The circular economy requires globally agreed definitions – can we agree on the colour green?

As environmental pressures increase, policymakers all over the world are taking action to promote the shift to a circular economic model. However, there is no uniform global definition of what circularity is or what is required of a product for it to be circular, and regulatory fragmentation increases.

In a time when we need to work together to facilitate circularity and the green transition, the opposite is taking place. However, there are solutions out there to prevent this. This is why the National Board of Trade Sweden teamed up with the OECD, UNECE, Volvo Group, the German National Metrology Institute and the Australian Government to discuss how we can work together to “agree on the colour green” and find a common approach in the transition to a circular economy.

Trade is global; thus, the green transition also needs to be global. Regulatory fragmentation could risk undermining the green transition, creating both barriers to trade as well as limiting consumer confidence. Trade is particularly helpful to expanding the circular economy and ensuring that local supply is covered when there is not enough local demand. Trade can also help support the scalability of circular business models. However, companies are forced to navigate a plethora of national and international standards and regulatory requirements that govern the life cycle of goods, limiting the possibility to use scalability. On the other hand, citizens looking for products that are respectful of the environment need sound and comprehensive information to guide their choices.

Encouraging impact assessment and stakeholder consultations, as well as international regulatory cooperation, could play a key role in mitigating regulatory fragmentation.

As outlined in a newly published report from the National Board of Trade Sweden, there is potential to adopt more aligned approaches and increased transparency to address the fragmentation in the transition to a circular economy. To align these approaches, the recent OECD Recommendation on International Regulatory Co-operation to Tackle Global Challenges calls for domestic governance that is conducive to regulatory cooperation, and to embed international considerations in the domestic rulemaking process.
Read the report: Addressing Fragmentation for a Global Circular Economy: Lessons from the EU Single Market

In our discussions we tried to identify regulatory governance solutions and the role of voluntary standards for a common and inclusive approach to the circular economy. We concluded that Good Regulatory Practices (GRP) are key. GRP encompasses many approaches that could be used to reduce and prevent regulatory fragmentation on circularity, thereby facilitating trade rather than creating trade barriers. Our discussions found that a transparent and inclusive regulatory approach, for example, encouraging impact assessment and stakeholder consultations, as well as international regulatory cooperation, could play a key role in mitigating regulatory fragmentation. 

• International regulatory cooperation can be used on international, multilateral and plurilateral levels and can be a powerful tool to expand the circular economy. There are many levels to international regulatory cooperation; it can include everything from exchanging information on upcoming regulations, sharing research results, to developing joint standards and mutual recognition of regulations and harmonisation. Organisations such as the UNECE promote international regulatory cooperation in a multilateral setting and can work to promote harmonisation across economies.
• Involve stakeholders. Stakeholders, particularly industry stakeholders, address issues ahead of regulators and are innovative leaders when it comes to addressing challenges, such as the transition to a circular economy. One such example is the Volvo Group, which has been working with circularity since the 1950s. However, fragmented approaches and misguided requirements might hamper innovative solutions. This demonstrates that stakeholder involvement is key!

The importance of regulatory impact assessment must also be underlined as it can help integrate environmental effects into a regulatory proposal. For circular products this could help mitigate requirements that do not consider the circular context, for example, requirements on what recycled means for a specific sector. This will also help ensure market inclusivity, regardless of the origin of the product. A key approach is also changing the notion of what waste is and establishing end-of-waste criteria, which require product requirements that are fit for purpose and a suitable regulatory framework.

The transition to a global circular economy requires a global approach. In order to promote innovation, reduce costly barriers to trade for companies and increase consumer confidence, regulators across economies must join forces to find common regulatory solutions. As outlined above, tools are available that could play an essential role in achieving this, and many of the most effective tools, such as transparency and the use of international standards, are already in place – regulators just need to start using them to a greater extent.

Linda Bodén
Senior Adviser, National Board of Trade Sweden

Felinda Wennerberg
Senior Adviser, National Board of Trade Sweden

Marianna Karttunen
Policy Analyst, Organisation for Economic Cooperation and Development, OECD

Alberto Morales
Policy Analyst, Organisation for Economic Cooperation and Development, OECD

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