The transition to a more circular economy

The growing world population and rising material prosperity in large parts of the world are putting our planet under increasing pressure. The problem is closely related to the prevailing 'linear' economic model. This model leads to depletion and waste of natural resources, while waste production and environmental pollution are widespread and even increasing. The transition to a 'circular' economy is a story of opportunities and obstacles, uncertainties and pitfalls, dynamic effects and growing importance, including in Belgium.

'Transitioning from a linear economy to a circular economy' essentially means making the transition from an economic system based on the principle of 'take, make, throw away' to a more sustainable model where products and raw materials are reused to the maximum extent possible. That linear economy has led to resource depletion, pollution and ecological damage, whereas the circular economy seeks to preserve value through reuse, repair and recycling.

However, the concept of the circular economy goes beyond recycling. It includes a range of ‘R-strategies’ such as Refuse, Rethink, Reduce, Reuse, Repair, Refurbish, Remanufacture, Repurpose, Recover, Recycle, with the aim of enabling products to remain valuable for longer. Related concepts such as the 'performance economy' and the 'sharing economy’ or ‘WE economy' emphasise the importance of collaboration and community-building within the circular economy. They are about using resources and products more efficiently and minimising distribution chains.
The circular economy thus offers an alternative to the traditional linear economy by creating closed cycles and promoting sustainability, where economic growth goes hand in hand with ecological balance.

There are several reasons to make the transition to a circular economy. It’s not just about the ecological pressure; the transition also offers economic opportunities. Companies can not only save costs through using resources and materials more efficiently, reducing waste and reducing transportation; they also become less dependent on commodity imports from unstable countries and are able to reduce their supply and pricing risks.
Another advantage is the new value propositions that companies can use to differentiate themselves from their competitors. Or the revenue models based on use rather than ownership of goods, enabling companies to build a long-term, deeper relationship with their customers.

Product, process and system improvements are not infrequently driven by the circular economy. Focusing innovation efforts on finding solutions to major societal problems means that economic and social added value go hand in hand. And although the economic potential of the circular economy remains uncertain, there are opportunities for new activities and innovations.

However, the transition to a circular economy does not happen by itself; it is a long and complex journey with many obstacles to be overcome along the way. The linear economy is entrenched and 'path dependency' (the determining influence of choices already made) is a particular hindrance to the development of the circular economy. Think of things such as accounting rules, legal and regulatory frameworks, all of which are geared to linear thinking. The upfront investments needed and the higher costs also present financial hurdles for circular production chains.

There are also a number of operational hurdles to be overcome, such as supplier dependency and more complex trading models, while technological obstacles such as decreasing efficiency of materials reuse and more complex recycling processes are a reality. Finally, there are also socio-cultural barriers such as consumers' preference for new products and the perception that recycled products are inferior.

While there is now much more focus on circularity, insufficient progress is being made at global level. The share of secondary materials in total material use is decreasing, despite the increase in the tonnage of secondary materials being used. The Circular Economy Business Index (CEBIX) shows that European countries and Japan score relatively well, while the US and China perform less well. Belgium ranks 14th out of the 49 countries in the Index. The Global Waste Index analyses how OECD countries deal with waste. South Korea, Denmark and Germany score best, while Turkey, Latvia and Chile score lowest. Belgium ranks 11th out of a total of 38 OECD countries.

It is difficult to capture circularity in a single number. Eurostat's Circular Economy Indicators provide some insight into trends and international differences at European level. KBC’s report compares Belgium with three neighbouring countries (the Netherlands, Germany and France) and the EU27 in terms of materials consumption and dependence, waste generation and treatment, and secondary materials use.

Belgium has a high 'direct materials input' per capita due to substantial goods exports, but the 'domestic materials consumption' is relatively low and the 'materials footprint' is average in an EU perspective. 'Materials productivity' has increased in Belgium and its neighbouring countries, indicating a decoupling of economic activity and materials use. The Netherlands scores particularly well in this area.

Belgium produces more waste per inhabitant than the EU average, but takes top place in the EU when it comes to recycling rates for all waste generated. Belgium also performs well on the Circular Material Use Rate, with high use of recycled materials relative to total materials consumption.

The circular economy in Belgium also includes maintenance and repair, rental, sharing platforms, second-hand shops, and more besides. The share of 'typical' circular sectors in the total Belgian economy and employment is around the average.

The government plays a crucial role in the transition to a circular economy. Although circular activities are on the increase, the linear economy continues to dominate. The government can accelerate the process of transition by adapting and harmonising legislation within the EU, avoiding overregulation and promoting the use of secondary raw materials. There is a need to raise awareness among businesses and consumers, alongside fiscal measures to reflect the negative effects of linear production methods. The government can also act as a facilitator for knowledge and innovation and can set a good example by applying circular principles itself.

The EU has been committed to circularity since 2015, with the launch of the Circular Economy Action Plan (CEAP) being a recent high point in the European Green Deal. The CEAP focuses on sustainable product design, waste reduction and consumer empowerment. The focus is on resource-intensive sectors, and a number of practical rules and proposals have been introduced, such as a ban on destroying unsold consumer goods and the right to repair.

The Corporate Sustainability Reporting Directive (CSRD) sets guidelines for larger companies to integrate sustainability and manage environmental and social impacts. This includes compiling a report on use of resources and the circular economy. The EU Taxonomy provides a classification system for sustainable activities, with circularity being one of six environmental objectives. Also take a look at the latest webinars on ESG reporting and the EU Taxonomy.

Here in Belgium, the Federal Circular Economy Action Plan was approved, containing proposals focused on product standards and consumer protection. This Plan complements regional actions and is coordinated through the Intra-Belgian Platform for Circular Economy. Flanders Circular and the Circular Economy Support Centre are examples of partnerships that contribute to the circular transition.

We can therefore say that Belgium has a strong position in recycling and circular materials consumption, but that there is still room for improvement in the areas of materials footprint and import dependence. The transition to a circular economy requires a growing awareness of the unsustainability of linear production and consumption. Public policy needs to focus on removing barriers and encouraging circular entrepreneurship without harming economic activity and employment.

Get inspired by the testimonials of fellow entrepreneurs or rewatch one of the webinars, such as this one on ESG reporting or this one on the EU Taxonomy.

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