Rethink value creation
Claims for a circular industrial location for the 21st legislative period
February 11, 2025
1. Initial situation
The coalition agreement for the 20th legislative period contained numerous regulatory plans for the framework conditions for circular value creation, which were not implemented or not completed. For example, preliminary work was carried out on an ordinance to determine the end of waste status for mineral substitute building materials and an amendment to Section 21 of the Packaging Act. In addition, the amendment to the Commercial Waste Ordinance was introduced into the parliamentary process and a National Circular Economy Strategy (NKWS) was adopted, the implementation of which will require the establishment of a stakeholder platform and the use of additional budget funds to promote circular value creation. However, for the Circular Economy to become a real success factor for Germany as a business location, the following fundamental conditions must be considered politically:
▪ The framework conditions for Germany as an industrial location, including competitive energy costs, swift approval procedures, digital infrastructure and the training of skilled workers, must be designed in such a way that companies can produce, invest and innovate in Germany even in the face of global competition.
▪ Companies must be put in a position where circular strategies can also be implemented as business models in a free European internal market. Depending on the sector, this also requires the establishment of green lead markets. Issues relating to procurement and funding law as well as financing must be clarified beyond doubt.
▪ The desired product and material cycles must be supported by a coherent legal framework that, on the one hand, provides consistent definitions and specifications and, on the other hand, defines the interfaces between product, waste and substances law in such a way that cycles are enabled and not prevented. Cross-departmental governance with central coordination in the federal government must also be designed accordingly
▪ The European model of a holistic Circular Economy must be anchored in international trade and climate protection policy as well as standardization work to strengthen the competitiveness of companies.
2. Eight claims for the 21st legislative period
1) Quickly ensuring legal and planning security
The new federal government must carefully examine right from the start how the initiated projects can be sensibly continued so that the economic players have planning security. In addition, circular value creation must be integrated into the organization and work processes of the federal government as a strategic cross-cutting issue of central importance for industrial and location policy in such a way that coordinated and interdepartmental joint work at national and European level is made possible. Only in this way will it be possible to transform the opportunities of circularity into actual benefits for the industrial location.
A continuation of the Federal Environment Ministry's concept for the end of waste status for a few mineral substitute building materials from 2023 is rejected in this form. If the initiative is continued, all materials and material classes of the Substitute Building Materials Ordinance must be taken into consideration. The need for further development of German packaging law already arises from the need to adapt to the European Packaging Ordinance (PPWR). The revision of Section 21 of the German Packaging Act (VerpackG) must also be taken up again quickly to establish a functioning incentive system for recycling-friendly design in line with European law within the existing and proven private sector system for packaging subject to system participation. Although the amendment to the Commercial Waste Ordinance makes sense, it requires further practical development. Furthermore, it must be examined to what extent the work of the Strategy Forum for Standardization founded by the Federal Ministry of Economics can be better dovetailed with the processes of the High Level Forum for Standardization - an initiative of the EU Commission. This step is important so that the forum can also fulfill its original and meaningful mission for the Circular Economy.
2) Implementing the National Circular Economy Strategy sensibly in the context of European policy
Germany needs a Circular Economy Strategy that pursues realistic goals and measures across legislative periods. The objectives and measures of the strategy adopted in 2024 where the federal government has actual scope for action should now first be considered. Particularly in the areas of raw materials policy, climate protection, digitalization, standardization and public procurement, the federal government should develop suitable processes to link the often still unconnected subject areas. It is also necessary for the implementation of the strategy to be identified as a task for the entire federal government and for the stakeholder platform set out in the strategy to be established to support its implementation. For all legal framework conditions directly related to the functioning of competition in the European internal market, such as product design, deployment quotas and emissions trading, national rules should be avoided, and European solutions should be actively co-designed instead. In addition, a dialog should be initiated between the federal government, the federal states and industry for a sustainable implementation of circular framework conditions. The blanket and cross-sector targets for reducing the use of primary raw materials discussed as part of the NKWS are not suitable for triggering targeted and positive effects for circular value creation in Germany. Such a cross-material metric is not suitable for making qualitative and quantitative statements about resource requirements and use during the desired transformation of Germany as an industrial location. Instead, individual material flows should be considered in a differentiated manner and discussed with a view to possible meaningful targets as an incentive to strengthen a Circular Economy. The informative value of purely weight-based indicators should also be considered
3) Shape product design specifications and minimum content quota in the Circular Economy at European level, not nationally
The design of products is a key to circular value creation and at the same time an opportunity for company-driven innovation Binding requirements, such as those provided for in the EU Ecodesign and Packaging Regulations, must always be discussed and adopted with a sense of proportion for the entire European single market. National requirements for product design always harbor the risk of distortion and fragmentation in the internal market, which ultimately leads to a weakening of the entire economic area. This also requires effective market surveillance and enforcement to check the conformity of goods imported from third countries with European requirements. Products and services that do not meet the requirements must not be made available on the European market.
