This article summarises the key proposals in the EU's Circular Economy Package I, looks at similar initiatives in the UK and provides some practical advice for businesses seeking to understand the potential effects of these initiatives.
The European Commission's 'Circular Economy Package', which was published on 30 March 2022, forms part of a broader wave of legislative reform connected to Europe's transition to a green economy. The circular economy package contains a raft of legislative proposals and policy documents focusing on the sustainability of products, increased transparency and consumer rights.
The EU Sustainable Products Initiative
One of the key proposals adopted on 30 March 2022 as part of the Circular Economy Action Plan is the proposal for a Regulation on Ecodesign for Sustainable Products, adopted as part of the Sustainable Products Initiative. Its key features are discussed below:
- Ecodesign requirements. The Regulation sets out new and broader ecodesign requirements that could potentially apply to any physical product placed on the market in the EU. Only a few sectors, such as food, animal feed and medicinal products are exempt. The Regulation would repeal the existing Ecodesign Directive which focuses on energy-related products, and establish a new framework with far more extensive requirements. These requirements cover the durability and reliability of products; their reusability, upgradability, repairability, and ability to be maintained and refurbished; the presence of substances of concern; energy and resource efficiency; and recycled content. Similar to the current framework under the Ecodesign Directive, it is recognised that one size does not fit all, and secondary legislation would be required to set the specific requirements for each product group. The European Commission intends to publish a working plan by the end of 2022 identifying priority product groups. Certain product groups have already been identified as targets for the new measures, namely those with high environmental impact and potential for improved sustainability performance, such as textiles, and intermediate products such as iron, steel and aluminium.
- Digital product passport. If the Regulation is adopted, products covered by the specific ecodesign measures will also need to carry a digital product passport. This is intended to ensure that authorities, other companies in the supply chain and consumers can access information about the sustainability credentials of the product, for example, through a QR code. The idea behind this is that increased transparency will drive consumers towards making more sustainable choices and that it will also provide market intelligence for refining the rules in the future. The specific information to be included in the digital product passport will be set out in secondary legislation and is likely to vary from one product group to another.
- Unsold consumer goods. If adopted, the proposed Regulation will require companies of a certain size to publish information about the number of unsold consumer products that are discarded each year and the reasons for discarding them. The Regulation does not propose a ban on the destruction of unsold consumer goods but, if adopted, it would give the European Commission the power to adopt a ban via secondary legislation. Some members of the European Parliament have already indicated that they would like to see such a ban entering into force immediately.
Sustainable and Circular Textiles
As part of the Circular Economy Package, on 30 March 2022, the European Commission also published the EU Strategy for Sustainable and Circular Textiles. This policy document focuses on fast fashion, textile waste and ensuring that textile production respects social rights. In particular, it:
- Recommends setting new design requirements for textiles under the Regulation on Ecodesign for Sustainable Products (discussed above), developing binding product-specific ecodesign requirements to increase textiles' performance in terms of durability, recyclability, repairability and the unintentional release of microplastics.
- States the European Commission's intention to improve product transparency by reviewing the current Textile Labelling Regulation to require the inclusion of new sustainability-related information. As part of this review, the Commission will also consider the introduction of a digital label.
- Proposes harmonised EU extended producer responsibility rules for textiles with the eco-modulation of fees, as part of a revision of the Waste Framework Directive planned for 2023. Eco-modulation of fees would aim to incentivize the manufacture of more sustainable products, as fees payable by textile producers would take into account the environmental performance of their products.
Further actions being considered include: an action to reverse overproduction and destruction of unsold or returned textiles; a restriction on the export of textile waste; and the incentivisation of the reuse and repair sectors.
EU consumer law changes
The Circular Economy Package places a great deal of importance on transparency, since this is seen as key to encouraging consumers to make more sustainable choices. This is reflected in the various proposed changes to consumer law, which focus on the omission of important environmental information by businesses and greenwashing. The changes proposed would be enforceable under existing consumer law enforcement mechanisms.
- Durability and repairability information. A requirement to provide information on the durability and repairability of goods would take effect by amending the existing Consumer Rights Directive. Businesses would be required to provide consumers with information about the availability of software updates provided by the producer and provide relevant information on repairs, including a repairability score, where applicable.
- Planned obsolescence. The Commission is also targeting planned obsolescence through its transparency push, to avoid products being programmed to break after a set period of time. Businesses will no longer be able to omit information on features introduced to limit durability or suggest that a product has limited functionality when using 3rd party spare parts or accessories.
- Greenwashing. Misleading environmental claims will face greater regulatory scrutiny. The Commission has proposed to introduce a ban on vague claims such as 'green' and 'eco-friendly'. Similarly, it will not be possible to make claims about the sustainability of a product where the claimed sustainable practices relate to only part of a product.
Further initiatives on the horizon
The initiatives published on 30 March 2022 form part of the EU's Circular Economy Package I. The EU's Circular Economy Package II is due for adoption in July 2022. This is likely to include: a legislative proposal on substantiating green claims, a review of the Packaging and Packaging Waste Directive and measures to reduce microplastic pollution.
What is happening in the UK?
The UK stated its intention that leaving the EU would not change its "world leading ambitions on the environment" and there has been significant activity addressing greenwashing, the circular economy and other sustainability objectives. For example, in October 2021, the UK's Competition and Markets Authority (CMA) published its final guidance on misleading green claims and we understand bringing enforcement action against businesses with misleading claims will be a priority in 2022.
More recently, in March 2022, the CMA set out its recommendations for further action for government, some of which broadly align with the EU's Circular Economy Package proposals. The CMA's three main recommendations for further action for the government to consider are:
- Changing consumer law to make it easier for consumers to make sustainable choices, for example, by requiring businesses to provide more accurate environmental information.
- Encouraging greater consistency and coordination across sectors and regulatory regimes, for example, by legislating to create standardised definitions of commonly-used environmental terms.
- Identifying other ways of promoting more sustainable consumption, for example, by introducing measures to address planned or premature obsolescence and software updates.
What should businesses do now?
Now is the time for businesses to recognize the potential impacts of these initiatives on their operations. In particular, it is worth considering:
- Keeping on top of regulatory compliance by assessing which aspects of the proposed new rules may apply to the business and future proofing as far as possible to ensure compliance.
- Contributing to the public consultations that the European Commission will open shortly, for example, on which products should be prioritised for ecodesign measures. This gives stakeholders the opportunity to provide their views and possibly influence the development of the EU rules.
- Assessing green claims against industry codes and guidance. Claims should be updated if they might be considered inaccurate or misleading, as in both the EU and the UK, there is a clear drive towards correcting potential greenwashing.
This article first appeared in the May 2022 issue of PLC Magazine
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