The circular economy as a sovereignty lever for strategic materials in Europe

The European economy is in need of a boost and the European Commission has promised to focus on European competitiveness during the ongoing legislative term. Nevertheless, it is still unclear how much of this competitiveness is planned to be achieved through circular economy actions. Strategic autonomy is repeatedly used as an argument during political debates, and there is a clear consensus regarding the need to reduce the dependencies on third countries, namely China and Russia. With President Trump’s decision to start a trade war with the world – including the EU – the dependency on the US is now also under scrutiny. 

But why are legislators not focusing more on the circular economy to achieve this strategic autonomy?

Europe is the most resource-dependent continent, so tackling issues of circularity and resource-efficiency are both critical and urgent for us. Dependence on the availability of raw materials in the global markets increases uncertainties and investment risks.

The competition for the scarce resources that are mainly found outside of Europe is intensifying every day, making the one who is able to produce the most goods from the least resources, the winner. As a solution, we would need to produce the same level of output and wellbeing with one tenth of our resources and one tenth of our emissions.  

With well-functioning internal circular economy markets, the EU could reduce the need for imported raw materials and energy from third countries and thus enhance Europe’s self-sufficiency and independence. In order to do so, we need clear, legally binding targets for circular economy, resource- and energy-efficiency, eco-design, and material footprints. Together with targets, we need indicators to follow the progress and to collect comparable data. Setting targets without appropriate indicators would not lead us very far. 

Despite all the potential value-added aspects of circular economy, the EU decided to go to a different direction in the end of the last term when proposing the Critical Raw Materials Act. The underlying idea is desirable, as European self-sufficiency stabilizes our markets against global fluctuations and ensures the availability of raw materials needed for technology and the achievement of our carbon neutrality goals. Nevertheless, instead of focusing on ten-fold resource efficiency and closed-loop material cycles together with the design-out-waste principle, the EU proposed a fast-track procedure to open new mines in the EU to respond to the critical resources challenge. The proposal is completely in contradiction with the EU biodiversity strategy as investing in environmentally destructive new mines is neither environmentally sustainable nor economically reasonable.

To fix this destructive side-track direction, we need to set clear ambitious targets in the upcoming Circular Economy Act to accelerate the circular economy markets. In addition, we would need a European Resource Economy Law comparable to the European Climate Law.

This would set clear, legally binding targets for resource efficiency, resource use reduction and the share of recycled content in products. The law would also need to be incorporated into corporate sustainability reporting systems as the law should set requirements for companies to measure their resource use and efficiency.  Instead of destroying the much-needed CSDDD, we would need to strengthen the non-financial reporting requirements to ensure the achievement of EU climate and environmental goals as well as gaining competitiveness while achieving stronger strategic autonomy. Backing down sustainability reporting means that it is also easier for non-European companies to gain a competitive advantage in our markets, as Chinese companies with weaker environmental and human rights laws can produce faster and cheaper goods to our internal markets without needing to address their sustainability issues.

Circular economy is not only about recycling our materials in closed-loop cycles but also following the circular economy hierarchy – starting with reducing, reusing and repairing. For this, we need to continue our work on Ecodesign and to set up ambitious targets for the minimum requirements for product durability, reparability and reusability to ensure the longevity of products.

An example of this would be to create a definition for single-used textiles, which sets clear requirements for minimum standards for the durability and quality of clothes and other textiles, as well as their maximum environmental footprint while addressing human rights issues. However, in order to set targets for minimum requirements in the textile supply chain, we are back with the crucial need for strong CSDDD to ensure that the minimum requirements in the whole supply chain are respected. 

What we need is a paradigm change. Because as long as our core paradigm remains the same, our methods and actions remain the same. This paradigm change starts by solving Europe’s massive financial challenge. European investments are lagging behind and what money we have is locked in fossil-based operations. As much as 70 % of our assets are in unsustainable targets – not even neutral ones, but in outright harmful or even dangerous industries and sectors. Imagine what we could do with that money if we invested it in green energy and circular economy – both of which boost European competitiveness and strategic autonomy while addressing the existential crises of climate change and biodiversity loss. 

We are at the crossroads of either making sustainable future-proof decisions or continuing the paradigm based on a linear fossil-based economy, which keeps further hindering our competitive position. The choice is ours.