What is the Circular Economy?

The circular economy is focused on managing resources better by reusing, remanufacturing, recycling and repairing, moving forward from the traditional "take, make, dispose" model.

This crucial evolution away from the standard linear economy model can minimise waste and maximise the value of resources by keeping products and materials in use for as long as possible, which can benefit businesses, society, and the environment.

SaveMoneyCutCarbon advises that the adoption of this sustainable business model is important for businesses of all sizes as they develop their Environmental, Social and Governance (ESG) frameworks. It is particularly useful for listed companies and for those that might seek access to funding for growth.

Circular economy initiatives could generate £75 billion in economic benefits for the UK by 2030 (1) while creating 700,000 new jobs (2). And moving to this more efficient model could generate £3.6 trillion for the globe. (3)

Key Ways New Policies Are Affecting Businesses

The government’s circular economy policies incentivise or require businesses to design products for durability, repairability, and recyclability. Examples like waste management regulations are increasing the need for businesses to manage and report waste, with penalties for excess waste generation.

The UK’s circular model also encourages business to pay more attention to material sourcing and use in a sustainable manner. Policies encourage the use of recycled and sustainable materials, impacting procurement strategies.

At the same time,  stricter rules have been introduced around reducing single-use plastics and encouraging reusable or recyclable packaging materials.

Policies Driving Change

Recent regulations and policies, such as Extended Producer Responsibility (EPR), the EU Circular Economy Action Plan, and  bans on single-use plastics are helping  businesses to focus on the need for more effective resource management, not only in the UK but across the globe.

The UK government’s Resources and Waste Strategy aims to establish a circular economy, with five strategic ambitions including doubling resource productivity and eliminating avoidable waste by 2050. (4) The need to decarbonise the waste sector, one of the benefits of the new economic model, is more pressing now with the commitment to  net zero greenhouse gas emissions.

The UK generates around 41 million tonnes of commercial and industrial waste annually, highlighting the urgency for circular economy practices (5), and the Department for Environment, Food and Rural Affairs (Defra) has set a waste recycling target of 65% by 2035. (5)

Extended Producer Responsibility

The government continues to update the Producer Responsibility Obligations that place restrictions and obligations on businesses that produce or handle packaging materials. Producers are required to finance the recovery and recycling of packaging waste, encouraging the use of recyclable materials and reducing packaging waste. (6)

The Extended Producer Responsibility (EPR) policy puts the onus on businesses to manage environmental impacts of products throughout the lifecycle, encourages more sustainable products and manufacturing processes and makes producers are responsible for the financial costs of managing products at the end of life. 

EPR is an established policy approach adopted by many countries around the world, across a broad range of products and materials. It gives producers an incentive to make better, more sustainable decisions at the product design stage including decisions that make it easier for products to be re-used or recycled at their end of life. (7)

The policy approach could encourage businesses to implement retrieval and recycling programmes and set up collection points while at the same time designing products that are easier to reuse, repair, and recycle.

EU Circular Economy Action Plan

The European Commission launched the Circular Economy Action Plan (CEAP) in March 2020, as one of the key elements in the European Green Deal strategy for sustainable growth. The EU hopes that the transition to a circular economy will reduce pressure on natural resources while creating new jobs, and meet the 2050 climate neutrality target. (8)

The action plan aims to stimulate initiatives across the entire product life cycle, focussing on design while promoting other circular economy processes. It encourages sustainable consumption, and aims to ensure waste prevention, ensuring that resources are circulated within the EU economy for as long as possible.

The EU aims to halve the quantity of municipal waste not recycled or prepared for reuse by 2030, while all EU member states must recycle or prepare for reuse at least 60% of their municipal waste by 2030. (9)

In the UK, the government continues to evolve programmes and policies to support the evolution of a circular economy.

Waste and Resources Action Programme (WRAP)

WRAP is a prominent advocate and enabler of new and sustainable economic practices, working with businesses, governments, and communities. It provides guidance, support, and funding to help businesses implement sustainable practices and reduce their environmental impact.

WRAP is developing short policy briefs that pull out new nation-specific data on carbon savings, reduced biodiversity loss, and economic growth benefits from more implementation of the circular economy. These briefs also provide suggestions for new nation-specific policy interventions that can help deliver these benefits. (10)

Environment Act

The Environment Act 2021 aims to address environmental challenges and promote the circular economy in the UK. The Act included provisions for EPR schemes, and introduced deposit-return systems to encourage recycling and measures to tackle plastic pollution.

The government advises: “It will help us transition to a more circular economy, incentivising people to recycle more, encouraging businesses to create sustainable packaging, making household recycling easier and stopping the export of polluting plastic waste to developing countries.” (11)

Legally binding environmental targets are enforced by the independent Office for Environmental Protection (OEP) which holds government and public bodies to account on environmental obligations.

