7 Must-Know Policies to Decarbonize Your Company Through Circular Economy

July 25, 2023

The concept of a circular economy is not new. It has been part of the sustainability discourse for decades, with Japan initiating early efforts in the 1990s. However, the drive towards adopting circular economy principles has gained significant momentum in recent years, particularly in the European Union (EU).

The EU has been at the forefront of this shift, advancing ambitious policies aimed at reducing raw material consumption and increasing resource efficiency. The EU's commitment to the circular economy is epitomized in the European Green Deal, an ambitious plan to become the first climate-neutral continent by 2050, with the circular economy as a cornerstone strategy.

What does this look like? Policies that enable tax breaks or subsidies are one way of rewarding companies that are making the right moves in their organization. Not only will they be incentivized to reduce their energy and waste consumption, but also to invest in renewable energy technology.

From subsidies for vehicle remanufacturing, to farmer training in regenerative food production, governments can use many different policy instruments to develop and scale circular economy solutions.

The European Green Deal: A Beacon for Circular Economy Regulation

The European Green Deal is a comprehensive roadmap for Europe's sustainable transition. It aims to achieve zero greenhouse gas emissions by 2050 while promoting a pollution-free environment. To realize this vision, the Green Deal encompasses extensive measures spanning transportation, agriculture, ecosystems, and biodiversity, with a particular emphasis on the circular economy.

This requires improvements in transportation, agriculture, ecosystems, and biodiversity, as well as promoting a circular economy for reuse and recycling. From 2021 to 2027, 35% of EU research funds will support eco-friendly technologies.

A critical part of the Green Deal is the European Commission's Circular Economy Action Plan (CEAP), which focuses on reducing the environmental footprint of products and promoting a culture of reuse and recycling. The plan also envisages the development of a Digital Product Passport (DPP), a tool to enhance product and component traceability in the circular economy.‍

Additionally, the EU introduced the Net-Zero Industry Act and the European Critical Raw Materials Act as part of the Green Deal Industrial Plan. These acts focus on lowering emissions, promoting green practices, and ensuring essential supplies for Europe's green and digital shift. They support climate action and a sustainable economy and help attract green technology investments in Europe, preventing companies from moving during the energy transition.

Take Note of these four more regulations: 

Additional significant EU regulations on supply chain transparency and energy transformation have been put into effect.

- Fuel Quality

- Renewable Energy

- Carbon adjustment

- Green Claims

Regulatory Landscape Across the Globe

While the EU leads the charge in circular economy regulation, other regions are also making significant strides. For instance, China enacted the Circular Economy Promotion Law in 2008, emphasizing waste reduction, reuse, and recycling.

In North America, Canada has implemented the Canada-wide Action Plan on Zero Plastic Waste, focusing on plastic waste management. 

The United States has enacted what is widely regarded as the most comprehensive strategy to date in this area: the Inflation Reduction Act (commonly referred to as the IRA). This plan contemplates (among other initiatives) over $400 billion in new investments across the country, particularly targeting industries associated with green energy and the mitigation of harmful greenhouse gas emissions.

In Africa, South Africa's Economic Reconstruction and Recovery Plan outlines the country's commitment to green economic growth, including initiatives to promote waste management and recycling.

In South America, Ecuador's Circular Economy Pact highlights the country's commitment to sustainable production and consumption patterns.

Many Asian countries, including South Korea and Japan, have also introduced circular economy policies, focusing on green technology and sustainable resource management.

Similarly, India, another major Asian player, has concentrated its efforts on promoting the growth of green and renewable technologies within its borders, allocating over $600 million in an investment plan for solar energy infrastructure and related technologies (like batteries) across the nation.

The Role of Blockchain Technology in the Circular Economy

Blockchain technology has emerged as a powerful enabler for the circular economy, providing enhanced transparency and traceability across supply chains. It offers an immutable digital record of transaction data, authenticated each time a new transaction occurs. This transparency can be used to track materials throughout the manufacturing process, ensuring that products are reused, recycled, and remanufactured in the most efficient way possible (Creating a Digital Product Passport (DPP).

  • This game-changing passport provides real-time insights into the supply chain journey of any product, revealing how and where materials are sourced and used. Furthermore, businesses can use this technology to generate transparency reports, allowing them to showcase the quality of their products and operations.
  • One of the unique features of blockchain technology is 'smart contracts'. These are self-executing contracts with the terms of the agreement directly written into code. They can be programmed to automatically issue actions or contracts when specific conditions are met. This feature is particularly useful for tracking used materials and their inclusion in a specific supply chain.
  • Blockchain not only provides a means of tracking materials but also offers enhanced security. With blockchain, you'll have an immutable record of data transactions. This means no transaction can be changed or altered in any way. This provides an extra layer of reliability and trust.
  • Another benefit of blockchain in the circular economy is that it provides a platform for more efficient transactions. This means businesses will be able to streamline processes and reduce the cost and time associated with certain operations. Overall, this makes businesses more productive while reducing waste in the process.
  • Mass balance, also known as mass flow accounting or material flow analysis, is a critical concept within sustainability and the circular economy. By accurately tracking and analyzing these flows, mass balance can help verify the sustainability claims made by companies, thereby combating 'greenwashing' — a deceptive tactic where companies exaggerate or falsely claim environmental benefits.
  • ESG reporting also faces the risk of greenwashing, where companies exaggerate or falsely claim environmental benefits. This is where blockchain technology can play a crucial role by providing an immutable record of data transactions, thereby ensuring transparency and accountability. This data is invaluable for investors, allowing them to make more informed decisions.

Accelerate Digitalization with MARCO Track & Trace

The circular economy is already showing its effectiveness in several sectors (especially in high capital industries such as chemical, energy, agriculture, fashion, mining, and plastic), contributing to sustainability and the efficient use of resources. It is the path to a future with fewer gas emissions and a more sustainable world. For instance, a blockchain pilot project for circular plastic recycling by Finboot, SABIC, Plastic Energy, and Intraplás gained lots of recognition because it was a first of its kind in the industry. The project aims to support end-to-end digital traceability of circular feedstock in customer products throughout the recycling process. More recently, Finboot announced a new partnership with CRDC Global, a fast-growing firm that utilizes a proprietary process to convert any type of plastic waste into a construction aggregate, to help them ensure its RESIN8 production processes are even more transparent, efficient, and sustainable.

Conclusion: Regulation is essential for reaching net-zero

The circular economy represents a paradigm shift in how we produce, consume, and dispose of products. As this shift accelerates, regulatory landscapes are evolving to support sustainable practices and penalize unsustainable ones.

Blockchain technology is emerging as a powerful tool in this transition, offering enhanced supply chain transparency and traceability. 

Ultimately, the transition to a circular economy is not just a regulatory requirement—it's a business imperative. By embracing circular economy principles, businesses can unlock new efficiencies, reduce their environmental impact, and build a net-zero future.