The indicators on which country is leading the circular transition – and what needs work
Since 2022, advanced economies that have traditionally centred around services are turning their attention back to the making and procuring of commodities.
Already, European countries are diversifying trading partnerships and bolstering regional supply chains to strengthen resilience in critical goods after two years of supply uncertainties in food, fuel, chemicals.
One powerful way to boosting supply chains closer to home is to utilise more, and more diverse, wastestreams produced by agriculture and industry. This serves the need to meet demand for goods whilst conserving natural resources.
With the circular economy an untapped source of high value goods, which countries are leading the way on its implementation? And how can we tell?
The EU’s waste problem
Europe has never shied away from the circular economy concept, having supported research, development, and roll out in this area since 2015’s first circular economy action plan.
But the EU’s enthusiasm for turning waste into resources is more than balanced by its huge disposal levels. Over the 2010s, the European Union was collectively the world’s largest waste exporter, offloading it mainly to nations in the global south for burning or landfill.
China was Europe’s waste-dump of choice.This came to a head in 2018 when China stepped in to ban the import of 24 solid waste types including plastic and paper. EU’s waste export China slowed to a trickle, from 1.4 million tonnes of plastic waste sent over to the nation in 2016 to only 50, 000 tonnes in 2018.
After this though, the EU has not so much redoubled on circular usage as much as shifted the problem elsewhere: now, the biggest recipient of EU waste is Turkey.
Circular innovation and investment
How can we measure where progress is happening on the circular front?
Since the circular economy is a sector where innovation, as well as scaling, is needed, the numbers of circular-related patents might give an idea.
In 2019, there were around 5701 total patent applications filed at the EU patent office for climate mitigation tech in wastewater treatment or waste management. This was out of a total 180, 000 patent applications across all fields.
What is striking is that 94% of these patents came from non-EU applicants: China and Hong Kong came first at 3975 of the total, representing 69% followed by South Korea at 606, Japan at 508, and the US at 202.
The EU member states collectively filed for 295 patents: or 0.05 % of the total. The leading EU member state for waste management patents collectively was Germany, at 85 applications in 2019.
Another indicator for how a country’s circular economy is doing is the amount it is investing in the sector. Germany again tops the EU league when it comes to private investment and gross added value relating to the circular economy sectors (the recycling sector, repair and reuse sector and rental and leasing sector) at €37 billion (37 772 000 000). 300 000 are employed by the sector.
With its strong performance on two fronts – patents and investment – let’s look at some major circular initiatives that have already been implemented in Germany.
Germany’s potential for circular leadership
The hotspot for circular business activities Germany is the Ruhr valley. Traditionally the country’s industrial heartland, it is now trying to attract waste-focused companies through the new Circular Valley sustainability project, which aims to support the European Green Deal and the EU’s Circular Economy Action Plan.
Its circular economy accelerator is available to 15 start-ups twice a year, offering an intensive 3 moth program that exposes them to industry, government, and R&D partners as well as workshops, mentoring, and coaching. All costs are covered by the foundation.
On top of business support, it hands out hard cash. In June 2022 it selected three dozen recycling and landfill diversion companies for investment. They include US plastic footprint software provider Ampliphi and Canadian plastic scrap user Jeosal Materials research Corp. Some are targeted a recycling digital and climate tech electronics: lithium-ion batteries and wind turbines.
The Circular Valley Sustainability project is one that could easily be emulated by other European countries looking to kickstart its green industrial transition. It does not just direct targeted investment: by agglomerating circular businesses in the same place, it fosters an ecosystem that encourages knowledge-sharing between related industries.
As well as new circular startups, there is growing interest within Germany’s legacy chemical industry in new business models. One example of this comes in the Trilateral Chemical Region is located where Flanders, North-Rhine Westphalia and the Netherlands’ meet. This is one of the most concentrated clusters of the chemicals industry in the world.
Formally organised in 2017, the Trilateral Strategy for the Chemical Industry has included achieving a “digital, sustainable and circular chemical industry” as one of the consortium’s 2030 objectives.
