March 08, 2019

Essential Elements When Navigating the Circular Economy

Jonathan Nwagbaraocha

Joint article with the Section's International Environmental and Resources Law Committee.

The circular economy aims to minimize waste generation and maintain the value of products and materials.  Organizations in both the public and private sectors are exploring ways to transition to a circular economy.  Technology companies are balancing costumer needs and corporate sustainability goals to come up with innovative ways to engage in circular economy activities.  Regulatory bodies are sharing best practices and revising regulatory and market driven structures in order to align a variety of chemical, waste, and product regulations and create incentives to facilitate the transition to a circular economy.  This article describes essential elements of a circular economy and lessons we can learn from technology companies and regulatory bodies to ensure an effective transition to a circular economy.

Overview of Circular Economy

The circular economy can be contrasted with a traditional linear economy. In a linear economy, raw materials are used to make a product and, after it is used, the product is thrown away. In a circular economy, material extraction is reduced by using less material, products are made of reused parts and materials, and materials and parts are remanufactured, reused, and recycled.

Transition from a linear economy to a circular economy involves four essential elements:

  • Product Design: Determines the longevity, reparability, recyclability, proportion of recycled and reusable material in the product, and its suitability for refurbishment or remanufacture;
  • Sustainable Sourcing: Ensures the minimal use of finite raw materials and improves the market for secondary materials;
  • Consumption: Influences the demand for a circular economy by purchasing goods that contribute to a circular economy and minimize negative environmental impacts and waste creation across their whole life-cycle; and
  • Waste Management: Changes the perception of waste as a problem to waste as a resource.

European Commission, Closing the Loop – An EU Action Plan for the Circular Economy, 2015 available at https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:52015DC0614&from=EN.

Thoroughly review products, supply chains, and facilities to find opportunities to incorporate circular economy activities

Companies in the information technology industry have implemented circular economy activities into their processes. For example, Xerox has implemented an adaptive leasing product business model through which 100 percent of returned equipment is optimized for end-of-life processes, which prioritizes equipment longevity, re-use and remanufacturing. Xerox Corporation, You and Xerox: Enabling the Circular Economy (2017) available at https://www.office.xerox.com/latest/XOGBR-60U.PDF. Remanufacturing is a standardized industrial process that restores used parts to fulfill a function that is at least equivalent compared to the original part. This optimized reverse logistics system has helped Xerox realize over $127 million USD in cost benefit, achieve over 115 million lb. CO2 equivalent in greenhouse gas savings, and decrease cross-continental transportation.

In order to effectively integrate circular economy activities, companies have to identify key processes and documents. For example, creating the robust reserve logistics remanufacturing process at Xerox requires creating agreements with clear terms for customers, building a reserve logistics system that will collect equipment, creating a process to analyze and determine the appropriate action for components and equipment, and finally ensuring that remanufactured equipment is marketed to customers. This involves engaging organizations throughout the various functions of a company, including legal, marketing, and supply chain, to ensure that expectations are clear, and processes work efficiently.

Engage relevant organizations/stakeholders when developing and implementing circular economy activities

Google has also integrated circular economy practices and principles into the fabric of Google’s infrastructure, operations and culture through a partnership with the Ellen MacArthur Foundation. Shobhit Rana & Kate Brandt, Case Study: Circular Economy at Work in Google Data Centers (Sept. 2016), available at https://www.ellenmacarthurfoundation.org/assets/downloads/data-center-case-study-14-9-16.pdf. For example, Google has focused on analyzing the life-cycle stage of components to ensure that refurbished components are put back into inventory, any excess components supply is sold on the secondary markets, and materials are recycled. Id.

Building private-public partnerships is critical to ensuring a transition to a circular economy by bringing entities together to share ideas and develop innovative ways to integrate circular economy activities into processes and bring about systemic change. United Nations Economic Commission for Europe (UNECE), How Can Innovation and Public–Private Partnerships Support Sustainable Production and Consumption and the Shift to a Circular Economy?, 2018 available at https://www.unece.org/info/media/news/innovation/2018/how-can-innovation-and-public-private-partnerships-support-sustainable-production-and-consumption-and-the-shift-to-a-circular-economy/doc.html. Partnerships among governments, the private sector and civil society are often useful to explore new regulatory models and co-ordinate different economic activities. Id. Google’s global partnership with the Ellen MacArthur Foundation is an excellent example demonstrating how these types of partnerships can be effective.

Comprehensively review and revise accordingly waste, chemical, and product requirements to ensure consistency, remove hurdles and create incentives to transition circular economy

With a variety of international and domestic laws influencing the transition to a circular economy, it is critical to remove hurdles, create incentives, and harmonize practices and policies. On the international level, the Basel Convention establishes rules for the transboundary movement of hazardous waste between countries who have ratified the Convention. Under the Basel Convention, there are Technical Guidelines on e-waste intended to help countries to determine what is waste electrical and electronic equipment (EEE) and non-waste EEE. UNEP/CHW.12/5/Add.1/Rev.1 (2015), available at http://www.basel.int/Implementation/Publications/LatestTechnicalGuidelines/tabid/5875/Default.aspx#. This has implications for the movement of used EEE intended for repair and refurbishment and the rules applicable thereto. Clear and consistently interpreted rules for transboundary movement of remanufactured EEE are necessary to ensure a transition to a circular economy.

