A new Circular Economy Action Plan for a Cleaner and More Competitive Europe

Position

A new Circular Economy Action Plan for a Cleaner and More Competitive Europe COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS

Federation of German Industries e.V.

Date: 31.08.2020

BDI on the European Commission's Circular Economy Action Plan of 11 March 2020

Introduction With its Action Plan Circular Economy (COM (2020) 98) from March 11, 2020, the European Commission's wants by its own interpretation to offer a forward-looking agenda for a cleaner and more competitive Europe, to be promoted together with business, consumers and civil society organizations.

The Action Plan is intended to accelerate the transformation called for by the European "Green Deal" and in doing so to tie in with the measures for the circular economy that have been implemented since 2015. It addresses, in particular, a new policy for sustainable products, strengthening consumers and public-sector clients, the closed-loop principle in production processes and numerous measures to revise European waste legislation.

The BDI supports the basic objectives of the EU Action Plan Circular Economy. A Circular Economy is the basis for sustainable economic activity and also offers numerous opportunities for innovative business models. However, the instruments proposed in the EU Action Plan must take into account not only ecological goals but also the economic and social dimensions of sustainability. Duplicate and contradictory regulations must also be avoided. Only then can the Action Plan become a milestone on the path to sustainable development.

The Action Plan proposes numerous measures that will have a significant impact on the design of products, the flow of production processes and the design of value chains. This applies, for example, to the announced legal framework for a sustainable product policy, which is intended to regulate issues such as durability, reusability, reparability or the proportion of recycled materials in products. Equally relevant are consumer-related initiatives, such as the planned "right to repair", which will have an impact on general warranty law and long-term availability of spare parts.

Furthermore, the goal of pollutant-free cycles still leaves many questions unanswered and will entail considerable changes in product design and production processes.

The Action Plan can provide opportunities for companies to secure competitive advantages with innovative, more sustainable products.

However, many companies will face major challenges along the way.

In some cases, they have to make considerable investments in research and development, realign their product portfolios and open up new markets.

Transformation processes and technical ramp-ups take time.

The goals of a sustainable product policy and the creation of markets for recycled and secondary raw materials can only be achieved if companies succeed in meeting these challenges. The political decision-makers at European level and in the Member States are called upon to provide targeted support in implementing the Action Plan. Therefore, a precisely tailored promotion and support framework must be developed at EU level.

BDI on the European Commission's Circular Economy Action Plan of 11 March 2020

Design of sustainable products/legislative proposal for a sustainable product policy The announced “sustainable product policy legislative initiative� should be used to enable the European Union's environmental product policy to be a unified whole, i.e. without the coexistence of duplicate and contradictory sets of rules for the same products. The envisaged fundamental sustainability principles should take into account all aspects of sustainability, i.e. ecological, economic and social responsibility, equally.

This has worked well so far with the Ecodesign Directive, as it is implemented "tailor-made" for the product groups concerned.

Products are produced by companies primarily according to the needs of the market. In addition, they must meet the necessary safety standards specified in each case. Ecological specifications, which, depending on the product, focus primarily on durability, reusability, recyclability and retrofitting capability, are also to be considered equally important in the sense of sustainable products. It is important to focus on the entire product life cycle, including the conservation of resources through multi-recycling as well as possible positive effects through product application and optimization.

When assessing the recyclability of products, the principle of innovation must be taken into account in addition to an evaluation of the recyclability based on the existing treatment infrastructure: The intensive innovation and development in the field of waste and recycling technology can and will lead to the development of new closed-loop solutions for products that are not recycled today. Legislation must take this into account appropriately, for example by regularly revising the criteria of recyclability. Recyclability must therefore not be assessed solely on the basis of rigid design criteria.

The goal must be a mix of innovation-driven improvements for the circular economy and common standards for sustainable product design.

However, binding targets for the use of recycled materials in production presuppose that there are adequate markets for such materials at competitive prices and in the required quality or that such markets can be created with the involvement of all actors along the product life cycle.

