Circular economy shifts from environmental policy to industrial strategy

Circularity shifts to the centre of industrial policy

For years, the circular economy was largely viewed through an environmental lens, focused on reducing waste, improving recycling rates and lowering resource consumption, but today that narrative is evolving.

As governments grapple with supply chain disruption, geopolitical uncertainty and growing demand for critical materials, circularity is increasingly being positioned as a cornerstone of industrial strategy. In Europe, this shift is becoming particularly evident through the development of the forthcoming Circular Economy Act, which aims to strengthen markets for secondary raw materials and accelerate the transition towards a more resource-efficient economy[i]. The European Commission has set an ambition to double the EU's circular material use rate from around 12% today to 24% by 2030, positioning circularity as a key pillar of the bloc's competitiveness agenda.

Europe's resource challenge

The renewed focus on circularity comes amid growing concerns around resource dependence. Many of the materials required for clean technologies: from electric vehicles and batteries to renewable energy infrastructure, rely on complex international supply chains. As demand for these technologies accelerates, securing reliable access to critical materials is becoming an increasingly important strategic priority.

The European Commission has highlighted that around 90% of biodiversity loss is linked to resource extraction and processing, while Europe's economy remains heavily dependent on virgin materials. As such, policymakers are increasingly recognising that resource security will be just as important as energy security in maintaining long-term economic resilience.

From waste management to economic opportunity

Perhaps the most significant shift is how policymakers are framing the opportunity. Historically, circular economy policies focused heavily on waste collection, recycling targets and end-of-life management. Increasingly, however, attention is turning towards creating demand for recycled materials and enabling circular business models to compete at scale.

Data from the FutuRaM project found that by 2050, waste recovery systems could help Europe reclaim between 4.1 and 5.7 million tonnes of CRMs (Critical Raw Materials)[ii]. CRMs include many strategically important materials such as lithium, cobalt, and rare earth elements. However, despite being critical components in many modern technologies such as smartphones, batteries, and clean technologies, they are largely lost during collection and waste processing at present.

In their study FutuRaM researchers assessed seven major waste streams to map out the landscape for the potential recovery of 42 different CRMs, these streams were:

· Waste electrical and electronic equipment (WEEE)

· Waste batteries

· End-of-life vehicles

· Construction and demolition waste from buildings

· Slags and ashes from industrial processes

· Mining waste

· Dismantled wind turbines

The research revealed that in 2022, 5.2 million tonnes of CRMs embedded in products were placed on the market, compared to 2.1 million tonnes embedded in waste and 1.4 million tonnes recovered, highlighting both the scale of material in use, and the gap between consumption and recovery. Looking ahead, by 2050 CRMs in products placed on the market could rise to between 8.4 and 12.2 million tonnes annually, with waste generation reaching between 5.2 to 6.4 million tonnes. In contrast, recovery could reach 4.7 to 5.7 million tonnes, therefore underscoring the growing strategic importance of recycling systems.

Five of the analysed CRMs – including platinum, and rhodium –were found to have recovery rates of over 80% thanks largely to well-established collection and processing routes. Eight others, including aluminium, copper, palladium, and nickel fell within the 40–80% range, where collection and treatment infrastructure is in place, but losses remain significant. For 22 CRMs, recovery yields were found to equal less than one tonne per year across Europe, with most rare earth elements falling into this category.

According to the report, within 24 years some 17 CRMs, including cobalt, lithium, and rare earth metals such as dysprosium and neodymium, could achieve recovery rates above 80%, that’s if the right legislative and industrial choices are made now. The researchers also note that the volume of products containing CRMs is expected to grow sharply as electrification, renewable energy deployment, and digitalisation accelerate. This growth ultimately leads to an increase in the number of CRMs that could be recovered in the future.

FutuRaM note that some of the most valuable materials are the least likely to pass through formal recycling systems as the market value of elements such as gold drives diversion of products into informal and often untracked flows.

Industry groups have argued that Europe must move beyond a "waste management approach" and instead build functioning markets for secondary materials. Proposed measures include harmonising regulations across member states, creating a single market for recycled materials, supporting digital product passports and introducing mechanisms to stimulate demand for recycled content. The objective is not simply to recycle more materials, but to create domestic value chains capable of retaining resources within the European economy for longer.

This shift is particularly relevant for sectors such as batteries, electronics, construction materials and packaging, where access to recovered materials could help reduce reliance on imports while lowering costs and emissions.

Circularity moves from ambition to implementation

The forthcoming Circular Economy Act aims to establish a genuine European market for secondary raw materials, while supporting the EU's wider goal of doubling its circular material use rate by 2030. The legislation is also expected to support the development of common rules across member states, reducing fragmentation and making it easier for circular business models to scale. At the same time, circularity is becoming closely aligned with the EU's broader industrial agenda. Policymakers are increasingly linking circular economy measures to the Clean Industrial Deal, recognising their potential to improve competitiveness, strengthen supply chains and support industrial decarbonisation.

Investment activity is already beginning to reflect this trend. Outside of the EU, last month, UK battery recycling company Altilium secured additional backing from strategic investors alongside government support for the development of the UK's first commercial refinery for recovering critical battery materials from end-of-life electric vehicle batteries. The project is designed to help establish a domestic circular supply chain for battery materials and reduce reliance on imported critical minerals. Developments such as these suggest that circular economy solutions are increasingly being viewed as strategic infrastructure rather than niche sustainability initiatives.

Competitiveness, not just sustainability

The changing narrative around circularity mirrors a broader trend emerging across the sustainability landscape. Much like renewable energy is increasingly valued for its contribution to energy security, circular economy initiatives are now being recognised for their role in strengthening industrial competitiveness and economic resilience. For businesses, this could create new opportunities across recycling, remanufacturing, repair services, material recovery technologies and digital solutions that help track products and resources throughout their lifecycle. Companies that can secure access to recycled materials, develop circular supply chains or reduce dependence on virgin resources may find themselves increasingly well-positioned as governments seek to strengthen domestic industrial capabilities.

The circular economy is often presented as a sustainability initiative. Increasingly, it looks like an economic one. As demand for critical materials rises and global supply chains become more complex, governments are beginning to view circularity as a strategic tool for improving resilience, reducing resource dependence and supporting domestic industry.

For businesses operating across clean technology, advanced manufacturing and resource-intensive sectors, the question is no longer whether circularity matters. It is how quickly it becomes a competitive advantage.