2.1.

Designing and innovating for a circular economy

Circular economy approaches design out waste and typically involve innovation throughout the value
chain, rather than relying solely on solutions at the end of life of a product. For example, they may
include:
reducing the quantity of materials required to deliver a particular service (lightweighting);
lengthening products useful life (durability);
reducing the use of energy and materials in production and use phases (efficiency);
reducing the use of materials that are hazardous or difficult to recycle in products and production
processes (substitution);
creating markets for secondary raw materials (recyclates) (based on standards, public procurement,
etc.);
designing products that are easier to maintain, repair, upgrade, remanufacture or recycle (ecodesign);
developing the necessary services for consumers in this regard (maintenance/repair services, etc.);
incentivising and supporting waste reduction and high-quality separation by consumers;
incentivising separation, collection systems that minimise the costs of recycling, and reuse;
facilitating the clustering of activities to prevent by-products from becoming wastes (industrial
symbiosis); and
encouraging wider and better consumer choice through renting, lending or sharing services as an
alternative to owning products, while safeguarding consumer interests (in terms of costs, protection,
information, contract terms, insurance aspects, etc).
An important starting-point is the design of production processes, products and services. Products can
be redesigned to be used longer, repaired, upgraded, remanufactured or eventually recycled, instead of
being thrown away. Production processes can be based more on the reusability of products and raw
materials, and the restorative capacity of natural resources, while innovative business models can create
a new relationship between companies and consumers.
The following conceptual diagram illustrates in a simplified way the main phases of a circular economy
model, with each of them presenting opportunities in terms of reducing costs and dependence on natural
resources, boosting growth and jobs, as well as limiting waste and harmful emissions to the
environment. The phases are interlinked, as materials can be used in a cascading way, for instance,
industry exchanges by-products, products are refurbished or remanufactured, or consumers choose
product-service systems. The aim is to minimise the resources escaping from the circle so that the
system functions in an optimal way.
Some EU policies and instruments already provide tools and incentives in line with the circular
economy model. The waste hierarchy that underlies our waste legislation is leading progressively to
adoption of the preferred options of waste prevention, preparation for reuse and recycling, and

discourages landfilling. Chemicals policy aims at phasing out toxic substances of very high concern.
Some ecodesign measures for energy-related products include requirements on durability and to
facilitate recycling. The Bioeconomy Strategy[12] promotes the sustainable and integrated use of
biological resources and waste streams for the production of food, energy and bio-based products.
Climate policy creates incentives to save energy and reduce greenhouse gas emissions.
A common and coherent EU framework for promoting the circular economy will help bring such
elements together with Horizon 2020 to address the research and innovation challenge[13].
In order to support design and innovation for a more circular economy, the Commission will:
- under the EU Research and Innovation Programme (Horizon 2020), demonstrate the opportunities for
moving towards a circular economy at European level with large-scale innovation projects targeted at
cooperation within and between value chains, fostering skills development and supporting the market
application of innovative solutions;
- establish a reinforced partnership to support research and innovative policies for the circular economy;
- facilitate the development of more circular models for products and services, including through a more
coherent product policy, and further develop the application of the Ecodesign Directive by paying
further attention to resource efficiency criteria, including for the future priority product groups in the
2015-2017 Work Plan; and
- encourage the cascading principle in the sustainable use of biomass, taking into account all biomass
using sectors so that biomass can be utilised in a most resource efficient way.
2.2. Unlocking investment in circular economy solutions
The EU and the Member States should encourage investment in circular economy innovation and its
take-up, and, against the background of the reform of the financial system, address barriers to mobilise
more private financing for resource efficiency. Recent Commission proposals on non-financial
reporting[14], long-term financing[15] and occupational pension funds[16] have integrated requirements
to disclose relevant environmental information to investors or consider investment risks related to the
scarcity of resources and climate change.
In order to reduce the risk for investors, innovative financial instruments are being developed, such as
the Natural Capital Financing Facility of the Commission and the European Investment Bank. Public
private partnerships (PPP) are also effective instruments for leveraging private action and investment in
resource efficiency. The Sustainable Process Industry through Resource and Energy Efficiency (SPIRE)
PPP and the Bio-Based Industries Joint Technology Initiative are actively contributing to circular
economy goals.
Policy has a further role in providing the right signals for investment in resource efficiency by
eliminating environmentally harmful subsidies and switching taxation away from labour towards
pollution and resources. Progress on environmental tax reform in EU Member States is addressed within
the European Semester of economic policy coordination.
In order to unlock investment in the circular economy, the Commission will:
- take up promising areas identified by the Resource Efficiency Finance Roundtable[17] including
innovative financial instruments, reflecting resource issues in accounting rules for companies, clarifying
the sustainability responsibilities of financial institutions (fiduciary duties), developing methodologies

