The EU is moving its recycling and waste treatment targets beyond waste management. Its goal is to integrate waste streams back into production, as far as possible eliminating the concept of waste altogether and creating a circular economy.

Natural ecosystems function this way; from prairies to rainforests, nothing is wasted and there is no ‘trash,’ just stages of use and reuse.

But human economies have never managed to replicate this natural efficiency. Companies make products from available resources, turn a profit and move on; what’s left behind is referred to as ‘externalities’ by economists because it’s external to the companies’ calculations of profit and loss.

Traditionally such externalities were either tolerated by local communities, ignored, or dumped far away. The canals in industrial Britain were so polluted that children amused themselves by setting them on fire; in the 1940s and 50s, air pollution in Los Angeles was so bad as to make photography of the city almost impossible. Local communities are increasingly aware of the potential harms of industrial waste and less likely than ever to tolerate them.

Los Angeles California Smog

Historical silver mines in the US are heavily polluted with heavy metals a century or more after some ceased operation. Miners out to make a quick buck in the 1870s did not consider the lasting effects of their operations, but we know better now. They thought they had an endless wilderness into which their waste could pour. We know better on that score too.

Waste dumped in landfills, in deserts, or the deep sea has come back to haunt us, and we are increasingly aware, partly through global supply chains, that on a planet with 7 billion people, there is no ‘away’ to throw anything to. A growing global economy uses more resources than can be acquired and creates more waste than can be disposed of.

The traditional means of disposing of externalities — waste — are no longer available to us in the USA. In Europe — smaller, older, more densely populated and more anciently polluted — those facts made themselves known earlier.

The EU’s solution is to try to close the circle of production, waste, and resources, making externalities internal so that companies must plan for the re-use of their waste and seek to source raw materials from waste too.

‘A circular economy will cut CO2-emissions, while stimulating economic growth and creating job opportunities,’ says the European Parliament.

The circular economy

‘For a circular economy,’ explains the European Commission, ‘it is essential to recycle materials from waste in order 'to close the loop'. The recovery of energy from waste also plays an important role.

For the European Commission, the tactical goals are to:

  • Improve waste management
  • Stimulate innovation in recycling
  • Limit landfilling

The EU’s Waste Framework Directive is its keystone waste management law, which will be rewritten with a mixture of short-term goals focused on specific forms of waste, and the long-term strategic goal of integrating waste streams into production.

Key to this will be waste separation and a redesign of production to accommodate reuse. Consulting firm EY Global says Europe’s transition to a circular economy is ‘being hindered by both the limited quantity and the issues with the quality of our recyclables.

‘Products are not always designed to be recyclable, people do not sort their waste perfectly and many materials are difficult to separate in a sorting plant once they are mixed with other waste streams, for example, bio-waste mixed with paper.’

Specific provisions of the EU circular economy plan

European Union flag

The European Commission’s plans for a circular economy are designed to ensure that resources remain in the EU as long as possible, and to contribute to decarbonization, tying the plan into the EU’s climate commitments.

It includes measures to:

  • Make sustainable production the norm rather than the exception EU-wide, including restricting or disincentivizing single-use products and ensuring that products on the EU market are designed to be easier to repair, reuse, recycle, and are made from recycled materials as much as possible.
  • Build lifespan considerations into consumer purchase decisions, including through point of sale information, incentivizing consumers to make purchases that involve lower total cost of ownership and greater product longevity.
  • Ensure less waste by transforming waste into high-quality secondary resources, and targeting waste exports and illegal waste shipments.
  • Target economic sectors that combine high resource consumption and high potential for circularity, such as:
    • Electronics
    • Information and communications technology
    • batteries and vehicles
    • Packaging
    • Plastics
    • Textiles
    • Construction
    • Buildings and food

That encompasses a lot of the EU economy; ICT alone accounts for about 3.7% of EU GDP, but it’s even higher in the USA — over 11%. Targeting these sectors also means targeting the most important and dynamic parts of the economy and deliberately reshaping it.

The EU Commission expects these measures to produce economic growth rather than to cost money, producing a 0.5% GDP bump by 2030 and creating around 700,000 new jobs.

Finance will partly be from private investment through EU financial instruments like InvestEU.

Even more ambitiously, the EU has proposed the launch of a global circular economy alliance to explore the possibility of international agreement.

How European businesses are responding

Europe has been moving in this direction since 2017. Now, there are some concrete examples of circular economies. Some use offsetting systems to reduce the overall effect of EU business and consumer resource use, like Closing the Loop, which logs EU tech purchases and buys and recycles an equivalent quantity of tech goods from countries that lack recycling facilities.

However, Closing the Loop is offsetting consumption rather than making it truly circular — goods are not bought, used, and turned into other goods within the same jurisdiction.

AEIFOROS S.A. gets closer to that goal. They use the slag (waste metal and other materials) from electric-arc furnaces to coat heavy pipes for offshore projects. Using furnace slag for concrete aggregate is not new, and it has long been used for road construction, but higher value-added uses point to a closing of the value gap in the circular economy; it’s one thing to recycle furnace slag as road aggregate, another to build it into the production process of specialized equipment.

