Last month, we hosted a panel discussion to launch our latest report, Amplifying action on resource efficiency, which brings forward new business trials showing that greater resource efficiency could deliver significant economic benefits to EU businesses. Speakers included:

• Jyrki Katainen, European Commission Vice-President for Jobs, Growth, Investment and Competitiveness
• Monica Mireles Serrano, Senior Advisor - EU Environmental Policy, IKEA Group
• Mat Roberts, Director of Sustainability Strategy, Interserve
• Ian Ellison, Sustainability Manager, Jaguar Land Rover
• Cuno van Geet, Senior Advisor - Resource Efficiency, Rijkswaterstaat
• Nick Molho, Executive Director, Aldersgate Group

The Aldersgate Group’s Executive Director Nick Molho introduced the Group’s latest report, which brings forward new business trials showing that greater resource efficiency could deliver significant economic benefits to EU businesses. 
 
The new research published by the Aldersgate Group on behalf of the REBus project is based on the successful delivery of 26 business pilots that have gained €5.62m in financial benefit and reduced materials consumption and greenhouse gas emissions by 62,619 tonnes and 1,953 tonnes, respectively. The work has been conducted across the UK and the Netherlands in a range of key market sectors (including electrical and electronic products, textiles, construction and ICT) that are worth an estimated €350bn to the EU economy.
 
Nick highlighted three key recommendations from the report:

1. He welcomed the Commission’s recently published eco-design working plan but noted the importance of expanding the list of products covered by resource efficiency standards “in the near future”. This should include complex products such as white goods and ICT products.
2. Nick also emphasised that “most of the pilots would not have happened without access to expertise from the REBus delivery team”. Therefore, funding for circular economy innovation from the European Investment Bank (EIB) as well as an expansion of the Commission’s Innovation Deals will play an important role in tackling the finance and expertise barriers that businesses often face.
3. Finally, Nick noted that the current fiscal regime does not incentivise the use of secondary materials and resource-saving services. The Commission should use its forthcoming Action Plan on VAT to allow for greater flexibility on VAT and encourage Member States to apply this flexibility to reduce rates for resource-saving goods and services. 

Nick also emphasised the importance of businesses and civil society working closely with EU institutions on the Circular Economy Package. Their collaboration will help tackle some of technical, regulatory and public engagement barriers that must be overcome to accelerate the transition to a more resource efficient EU economy.

Jyrki Katainen, European Commissioner for Jobs, Growth, Investment and Competitiveness, welcomed the latest Aldersgate Group report and asserted that the “circular economy will be the next megatrend in the world market because it makes a lot of economic sense”.
 
The Vice-President noted that the Commission is establishing a Circular Economy Finance Support Platform with the EIB to bring together both public and private players. The Platform is for exchanging views on whether and how the finance community needs changes to regulations in order to provide new products to the market. The circular economy “often requires new business models that are different from traditional ones and therefore may require different financial products”.
 
He also shared his views on the range of policy areas included in the Aldersgate Group’s new report:

• On the waste package: “The waste package is a very central part of our Circular Economy Package…The Commission hopes that the legislatures will work constructively. This will ensure legal certainty and enable us to reap the benefits from improved waste management sooner rather than later.”
• On fiscal regulations to incentivise resource efficient goods and services: “I have mixed feelings because I think that reduced [VAT] rates may have some impact to consumer behavior but the change will not be significant…As a former Finance Minister, I appreciate VAT. It’s the easiest way to collect money and that is why I would rather reduce rates for salary taxes or direct taxes…but I promise to you to keep my mind open.”
• On green public procurement: “It is an extremely important issue because our sector is so large in the EU…At the moment, it is all voluntary so it depends on the Member States and local authorities to make green public procurement real. Some are very ambitious on this [like Italy]…Some Member States however are doing little here and we want to help them.”
• On eco-design standards for resource efficiency: “Finally we managed to publish the expanded list of products last December. I think this is the first time that we managed to communicate it right…I fully agree with you that we should widen the scope to repairability and reusability so it’s a big opportunity for all of us.”
• On tackling barriers to innovation: “[The innovation deals] are a very good tool that we have developed to make sure we get more information on which regulatory barriers we need to tackle to support innovation…Even though circular economy is not supposed to be an issue which always must be subsidised, there will be some projects that need public support”.