UK Plastics Pact

The UK Plastics Pact brings together businesses, non-governmental organisations (NGOs), and government agencies to eliminate unnecessary single-use plastics and promote recycling. Pact members aim to eliminate problematic plastics, reducing the total amount of packaging on supermarket shelves, stimulate innovation and new business models and help build a stronger recycling system in the UK. (12)

The Plastics Pac is led by the Ellen MacArthur Foundation and the goal is to ensure that that plastic packaging is designed so it can be easily recycled and made into new products and packaging and, with the support of governments, ensure consistent UK recycling is met. (13)

Plastic Packaging Tax

The Plastic Packaging Tax aims to reduce the use of plastic packaging containing less than 30% recycled content and incentivises the use of recycled materials while encouraging the adoption of more sustainable packaging solutions. The tax came into force on 1 April 2022 and is charged at a rate of £217.85 per tonne from 1 April 2024. (14)

Single-use plastics ban

The ban was introduced in 2023 and applies to businesses, including retailers, takeaways, food vendors, and the hospitality industry. The ban includes:

·      Single-use plastic cutlery, trays, plates, bowls, and balloon sticks

·      Certain types of polystyrene cups and food containers

·      The supply of ready-to-consume food and drink in polystyrene containers

·      All types of single-use plastic, including biodegradable, compostable, and recycled

·      Items wholly or partly made from plastic, including coating or lining (15)

Landfill Tax

The government also imposes a Landfill Tax to discourage the disposal of waste in landfills. This tax encourages businesses to adopt practices prioritising recycling, reuse, and waste reduction. It applies to all waste  disposed of by way of landfill at a licensed landfill site, unless the waste is specifically exempt. (14)

Energy Savings Opportunity Scheme (ESOS)

ESOS is a mandatory energy assessment and energy-saving identification scheme for large UK businesses, which can help to  stimulate improvements in resource efficiency and waste reduction. (15)

Practical Steps Businesses Can Take

The national sustainable economy drive is encouraging businesses to adopt circular business models, such as product-as-a-service (leasing instead of selling), remanufacturing, and closed-loop systems in the supply chain, packaging, payment and quality control for example.

Businesses can focus on reshaping products and processes, employing eco-design principles, extending product life cycles, and finding ways to reuse materials. They can also collaborate with suppliers and partners to improve resource efficiency, developing circular economy supply chain.

Conclusion: The Future of Business in a Circular Economy

The circular economy represents a paradigm shift in how businesses operate, emphasising sustainability, resource efficiency, and innovation.

The  circular economy is being stimulated by government policy and evolving regulations but it is not simply a matter of regulatory compliance – it can also be a business opportunity. Economic benefits can include:

·      Cost savings by reducing waste and more efficient use of resources

·      New jobs in sectors like remanufacturing, recycling and renewable energy

·      More resilient supply chains.

In SaveMoneyCutCarbon’s view, government policies could be a stimulus for businesses to innovate, reduce waste, and increase profitability while contributing to sustainability goals. By embracing circular economy principles, companies can not only reduce their environmental footprint but also drive economic growth and create a more resilient, equitable society. As the world moves towards a net-zero future, the circular economy offers a viable pathway towards a more sustainable and prosperous future for all.

Bibliography

1 Deloitte:  The UK Circularity Gap Report (accessed September 2024) https://www2.deloitte.com/content/dam/Deloitte/uk/Documents/risk/deloitte-uk-the-circularity-gap-executive-summary.pdf

2 WRAP: Employment and the Circular Economy (accessed September 2024) https://wrap.org.uk/resources/report/employment-and-circular-economy

3 Ellen MacArthur Foundation:  Cities and circular economy for food (accessed September 2024) https://www.ellenmacarthurfoundation.org/cities-and-circular-economy-for-food

4 UK Parliament: Government’s programme of waste reforms (accessed September 2024) https://publications.parliament.uk/pa/cm5804/cmselect/cmpubacc/333/report.html

5 GOV.UK: UK statistics on waste (accessed September 2024)  https://www.gov.uk/government/statistics/uk-waste-data/uk-statistics-on-waste

6 GOV.UK:  Producer responsibility regulations (accessed September 2024) https://www.gov.uk/government/collections/producer-responsibility-regulations

7 DEARA: Extended Producer Responsibility (accessed September 2024) https://www.daera-ni.gov.uk/landing-pages/extended-producer-responsibility

8 EU.com: A new Circular Economy Action Plan (accessed September 2024) https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=COM:2020:98:FIN

9 EEA: Reaching 2030’s residual municipal waste target — why recycling is not enough (accessed September 2024) https://www.eea.europa.eu/publications/reaching-2030s-residual-municipal-waste

10 WRAP: WRAP and the circular economy (accessed September 2024) https://wrap.org.uk/taking-action/climate-change/circular-economy

11GOV.UK: World-leading Environment Act becomes law (accessed September 2024) https://www.gov.uk/government/news/world-leading-environment-act-becomes-law

12 WRAP: The UK Plastics Pact (accessed September 2024) https://www.wrap.ngo/taking-action/plastic-packaging/initiatives/the-uk-plastics-pact

13 Ellen MacArthur Foundation: UK Plastic Pact (accessed September 2024 https://www.ellenmacarthurfoundation.org/uk-plastics-pact

14 GOV.UK: Plastic Packaging Tax: steps to take (accessed September 2024) https://www.gov.uk/guidance/check-if-you-need-to-register-for-plastic-packaging-tax

15 GOV.UK: Single-use plastics bans and restrictions (accessed September 2024) https://www.gov.uk/guidance/single-use-plastics-bans-and-restrictions

14 GOV.UK: Environmental taxes, reliefs and schemes for businesses (accessed September 2024)  https://www.gov.uk/green-taxes-and-reliefs/landfill-tax

15 GOV.UK: Energy Savings Opportunity Scheme (accessed September 2024) https://www.gov.uk/guidance/energy-savings-opportunity-scheme-esos