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Transitioning to a Circular Economy – What does it mean?

With a draft of the Circular Economy Bill and the Whole of Government Circular Economy Strategy 2021-2022 due to be published in the coming weeks, now seems an opportune time to consider what is meant by the term "circular economy" and what steps we, as individuals and businesses, can take in the move towards a circular economy.


Our current economic model of production and consumption is considered to be linear and can be summarised as:



Essentially, we take natural resources to make products that we use, generally for a limited time, before we dispose of them as waste when no longer wanted or needed.


The concept of a circular economy focuses on maintaining the value of products for as long as possible. Products that are no longer wanted or needed should be re-distributed. Once products have reached the end of their life in terms of usage, where possible, the components, materials or products themselves should be used to create other products with a minimal amount of waste produced.


Transitioning to a circular economy requires action from a broad range of stakeholders, from those involved in production and manufacturing through to end users of products and on to those in the waste management industry. Governments also have a key role to play in framing the transition and its parameters. While the European Commission adopted its first circular economy action plan in 2015, the new action plan (note 1) adopted in 2020, as a key part of the European Green Deal, aims to accelerate the transformational change needed to shift away from a linear to a circular economic model. It details 35 actions to be taken across the entire product life cycle including initiatives focusing on sectors such as batteries, construction, electronics, packaging, plastics and vehicles that are resource intensive but where the potential for circularity is high (note 2).


Highlighting its commitment to transitioning to a circular economy, the Irish government recently announced funding for ten projects across Ireland under the first Circular Economy Innovation Grant Scheme. Two other key initiatives specifically focused on the circular economy, the publication of the waste action plan for a circular economy in September 2020, which is due to be implemented through the Circular Economy Bill (note 3), and the development of a circular economy strategy, are also worth mentioning as these will provide a framework for measures to drive the practical implementation of the transition to a circular economy.


From an industry perspective, the European Commission's focus on improving the flow of money towards financing the transition to a sustainable economy has led to the introduction of a number of legislative measures aimed at funnelling private capital to sustainable investments. One such measure is the Taxonomy Regulation (note 4) which establishes a framework to facilitate sustainable investment and sets out high level criteria for determining whether an economic activity is environmentally sustainable for the purposes of establishing the degree of environmental sustainability of an investment. Transitioning to a circular economy is one of the six environmental objectives to be taken into consideration when determining the extent to which an investment can be considered to be "taxonomy aligned" and with investor appetite for sustainable investments continuing to grow, investment in activities that substantially contribute to the transition to a circular economy is only set to increase.


Given the scale of the task involved in reshaping our economy from linear to circular, it is reassuring to note that as individuals and businesses we are contributing to a circular economy through actions many of us already take. Although we don't necessarily equate our actions with the concept of a circular economy, the following are examples of activities that contribute to the circular economy:

Action

Business Example

Individual Example

Maintain and repair items

​Computer equipment

Clothing and shoes

Replace single use items with reusable options

Eliminate single use options and provide reusable alternatives

Use reusable mugs and bottles for drinks on the go

Borrow or share

Hiring equipment that is only used occasionally

​Appliances and tools that we don't regularly use can be borrowed from or shared with family or friends

Find a new home for items no longer needed

Donating equipment to non-profit organisations

Selling items second hand

The pre-consultation document on the circular economy strategy acknowledges that greater awareness of further actions we can take, as individuals and as businesses, to support the move towards a circular economy is needed. Lack of public awareness relating to the circular economy generally and the effects our buying, usage and disposal habits have on our ability to transition to a circular economy is highlighted as one of the major social barriers to the circular transition. It is clear that action is required to raise public awareness of the steps that we need to take to facilitate the move to a circular economy. It is equally clear that one of the key measures of success will be the ability to articulate the tangible steps required and to alter individual mindsets and habits. It will be interesting to see what approach will be taken to achieve this objective.



Contributed on 24 September 2021 by Jill Shaw, Professional Support Lawyer, Asset Management and Investment Funds, Walkers.








Notes:

  1. https://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1583933814386&uri=COM:2020:98:FIN

  2. Further information on the implementation of the initiatives listed in the action plan can be found on the European Commission's website at https://ec.europa.eu/environment/pdf/circular-economy/implementation_tracking_table.pdf

  3. The General Scheme of the Circular Economy Bill 2021 was published in June 2021 and the bill is due to start its journey through the legislative process in the near future.

  4. Regulation (EU) 2020/852.

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