for resource stress tests for companies, and exploring the potential of the bonds market to channel
additional finance for resource efficiency projects;
- prepare guidance on the possibilities offered by the new public procurement directives in the field of
Green Public Procurement (GPP), and a recommendation on monitoring Member States performance in
achieving the indicative 50 % GPP target[18], support innovative instruments, such as pre-commercial
procurement and public procurement for innovation, and facilitate the establishment of GPP networks
among public authorities; and
- further integrate circular economy priorities into EU funding and encourage Member States to use
available EU funding in programmes and projects on the circular economy, in particular through the
European Structural and Investment Funds.
2.3. Harnessing action by business and consumers and supporting SMEs
Business and consumers remain the key actors in the transition to a more circular economy. Upstream
and downstream decisions in the value chain need to be better connected, providing coherent incentives
between producers, investors, distributors, consumers and recyclers, and ensuring a fair distribution of
costs and benefits. Market mechanisms need to be employed to ensure the most efficient allocation and
use of resources, and where there are market failures or innovation bottlenecks, these must be addressed.
Functioning secondary materials markets need to be developed. Particular attention should be paid to
enabling entrepreneurs to tap into potential new markets linked to circular economy, and to ensuring that
the necessary skills base is available in the labour market. Consumers should be empowered to make
informed choices through better information on green credentials of different products.
The European Resource Efficiency Platform has identified[19] significant opportunities for business at
different stages in the loop feeding materials back into the production process or various segments of
the supply chain of origin or in other supply chains. These are based on experience of successful
initiatives that could be scaled up and applied more widely, and include:
in the production phase, sustainable sourcing standards, voluntary schemes led by industry and
retailers, and industrial symbiosis to provide markets for by-products;
in the distribution phase, improving information on the resources contained in products and how they
can be repaired or recycled, referred to in the recommendations of the Platform as a product passport;
and
in the consumption phase, collaborative consumption models based on lending, swapping, bartering
and renting products, and product service systems to get more value out of underutilised assets or
resources (e.g. cars, tools, lodging).
The Environmental Footprint pilot phase set out in the Commissions Building the Single Market for
Green Products Communication[20] is bringing stakeholders together to develop a common, agreed way
for measuring the environmental impact of products and organisations. After the pilot phase, the
Commission will assess whether these methods are successful so that they can be applied in existing or
new instruments to improve environmental performance of products.
Such measures should be scaled up to ensure good framework conditions and a level playing-field for
existing and new businesses to adapt to global resource megatrends, to reward the best companies, to
encourage new entrepreneurs to develop the business solutions of tomorrow, to test them on the market
and to provide credible information to consumers. The multi-stakeholder process launched in the

context of the European Consumer Agenda[21] has highlighted the need for effective tools against
misleading and unfounded environmental claims.
The labour force has to be equipped with the relevant skills in order to ensure an effective, job-rich
transition[22]. The Green Employment Communication[23] creates the framework for unlocking the job
creation opportunities of a more circular and resource-efficient economy. National, regional and local
authorities and social partners also have an important role in developing targeted and coordinated
support in the form of investment, infrastructure, technology and skills, in particular focusing on the
needs of SMEs. They are also well positioned to facilitate a shift of consumer choice to more
sustainable products and services, and encourage behavioural change.
To support action by business, in particular SMEs and consumers, the Commission will:
- build on the results of the Environmental Footprint pilot phase running until 2016 and set out how to
apply the use of environmental impact measurement in product and process design and in providing
consumers with better information on environmentally sustainable choices;
- trigger broad stakeholder cooperation through coordination and support action under Horizon 2020
and its instruments, including the European Institute of Innovation and Technology, the European
Structural and Investment Funds, the Eco-innovation Action Plan, the Green Action Plan for SMEs, and
the European Consumer Agenda;
- build on the Raw Materials European Innovation Partnership stakeholder commitments that are
directly linked to resource productivity;
- support job creation and skills development through enhanced policy coordination, directing European
funding to programmes and schemes that support green growth, improving information and monitoring,
including through the European Semester process, and working with social partners, education and
training institutions and other stakeholders; and
- support best practices exchanges at the international level.
3. Modernising waste policy and targets: waste as a resource
Turning waste into a resource is part of closing the loop in circular economy systems. The objectives
and targets set in European legislation have been crucial drivers of improved waste management; they
stimulate innovation in recycling and reuse, limit landfilling, reduce losses of resources and create
incentives for behavioural change. But in the EU we still generate about five tonnes of waste per person
per year on average, and little more than a third of that is effectively recycled.
The European Union has set out its political commitment[24] to reduce waste generation, to recycle
waste into a major, reliable source of raw materials for the Union, to recover energy only from nonrecyclable materials and to virtually eliminate landfilling. Taking waste policy further will bring
significant benefits for growth and job creation at relatively low or no cost, while contributing to a
better environment. With respect to global markets, an ambitious waste policy is expected to drive
innovation and help make EU companies even more competitive in the provision of waste management
services and offer new market opportunities to EU exporters.
3.1. Defining waste targets for a move to a recycling society
Europe has made substantial progress in turning waste into a resource and promoting sustainable ways
of waste management such as recycling. However, performance varies considerably between Member