This cross-border chemicals industry confederation is particularly looking for ways that the companies in the region can cooperate with agriculture, which is strongly represented in this cross-border area, for future bio-based feedstocks.
The chemicals industry would need considerable cash to fit new infrastructure in line with the needs of biomass processing. One way that the strategy aims to raise capital is through the European Fund for Strategic Investments currently targeting circular economy projects by large and medium companies.
Recycling as a circular indicator
Another indicator of the health of circular economies are high recycling rates.
A strong recycling sector is crucial to any circular system since the latter relies on recycling facilities to provide feedstock. From the perspective of the company, anything made from recycled materials should sell on at a higher price than in its former incarnation meaning that waste processing methods must be cost-effective.
Recycling however is where Germany is lagging behind certain other countries in the EU. On this measure, excluding mineral waste, Belgium (87), Slovenia (80), the Netherlands (74), Italy (72), and Luxembourg (71) have the highest rates – defined as the percentage of total waste treated and subjected to a material recovery process, other than being burnt for energy.
At the same time, rates of material recovery and recycling is not a certain indicator of how far advanced circularity is. Although robust recycling programmes are a pre-requisite for circularity, it says nothing about the quality of the raw materials coming out of the process.
The key question is whether industry is willing and able to use the recycled materials, put them back into the value chain high high-value goods, and displace demand for virgin materials.
Luckily, the EU does collect figures on actual use rates of materials that have been used, disposed of, and finally recycled within country’s borders. It figures this out by calculating the percent amount of total waste recycled in domestic recovery plants minus both imported waste destined for recovery and any exported waste destined for recovery abroad.
This method tries to get at how much waste processed in the country is staying in the country – presumably, everything that stays behind is being absorbed as feedstock by domestic industries.
Again, on this measure for actual use of recycled materials by manufacturers, Germany is lagging compared to its performance on circular patents and circular investments.
The percent of domestic waste staying in the country are around 12% – hovering around the EU28 medium. Low rates of recycled material use are confirmed by other statistic: Despite a rate of municipal waste recycling of around 68%, more than 88% of the material inputs used in German industry are virgin. This indicates three possibilities: the poor quality or cost of the raw materials coming out of recycling plants, low demand for recycled inputs from manufacturers, or both
On actual use of recycled raw materials, the Netherlands comes out on top by a large margin – 30 percent of waste recycled in domestic recovery plants stays in the country for use. Belgium follows in second place at 21.5. By comparison, these figures mean that Germany is likely exporting its recycled materials abroad.
The Netherlands runs ahead with circularity
Currently, the Netherlands fits the bill for being the circular centre of Europe.
It has some of the highest recycling rates and its domestic industries appear to be actually using the output from the recycling process.
These are pretty strong indicators that this is where Europe’s most robust circular economy is located. What is it getting right?
The Netherlands has clear targets on circularity – these were unveiled by the Dutch government back in 2016, setting a 50% reduction target in the use of primary raw materials by 2030 and an ambitious 100% circular economy by 2050.
By contrast, although the federal government in Germany accepts that the circular economy is an important strategy for economic and environmental security, it has not outlined similarly specific targets for the circular economy.
Next, we see differences between German and Dutch implementation of its circularity goals. The Netherlands has its own Holland Circular Hotspot, otherwise known as Holland’s ‘living lab’. It brings together private and public entities across governments, universities, and corporations to promote circular economy goals.
However, in the Dutch case, the project sees circular initiatives integrated into daily regional and municipal life. This is a process of trial, error, and iteration, with knowledge hubs that enable municipalities to share and learn what has worked where.
Moving national circularity along
The European Green Deal was forged during a global pandemic and a sanctions war. Over the coming years, economic security and sustainability agendas will likely align ever more closely on the continent.
What the Netherlands’ ongoing experiment in implementing circularity shows is that innovation is not enough to roll out new economic and business models – practices must be showcased, prototyped, and refined in their applications to everyday life.
Further, legislation and targets must be specific to the circular economy and not just sustainability in general. Without guidance on technical specifications and concrete goals for circular products and outputs, businesses and citizens alike will be left guessing what the concept really entails in practice.