Mandatory input quotas for certain Circular Economy Raw Materials are a significant market intervention that can be used to stimulate the markets, depending on the material. The decisive factor here is always that the choice of instrument indeed leads to the desired positive effects on the raw materials markets or to savings on greenhouse gas emissions. Minimum content quotas have already been adopted in various pieces of legislation at European level. For example, minimum recycled content quotas exist in the EU Single-Use Plastics Directive, the EU Battery Regulation, the EU Packaging Regulation and the EU Taxonomy Regulation. In addition, corresponding instruments are enshrined in the EU Critical Raw Materials Act (CRMA), the EU Ecodesign Regulation and the proposal for an EU End-of-Life Vehicles Regulation. Interactions with other areas of regulation and environmental objectives, such as chemicals legislation, have not yet been sufficiently taken into account
For the practicability and feasibility of such minimum content quotas by companies, it will be essential overall that the calculation and calculation methods still to be defined are developed quickly and are as easy to implement as possible, as well as being enforceable for the administration, including market surveillance. This also includes the development and recognition of procedures for balancing the proportion of Circular Economy Raw Materials in the basic materials industry by means of mass balances, which must allow clear allocations to use in products through corresponding certifications
At European level, it has not yet been taken into account that minimum recycled content quotas from different regulations sometimes address the same material flows, which can lead to undesirable market effects. Availability should always be kept in view and be based on regular monitoring of the specific material flows, i.e. on a scientific database. A realistic assessment of the potential quantities of Circular Economy Raw Materials is crucial for the development and effectiveness of measures. For a level playing field and the use of the internal market as a lever, use quotas for Circular Economy Raw Materials should generally be discussed at European level. National minimum recycled content quotas are not expedient due to their unequal treatment of companies on the internal market and should be rejected as a market-distorting obstacle
In addition, markets for circular products and raw materials must finally be stimulated and not blocked by effective measures in public procurement.
4) Focus on supply-critical and strategic raw materials
As part of the CRMA adopted at EU level, circular value creation is to be strengthened to achieve greater security of supply for critical and strategic raw materials in accordance with the CRMA. By 2030, at least 25% of the annual consumption of strategic raw materials should be covered by recycling. Furthermore, concrete measures for circularity are to be examined and implemented at member state level. The NKWS also takes up the goal of security of supply for critical and strategic raw materials
through a Circular Economy from the CRMA. The German government should therefore immediately begin to develop corresponding national measures with economic operators The aim must be to create an innovation-promoting and market-based environment for circular economy solutions with regard to critical and strategic raw materials in key technologies (e.g. heat pumps, energy storage systems, electric motors, wind and solar systems, hydrogen technologies, etc.). Funding for circular solutions for the entire life cycle, which are developed by science and industry, must therefore be strengthened and not reduced. At the same time, framework conditions must be created that provide investment security and investment incentives, especially for the development of business models in this area. Otherwise, Germany as an industrial location risks failing to achieve its goal of assuming a pioneering role in the field of circularity for strategic and critical raw materials relevant for key technologies
It should also be noted that critical raw materials are often contained in production waste and/or in products that are classified as hazardous under waste legislation at the end of their life cycle. This classification sometimes has a significant impact on the possibilities for importing and exporting such waste streams. In addition, monitoring must be established and continuously evaluated, particularly with regard to the trade Circular Economy Raw Materials, whereby trade restrictions in other parts of the world should also be observed. These circumstances must be given greater consideration by the German government in future when it comes to the establishment and development of circular capacities.