Regulations on this should therefore not be made generally, but rather product-specific, for example within the framework of the Ecodesign Directive.

Double regulations as well as contradictory and conflicting regulations should be avoided in the future and, if necessary, eliminated. Furthermore, consequences and effects on other areas of regulation, especially negative ones, should also be included in a holistic view. WTO conformity of all planned measures must also be ensured. With this in mind, all productwww.bdi.eu

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BDI on the European Commission's Circular Economy Action Plan of 11 March 2020

related EU legislation should be reviewed for coherence before new regulations are created. This also applies in view of the announced extension of the scope of the Ecodesign Directive. Resource-related criteria are already applied in the current implementation. This has the advantage that these can be defined product-specific and thus "to the point". For example, specifications on the reparability of products only make sense if they involve all stakeholders along the product life cycle and are ecologically and economically justifiable. In addition, the preliminary studies to be carried out in advance can clarify whether other regulations already apply to the product group in question and whether the desired objectives can be achieved more easily by "tightening up" these regulations.

Strengthening the position of consumers The labelling of product-specific sustainability services can contribute to better information for consumers, but should in principle be on a voluntary basis. Various instruments are available for this purpose, such as national environmental labels (EU Ecolabel, Blue Angel, etc.), Environmental Product Declarations (EPDs) and industry-specific labels such as OekoTexÂŽ Standard 100 and many others.

However, general methods for recording product-specific sustainability performance that are flexible, consistent, easy to apply and affordable for small and medium-sized enterprises still need to be developed or greatly improved. This also applies to the methodology for the calculation of Product Environmental Footprints (PEF) initiated by the European Commission. Here, for example, the Category Rules should be designed to be fully ISO-compliant.

In order to promote sustainable products, transparent, reliable and relevant information for consumers about the recyclability and use of recycled raw materials at the point of sale can also be an important step towards enabling them to choose sustainable products that are oriented towards closed-loop recycling management. Not only the labelling of products but also information on the adequate separation and collection of waste can play an important role in this context.

The introduction of a uniform recycling label with criteria for the recyclability and use of recycled raw materials for products where this is not already specifically regulated, in particular for use in public procurement, should be considered at EU level. It should be noted, however, that any labeling of a product property necessarily requires its exact and comprehensible determinability or measurability. Furthermore, it must be ensured that market surveillance has sufficient resources to effectively verify the accuracy of the label and to sanction any infringements. Distortion of competition would otherwise be the result.

Labelling must also be simple and understandable and must be productwww.bdi.eu

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BDI on the European Commission's Circular Economy Action Plan of 11 March 2020

specific and EU-wide. However, many consumers are already overstrained by the variety of environmental and product labels.

Strengthening the position of public contractors The European Commission plans to propose binding minimum criteria and targets for green public procurement (GPP) in sector-specific legislation.

This action will also be accompanied by promoting exchanges between public procurement bodies in the EU and developing GPP guidance documents. For example, rules for binding minimum environmental criteria for the procurement of products and services in certain procurement areas could be envisaged.

In order to avoid an instrumentalization of GPP in the sense of an inadmissible preferential treatment of an individual bidder or discrimination against bidders, it must continue to apply that in public procurement environmental specifications must always relate to the specific contract and must not be inadmissibly "selective" or arbitrary.

Public procurement can thus make a decisive contribution to promoting innovation in green products and services. In order to ensure the necessary legal certainty, it is essential, when implementing GPP objectives, that both the awarding bodies and the providers have clarity about the legally binding criteria according to which an award is tendered and carried out.

In addition, all regulations must comply with EU public procurement law for awards above the thresholds of the EU public procurement directives and for smaller awards of cross-border interest. Since the public procurement law necessary in the interest of transparency and equal treatment is complex in any case, it is essential to ensure that the complexity of procurement procedures remains manageable and is not overburdened by unnecessary special regional regulations, for example.

