for a transition to the circular economy.”?
Where to begin??
The Ellen MacArthur Foundation’s Toolkit for Policymakers provides guidance to legislators and companies pursuing circular economy transition, including basic principles and examples from around the world. It offers a detailed step-by-step methodology to explore and prioritize circular economy opportunities; quantify their impact; identify the barriers limiting these opportunities; and map and prioritize the policy interventions to overcome these barriers. There is also a discussion of when and how to engage relevant stakeholders, and a final section for policymakers considering how to tailor this methodology to their specific circumstances
The methodology suggests that relevant stakeholders need to be mapped and engaged early on in the process. They should align on starting point, ambition and focus areas, it suggests. Once the focus sectors have been selected, the sector-specific assessment can begin. The circular economy opportunities need to be mapped and prioritized. For the prioritized opportunities, sector-specific economic impact needs to be assessed, barriers limiting their realization identified and policy options to overcome these barriers mapped. The next step is to analyze national implications by a core group of policymakers, policy and economics experts and government agencies.?
The United Nations Economic Commission for Europe in its policy brief takes five aspects into consideration for policy development. They are: traceability of products along international value chains; innovation-enhancing procurement; institutional arrangements for the transition to circular economy; financing; waste management and? digital solutions.?
Showing the way
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Japan was among the first countries to recognise the importance of a circular economy. It approved the Circular Economy Vision in 1999 to transform the economic system from one based on mass production, mass consumption and mass disposal, to a circular economic system where environmental and economic aspects are integrated. In 2007, just 5% of Japan's waste ended up in the landfill. And did you know it recycles 98% of its metals??
In recent times, several governments have established a long-term vision to transition to a circular economy. These have taken various forms, such as: strategies; roadmaps; action plans and bills. The Netherlands aims to be fully circular by 2050 and Finland aims to become a world leader in the circular economy by 2025. The Dutch government’s Green Deal supports companies to identify opportunities and ease implementation barriers. Some governments have set up task forces to remove regulatory barriers. While London’s 2015 housing legislation allows a sharing economy such as those offered by Airbnb, China has reduced VAT on goods produced from secondary materials.?
In January 2021, the UAE Cabinet approved the UAE Circular Economy Policy. The framework identifies priorities including infrastructure, sustainable transportation, sustainable manufacturing, sustainable food production and consumption for a circular transition. In July 2022, the nation approved 22 policies aimed at accelerating the country's transition to a circular economy. The council highlighted eight relevant trends, including waste-to-resource, reuse, artificial intelligence, remanufacturing, bio-based materials and repair work. It also identified at least 16 circular economy activities that open opportunities for businesses, such as upcycling textile waste into new products, developing artificial intelligence-enabled waste management solutions and remanufacturing electronic waste.
The efforts of the European Union and its member states have focused on reducing raw materials consumption or increasing resource efficiency. In 2015, it adopted the first circular economy action plan and five years later it implemented the action plan. In May 2023, the European Commission revised the circular economy monitoring framework. The European Union Parliament recently adopted the directive on “right to repair.” The rules clarify the obligations for manufacturers to repair goods and encourage consumers to extend a product’s lifecycle through repair.??
Many countries in Africa have implemented taxation and bans on single-use plastic to tackle plastic waste. In 2019, the African Development Bank announced it would stop financing coal projects.?
Key enablers
The World Business Council for Sustainable Development published a report exploring the key enablers from policies around the world that are essential to unlocking and accelerating circular actions. It identifies four key enablers namely: Incentive Mechanisms; Partnerships and Collaboration; Aligning Circular Economy in Mainstream Policies and Traceable Actions & Targets.??
How companies can adapt to evolving policy trends?
As governments come up with new policies and regulations, companies are on the lookout for guidance to quickly adapt to changes.? Ernst & Young has the following recommendations: