International developments and implications for Aotearoa New Zealand

This information has been developed for businesses and policy makers to support greater awareness about the growing number of policies and regulations being introduced in many countries. The overview draws on research conducted by Thinkstep-anz, Aurecon and the Sustainable Business Network. 

Key developments

Circular economy strategies, policies and regulatory measures are increasing worldwide, including with our key trading partners

Many countries have developed policy and regulatory measures to support the shift towards a more circular economy. These aim to encourage circular practices, resource efficiency and avoid the creation of waste. Recent measures, mostly over the past 5 years, include:

• The adoption of over 40 national or trans-national level circular economy strategies worldwide, including 33 national circular economy roadmaps in Europe.[1]
• The introduction of more than 180 international legislative instruments with objectives of reduced linear consumption and reuse of materials.[2]

New Zealand’s top four trade partners, China, Australia, US, and Japan, as well as in the UK, and EU, have circular economy objectives (explicitly or implicitly) in their trade and economic policies. There are also circular economy provisions in New Zealand’s recent Free Trade Agreements with the EU, UK, and our updated Closer Economic Relations Sustainable and Inclusive Trade Declaration with Australia.[3]

The Australian government, both at federal and state level, is supporting circular economy developments. Activities include a Circular Economy Ministerial Advisory Group, established in 2023 to provide advice to the Australian Government on the transition to a more circular economy, including regulatory and commercial issues, best practice initiatives, circular economy research, development and innovation needs, and measurement of progress.[4]

Global circularity hubs, networks and alliances are on the rise

There are a growing number of local, national, and transnational networks, hubs, and institutes designed to support knowledge exchange, innovation, and adoption of circular practices. Examples include the Circularity Accelerator (World Green Building Council), the Ellen MacArthur Foundation, the Circular Economy Initiative (CEI) Action group, Circular Australia, and the Holland Circular Hotspot.

There is also growing global attention to the bioeconomy for the opportunity it presents to support more sustainable economic activity and natural resource use, including the International Advisory Council on Global Bioeconomy (IACGB) and the Global Bioeconomy Alliance (universities).

These and other global alliances are supporting the development of international agreements that support the transition from the current linear-based economy to a more circular economy. Examples include the UN Global Plastics Treaty, where 175 nations have agreed to develop a legally binding agreement on plastic pollution by 2024, which will reduce greenhouse gas emissions from plastic production, use and disposal.[5]

Circular measures are wide-ranging in nature and purpose

Countries have implemented a range of measures including bans, levies, taxes, minimum prices, requirements for information on products, procurement, grants and other fiscal incentives. There has also been growing attention and support for circular policy objectives, such as extended producer responsibility, repairability and reuse and recycling of materials.[6]

Initial global drivers for circular approaches were limited raw material availability, climate change and degenerating natural capital. Subsequent drivers have included increasing resilience (including to geopolitical risks and volatile trade), productivity gains, economic competitiveness, and higher value jobs.

There is a growing inclusion of circularity and resource efficiency as part of climate policies to reduce greenhouse gas emissions. For example, “circularity” is noted as an initiative in the ‘Nationally Determined Contributions’ of 79 countries, including New Zealand.[7]

Sustainable ecosystem management practices from indigenous communities can inform the development of a circular economy. Aspects of what we now call the circular economy have been longstanding practice within many indigenous communities for generations, including for Māori.[8]

Trade implications for New Zealand

New Zealand will require ongoing awareness of international circular economy developments to make timely responses to opportunities and risks. This includes keeping up with regulations, policies and strategies proposed by our major trading partners to ensure that our exporters can meet changing standards. Failure to comply with international standards and practices may mean reductions in market access, additional trade costs, or loss of competitive advantage.

Examples include:

• changes to Australian sustainability and recyclability requirements which New Zealand exporters will need to meet as part of Australia's 2025 National Packaging Targets.[9]
• EU reporting and disclosure measures that will have implications for some products placed on the market in the EU, including for product compliance, recyclability, or recycled content requirements, labelling and eco-design requirements, and traceability and product data.[10]

New Zealand has limited ability to influence design and manufacturing abroad. This makes strategic collaboration with trade partners on circular economy approaches important to mitigate risks of supply chain disruptions and market volatility. Aligning sustainability and circular economy strategies with each trading partner's specific policies and market conditions will be pivotal.

