Businesses Urge EU to Strengthen Circular Economy Act as Industry Seeks Clearer Market Rules

A group of major businesses has urged the European Union to deliver a strong Circular Economy Act, arguing that clearer and more consistent rules are needed to scale circular business models across Europe.

The call comes as the European Commission prepares new legislation designed to accelerate the shift from a linear economic model, based on extracting resources, making products and disposing of waste, to a circular model that keeps materials in use for longer. The Circular Economy Act is expected to be adopted in 2026 and is intended to improve access to secondary raw materials, stimulate demand for recycled content and strengthen Europe’s industrial resilience.

According to Forbes, the business appeal is linked to a wider push by companies and sustainability organizations to ensure that the new law does more than set broad ambitions. Businesses want the Act to address practical barriers that currently make circular systems difficult to scale, particularly for companies operating across several EU markets.

Why the Circular Economy Act matters

The European Commission has positioned the Circular Economy Act as a central part of its competitiveness and decarbonization agenda. The law is expected to build on the 2020 Circular Economy Action Plan, which introduced measures covering product design, repair, packaging, batteries, textiles, waste shipments and consumer information.

While the EU has already adopted several important circular economy measures, companies argue that implementation remains fragmented. Businesses selling products or managing materials across the EU often face different rules in different countries, including separate reporting systems, labelling requirements, collection schemes and Extended Producer Responsibility obligations.

This can increase compliance costs and make it harder to build efficient circular supply chains. For a company trying to introduce reusable packaging, take-back systems, repair services or recycled-content products across Europe, fragmented national rules can slow investment and reduce the commercial case for scaling.

A Single Market for Secondary Materials

One of the central business demands is the creation of a genuine single market for secondary materials. Secondary materials are resources that have been recovered, recycled or reused and can replace virgin raw materials in production.

A stronger EU-wide market would make it easier for manufacturers to access reliable supplies of recycled plastics, metals, textiles, paper, glass and other materials. It would also help recyclers and waste management companies find buyers for higher-quality recovered materials.

This is particularly important for sectors with significant material needs, such as packaging, electronics, construction, automotive manufacturing and consumer goods. These industries face increasing pressure to reduce waste, lower emissions and improve resource efficiency, while also managing volatile raw material prices.

For the net zero transition, secondary materials can play an important role. Producing goods from recycled or reused materials can reduce demand for energy-intensive virgin material extraction and processing. However, companies need confidence that secondary materials will be available in sufficient volumes, with consistent quality and recognised standards.

Harmonized rules and Producer Responsibility

Businesses are also calling for greater harmonization of Extended Producer Responsibility systems. These schemes require producers to take financial or operational responsibility for the collection, treatment or recycling of products and packaging at the end of their life.

In principle, Extended Producer Responsibility can encourage better product design and increase recycling rates. In practice, companies often face different schemes across different countries. This can create administrative complexity, especially for firms selling the same products across the EU.

A more harmonized approach could reduce duplication and make it easier for companies to comply. It could also support more consistent data collection, clearer recycling targets and stronger incentives for producers to design products that are easier to reuse, repair or recycle.

For policymakers, this is a difficult balance. Waste management systems are often organised nationally or locally, and infrastructure differs across Member States. However, businesses argue that the Single Market cannot function effectively for circular products and materials if the rules remain too fragmented.

Incentives for Circular Business Models

Another major issue is the cost gap between circular and linear business models. Circular approaches can deliver environmental and long-term economic benefits, but they often face higher upfront costs.

Reuse systems may require reverse logistics, cleaning infrastructure and new tracking systems. Repair and refurbishment models require skilled labour and spare parts availability. Recycled materials may be more expensive than virgin materials when fossil-based inputs are cheap or when recycling infrastructure is underdeveloped.

For this reason, businesses are calling for measures that create a more level playing field. These could include green public procurement, tax incentives, VAT adjustments, targeted funding and stronger demand-side measures for recycled or reused materials.

Public procurement is especially important because governments are major buyers of goods and services. If public authorities prioritise circular products, such as reusable materials, recycled-content goods, repairable equipment and low-waste services, they can help create stable demand and encourage private investment.

Investment and Supply Chain Coordination

The business appeal also highlights the need for financing tools and better coordination across supply chains. Circular economy projects often depend on cooperation between manufacturers, recyclers, logistics providers, retailers, technology companies and public authorities.

For example, a recycled-content packaging system may require product redesign, consumer collection, sorting infrastructure, recycling capacity, quality testing and long-term purchasing agreements. If one part of the chain is missing, the whole model can struggle to scale.

Companies have therefore supported ideas such as regional circularity hubs and platforms that connect suppliers and buyers of secondary materials. These mechanisms could improve transparency, help match supply with demand and reduce uncertainty for investors.

Financing will also be essential. Many circular infrastructure projects require significant capital expenditure before they generate returns. Clearer regulation, predictable demand and public support can help reduce risk and attract private finance.

Implications for Industry and Net-Zero Strategies

The Circular Economy Act has direct implications for corporate sustainability and net-zero strategies. Many companies are now focusing not only on direct emissions from their own operations, but also on Scope 3 emissions across supply chains and product use.

Material choices are a major part of that challenge. Products made from virgin steel, aluminium, plastics, textiles, chemicals or construction materials can carry significant embedded emissions. By improving material efficiency, extending product lifetimes and increasing recycled content, companies can reduce emissions associated with resource extraction and manufacturing.

Circularity also supports resilience. Europe imports many raw materials and is exposed to supply chain disruptions, geopolitical risks and price volatility. A stronger circular economy can help keep valuable resources within the European economy for longer and reduce dependence on external suppliers.

This is especially relevant for critical raw materials used in batteries, electronics, renewable energy technologies and electric vehicles. Recovering more value from waste streams could support both climate goals and industrial security.

A Test of EU Implementation

The central question is whether the Circular Economy Act will simplify and strengthen Europe’s circular economy framework or add another layer of complexity. Businesses are broadly supportive of stronger circular economy policy, but they want legislation that is practical, harmonized and investment-friendly.

For companies, the most useful outcome would be a framework that gives long-term certainty, aligns rules across Member States and creates stronger demand for circular products and materials. For policymakers, the challenge will be to design rules that are ambitious enough to change markets while remaining workable for businesses of different sizes and sectors.

The Act will also need to complement existing EU legislation, including rules on ecodesign, packaging, batteries, right to repair and waste shipments. If these policies are well coordinated, they could help create a more coherent framework for product durability, repairability, recycled content and material recovery.

Outlook

The business call for a stronger Circular Economy Act reflects a wider shift in how circularity is viewed. It is no longer only a waste policy issue. It is increasingly linked to industrial competitiveness, emissions reduction, resource security and supply chain resilience.

If the EU delivers a clear and ambitious Act, it could help circular business models move from pilot projects to mainstream practice. This would support companies seeking to reduce material-related emissions, improve resource efficiency and meet growing regulatory and customer expectations.

However, success will depend on the detail. Harmonized rules, strong demand signals, reliable standards and targeted investment support will be needed to make circularity commercially viable at scale. Without those elements, Europe risks maintaining a fragmented system where circular solutions remain harder to deploy than linear alternatives.

For businesses and investors, the coming legislative process will be important to monitor. The final shape of the Circular Economy Act could influence product design, procurement, recycling markets, sustainability reporting and long-term capital allocation across several key sectors of the European economy.

Source: www.forbes.com