The circular economy: Europe’s next big thing

The circular economy is Europe's next big thing, with a potential to bring major growth, leading industrialists predict.

Speaking in Brussels on Wednesday (10 March) after a meeting of the steering committee of the European Round Table of Industrialists (ERT), Jean-Francois van Boxmeer, the CEO of leading brewer Heineken said the idea is gaining traction.

He noted he is leading talks on behalf of the ERT with the European Commission on the concept.

Circular economy is more than just old-fashioned recycling.

It is the creation of a new business model in which products are designed to be stripped down to their smallest components after they've been used, with the parts re-inserted into the production chain instead of being discarded.

The price of natural resources has increased at twice the rate of wage growth over the past decade.

This represents a historic shift compared with the 20th century, when the price of resources would normally fall while cost of labour rose.

How should the EU react and fairly tax the potential recycling and renting of goods? What models of insurance will be required for circular car sharing and what political initiatives are needed to underpin the circular model?

The ERT is trying to develop a policy on the circular economy’s potential in the year to come.

"We need to accept a wide margin of error when moving ahead with this. But Europe has a big potential here following in the footsteps of sustainable growth", Van Boxmeer said.

Despite this assessment, the European Commission has been embroiled in controversy on just this topic. It recently withdrew legislative proposals on the circular economy, as part of a move to rid EU law books of red tape or unnecessary laws.

But following an outcry in the European Parliament, it backtracked and said it would come with a better proposal later this year.

Forum for multinationals

ERT is a forum bringing together some 50 leaders of multinational companies of European parentage.

Its chairman, Benoit Potier, who is also CEO of the French gas firm Air Liquide, praised the newly-installed commission for “sensitivity to over-regulation” and for scrapping the “silos” a term for the strict divisions inside the commission, often complicating a cross-policy approach in the past.

Potier mentioned the merger of climate and energy policies under one commissioner as one such step forward.

The ERT representatives were, however, less impressed with commission president Jean-Claude Juncker’s €315 billion investment programme to kick-start Europe’s stagnant economy.

A commission “task force” has listed about 2,000 projects which could be eligible for new funding under the scheme.

“A list of 2,000 projects is not a plan", noted Potier, refusing to single out any particular items from the list as of particular interest for the ERT.

Digital task-force

The ERT is perhaps best known for it’s 1984 investment report “Missing Links”, which proposed three major infrastructure projects: the Channel link between England and France; Scanlink - a plan to connect the road and rail gaps between northern Germany and Scandinavia; and proposals for a trans-European network of high-speed trains.

“Now Europe is covered with highways that were not there when I was born”, Van Boxmeer said.

The ERT belives that in the future Europe needs to move beyond building traffic links and to invest in the construction of grids for energy and networks for digital communication.

The industrialists announced that they plan to set up their own internal task-force on digital development.

Taxation

A united call for European tax-harmonisation seems, however, not on the cards, despite an hour-long debate among the industrialists on Wednesday morning on the matter.

"Nobody wants to invest without knowing how the tax-structures are going to be in the future. It is key for investors", remarked Potier.

The group thinks that taxation, realistically, remains something for sovereign states to regulate and to compete on. It is not the responsibilities of the companies, who only make use of the rules, said Van Boxmeer.

"This debate is not for us, but for the countries and for those companies who are localising their headquarters just for tax purposes", Potier added.