Circular principle in production processes In order to promote circular principles within industrial production, the Commission proposes that the review of the EU Directive on industrial emissions should consider whether criteria related to recycling and BREFs should be given more weight in the future.

In the opinion of the BDI, there is no need to amend the EU directive on industrial emissions at this stage. The objectives of the Directive improving the quality of the environment and creating a level playing field - will be achieved. The BAT process laid down in the Directive and the criteria for the classification of a process as BAT (Annex III of the Directive) already ensure that the best available techniques for industrial installations are continuously reviewed and developed, also in the sense of a circular economy. An additional definition of the already extremely complex BAT processes on the basis of more narrowly defined circular www.bdi.eu

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BDI on the European Commission's Circular Economy Action Plan of 11 March 2020

economy criteria also carries the risk of double regulation in emission and waste legislation.

Less waste, more value In addition to the focus on product policy in the European Commission's new Circular Economy Action Plan, the action plan again announces numerous measures to revise European waste legislation.

These include vertical measures such as a revision of EU legislation on batteries, packaging, end-of-life vehicles, electronic equipment, construction products, textiles and waste shipment rules. In addition to these specific projects, the Commission also defines other horizontal areas of action: I. The Commission has the explicit objective of strengthening the markets for recycled and secondary raw materials. This objective is strongly supported.

It will use general instruments such as standardisation, improved data exchange, assessment of establishing workable end-of-waste criteria and classification of by-products, and product design requirements. At the same time, it is announced that a number of legislative acts will consider the mandatory use of recycled raw materials. The focus here is on batteries and components of vehicles, packaging, textiles and construction products.

According to the action plan, the materials potentially affected are plastics, metals and steel as well as mineral materials.

The intended strengthening of the sales markets for recycling and secondary raw materials in the EU is expressly welcomed. However, it will be important to identify and apply the right instruments to promote the use of recycled and secondary raw materials on the basis of the criteria of quality and quantity of recycled and secondary raw materials and differentiated according to materials and products. It must also be taken into account that materials behave differently, that their recyclability differs and that there is therefore no one-size-fits-all solution, or in many cases solutions already work in practice with existing cycles. It has to be mentioned that performance and innovation, safety and user requirements for products are in harmony with the use of recycled and secondary raw materials.

The use of mineral secondary raw materials, for example, already makes an important contribution to recycling management by helping to conserve resources.

In addition, primary raw materials will continue to be needed in the future to cover the demand for raw materials.

II. www.bdi.eu

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BDI on the European Commission's Circular Economy Action Plan of 11 March 2020

Both the Communication on the European Green Deal and the new Circular Economy Action Plan set out the objective of revising European rules on waste shipments. It is proposed to make the conditions for cross-border trade in waste much more restrictive.

Recycled materials and products and also recycled construction materials must be able to be traded freely on the world markets just like new or unused products. Only in this way they can compete fairly with primary raw materials and products. This will only succeed, however, if a high level of protection for human health and the environment is simultaneously achieved worldwide. To achieve this, a common understanding of highquality treatment and transport of recycled materials is essential. The Basel Convention and the European Waste Shipment Regulation are two examples of this. In future, even greater care must be taken to ensure that hazardous waste does not reach third countries illegally and create major risks there.

This requires in particular a consistent implementation of the existing regulations in all countries as well as a reliable and uniform application of the corresponding regulations on waste shipments. Thus, among other things, the classification as waste, the definition of waste and the classification as non-hazardous or hazardous are central. On the other hand, however, a common understanding of what quality and recovery standards are required for non-hazardous waste must also be ensured so that nonhazardous waste can continue to be freely used as a recycling raw material worldwide where there is a demand for it. More efficient controls on waste shipments, reliable quality assurance of recycled raw materials and international and enforceable rules are essential to establish a global circular economy Finally, a functioning circular economy includes not only waste for preparation for re-use or recycling, but also for other recovery and disposal in suitable and specialised facilities. Efficient waste incineration also has its role to play.

