How to prepare your business for the Circular Economy Act

A patchwork of EU rules sets out the framework for waste, recycling and producer responsibility. The aim of the Circular Economy Act is to create a common framework that brings these rules together. The intention is not to replace directives such as WEEE and PPWR, but rather to ensure that the rules are more consistent and easier to implement.

– The Circular Economy Act is expected to be adopted by the end of 2026, although not all the details have been finalised yet. However, the ambition is clear. The aim is to create more harmonised rules within the EU and to increase the supply and demand of recycled materials and other circular alternatives, says Heidi Hautajärvi Stenmark, project manager at RISE. So far, EU countries have been slow to make the transition. The proportion of reused materials has only increased marginally since 2010. At that time, the figure was 10.7 per cent; by 2024, it had risen to 12.2 per cent. The current target is to double the circularity rate by 2030.

– I think there has been too much reliance on the idea that the circular economy would emerge once new markets for recycled materials, second-hand goods, and sharing platforms were established. However, it is difficult to align supply and demand when a market is completely new. In such cases, regulations may be necessary, says Ann-Charlotte Mellquist, unit manager at RISE.

Foundation of the Clean Industrial Deal

The Circular Economy Act is one of the key components of the Clean Industrial Deal. The Clean Industrial Deal aims to make sustainable products, services and business models the norm and change our consumption patterns to eliminate waste. The product groups highlighted as relevant to the Clean Industrial Deal are electronics/information and communication technology, batteries and vehicles, packaging, plastics, textiles, buildings and construction, and food, water and nutrients.

– Much of the legislation, including what we know so far about the Circular Economy Act, is based on waste management. For example, this approach involves setting recycling targets. What is really needed is a discussion about how much material we should use in the first place. However, we have to start somewhere. If you run a business in one of these sectors, you need to find out exactly what applies to the materials and products you handle, says Ann-Charlotte Mellquist.

Now is the time to start gaining a clearer understanding of your material flows, product data, supply chains, and opportunities for reuse and recycling. This information will become increasingly important in the future.

The creation of a single market for recycled materials and product passports is set to simplify the transition

A key aspect of the Circular Economy Act is the establishment of a single market for secondary raw materials within the EU, with the aim of increasing the supply of high-quality recycled materials and stimulating demand for them. Currently, waste regulations mean that an item is classified as waste as soon as an organisation stops using it. In such cases, the items may not be exported.

– This has been a huge obstacle to the circular economy, so I expect to see a change there. Easing this regulatory burden would have a significant impact, says Heidi Hautajärvi Stenmark.

Another piece of the puzzle that is clearly linked to the ambition of creating a single market for secondary raw materials is the concept of digital product passports. For example, a digital product passport could contain information on a product's materials, how it can be repaired and how its components should be handled at the end of its life. These passports are intended to increase traceability, transparency, and circularity throughout the entire value chain, from manufacturers to recyclers.

– This transition will require greater collaboration between companies, particularly within value chains. New logistics providers and platform developers will need to work alongside existing companies, which will require them to share data in new ways. Digital product passports can simplify this, says Ann-Charlotte Mellquist.

Digital training courses and collaborative workshops reduce the barriers to entry

If you think the Circular Economy Act sounds like a big, complex issue, you're right. It is a far-reaching legislative proposal designed to cover all aspects of circularity. However, one thing is clear: there are steps you can take right now. RISE, for example, has developed an introductory digital course where participants gain a basic understanding of digital product passports and how they can be used as a competitive tool. This kind of knowledge-building initiative can make new regulations more tangible.

Support is also available for developing new business models and products that are highly recyclable and have a long lifespan, which is known as future-adaptive design. RISE runs a collaborative workshop called the Circular Business Lab, where companies can access expertise in circular business models and resource flows. They can also collaborate with industry peers facing similar challenges in a neutral setting.

– In our collaborative initiatives, such as those in the textile sector, we have received a very positive response from the industry. This includes feedback from small and medium-sized enterprises, as well as larger companies. They recognise the value of joining forces to address shared challenges such as textile sorting and recycling. Testing innovative solutions together creates new opportunities for business development and collaboration, says Heidi Hautajärvi Stenmark.

The design phase is crucial – Who do you need at the drawing board?

Heidi Hautajärvi Stenmark and Ann-Charlotte Mellquist's top tip for manufacturers is to be brave and try new things.

– The design phase is crucial, as it involves designing with sustainability, recyclability and reusability in mind. This is already addressed in several EU directives, but we are likely to see even more of this in the future. This shift in thinking will require new people to be brought in at the design stage. For a vehicle manufacturer, for example, it may be the service technicians who need to be included – the people who know which parts break down most often," she explains.

Ann-Charlotte Mellquist elaborates on this point.

– You need to think long-term. What would you do if the raw materials used in your products became scarce or too expensive? How well equipped are you to run a business that doesn't rely on buying new materials and ingredients? If you don’t consider these issues, you won’t succeed. Those who have thought things through and tested their ideas are best prepared to handle change, says Ann-Charlotte Mellquist.