States. Six have already effectively eliminated the landfilling of municipal waste, reducing it from 90 %
to less than 5 % in the past 20 years and reaching recycling rates of 85 % in certain regions. In others
over 90 % of waste is still landfilled and less than 5 % is recycled.
Strong policy signals are needed to create longer-term predictability for investment and change so that
materials, such as plastics, glass, metals, paper, wood, rubber and other recyclables, re-enter the
economy as secondary raw materials at competitive prices. Setting clear recycling targets for the period
to 2030 will provide such predictability. Separate collection at source along with sound methodologies
to calculate recycling rates will ensure high quality recycling and contribute to the development of
markets for the supply of high quality secondary raw materials. To that effect, the existing measurement
method to assess what is actually recycled should be clarified as some Member States currently report
waste collected as waste recycled despite significant material loss between these phases. Landfilling of
all recyclable waste shall be prevented by 2025. Member States should endeavour to virtually eliminate
landfill by 2030. Energy recovery, including waste-to-energy recovery and use of bio-fuels, will have a
role to play with respect to non-reusable and non-recyclable waste. This will require more efficient use
of the unevenly spread energy recovery capacity currently available in the EU, together with measures
to avoid overcapacity.
Successful implementation can create more than 180 000 direct jobs in the EU by 2030, in addition to
the estimated 400 000 jobs that will be created by the implementation of the waste legislation in
force[25]. It will lead to satisfying between 10 and 40% of the raw material demand in the EU, while
contributing to achieving the 2030 EU target to reduce greenhouse gas emissions by 40% 62 Mt of
CO2eq per year would be avoided in 2030.
In order to boost the economic, social and environmental benefits gained from the better management of
municipal waste, the Commission proposes to:
- boost reuse and recycling of municipal waste to a minimum of 70% by 2030;
- increase the recycling rate for packaging waste to 80% by 2030, with interim targets of 60% by 2020
and 70% by 2025, including targets for specific materials;
- ban the landfilling of recyclable plastics, metals, glass, paper and cardboard, and biodegradable waste
by 2025, while Member States should endeavour to virtually eliminate landfill by 2030[26];
- further promote the development of markets for high quality secondary raw materials, including
through evaluating the added value of end-of-waste criteria for specific materials; and
- clarify the calculation method for recycled materials in order to ensure a high recycling quality level.
3.2. Delivering simplification and better implementation of waste legislation
Targets leave flexibility to Member States to decide how to achieve them. However, there is significant
potential to further simplify and improve the implementation of waste legislation at national level and to
reduce the current disparities.
In 2012, the Commission developed a Waste Management Scoreboard and roadmaps with specific
recommendations for the Member States with the weakest performance. It will continue to focus
particular attention on the Member States with the largest distance to the targets, seeking to address, in
partnership with them, implementation weaknesses at an early stage.

