In this insightful piece, Mirco Peron, Assistant Professor of Supply Chain Management at NEOMA Business School, argues that embracing technology could help Europe develop a circular economy
The European Green Deal sets an ambitious goal: for Europe to become the first climate-neutral continent by 2050. One of the Green Deal’s key pillars is accelerating the transition to a circular economy. It has been a focus of the European Union’s (EU) sustainability strategy for the last decade.
Former European Commission President Jean-Claude Juncker first adopted a Circular Economy Action Plan in 2015, a commitment reinforced five years later by the New Circular Economy Action Plan under his successor, Ursula von der Leyen. These plans outline initiatives to support the development of sustainable products, create a well-functioning EU market for secondary raw materials, and address waste exports from the EU, among other actions. So, what makes circular economies better?
The circular economy: A healthier environment
Most economies still operate from a linear “take-makeuse-dispose” model. Virgin raw materials are fed into the system to create products which are sold, used, and discarded when they no longer fulfil their purpose. Waste is kicked out at the end of this chain of events, which has to be deposited somewhere. This raises several problems.
First, in a linear economy, creating new products, services, or supply chains requires firms to source more natural resources. The planet has a limited supply, and they will grow ever scarcer as industries chew through them. A statement by the European Commission warns,
“There is only one planet Earth, yet by 2050, the world will be consuming as if there were three”.
Second, as raw materials pass through the economy, large quantities of waste are created in the process of transforming them into finished goods. The European Investment Bank (EIB) estimates the world’s population consumes 100 billion tonnes of materials per year, with over 90% of these extracted resources ending up as waste.
Third, this waste is often dumped back into the environment, negatively impacting local biodiversity and ecological health. For instance, in 2022, the EU discarded 136 million tonnes of domestically generated waste in landfill sites, and UNESCO reports that around 8-10 million tonnes of plastic end up in the ocean yearly.
In contrast, a circular economy recycles and reuses products, materials, and resources. This alleviates the pressure on natural resources such as water and land use and minimises the amount of waste created. Reducing waste that would otherwise contribute to air, water, and soil pollution contributes to the planet’s health and public health in human societies.
Fostering resilience and innovation in the circular economy
Transitioning to a circular economy can also benefit businesses. Redesigning business models, production processes, and products enables firms to reduce costs, improve efficiency, and stimulate innovation.
Reusing and recycling materials enables firms to scale back their dependence on virgin resources, which are often costly to extract. As a result, they can access raw materials at a cheaper price while reducing fees associated with waste disposal and landfill management.
Circular economies also encourage innovation through the development of new business models. One example is the product-as-a-service concept, where firms typically retain ownership of a product and offer it out to consumers in a subscription-style arrangement.
This enables companies to develop new revenue streams that also contribute to the resilience of their supply chains. In the product-as-a-service model, because companies can maintain control over their products, they can ensure they are recycled instead of being disposed of.
Promoting the reuse of products, materials, and resources also supports job creation in expanding repair and remanufacturing sectors.
Circularity within the EU: The pace of change
Despite a large number of policy initiatives, the increase in circularity within the EU was only around 12% in 2022, and has been slow to progress since.
There are hints the European Commission acknowledges this. Last summer, President von der Leyen signalled that it is time for the EU to adopt a dedicated piece of legislation for the circular economy. She announced the plans for the Commission to propose a Circular Economy Act in 2026 to catalyse investment in the EU’s recycling capacity.
Technology should also play an important role in the transition. Research suggests that Industry 4.0 technologies – such as artificial intelligence (AI), robotics, and the internet of things – could be essential enablers in the journey towards a more sustainable and resilient Europe.
For instance, the vast analytical capabilities of AI could play an integral role in strategic decision-making, analysing supply chains and helping managers decide on the most appropriate strategy to reuse, repair, or recycle end-of-life products.
Additive manufacturing (AM), also known as 3D printing, could also assist by reducing production wastes and facilitating the recycling and repurposing of materials, as it enables parts to be made from recycled resources or easily remanufactured. Using recycled powders could also help to reduce the cost of additive manufacturing for companies.
If Europe hopes to achieve its ambitions outlined in the Green Deal, it must start accelerating towards a circular economy immediately. Legislation will play an essential factor in encouraging investment. Still, innovation and embracing new technologies will also be essential to creating a more sustainable, resilient European economy and a healthier planet.
