How ambitious legislation can pave the way for greater circularity

Policies and regulations play a key role in creating an enabling environment for a circular economy. We conducted an assessment of current legislative trends and developments, and investigated how they will push circularity forward – here in Berlin, on a national level and beyond.

It establishes harmonised reporting criteria for businesses, which achieves plausibility and comparability of data and facts. 

With the CSRD, all European companies above the size of 250 employees need to report on how they plan to lower their CO2 emissions, how they strive to achieve circularity within their business, how they protect and recover biodiversity threatened by their business activities, and how they protect human rights. What can be expected is that this directive will require the majority of European businesses to start grapple what circular economy means in their firm’s context. Further, the CSRD has the potential to lead to the initiation of wider change processes within business operations, as private firms will strive to adhere to the reporting requirements, and might even establish a unique selling point through their circularity initiatives (Econsense, 2022).

One thing is for sure: The circular economy has arrived on Germany’s political agenda again. In comparison to Germanys’ stellar reputation in the late 90ies due to its progressive waste management policies, progress in the German circular economy has been rather slow in the past 20 years. However, the current government, consisting of the green party, the social democrats and the liberal party, have jointly developed the ‘national circular economy strategy’ in their coalition paper. Under this strategy, the coalition aims to bring forward topics such as a plastic tax for German producers, a digital product pass with comprehensive information on a product’s materials and its supply chain, and standards that ensure recyclability being addressed already in a product’s design stage (IHK Karlsruhe, 2021). There are lots of ambitious targets, especially for the plastic sector, however, with past and present crises, like the corona pandemic and the war in Ukraine, progress going from targets to legislation has been slow.

Nonetheless, there are some important policies and legislations that have a positive impact on the circular economy in Germany. For example, the German institute for standardization has recently published a standardization roadmap for the circular economy. Standards help to create transparency and precision for businesses through harmonization and unification of terminology. Focussing on the key sectors digitalisation & business models, electronics, batteries, packaging, plastics, textiles and construction, the roadmap will give guidance and clarity to businesses and entrepreneurs operating in these sectors (DIN, 2022).

The circular economy is a popular concept among policy makers that will push legislation in favour of resource efficiency, the sharing economy, standardisation and other economic trends we can currently observe. When looking at the EllenMacArthur Foundation’s universal policy goals for the circular economy, we can see that some of them start materialising in the current policy landscape (EllenMacArthur Foundation, 2023b).

So what can businesses, entrepreneurs and start-ups learn from the current legislative developments? One thing is for sure, coming years will see policy focus more and more on the incorporation of circularity already at the design phase of a product or service – so as a business, entrepreneurs have to learn to challenge ownership, and embrace Design4Recycling and Design4Reuse! Further, one must keep in mind resource efficiency and management: It is likely that more and more attention in policies will be laid on how private actors use raw materials – and whether they are of primary or secondary source. Secondary raw materials will be favoured over primary raw materials, and more and more non-circular products will be banned. Another important related topic are pricing mechanisms, which will play an ever-increasing role.

It is likely that primary raw materials will be heavily taxed, and secondary raw materials will be cheaper in the future. So it might be a good idea to future-proof your business by centring your business model around recycled or refurbished materials. Working on a thorough circular business model can also pay off in a more obvious way, as investments in the circular economy will increase – a key trend which can already be observed today, through stricter reporting. And lastly, think collaborative, not competitive – allowing cross-industry knowledge transfer and building initiatives in which different stakeholders work together and share knowledge is the only way to a seamless transition from linear to circular.