The circular economy also presents New Zealand with economic opportunities associated with a more resource-efficient and environmentally sustainable economy. Business opportunities based on our bioeconomy include production of high value wood products, native botanicals, essential oils, biocosmetics, marine bioactives, and farm inputs such as animal feed and fertilisers.[11] The adoption of circular policies and practices could also help maintain or grow New Zealand’s competitiveness in trade, particularly in markets with a focus on climate change and sustainability, and for the Māori economy.

For this reason, it may be helpful to ensure there are adequate information and advisory services for businesses to help them understand and meet any requirements, where possible. The government has an important role to utilise existing information channels, such as through trade relationships and knowledge networks, to maintain awareness of international developments and implications for New Zealand. Our existing and future trade agreements and broader international relationships can act as policy dialogue channels with other countries. These settings can enable New Zealand exporting firms to meet the environmental expectations of our trade partners and consumers.

Circular economy policy and regulatory areas

In a circular economy, products and materials are kept in circulation through processes like maintenance, reuse, refurbishment, remanufacture, recycling, and composting. Downstream efforts such as waste and resource management are usually the first areas to be addressed in domestic circular economy policy, though more significant shifts occur with policies focussed on upstream waste prevention and resource recovery. Some examples of key policy and regulatory areas include:

Circular economy-driven design

Influencing the design of products and assets for durability and reuse can result in significant waste elimination and efficient material circulation. Initiatives such as digital product passports can support supply-chain transparency and life cycle information sharing, which complement broader circular economy initiatives.

• For example, Japan’s Circular Economy Vision requires companies to select a circular approach appropriate to their business type in every process of the supply chain. This includes design, production, use and disposal, as well as designing for total circularity through a life cycle approach.[12]
• The European Commission adopted their Circular Economy Action Plan (CEAP) in 2020, a key component of the European Green Deal, which contains initiatives along the entire life cycle of products. A digital product passports initiative is one of the key actions under the Circular Economy Action Plan (CEAP) and part of the proposed Ecodesign for Sustainable Products Regulation.[13]

Repairability

Repairability is a measure of the extent and ease with which a product can be repaired and maintained.

• A Repairability Index was introduced in France in 2021. This was able to be quickly introduced to market in part because its methodology requires manufacturers of products to provide their own repair rating. The rating currently covers a range of five electrical and electronic products, which will be expanded over time.[14]
• The United Repair Centre, from the Netherlands, has repair hubs in Amsterdam and London, and seeks to extend clothing lifecycles and reducing textile waste in a ‘one stop shop.[15]

Remanufacturing

This allows for products at the end of their useful lives to be given a completely new life, while also preserving the maximum value. Remanufacturing contributes to conserving the materials within products and helps prevent the generation of waste.

• In Canada, sales revenues from remanufacturing and comprehensive refurbishment generate an estimated CAD$5-6 billion annually. The International Resource Panel has found that when compared to manufacturing a new product, remanufacturing can reduce the need for new materials from 80 to 98% and reduce 57 to 87% of the energy needs and associated greenhouse gas (GHG) emissions related to their manufacturing.[16]

Circular economy for emissions reduction

Most attention on emissions and climate change mitigation to date has focused on the role of energy (largely scope 1 and 2 emissions). However, increasing attention is being paid to material and wider supply chain related emissions (scope 3). A shift to a circular economy is a key part of reducing scope 3 emissions in material production and supply chains.[17]

