Moving To A Circular Economy – Strategy

On 24 September, Ed Turtle (Cooley) joined by Michelle Walsh (Compliance & Risks) and Simon Kennedy (Ramboll), presented a webinar
discussing the implications of moving to a circular economy for
products manufacturers, suppliers and other stakeholders. Moderated
by Claire Temple (Cooley), our speakers delivered
a whistle-stop tour of the latest legal developments, together with
the economic argument for the circular economy.

As an area of major regulatory and business change, the impact
of the move towards the circular economy will likely be
significant. If you weren’t able to join, or would like a
recap, read on for our key takeaways from the webinar, answers to
some questions raised that our panel didn’t get to, and details
of how to get a copy of the slides and access a recording of the
webinar.

Key takeaways

• In light of the current climate
  crisis, the circular economy is a necessity. Although moving to a
  circular economy may seem like an onerous task, and zero waste may
  seem aspirational, by setting measures across the entire life cycle
  of the product, circular economy goals are completely
  achievable.
  




• There is a strong economic argument
  for moving to a circular economy. The waste, or ‘value
  leakage’, resulting from a linear economic model represents
  wasted economic opportunities or value. The circular economy is
  about recapturing that wasted value.
  




• While the EU has opted for a very
  ambitious plan, and intends to lead international efforts in this
  field, this is not just an EU policy. Many other countries are at
  different stages of implementing their own circular economy plans.
  This is a truly global phenomenon.
  




• Businesses need to be prepared.
  Sustainability requirements are going to apply to many more
  products, and these requirements will require consideration at
  design stage. We can look to sectors that have existing ecodesign
  and labelling requirements to learn lessons, and to anticipate
  what’s coming next.
  




• Consumer information requirements
  will make sustainability a more important factor in purchasing
  decisions. At the same time, tighter controls and greater
  enforcement will make it more important to be able to substantiate
  environmental marketing claims.

Responses to Questions

Q. When can we expect the new consumer protection directive?
Can we expect a mandatory or suggested language, so as to avoid
greenwashing, or perhaps a Guidance document from the EU
Commission?

A. The European Commission is planning to adopt proposals in its
“strengthening the role of consumers in the green
transition” initiative in Q2 of 2021. For more information
on this initiative, including on the public consultation (which
closes on 6 October 2020), please also see our blog post.

The Commission is considering three possible approaches:

1. Maintaining the status
   quo – i.e. no new mandatory requirements or guidance. This
   would mean businesses are left to decide what environmental
   information they provide and issues like greenwashing would need to
   be tackled on a case-by-case basis by authorities under existing EU
   legislation (chiefly, the Unfair Commercial Practices Directive
   2005/29/EC, as amended by the new Omnibus Directive
   (20119/2161)).
   




2. Amending the existing
   consumer protection regime. Making targeted changes to
   existing legislation to require information on environmental
   characteristics, durability and reparability as part of the minimum
   information provided at point of sale, and creating a blacklist of
   unfair practices when it comes to issues like greenwashing and
   premature obsolescence. The Commission is also considering moving
   forward guidance alongside these targeted changes.
   




3. A new consumer protection
   directive. This would establish a bespoke regime laying
   down what information must be provided at point of sale, setting
   criteria for labelling and environmental claims and including
   definitions, and prohibitions, on greenwashing and premature
   obsolescence. Although the Commission hasn’t addressed this, we
   anticipate there would be accompanying guidance with any new
   regime.

We’ll have to wait for the Commission’s full impact
assessment to know which approach it favours (it has only carried
out the inception impact assessment, similar to a roadmap, so far).
Our sense is that the third option might be the most attractive for
the Commission – given the emphasis the EU is placing on reforms in
this area.

Q. In your opinion is the UK likely to implement similar
reforms? How far will the UK framework move away from the EU
one?

A. The starting point is that existing EU environmental measures
will crystallise into UK law – so current ecodesign, energy
labelling and waste provisions will remain in place. In terms of
future EU legislation, this won’t apply automatically in the
UK. However, our view is that the UK is likely to end up with
similar requirements.

The UK could agree to harmonise with EU measures in a trade
agreement (albeit an agreed trade agreement any time soon is
looking increasingly unlikely), or the UK could decide to take
similar measures of its own initiative. We think that the latter
approach is likely in the absence of an agreement to harmonise. The
UK supported the EU proposals whilst it was still a member of the
EU, and UK the Government issued a policy statement in July
reiterating the UK’s commitment to achieving a circular
economy, and indicating that it would implement measures similar to
the EU proposals.

Given this, in terms of divergence, it’s difficult to see
the UK moving away from the EU significantly in this area. The UK
Government has said that Brexit will allow it to go further with
circular economy measures than the EU proposals. But, in practice,
we expect there to be broad parity – especially as, whatever
approach the UK takes, businesses supplying to consumers in the EU
will need to be compliant with EU laws, which is likely to have a
powerful market effect in the UK.

Q. Hi – I’m wondering if there are any thoughts on
the challenges for the electronics industry to incorporate recycled
materials into products that are compliant with RoHS, POPs, REACH,
and other materials standards. Is the EU considering this?

A. We agree that there are potential challenges for the
electronics industry in using recycled materials. Although there
are no firm proposals on the table yet as to how these will be
overcome, the good news is that the European Commission is alive to
the issue.

As part of its Circular Electronics Initiative, the Commission
is proposing to review EU rules on restrictions of hazardous
substances (RoHS) in electrical and electronic equipment and
provide guidance to ensure coherence with relevant legislation,
including REACH. The review and work on the guidance will take
place in 2021.

Q. Do you expect that manufacturers will be forced to make
easier-to-disassemble products in order to sort the waste materials
like battery, plastic parts and electronics from the main
product?

A. Yes, we do. Some requirements already exist. For example,
Commission Regulation 2019/2021 on ecodesign requirements for
electronic displays creates an obligation for devices to be
designed for dismantling, recycling and recovery from March 2021.
This will require that joining, fastening or sealing techniques do
not prevent the removal, using commonly-available tools, of
components that should be recycled pursuant to waste electrical and
electronics equipment (“WEEE”) or batteries legislation.
These requirements are supported by information requirements (e.g.
an obligation to make dismantling information available) and
marking requirements (e.g. marking of plastic components). We
expect to see requirements like this rolled out to a wider range of
products over time, particularly as part of the EU’s
Sustainable Products Initiative. See our blog post for more information on this.

Q. Are there any national circular economy initiatives that
you would recommend that we keep a close eye on in addition to the
EU initiatives?

A. Absolutely. We heard details of some national initiatives
during the webinar. You can check out the webinar recording and presentation materials for information on
proposals in Central and Latin America (Brazil, Argentina, Chile,
Colombia, Peru, Ecuador, El Salvador and Mexico), Canada and the
USA, Asia (China, Indonesia, Vietnam and Singapore) and Russia.

In Europe, it’s worth keeping an eye on what’s happening
in individual EU Member States. For example, in France, a new
repairability index will come into effect in January 2021. It will
take the form of a rating system from 1 to 10 and will cover five
product categories: washing machines, television, smartphones,
computer and electric lawnmowers. As with energy labelling, the
manufacturer will be responsible for calculating the rating and
must clearly display the information. The new index is a step
forward in terms of providing information about repairing products,
which is of course an important part of the move towards a circular
economy. However, this information does not of itself give a
reliable picture of how sustainable products are, as other factors
such as reliability and durability are not addressed. As mentioned
above, it’s also worth keeping an eye on the UK, to see whether
it will follow or diverge from the EU position.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.