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.
- 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:
- 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)).
- 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.
- 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.
If you would like more information about the implications of the circular economy, you can reach out to Ed Turtle, Claire Temple or your normal Cooley contact. An on-demand recording of the webinar and a copy of the slide deck is also available.