Economic measures have proved instrumental in improving national waste management, in particular
through landfill and incineration taxes, pay-as-you-throw and extended producer responsibility schemes,
or incentives for local authorities to promote prevention, reuse and recycling. Landfill bans have also
proved effective. Setting minimum requirements for producer responsibility schemes at EU level will
help cut costs and eliminate barriers faced by producers having to respect several national schemes in
the EU.
European funds can support Member States efforts focusing on integrated waste management including
separate collection, reuse and recycling infrastructure. Landfilling or stand-alone incineration should not
be supported in future.
Making the best use of available waste management capacity in the EU would require better planning
and information-sharing and may involve tolerating more shipments of waste within the EU towards the
most modern and efficient installations, at least as a transitional measure.
There is scope for further streamlining and facilitating national-level data collection and reporting, and
increasing the reliability of data and its consistency across the EU. Adopting common indicators will
facilitate better monitoring and benchmarking of Member States performance[27].
Actions to further simplify the waste acquis and ensure effectiveness and efficiency will build on efforts
undertaken already to cut the administrative costs of waste policy, for example, through exemptions
from requirements for take-back for certain SMEs or efforts to put in place mandatory electronic data
interchange for waste shipments.
To ensure that the benefits from EU legislation are delivered via simplification and better
implementation, the Commission proposes to:
- address overlaps amongst waste targets and align definitions;
- significantly simplify reporting obligations for Member States, including clarifying and streamlining
calculation methods for municipal, landfill and packaging waste targets;
- allow Member States to exempt SMEs or undertakings collecting and/or transporting very small
quantities of non-hazardous waste, from the general permit or registration requirements under the Waste
Framework Directive;
- introduce annual reporting through a single entry point for all waste data and make waste statistics
consistent with the requirements of EU waste legislation, while benchmarking national methodologies
against statistical standards;
- require the development of computerised data monitoring systems and third-party data verification in
Member States;
- establish an early warning mechanism to ensure that Member States put in place an appropriate set of
measures to meet targets on time;
- lay down minimum operating conditions for extended producer responsibility schemes that could be
further developed at national level or in EU guidance documents, and promote the use of economic
instruments in Member States; and

- promote direct investment in waste management options at the top of the waste hierarchy (prevention,
re-use, recycling).
3.3. Tackling specific waste challenges
Tailor-made approaches are needed to address particular waste challenges related to significant loss of
resources or environmental impacts.
Waste prevention: As a first priority affecting all the phases in a circular economy, it should be ensured
that less waste is generated. Waste prevention programmes have recently been adopted by the Member
States, as required by the Waste Framework Directive, and are currently reviewed by the European
Environment Agency. Following their assessment, the Commission will develop initiatives promoting
good practices in waste prevention in the EU.
Marine litter: Marine litter pollutes beaches, causes harm to marine life and creates a long-term waste
problem which is expensive to clean up. The 7th EAP calls for a Union-wide quantitative headline
reduction target supported by source-based measures.
Full implementation of the measures in the revised EU waste legislation package could deliver marine
litter reductions of 13 % by 2020 and 27 % by 2030. Setting a dedicated reduction target for 2020 would
give a clear signal to Member States currently developing measures to achieve good environmental
status for marine waters by the 2020 deadline under the Marine Strategy Framework Directive, and
would provide an impetus for the development of marine litter action plans within the four Regional Sea
Conventions. Other EU-level measures, incorporating inter alia the results of the ongoing evaluation of
the Port Reception Facilities Directive[28], will also contribute to the achievement of the target. A
second stage of the reduction target will be developed in due time, based on further analysis of the
reduction potential from other land- and sea-based sources, and taking into account the commitment
made at Rio+20 to achieve significant marine litter reductions by 2025.
Construction and demolition waste: Markets for recycled materials are essential to increasing the
recycling rate of construction and demolition waste. Design for better management of construction and
demolition waste, and increasing recyclability and recycled content in construction materials, will be
included in a framework for the assessment of the environmental performance of buildings, as outlined
in the Commissions Communication on Resource Efficiency Opportunities in the Building Sector[29].
Furthermore, under the proposed early warning mechanism, Member States performance will be
monitored against the target of 70 % recycling by 2020, with measures including increased landfill
charges for construction and demolition waste, or additional sorting obligations on major demolition
sites to improve the quality of recyclates.
Food waste: It has been estimated that up to 30% of all food produced around the world is lost or
wasted. The Commission is considering presenting specific proposals to reduce food waste.
Hazardous waste: Proper management of hazardous waste remains a challenge, with data on the actual
treatment path missing for part of this waste stream. As a first step, record-keeping and traceability will
be strengthened through the setting-up of hazardous waste registries and identifying capacities and
bottlenecks in Member States hazardous waste management systems. These registries might be
progressively expanded to other types of waste like it is already the case in several Member States.
Plastic waste: Plastic production in the EU is expected to increase at a rate of 5 % annually. While only
24 % of plastic waste is recycled, close to 50 % is landfilled, and the rest is incinerated. The public
consultation on plastic waste carried out by the Commission in 2013[30] pointed to significant potential