While countries have started to adopt circular economy regulations, no single piece of legislation will ensure the transition to the circular economy. Modifying the legislation landscape to encourage a transition to a circular economy will require changes to waste, chemical, and product regulations in order to ensure that definitions, targets, and objectives are aligned.

A great example is the EU Circular Economy Package (CEP), adopted in 2018, which amended the following Directives to remove barriers or create incentives to the circular economy:

  • Waste Framework Directive
  • Packaging and Packaging Waste Directive
  • Landfill Directive
  • Waste Electrical and Electronic Equipment (EEE) Directive
  • End-of-Life Vehicles and Batteries Directive

European Parliament, Circular Economy Package: Four Legislative Proposals on waste, (July 2018), available at http://www.europarl.europa.eu/RegData/etudes/BRIE/2018/625108/EPRS_BRI(2018)625108_EN.pdf.

The EU CEP amended the aforementioned Directives to define general requirements for extended producer responsibility schemes, align definitions and encourage the creation of incentives for producers to put greener products on the market and support recovery and recycling schemes. Id. The CEP also required the Commission to propose options on the interface between chemical, product and waste legislation and revise them accordingly to encourage the transition to a circular economy. European Commission, Closing the Loop.

These amendments are part of the Circular Economy Action Plan, adopted in 2015, which identified 54 actions needed to transition to a circular economy. These actions are a combination of voluntary initiatives and regulatory actions involving production, consumption, waste management and secondary raw materials. On March 4, 2019, the Commission announced that all 54 actions under the Action Plan have been delivered or are being implemented. European Commission, Report from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on the implementation of the Circular Economy Action Plan, (2019) available at https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:52019SC0090&from=EN.

The United States also has regulatory structures in place that can influence a transition to a circular economy. Based on the recent experience of the EU CEP, a variety of U.S. waste, chemical, and products laws may have to be amended. One area of particular interest is the need to align universal waste regulations, objectives, goals, and definitions. Federal regulations define universal waste as a category of waste materials designated as "hazardous waste" and includes batteries, pesticides, mercury-containing equipment, and lamps. 40 C.F.R. § 273.9 2018. Federal regulations are intended to promote the collection and recycling of universal waste and requirements related to labeling, responding to releases, and transporting to a facility that is permitted or otherwise designated for receiving hazardous waste. However, universal waste regulations can vary on the state level. First, a state does not have to include all of the universal wastes when adopting the federal universal waste regulations because the existing rules are less stringent than the previous requirements under the Resource Conservation and Recovery Act (RCRA). States can create different standards, but these standards must be equivalent to the federal regulations. Second, U.S. states authorized for the RCRA petition process may add additional universal wastes to the state's universal waste program if the waste meets the certain criteria and the state has a collection system in place and ensure that the universal waste program will increase the likelihood that the waste will be recycled. 40 C.F.R. § 273.80 and 273.81 2018.

With a number of countries exploring ways to influence a transition to a circular economy, sharing best practices and policies may positively contribute by encouraging a harmonized approach. In July 2018, the European Union (EU) and China signed a Memorandum of Understanding (MOU) on Circular Economy. Memorandum of Understanding on Circular Economy Between the European Commission and the National Development and Reform Commission of the People’s Republic of China, (2018) available at http://ec.europa.eu/environment/circular-economy/pdf/circular_economy_MoU_EN.pdf. The MOU addresses management systems and policy tools such as eco-design, eco-labelling, extended producer responsibility and green supply chains as well as financing of the circular economy. Id.

Conclusion: Optimizing Transition

The transition to a circular economy requires a shift in policies, processes and partnerships. The good news is that the shift has already started. Both Xerox and Google have demonstrated how they have integrated circular economy practices into their processes. Additionally, the European Union and China have committed to share best practices and revise regulations in order to encourage the transition to a circular economy. Both public and private entities will have to continue these activities in order to ensure an efficient and effective transition to a circular economy.

Jonathan Nwagbaraocha

Published: March 8, 2019


Jonathan Nwagbaraocha is Environment, Health, Safety & Sustainability Counsel and Compliance Leader for Xerox Corporation. As EHS&S Counsel, he advises on various environmental, health, safety, and sustainability matters throughout operations as well as related areas within supply chain and procurement and enterprise governance on a global basis. As Compliance Leader, he ensures that the organization is in full statutory compliance with all rules and regulations related to all applicable laws in our industry as well as internal policies. The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of Xerox Corporation.