Therefore, the Commission's objective of avoiding the negative effects of waste exports must not at the same time lead to a situation where shipments for energy recovery by incineration operations within the EU, which are necessary for a functioning circular economy, are possible.

III. In order to help citizens, businesses and public authorities to separate waste in the future, the Commission plans to harmonise the separate collection systems for waste in the Member States.

The overall aim is to better implement the separate collection obligations under European waste legislation.

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BDI on the European Commission's Circular Economy Action Plan of 11 March 2020

In doing so, it will be essential not to damage successful and established systems in the Member States at the expense of pure harmonisation efforts.

For citizens and companies, keeping waste separate is based on routines which should not be changed - provided that this makes economic, ecological and technical sense.

IV. The Commission also plans to further clarify the requirements for extended producer responsibility systems under the Waste Framework Directive.

The Commission is also considering harmonising the take-back systems for mobile phones, tablets and laptops in the EU. BDI will continue to work to ensure that the systems of producer responsibility can be differentiated and appropriately designed. The focus here is on functionality and expediency as well as economic and ecological sustainability. The aim is to design efficient systems via private-sector responsibility for material cycles. This should build on existing experience in industry with producer-supported take-back systems in the chemical, petroleum and steel industries which have been successful for decades.

Future legislative regulations should therefore be designed in such a way that the existing manufacturer-supported take-back systems of industry, which have been operating successfully for more than two decades, are not endangered but rather safeguarded.

V. In order to be able to consistently pursue the path taken towards a European circular economy, the EU and its Member States will in future have to continuously align their policies on the waste hierarchy set out in Article 4 of the Waste Framework Directive. It should be noted that the amount of municipal waste directly landfilled (level 5 of the waste hierarchy) is still high in several EU Member States.

One reason for this is that direct landfilling of municipal waste is still permitted and is therefore the cheapest form of disposal. In the interests of a single internal market, the Commission should put forward proposals on how to put an end to direct landfill of municipal waste as soon as possible.

Only in this way will the creation of a circular economy for municipal waste in Europe succeed.

VI. An essential prerequisite for the quality of recycled raw materials is their market conditions. Knowledge of the presence of substances of concern in waste and the appropriate handling of these substances in the recycling or recovery process can be important elements in achieving the quality objective.

The Commission has addressed the interface between chemicals, product and waste legislation under the first Circular Economy Action Plan, www.bdi.eu

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BDI on the European Commission's Circular Economy Action Plan of 11 March 2020

seeking to develop solutions for dealing with substances of concern in waste. This discussion process has not yet been completed. The BDI therefore welcomes the fact that the Commission is continuing the process.

This should be based on existing legislation. A new overarching legal area would be counterproductive, as contradictions and duplication of regulations in relation to existing law would be unavoidable.

Finally, the definition of "Substances of Concern" must also be clarified.

In the announced further adaptation of the classification of hazardous waste to the CLP Regulation, care must be taken to ensure that this does not lead to obstacles to recovery and a massive increase in the volume of hazardous waste. It must also be clear that a theoretical hazard potential alone is not sufficient to deny the recyclability of a substance or fundamentally question its use. If risks can be managed and reduced by appropriate measures, the use is also safe. It is therefore the real danger that counts.

The overall aim must be to identify and apply effective instruments for handling substances of concern in recycled raw materials, differentiated by materials, product groups or waste streams, where appropriate. In this context, too, it must be taken into account that materials behave differently, their recyclability differs and that there is therefore not one solution for all, or in many cases solutions already work in practice. It is unclear why the interface between chemicals, product and waste legislation should be continued in the framework of the announced sustainability strategy for chemicals.

The Commission also addresses the planned ECHA database on articles ("SCIP"). This database was included in Article 9 of the Waste Framework Directive by the European legislator without a regulatory impact assessment. The ongoing discussion process on the interface between chemicals, product and waste legislation was not taken into account.