5) Designing future-oriented rules for the end of waste property
Circular Economy requires smooth, cross-company transitions between waste, product and substance legislation with the associated legal certainty for companies. Companies that want to transport and store waste as raw materials and use it in production are confronted with a wide range of waste legislation and administrative requirements. In order to create legal certainty, companies can have the authorities check individually whether a material is legally classified as waste, non-waste or, if applicable, as a by-product at a certain point in time. If the classification remains at an individual level for each test case, the respective competent authorities may interpret the abstract criteria laid down in the Circular Economy Act differently. As a result, this leads to an uneven playing field and potentially high hurdles for the implementation of circular business strategies. Authorities must be able to make clear and unambiguous decisions in order to avoid a potentially unfounded unfavorable interpretation for companies. Consequently, a uniform and unambiguous understanding of the criteria (e.g. among authorities in all federal states) as well as an exchange of experience and knowledge building on positive examples play a special role and must be strengthened. In addition, uniform application and interpretation of the law must also be achieved at European level
In addition to the goal of protecting the environment and health in regulation, the goal of circular value creation must also be reflected in waste and circular economy law as a fundamental value creation model for scaling circular strategies in companies. Care must therefore be taken to ensure that circular value creation strategies that are located above recycling in the waste hierarchy (reuse, repurpose, repair, etc.) are not impeded by a too early acquired waste status for products and materials
Depending on the material flow, the usefulness of possible national criteria for product recognition is assessed differently. In the case of plastics, for example, national criteria could lead to fragmentation in the European internal market. In the case of mineral substitute building materials, on the other hand, national criteria can make sense if they address all materials and material classes of the Substitute Building Materials Ordinance.
6) Promoting strategic circular economy standardization at European and international level
In view of the legislative processes at European level and the associated increase in standardization activities, there is a considerable need for the targeted promotion of entrepreneurial participation in standardization activities. When shaping the basic legal acts that have already been adopted, such as the EU Ecodesign Regulation or the EU Battery Regulation, it will be crucial that the sub-legislative rules yet to be created allow for the successful development of a harmonized circular internal market in the EU. Specific support is needed here for experts to continue and increase their involvement in this important design work.
This claim is not aimed at more standardization activities per se, but includes a targeted examination of where and whether there are still needs that are useful in the implementation and design of circular economy legislation. Examples include methods for measuring recyclability, recycling efficiency or the proportion of Circular Economy Raw Materials and standardized data parameters for digital product passports (DPP). This approach serves to close the gaps in legislation with the help of standards and thus make them applicable and comparable for the industry.
To this end, the strategic role of standardization, as laid out in principle in the NKWS, must also be better understood and recognized by the Federal Government for EU legislation and its implications for German industry. The initiative of the Federal Ministry for Economic Affairs and Climate Protection to establish a strategy forum for standardization is one way of representing Germany's goals as a business location at EU level. To this end, the original mission of the forum must be taken up and actually implemented so that circular economy standardization is given a stronger presence at European level.
In addition, the competencies in the area of standardization between the ministries must be better bundled and coordinated across departments. As a cross-cutting issue, standardization is relevant across all ministries and should therefore be taken up beyond the Federal Ministry of Economics and Technology and, above all, integrated into the coordinated work of the federal government in the area of the Circular Economy.
7) Shaping digital technologies and infrastructures
The German government must set the course for a decentralized and holistic information system for data from the Circular Economy that also enables small and medium-sized enterprises to provide and share data and use it for circular strategies. This requires a clear roadmap with reliable interim goals as to how this system can be set up in Germany, including with regard to connectivity to international data standards Here again, the NKWS stakeholder platform can play an important role in supporting implementation in order to ensure dynamic monitoring of the development of legislative processes and upcoming requirements at EU level and to feed these back into the information system.
It is also crucial that enforcement authorities are further digitized and staff are trained accordingly. The upcoming Digital Product Passport (DPP) requirements will require more data on circular product aspects to be made available in the EU in the coming years. This will create an important new opportunity to use this data to improve the enforcement of circular products.
8) Transparency in opinion-forming on sub-legislative EU law
In the framework legislation on the Circular Economy from the Green Deal, it was decided to draw up and adopt numerous delegated and implementing acts. The regulations in these legal acts will also be
decisive for the success of entrepreneurial circularity in Germany. The federal government and the ministries should therefore ensure the greatest possible transparency in the drafting processes of subordinate EU legislation and provide for broad stakeholder participation. At national level, it makes sense to closely involve the stakeholder platform for implementation support, which has already been mentioned several times. Only in this way will it be possible to achieve optimal investment conditions for companies in circular solutions, to help shape them and to keep them calculable.