Cuno Van Geet, Senior Advisor – Resource Efficiency at Rijkswaterstaat (Dutch Ministry of Infrastructure and the Environment), noted that access to expertise, rather than investment subsidies, was the most critical factor to the success of their government procurement pilots for REBus.
 
Amongst the ten procurement pilots led by Rijkswaterstaat was the Dutch Ministry of Defence (MoD), which looked at incorporating recycling content in their corporate wear. Engagement with the market was key, especially given how textiles with recycled content require new types of machinery and processing that were not readily accessible. The Ministry trialled the pilot on smaller goods like towels and overalls first, which improved understanding before starting a large tender for corporate wear.
 
Cuno noted that the major gains from their pilots were not just in the resources saved and financial benefit, but also the decrease in CO₂ emissions and water. Links between resource efficiency and climate need to feature more within policy, particularly for sectors like textiles, IT and construction. The MoD’s textile pilot is expected to deliver savings of over 14,500 tonnes of CO₂, 132,000 GJ of energy
(equal to 4.25 million m³ of natural gas) and almost 2.9 million m³ of water annually.

Mat Roberts, Group Sustainability Strategy Director at Interserve, noted that circular business models are “very much in their infancy” and asset models are still not equipped to make the shift away from the linear economy, making circularity “a hard sell but a sell that [Interserve] continues to support”.
 
He highlighted two immediate asks that the construction sector has around circularity. First, Mat called for “extra thought” to be put into the definition of waste and secondary assets according to use. Using the example of an industrial kitchen, he noted that the current regulatory environment allows Interserve to easily move these kitchens as singular units as well as their key components such as ovens and washers. The difficulty comes when companies want to move equally expensive components such as ceilings, walls and floors, which are promptly identified as demolition waste.
 
Secondly, the circular economy requires a social component beyond “technical skills to redesign, maintain, dismantle and repurpose” materials. A shift in core values within the workforce and customer base needs to champion “flexibility, collaboration and confidence for change”. The linear economy is longstanding and we must ensure people, workforces and customer bases have confidence in the changes associated with circularity. 

Monica Mireles Serrano, Senior Advisor – Public Affairs at IKEA Group, shared that the policy framework currently supports the sourcing of sustainable materials but there are two other “legs of a circular IKEA” where extra policy support is required.
 
Echoing Mat’s comments, Monica noted that the definition of waste is a key issue alongside extended producer responsibility, which on its own is “useful but not going to solve” the linear economy. 50% of IKEA’s TOMAT spray bottle is made from the plastic wrap enclosing every pallet delivered to their stores. Only three stores’ supply of plastic wrap is required to manufacture TOMAT worldwide but dealing with the regulations related to the transport of this plastic was “quite challenging”.
 
IKEA has launched pilots in Sweden and Belgium in an effort to develop a second hand market with their customers. These pilots include an online marketplace where customers can sell their used IKEA items to other users, in-store take-back and workshops to upgrade/recycle used furniture. While these pilots have found traction with their customers, expanding to other markets is “tricky and is still an area that needs work”. Monica noted that it is critical that the policy framework makes clear that policies going forward will support their work in the development of second-hand markets but also that rules will be comparable across countries.

Ian Ellison, Sustainability Manager at Jaguar Land Rover, emphasised that circularity is more than just “materials innovation but also innovations in how the business operates fundamentally” so building trust up and down the supply chain is critical.
 
Jaguar Land Rover is analysing all of its value chains to find opportunities for circularity. Their flagship programme has achieved 50% recycled aluminium in new cars and they aim to increase this to 75% by 2020. Other materials such as plastics are more complicated because they downgrade when reprocessed so the economic case is still not there. While metals have proven to be a more immediate avenue to implement circularity and ultimately saves millions of tonnes of CO₂, it still required several years of strategic planning with suppliers and demonstration of commitment to that level of change.
 
Ian suggested that the language of taxing ‘value added’ does not lend itself to the circular economy; instead it would be more appropriate to tax ‘value destroyed’, though that would be more difficult to implement. With the current tax regime, he noted the benefits of making amendments to VAT. The UK’s recent introduction of carrier bag charge has changed the way people are shopping. “We can all afford to spend 5p on a plastic bag but we’ve all learned to juggle our groceries”. A change in incentives via VAT “doesn’t have to be huge but it can change the way people think”.