Industry has repeatedly made it clear that setting up the database at very high cost results in an exorbitantly large amount of data, without it being sufficiently clear whether and how waste management/recycling companies can make good use of these data. In addition, there are concerns about the unexplained protection against data misuse and the problem of information loss during the use phase of a product or a change in its composition due to modifications, repairs, reprocessing etc. The current difficulties in the preparations for activating the database make it clear that the failure to carry out a regulatory impact assessment was an omission.

The Commission should carry out a cost-benefit analysis of the database in the context of the implementation of the Action Plan on recycling management with a view to achieving the desired objectives.

Furthermore, the establishment of the database must not anticipate or otherwise interfere with the process outlined above of identifying effective tools for handling substances of concern in recycled raw materials in the www.bdi.eu

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BDI on the European Commission's Circular Economy Action Plan of 11 March 2020

context of the discussion of the interface between chemicals, product and waste legislation.

Sustainable product design is of central importance The recyclability of products starts with their design through sustainable product design. Another important set screw is the proper return to the collection and sorting systems. This requires further measures for product labelling and targeted information from consumers and businesses in order to avoid mistakes and achieve higher recycling rates.

New classification system for financial products The introduction of the taxonomy regulation and thus a classification system for sustainable economic activities is intended to increase the transparency of financial products and companies with regard to their sustainability and to prevent so-called "greenwashing". Relevant market participants such as the European Investment Bank and the European Central Bank have already announced that they will incorporate the taxonomy into their own portfolio structuring. Except for the exclusion of the classification of coal-fired power generation as sustainable, the Taxonomy Regulation is basically technology-neutral. Among other things, it provides for technical assessment criteria to be developed for various environmental objectives. These are to be adopted by the Commission in the form of delegated acts by 31 December 2020 and applied from 31 December 2021.

In this context, criteria will also be established to determine when an economic activity makes a significant contribution to sustainable recycling management.

The various industrial sectors are already making significant contributions to recycling management and resource efficiency and thus to sustainable development. The preparation of the delegated legal acts in the field of environmental services must therefore be based on strictly scientific criteria and be technologically neutral. For example, the potential of environmental service technologies in the manufacture of durable products, recycled raw materials, the contribution to climate protection, energy generation and the removal of pollutants must be taken into account.

Leading role in efforts at global level The BDI supports the Commission's efforts to promote the transition to a fair, climate-neutral, resource-efficient and cycle-oriented economy, also at global level. The establishment of a Global Alliance for the recycling economy and a closer partnership with Africa is expressly welcomed. The www.bdi.eu

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BDI on the European Commission's Circular Economy Action Plan of 11 March 2020

Commission's approach of including the broader objectives of a circular economy in negotiations on free trade agreements also points in the right direction. 

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BDI on the European Commission's Circular Economy Action Plan of 11 March 2020

About BDI The Federation of German Industries (BDI) communicates German industries’ interests to the political authorities concerned. She offers strong support for companies in global competition. The BDI has access to a widespread network both within Germany and Europe, to all the important markets and to international organizations. The BDI accompanies the capturing of international markets politically. Also, she offers information and politico-economic guidance on all issues relevant to industries. The BDI is the leading organization of German industries and related service providers. She represents 40 inter-trade organizations and more than 100.000 companies with their approximately 8 million employees. Membership is optional. 15 federal representations are advocating industries’ interests on a regional level.

Imprint Federation of German Industries e.V. (BDI) Breite Straße 29, 10178 Berlin, Germany www.bdi.eu T: +49 30 2028-0 Contact Franz-Josef von Kempis Telefon: +49-30-2028-1509 v.Kempis@bdi.eu Dr. Claas Oehlmann Telefon: +49-30-2028-1509 C.Oehlmann@bdi.eu BDI document number: D 1186

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