For many European firms, the risk is that the circular economy makes recycled materials difficult to obtain; what happens when a supply chain based on trash from another industry dries up because that industry has changed its own supply chain and manufacturing process?

There are serious challenges ahead for EU businesses, but there is also the promise of interconnected recursive supply chains, more integrated, secure and lower-cost than those currently in use. (For the security-minded, this would also reduce the dependence of member states on potentially-hostile resource supplier countries.)

To achieve this circular integration, companies will have to work closely with each other while continuing to compete against each other. And they will have to bear the cost and disruption of transition to a new and untested way of doing business and managing production. The effects will go far beyond our conception of recycling, transfiguring trade routes across the continent as everyone’s trash becomes everyone’s treasure. And whole new industries will emerge to treat, manage and repurpose waste.

Making environmental regulation decisions in the EU

European Parliament

The EU used to have tension between its most and least environmentally-conscious members. Newer members were typically less interested in environmental regulation; Germany and the north-western fringe were particularly interested. But until the early 90s, the EU struggled to create common standards. Its 1985 directive, says Frances Cairncross in HBR, boiled down to telling member states: ‘“Draw up whatever policy you think appropriate to minimize the impact of drink containers on the environment, using either legal or voluntary means, as you prefer.”’

Partly this was a result of the EU’s own internal rules that bar member states from creating policies that could interfere with pan-EU trade. Then in 1988, the European Court ruled in favor of a Danish regulation common in Scandinavia, but then unusual elsewhere: all disposable drinks containers had to be sold with a deposit, and their manufacturers had to buy them back.

Germany followed suit and a slew of EU environmental regulation transfigured standards and trade in the bloc, now unconstrained by the least environmentally-ambitious member states.

Consequently, there is already broad agreement across the EU that the Commission can and should make these decisions, in collaboration with businesses. Since 2000, the effectiveness of this has waned and the EU has struggled to make decisions at the legislative level; bargaining between member states, businesses and the EU Parliament became an ineffective means of making decisions. Into the space created stepped EU regulatory bodies, which continued to push an environmental agenda based on the powers granted them by the legislature — a solution other blocs and nations might copy.

How does the United States compare?

US waste companies are operating in a very different market from the EU. While the EU is technically more federated than the 50 United States, in terms of its formal power arrangements, it’s also more accustomed to stronger state leadership and greater cooperation between labor unions, government and industry — especially in the wealthy, environmentally-conscious core and north-west.

In the US, more initiative comes from corporations, many of which have set their own greenhouse gas emission goals in the relative absence of state-level leadership.

Christiana Figueres, a former executive secretary of the United Nations Framework Convention on Climate Change who played a key role in negotiating the Paris climate agreement, told a recent Waste Management event that companies are ‘not doing this because they want to save the planet, as gorgeous as this planet is, they're doing it out of sheer business sense. Because it makes business sense to be responsible with the environment and social issues in order to have business continuity.’

The recent change of leadership in the White House has significant implications for waste management, via an increased emphasis on environmental regulation. President Biden has already signed several executive orders that ‘add up to a mini-Green New Deal’ and has pitched Congress on a $2 trillion climate and environment package that resembles the Green New Deal. Alongside the elimination of oil, coal and gas as electricity sources by 2035, the Biden plan also includes conservation goals of 30% of the US’ land and waterways.

Efforts to achieve a circular economy have also continued in the US, again with a greater emphasis on private-sector leadership. A document released by the US Chamber of Commerce in 2015 discussed efforts toward a circular economy in the electronics and IT, finance, manufacturing, environmental services and plastics and packaging industries.

For example, the document praises Caterpillar for its dedication to remanufacturing of engine parts, dating back to 1973 and operating as an aftermarket for Caterpillar’s own products. However, this is a far cry from the transformation of the economy the EU is attempting.

What’s next for US companies?

Serious environmental legislation is almost certainly coming. It will target reducing landfills, funneling waste streams back into production, and innovative recycling as well as sharp reductions in coal, oil and gas usage.

Currently, the USA lags behind the EU in waste remanufacturing and in waste management techniques more generally; EfW (Energy from Waste) is around 7% of the US’ total solid waste stream, and uses vastly more landfill than EU states, many of which have virtually eliminated landfill use. About 600 landfills around the US are using methane capture and burnoff to reduce their environmental impact, but even in these cases most of the methane is flared.

In the future, solid waste will need to be disposed of more effectively, and probably a mix of clean incineration for energy and reintegration into the supply chain can achieve this. How that will play out in the US remains to be seen.

We’ll also see a stronger showing for digital solutions to short-term waste management issues, from robotic sorters to remote-managed compactors, chipped recycling bins and web tools to identify appropriate waste management sites.

From 2015, the USDA and EPA began working to halve the US’ green waste (food and other biodegradable waste), and as this effort continues it will draw transportation and farming into the process. We’ll likely also see resin replacement in the plastics industry and a greater focus on biodegradability.

For US companies, progress towards a circular economy will probably be more piecemeal and dependent on location, driven less by direct state leadership and reliant on private investment at the company level.

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