Round we go again? Circularity policy under a new government

During ReLondon’s Circular Economy week, Alex Hutchinson, Senior Public Affairs and Communications Officer at the Aldersgate Group looks at current progress on resource efficiency and circularity in the UK. 

Delivering a genuinely circular economy can provide significant benefits for the UK. By enhancing efficiency and minimising waste, progress can cut environmental impact, reduce emissions, strengthen our economy against supply disruptions, and support the reshoring of industrial activity and creates jobs in sectors like recycling, repair, reuse and remanufacturing.

Despite these benefits, policy progress towards a circular economy has been slow. Businesses often outperform the government in both ambition and best practices in this area, and need to see policy that matches their actions.

For businesses, several layers of progressive intervention can be made on circularity. Be it, implementing circular product design, reducing their footprint through sensible material sourcing, providing after-purchase and circular services, or engaging customers and advising them on circular practice.

IKEA is working to become a circular business and is developing new products and services for customers to maintain or pass on products. Innovations include a buyback and resale service, and using more renewable and recycled materials in their products. Similarly, lighting multinational Signify has integrated circularity into its operations by offering ‘lighting as a service’ to commercial and public sector customers. Signify retains ownership of the lighting system and will install and maintain it while the customer pays a monthly service fee.

Cement manufacturer Cemex has launched a new business, Regenera, to use Cemex’s global reach and infrastructure to use waste and industrial byproducts as sustainable substitutes for fossil fuels and natural raw materials in its production processes.  

Many businesses recognise the sustainability and economic benefits of transitioning towards a more circular business model. For example, the World Economic Forum found that by integrating circularity, automotive companies can tap into new value pools beyond the limits of their current business model. Ambitious measures hold the potential to improve profitability by 1.5 times along the value chain and tap revenues per vehicle 15–20 times its sales price.   

Working across the value chain

Implementing and scaling circularity requires collaboration between businesses, including alignment along value chains. Currently, the challenge is that the demand for low carbon materials and products is underdeveloped or absent. Manufacturers lack enough demand to increase production, while companies downstream from them can only commit if they have a stable supply from upstream. Similarly, waste management businesses need viable business models to circulate materials back into the system. The knock-on effects mean innovation and the scaling of circularity are slow.

A report from The University of Cambridge Institute for Sustainability Leadership (CISL) terms this challenge the supply-demand catch-22 and shows how building demand for lower-carbon goods can play a key role in promoting circularity and driving innovation within the production and consumption processes, highlighting the crucial role of business collaboration in incentivising and enabling innovation.

Thankfully, progressive businesses are taking voluntary actions, like forming low-carbon buyers’ coalitions (e.g., SteelZero, Concrete Zero and the First Movers Coalition). However, a crucial part of success rests on policy support at all stages in the value chain – coordinating, pushing and pulling. Voluntary actions are compelling, but when competing globally, the industry needs to see more leadership from the government – mandatory standards, green public procurement, and digital passports for products.

The Aldersgate Group’s recent briefing on placing decarbonisation at the heart of industrial strategy also highlighted opportunities to embed circularity with a whole-value chain approach to industrial strategy.  

Scaling across the economy 

Ultimately, circularity requires action across the system and the new Labour government has a role to play in setting strategy, removing barriers and providing incentives to enable business and consumer action on circularity.

For our national legislators, this policy area has stagnated over time. The 2018 Resources and Waste Strategy laid out a promising vision for a sustainable future, but its implementation has been sluggish. The 2024 OEP progress report highlighted that overall recycling rates have stagnated, and waste disposal via incineration has increased.

There now seems to be an appetite for change. The Labour Party’s manifesto included a commitment to “reducing waste by transitioning to a circular economy”, the Environment Secretary has repeatedly indicated in public speeches that this policy area sits within his top five priorities for the Department for Environment, Food and Rural Affairs. Most recently, at the Labour Party Conference, there are reports that a new circular economy taskforce and strategy is in the making.

There is also a rapid review of the Environmental Improvement Plan, which is set to conclude before the end of the year. Here we will be eagerly awaiting any signal for changes to either Goal 5 (maximising resources, minimising waste), or Goal 6 (using resources from nature sustainably).

Amongst the business community and policy thinkers, this dial-up in positive messaging from the central government has been encouraging but the proof will be in the implementation. The government has shown that it can make policy decisions quickly, as seen with the end of the onshore wind ban, the same pace of delivery is needed in this policy area.