• Nestlé released its Net Zero Roadmap in 2020, committing the company to reduce its whole supply chain emissions by 20% by 2025 and 50% by 2030. As a result of this, and that by other international manufacturers, there are growing commitments by New Zealand businesses to measuring and managing whole supply chain emissions, including through circular practices such as reducing waste.[18]
• The Circular Built Environment Playbook report, launched in 2023 by The World Green Building Council, calls on the building and construction sector to accelerate the implementation of circular and regenerative principles. 55% of emissions in the sector are related to energy, but the remaining 45% of emissions are associated with the production and consumption of resources and materials - a challenge that can be addressed through circular practices at every stage of the building and construction lifecycle, from manufacturing to end of life reuse.[19]

Circular economy standards

There is a growing number of domestic and international standards relating to circular economy. Standards are a key enabler of circular economy transition for many reasons, including setting foundational definitions and principles, ensuring minimum quality and safety of new products, embedding circular economy principles in product design, and providing market access to new producers.

• One of the most comprehensive global databases for standards relevant to circular economy revealed that there were 559 international standards relating to circular economy as of 2022. An example of this is the International Organization for Standardisation (ISO) working toward standard language and approaches for the circular economy (ISO/TC 323).[20]

Fiscal measures

Fiscal measures can be used as a policy tool to encourage behaviour change and reduced resource use. In addition to tax, fiscal measures include levies, minimum prices for materials/products, grants or guaranteed returns/payments. Grants are often used to stimulate a desired change in society or the economy, such as the take up of an early stage, beneficial new technology.

• Examples include Extended Producer Responsibility (EPR) in the EU, Deposit Return Schemes (DRS) in Norway, South Australia and South Africa, and collection standards enacted in Belgium and Spain.

Reporting, disclosures, and greenwashing prevention

Reporting and disclosures based on the circular economy (and sustainability more broadly) are increasing, as consumers, governments, and businesses set higher expectations around the environmental impacts of production and consumption. In turn, this has also highlighted greenwashing issues.

• The International Sustainability Standards Board (ISSB) issued its inaugural standards for sustainability-related disclosures in global capital markets in June 2023.[21]
• In Europe, one of the actions of the Circular Economy Action Plan is a proposal for companies to substantiate their environmental claims using evidence.[22]

Footnotes

[1] Circular Economy Earth(external link) — Chatham House

[2] Regulating products, production, and consumption for a circular economy in Aotearoa New Zealand(external link) — Blumhardt, H. (2023). Victoria University of Wellington. 

[3] New Zealand Free Trade Agreements(external link) — New Zealand Foreign Affairs and Trade 

[4] Transitioning to a more circular economy (2023)(external link) — Australian Government, Department of Climate Change, Energy, and the Environment

[5] Historic day in the campaign to beat plastic pollution(external link) — United Nations Environment Programme

[6] Improving resource efficiency and the circularity of economies for a greener world(external link) — OECD Environment Policy Papers

[7] Circular Economy: From Commitments to Action(external link) — WRAP

[8] Lessons to be learnt from Māori business values(external link) — Sustainable Business Network

[9] Sustainable packaging targets in Australia(external link) — NZTE

[10] Green Claims Directive(external link) — European Commission

[11] Emerging and Future Platforms in New Zealand’s Bioeconomy — Coriolis

[12] Circular Economy Vision(external link) — Japan Ministry of Economy, Trade and Industry (METI)

[13] Circular Economy Action Plan (2023)(external link) — European Commission

[14] Indice de réparabilité(external link) — French Government - Indice Reparabilite

[15] https://www.unitedrepaircentre.com/(external link) 

[16] Study on remanufacturing and other VRPs in Canada(external link) — Canadian Minister of Environment and Climate Change

[17] Towards a Circular Economy: Implications for Emission Reduction and Environmental Sustainability(external link) — Business Strategy and the Environment 32, no. 4 (2023): 1951–65. 

[18] Nestlé welcomes Fonterra Scope 3 announcement(external link) — Nestlé

[19] The Circular Built Environment Playbook(external link) — World Green Building Council

[20] A practical guide to getting into circular economy(external link) — Association française de normalisation. (2020). 

[21] ISSB issues inaugural global sustainability disclosure standards(external link) — International Financial Reporting Standards (IFRS). (2023)

[22] Green Claims Directive(external link) — European Commission. (2023)