Strategy & Management

How to Run a Circular Economy in Europe

Chemical Industry, NGOs and Others Diverge over the Rules, Can New Proposals Sort Out the Differences?

03.09.2015 -

Since the industrial revolution in Europe the amount of waste in the region has been constantly increasing. This is because its economies have been based on a “take-make-consume-dispose” pattern of growth derived from a linear model in which resources are considered to be abundant, easy to source and cheap to dispose of.

Recently this model has been looking outdated. So Europe has been going circular by adopting a resource efficiency agenda, under which the added value in products is retained as long as possible. The aim is to reuse, repair, refurbish and recycle the great majority of materials and products.

Europe desperately needs to be more resource efficient because it is the region in the world which is most dependent on imported raw materials.

Leaders of the European chemical industry and most other industrial sectors, politicians, environmentalists, economists and virtually everyone else of influence agree that the objective of a circular economy is the right direction in which to move.

Value in All Materials

“Ultimately it's not about using less and less but about thinking in a completely different way to find a new cycle that works,” says Andre Veneman, AkzoNobel’s corporate director for sustainability and health safety and the environment (HSE).

“This requires us to see value in every material that we use,” he explains. “It is not about corporate social responsibility but about good business sense, as a scarcity of raw materials, combined with a rapidly growing global middle class, puts pressure on our current linear model.

The rewards from a circular economy would be impressive. Materials needs would fall by up to 24% by 2030 as a result of improvements in resource efficiency. Better use of resources could save European industry as much as €630 billion annually, according to European Commission figures.

Despite these potential outcomes, opinion is divided—particularly between industry and NGOs—about the best way to create a flourishing circular economy. “Everyone knows where to go but there’s a lot of disagreement about how to get there,” says Jeremy Wates, secretary general of the European Environmental Bureau (EEB).

Even the last European Commission, which left office in November 2014, took a different approach than its successor to the European Union’s regulatory framework needed to support the development of a circular economy.

Package Withdrawn

A Circular Economy Package of legislative proposals, put forward by the previous Commission and including tougher recycling targets, was withdrawn by the existing one, headed by Jean-Claude Juncker, to be replaced by a new, “more ambitious” regulatory initiative, details of which would be announced by the end of this year.

Yet transferring the Commission’s new proposals into legislation approved by the European Council, representing the EU’s 28 member states and the European Parliament, could take time. This is particularly because of lingering discontent among some government ministers on the Council and among members of the European Parliament (MEPs) to the shelving of the first package.

On the other hand large sections of industry were unhappy about the last Commission’s proposals.

The European Chemical Industry Council (CEFIC) considered that they were too narrowly focused on waste management. Business Europe, an umbrella group representing industry as a whole, thought they should have “taken an overarching approach” which would have covered all the interlinked stages in a circular economy while striking a balance between environmental and business impacts.

These views were echoed by the new Commission. It also regarded its predecessor’s package as concentrating too much on waste issues without exploiting synergies with other policies such as the need for well-functioning markets for secondary raw materials.

Business Needs

Now the chemical and other industries are waiting in anticipation details of the Commission’s new legislative plans.

CEFIC has been stressing the importance of EU circular economy policies which take into account the needs of business. “In the final analysis, the circular economy must still be an economy,” it says in a position paper on what it wants in the new package. “We are calling on the Commission to encourage investment in economically viable solutions, rather than imposing burdens that could undermine competiveness.”

The industry has shown through its own history of innovation the major contribution it can make to the creation of a circular economy.

“The chemical industry is one of the most prominent innovators because we design new molecules,” Hartwig Wendt, CEFIC’s executive director for sustainable development, told a circular economy stakeholders conference in Brussels in June organised by the European Commission.

He cited as an early example of resource efficiency the development over 100 years ago of the Haber-Bosch process for the artificial fixation of nitrogen to make ammonia fertiliser on a commercial scale.

Lignin Research

Chemical industry researchers are now working on the use of carbon dioxide as a raw material for chemical compound and also of lignin, a by-product of paper production.

“Every year millions of tons of lignin are disposed of as waste, predominantly through incineration,” Wendt said. “It has the potential to be turned into a basic chemical building block which can be dropped into a number of existing processing pathways.”

Europe’s chemicals sector has also been doing a lot to establish local circular economies through its networks of clusters throughout the region where the concept of waste has been extended to the underutilisation of manufacturing, energy, and water treatment capacity.

Chemical clusters have been pioneering the spread in Europe of industrial symbiosis, based on the collaboration between two or more companies, usually on the same site, in the use of each other’s surplus materials and energy.

Central Government Funding

“Local circular economies are being set up in these clusters as a result of whole supply chain working together,” explains Stan Higgins, chief executive of the North East of England Process Industry Cluster (NEPIC), based at Teesside, the UK’s and one of Europe’s largest chemical cluster.

“What’s important is not so much the right regulations but central government support for the running of clusters,” he adds. “Companies tend to operate separately from each other unless they are brought together by organisations like ourselves. We actually have to do without government funding while clusters in countries like Germany are all helped by governments financially.”

AkzoNobel, which has developed its own Resource Efficiency Index (REI) to measure its creation of more value from fewer resources, has also highlighted the difficulties of collaboration among businesses working in isolation from each other.

“We have become very good at working efficiently within silos, in very specialist processes but we fail to spot opportunities across different systems,” says Veneman. “We simply don’t ask ourselves the right questions – would someone else want this waste product? Could we harness it as a power resource? Could it be used somewhere else in the cycle?“

Design Stage

AkzoNobel believes that coatings and specialty chemicals producers like itself need to become involved in the design stage of product development.

“If our customers want to produce products that can be 100% reused and recycled we should think how we can help our customers to design these,” he continues.

The Commission has indicated that in order to cover all key stages of a product’s life cycle, its legislative plans for the circular economy may include a broadening of the scope of the existing Ecodesign Directive, at present mainly restricted to energy performance needs.

One concern in the chemical industry is that this change could result in potentially dangerous chemicals, particularly those already classified by the European Chemcials Agency (ECHA) as being substances of very high concern (SVHC), could be banned at the design stage from being used in all new materials and products, even those which are remanufactured or recycled.

This would be a move which would be supported not only by certain NGOs but also brand owners and retail chains anxious to project a green image to consumers.

SVHC-Free Products

A representative of the furniture chain Ikea told the Brussels stakeholders conference that it is already applying a policy of all its products being SVHC-free, whether they contain virgin or recycled materials.

“Our products stay in homes for a long time and we want our customers to feel secure that they remain safe for the entire family,” she said.

Wendt warned that when judging which substances to leave in recycled or reused materials or products it was important to take a risk-based approach. “Otherwise it would be difficult to close the loop,” he said. “We would have to reject for recycling far more products than we want.”

The Commission’s imminent proposals for an extended ecodesign directive could turn out to be a major point of difference between the chemical industry and NGOs and others on controls within the circular economy. MEPs have been calling for more restrictive ecodesign rules. New ecodesign regulations could even have implications for the future of REACh.

Discussions on a legal framework for a circular economy at the EU level have been going on now for almost three years. They look likely to continue a lot longer.



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