The European Union is significantly advancing its circular economy goals, with major policies like the Circular Economy Act and the Ecodesign for Sustainable Products Regulation (ESPR) shaping the business landscape. These initiatives aim to make sustainable products the norm, reduce waste, and enhance resource efficiency across the EU.
Expected EU Circular Economy ActBuilding on the 2020 Circular Economy Action Plan, a new EU Circular Economy Act is anticipated, with a formal proposal expected in 2026. This Act aims to:
- Promote recycling, reduce waste, and improve resource efficiency.
- Harmonize circular economy policies across Member States, simplifying legislation and creating a level playing field for businesses.
- Stimulate innovation in areas like electric vehicles, reusable packaging, sustainable fuels, and renewable energy technologies.
- Create market demand for secondary raw materials, especially critical ones like copper and lithium, to reduce reliance on third countries and enhance strategic autonomy.
- Address resource shortages and global competition, positioning the EU as a leader in the circular economy.
The development of this Act is a top priority for Jessika Roswall, the EU's Commissioner for Environment, Water Resilience, and a Competitive Circular Economy. More specific details about the Act are expected to become available throughout 2025.
Ecodesign for Sustainable Products Regulation (ESPR)Having entered into force on July 18, 2024, the ESPR is a cornerstone of the EU's strategy. It replaces the 2009 Ecodesign Directive and significantly expands its scope beyond energy-related products to cover nearly all physical goods sold in the EU. Key aspects of the ESPR include:
- Broader Scope: Applying to a wide range of products, including textiles, furniture, electronics, construction materials, iron, steel, and aluminium.
- Sustainability Criteria: Introducing more stringent requirements for durability, repairability, reusability, recyclability, energy performance, resource efficiency, and the reduction of hazardous substances.
- Digital Product Passport (DPP): Mandating a unique digital record for products, providing accessible information on sustainability, circularity, and compliance. This aims to enhance transparency and traceability throughout the value chain. The European Commission intends to adopt a delegated act on DPP service providers near the end of 2025.
- Ban on Destruction of Unsold Goods: Prohibiting the destruction of certain unsold consumer products, starting with apparel and footwear (effective mid-2026 for larger companies). Companies will also need to disclose information about discarded unsold goods.
- Working Plans: The first ESPR working plan, detailing product-specific requirements, is expected to be adopted and published by the European Commission. The first working plan (2025-2030) prioritizes products like steel, aluminium, textiles (especially apparel), furniture, tires, and mattresses for ecodesign and energy labelling requirements based on their potential for circularity.
- Delegated Acts: Specific ecodesign requirements for product groups will be introduced progressively through delegated acts, starting from the second quarter of 2025. Indicative timelines suggest requirements for textiles/apparel by late 2026 or early 2027, and for steel by Q4 2026.
- Repairability: Introduction of a repairability score for certain products, like consumer electronics and small household appliances, is planned, with requirements for recyclability of electrical and electronic equipment also forthcoming. Horizontal requirements on repairability are expected in 2026.
These EU policies will have a significant impact on businesses operating within or exporting to the EU market:
- Regulatory Compliance: Companies will face new obligations regarding product design, manufacturing, and end-of-life management. This includes meeting standards for durability, repairability, recycled content, and providing comprehensive product information through DPPs.
- Business Model Transformation: The regulations will push organizations to adapt their business models. This may involve shifting towards Product-as-a-Service (PaaS) models, enhancing repair services, and implementing robust environmental performance tracking.
- Supply Chain Adjustments: Sourcing locally, investing in circular technologies, and ensuring traceability of materials will become increasingly important.
- Innovation and Competitiveness: While posing challenges, these regulations also create opportunities for innovation in sustainable product design, materials, and circular business models. Companies that proactively adapt can gain a competitive advantage.
- Data Management: Increased sustainability data requirements, driven by ESPR and other regulations like the Corporate Sustainability Reporting Directive (CSRD), will necessitate robust data collection and management systems.
- Reduced Administrative Burden (Long-Term): Harmonized EU-wide standards are intended to simplify compliance and reduce administrative burdens in the long run, creating a more level playing field.
- Incentives: The EU is also prioritizing incentives, including financial and regulatory support, for businesses that adopt circular practices. Streamlined permitting processes and exemptions from certain waste management obligations may be available for companies prioritizing circular models.
- Green Public Procurement: The ESPR enables mandatory Green Public Procurement rules, requiring public authorities to purchase products meeting high sustainability and circularity standards, which will boost demand for such products.
Alongside the Circular Economy Act and ESPR, other important sustainability initiatives will progress in 2025:
- Corporate Sustainability Reporting Directive (CSRD): Approximately 11,000 large companies will report on their circular economy performance for the first time in 2025 (based on 2024 data), including risks, opportunities, strategies, and metrics.
- EU Green Claims Directive: Aimed at preventing greenwashing and ensuring the accuracy of environmental claims on products.
- Revision of EU Legislation on Packaging and Packaging Waste: Working towards making all packaging on the EU market reusable or recyclable in an economically viable way by 2030.
- Waste Reduction Targets: A targeted revision of the waste framework directive will focus on reducing waste in key areas, including food and textiles.
- Q2 2025 onwards: Delegated acts under ESPR begin introducing ecodesign requirements for specific product groups.
- June/July 2025: Secondary legislation on exceptions to the ban on destroying unsold clothing and footwear expected.
- By July 19, 2025: An implementing act will detail the format for disclosing information on unsold destroyed goods. Product-related implementing acts according to ESPR are possible.
- August 18, 2025: Due diligence obligations under the EU Batteries Regulation (EU-Batt-R) apply.
- End of 2025: Delegated act on the operation of Digital Product Passport service providers expected.
- 2026: Formal proposal for the EU Circular Economy Act anticipated.
- Mid-2026: Ban on destruction of unsold apparel and footwear for larger companies comes into force (July 19, 2026).
- End of 2026/Early 2027: Indicative timeline for ESPR requirements for textiles/apparel.
- December 31, 2026: End of transitional period from Ecodesign Directive to ESPR for mainly electrical equipment and white goods.
Businesses are urged to proactively adapt to these evolving regulations by increasing the use of secondary materials, exploring circular business models, investing in sustainable technologies, and preparing for new reporting and design requirements to remain competitive and compliant in the evolving EU market. The overarching goal is to foster an economic landscape where circular business models can flourish, contributing to the EU's ambition of achieving climate neutrality by 2050 and strengthening its global competitiveness in sustainable industries.