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Circular economy worth €1.8 trillion to Europe

New research values the move towards a circular economy in Europe at €1.8 trillion, with a major multinational stating that circular business principles are already providing a competitive advantage.

New research values the move towards a circular economy in Europe at €1.8 trillion (£1.3 trillion), with a major multinational stating that circular business principles are already providing a competitive advantage.  

The research, conducted over 9 months by resource efficiency think tank the Ellen MacArthur Foundation, focuses on three core ‘resource-intensive’ sectors: transport, food and the built environment. 

It concludes that Europe is “surprisingly wasteful in its model of value creation” – estimating that Europe lost 95 per cent of the material and energy value of discarded materials in 2012, and on average uses raw materials only once. 

Economic benefit

By moving towards a circular economy model where reuse of materials is prioritised, the report argues that Europe could cut resource costs by €600 billion (£420 billion) and achieve further benefits worth €1.2 trillion (£860 billion) a year by 2030. This includes a projected 11 per cent increase in average disposable income for EU households due to knock-on effects such as reduced product prices and traffic congestion. 

A separate report commissioned by waste management firm, Veolia, estimates that a ‘circular revolution’ focusing on a service-based rather than product-based approach to business could add around £29 billion to the UK economy by 2025.  

The European Commission is currently consulting on its upcoming circular economy policy package, which is due to be announced by the end of this year. 

‘Business advantage’

Dr Martin Stuchtey, director of the McKinsey Center for Business and Environment – which contributed to the Ellen MacArthur Foundation report – highlighted the opportunity for businesses.

“The results show that, given the massive change in technology, consumer behaviour and business models, the circular economy is both viable and attractive.

“We found that businesses that work on the basis of circular principles are amongst the fastest growing in the economy.”

Case study

One of these is paper-based packaging multinational, Smurfit Kappa, which has revealed in its latest sustainability report that circular business principles are providing a “competitive advantage”.

Recycled materials made up three-quarters of the company’s product in 2014, and paper material that is no longer usable after being recycled up to ten times is increasingly incinerated for energy or sold for agricultural use rather than sent to landfill.

The company is also starting to implement the concept of ‘reverse logistics’ following a pilot scheme with an ice cream manufacturer in France to collect old cartons when new deliveries are dropped off. 

‘Innovative solutions’

Chief executive of the company, Gary McGann, said: “The circular economy provides Smurfit Kappa with new business opportunities and innovative solutions to reduce material costs, ensuring our business is resilient in the face of growing resource constraints.”

“While a number of our operations are already advanced in their application of this systemic approach, others are on a journey to doing so.”