for using plastic more sustainably and showed strong support for eliminating the landfilling of plastics
and for the better design of plastics and plastic products. The Commissions recent proposal allowing
Member States to restrict the use of plastic bags[31], and the proposals in this Communication for
increased recycling and abandoning landfilling are important steps to improve plastic waste
management.
Recycling of critical raw materials: While all raw materials are important, critical raw materials deserve
particular attention as their production worldwide is concentrated in few countries, while many of them
have low substitutability and low recycling rates. The Commission promotes efficient use and recycling
of critical raw materials in the framework of the Raw Materials Initiative[32] and the European
Innovation Partnership on Raw Materials.
Illegal waste shipments: The Commission will step up action to ensure compliance with relevant EU
legislation, in particular Regulation (EC) No 1013/2006 on shipments of waste as recently amended in
order to reinforce waste shipment inspections.
Recycling of phosphorus: Phosphorus is a vital resource for food production, but it has significant
security of supply risks and its current use involves waste and losses at every stage of its lifecycle.
Following the Consultative Communication on the sustainable use of phosphorus[33], the Commission
is developing a framework for further action.
To address specific waste challenges the Commission:
- proposes an aspirational target of reducing marine litter by 30 % by 2020 for the ten most common
types of litter found on beaches, as well as for fishing gear found at sea, with the list adapted to each of
the four marine regions in the EU;
- envisages measures to stimulate markets in recycled materials derived from construction and
demolition waste and develop a common EU assessment framework for the environmental performance
of buildings;
- proposes that Member States develop national food-waste prevention strategies and endeavour to
ensure that food waste in the manufacturing, retail/distribution, food service/hospitality sectors and
households is reduced by at least 30 % by 2025;
- envisages developing a proper registry system for at least hazardous waste in all Member States;
- further to its proposal to reduce the use of lightweight plastic bags, proposes that plastics be banned
from landfill by 2025;
- proposes that Member States shall include measures regarding collection and recycling of waste
containing significant amounts of critical raw materials in their national waste management plans; and
- is considering developing a policy framework on phosphorus to enhance its recycling, foster
innovation, improve market conditions and mainstream its sustainable use in EU legislation on
fertilisers, food, water and waste.
4. Setting a resource efficiency target
In the 7th EAP, Member States and the European Parliament agreed that the European Union should
establish indicators and set targets for resource efficiency, and assess whether it would be appropriate to

include a lead indicator and target in the European Semester. Following wide consultations, resource
productivity, as measured by GDP relative to Raw Material Consumption (RMC), has been identified as
a candidate for a resource productivity target[34].
A realistic target to increase resource productivity, endorsed by the EU and its Member States, would
focus political attention and tap the currently overlooked potential of a circular economy to create
sustainable growth and jobs and increase the coherence of EU policy. It would be a proportionate way to
ensure this coherence and encourage action.
The EU is already forecast to increase its resource productivity by 15 % between 2014 and 2030 under a
business as usual scenario. Using smart policies to promote the transition to a more circular economy, as
called for by the European Resource Efficiency Platform, it would be possible to double this rate. While
contributing significantly to the sustainability dimension of growth, increasing resource productivity by
30% would also have a positive impact on job creation and growth of GDP[35].
Industry would benefit from this improvement in resource productivity through enhanced
competitiveness[36]. Resource costs can make up a significant part of their cost structure, and they need
available and predictable supplies[37]. There would be both immediate financial gains, and longer term
strategic benefits, as growing global demand drives up resource prices and volatility. Becoming more
resource efficient will therefore help Europe meet its reindustrialisation objective.
A resource productivity target, while not binding and set at the level of the EU, would provide an
impetus for those Member States that do not already have a target at national level to develop measures
that take account of resource use. It would lead to more balanced measures, that consider the wider
economic, social and environmental consequences and fill this gap.
Member States would be free to undertake the balance of policies and actions that are most
economically and environmentally advantageous in line with wider policy objectives. In doing so, they
would benefit from a range of already proven - but not widely deployed - good practice that they could
adopt and tailor to their own needs and circumstances. The review of the Europe 2020 strategy is
currently underway[38] supported by public consultation to gather all views on its development. The
Commission therefore considers that any decision on setting a resource productivity headline target
should be taken in the review, after taking into account the results of public consultation together with
recommendations of the European Resource Efficiency Platform.
To ensure that policy makers are aware of the overall picture of resource pressures on the environment,
other indicators, in particular for water use and finite land resources, need to be taken into account.
Eurostat has published a Resource Efficiency Scoreboard since 2013 as part of the Europe 2020
indicators[39]. This is designed to monitor implementation of the Roadmap to a Resource Efficient
Europe, communicate the link between resources and engage stakeholders further in the process of
measuring societal progress beyond GDP.