Regulatory barriers threaten transition towards circular economy, ICC report warns

Published in partnership with EY, the report – “Putting the circular economy into motion: From barriers to opportunities” – highlights the significant obstacles companies encounter when transitioning to circular business models that could otherwise deliver significant environmental, reputational and financial gains.

The circular economy is intended to maximise resource efficiency and minimise environmental impact by promoting continuous use, reuse and recycling of materials and products. But the study concludes that existing regulatory systems are not fit for purpose in enabling such approaches at scale – largely as a result of significant inconsistencies in national environmental laws and regulations that remain based on linear models of production and consumption.

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Regulatory barriers highlighted by the report include:

• Complex and fragmented import and export processes for secondary materials which create significant compliance and operational costs.
• Lack of a common international standard for “remanufactured” products.
• Customs systems that do not accommodate reverse logistics.
• No recognition of circular approaches under the 1989 Basel Convention on hazardous waste.

ICC Secretary General John W.H. Denton AO said:

“It’s certainly true that the shift to circular business models has been slower than many governments anticipated a decade ago. But that’s not surprising when you see that legacy regulations tilt the playing field against circularity – in effect, entrenching the dominance of the old model of extract, produce, consume and discard.

“We hope that our report can serve as a roadmap for clear and coordinated regulatory change – both at the domestic and international level – to put the circular economy firmly into motion. Reforming the Basel Convention to take into account the evolution of circular solutions and advances in technology is, in our view, an essential starting point for this effort.”

Based on an extensive series of interviews with businesses across a range of industries, the study also highlights a range of challenges companies face when looking to deploy circular approaches – from infrastructure gaps through to high upfront investment needs. It also pinpoints the need for a concerted effort to shift consumer perceptions and behaviour – including prevailing misconceptions about the quality of remanufactured, refurbished or recycled goods and materials.

Mark Weick, Managing Director, Climate Change and Sustainability Services at EY said:

 “Circular economy is a systematic approach that requires collaboration from all stakeholders across the value chain within an enabling regulatory framework. Concerted cooperation will be pivotal to drive meaningful impact to reduce climate change effects.”

The report concludes with a number of broad recommendations to incentivize the uptake of circular business models – starting with the facilitation of cross-border trade in secondary materials.

Pär Larshans, Director of Sustainability, Ragn-Sells Group, and Co-Chair of ICC’s Working Group on Circular Economy added:

“The transition to a circular economy is much needed if we want to reach the ambitions set in the Paris Agreement, and to ensure that humanity reduces the risk of overshooting any of the planetary boundaries. With this report, ICC focuses on the need for circular transitions to move away from a minimised waste focus to a resource efficiency focus where a decontamination step is included to enable free trade of recycled materials.”