3. Five central fields of action
The members of the BDI Circular Economy Initiative pursue the common goal of developing the Circular Economy into the main pillar of sustainable, defossilized industrial value creation. They have determined that our economic activities must also focus on using, recycling and reusing high-quality products and raw materials in cycles for as long as possible. At the same time, it will be necessary to support this ambition with new and innovative technologies, business models and circular services. It is also undisputed that stable access to sustainably sourced primary raw materials must be guaranteed for the supply of raw materials to industry in view of the transformation challenges it faces. This is the only way to ensure a secure supply of raw materials in Germany. The members of the BDI Circular Economy Initiative see themselves as shapers of the development towards a Circular Economy and stand for competition, openness to technology and innovation. Taking these principles into account, the transition to a circular economic model requires a holistic and ambitious policy that creates a secure framework for closing loops and does not view circularity as an end in itself. The basis for this is the realization that policies for circular value creation must be part of industrial and location policy. A governance structure within the federal government and the federal ministries must be designed accordingly. In order for the Circular Economy to become an opportunity on national, European and international markets, it must also be underpinned by appropriate expertise and understood as a strategic cross-cutting task in politics and business. The following five fields of action are central to this:
1) Circular products and services as a starting point
German industry is dependent on a functioning and free European internal market. In the future, product design should also be based on criteria such as durability, reusability, reparability, recyclability and the use of Circular Economy Raw Materials, particularly as part of the implementation of the EU Ecodesign Regulation and other product-specific regulations (e.g. the EU Battery and Packaging Regulations and a possible new EU regulation for end-of-life vehicles). The fulfillment of such circular criteria should also determine whether products can be placed on the European single market. They therefore apply to products manufactured in the EU as well as imported products and have the potential to make new circular business models competitive. The focus on product design offers the opportunity to establish circularity in business practice and in the use phase. The planned requirements are to be created in the coming years through the development of a large number of delegated and implementing acts as well as the development of harmonized norms and standards. It is imperative that the right balance is struck between a sensible framework and a degree of freedom for companies so that their creativity and innovative strength can flourish while maintaining fair competitive conditions throughout the value creation cycle.
In addition to this new legal framework, the revision of European substance legislation (REACH Regulation) is also expected. It is of central importance that the restriction or prohibition of substances is consistently based on a science-based approach with a comprehensive risk assessment so that product and material cycles can be planned and established by companies. In all these tasks, it will be
important for Germany to play a formative and proactive role at European level. Only in this way will it be possible to leverage the great potential of circular value creation for Germany as an industrialized country and to make conflicts of objectives transparent in the context of other sustainability requirements. Regular consultations with relevant stakeholders at national level, for example via the national Circular Economy Platform envisaged in the NKWS, can also serve this purpose. The aim must be to transfer joint expertise and knowledge to the European level in order to create practical rules for the internal market.
2) Functioning markets for Circular Economy Raw Materials
In addition to the supply of domestic and imported primary raw materials, the use of Circular Economy Raw Materials must be increased in general and for specific materials if greater security of supply, climate protection, environmental protection and resilience are to be achieved through circularity. Market acceptance of the use of Circular Economy Raw Materials must be increased. It must be borne in mind that the amount of waste and by-products produced absolutely limits the theoretical potential for raw materials and energy generated from them.
In order to leverage the potential of Circular Economy Raw Materials, it must be ensured that the law on the shipment of waste is also interpreted and further developed in the sense of a Circular Economy. Circular Economy Raw Materials must also be able to compete fairly with primary raw materials in terms of the administrative burden on companies. Furthermore, in the coming years it will be important to secure investments in new, comprehensive and reliable collection, sorting and recycling structures in line with the waste hierarchy and at the same time to establish or secure and further develop the existing infrastructure (also with regard to traffic and transportation), including private-sector systems supported by manufacturers for the implementation of extended producer responsibility. The potential, targets and measures for increasing the use of Circular Economy Raw Materials must continue to be considered on a material-specific basis. Instruments that are legally anchored at national level to promote the use of Circular Economy Raw Materials ("push" and "pull" measures) must be weighed up against the criteria of "impact on the goal of a single European internal market" (1), "impact on quantity - availability and demand" (2), "ensuring the quality required on the market" (3) and "expected price development" (4). This is the only way to ensure the intended steering effect in a market economy.
Key figures for the recycling and use of recyclates of critical raw materials in accordance with the EU Critical Raw Materials Act, if available, vary greatly depending on the type of metal. Critical raw materials are usually distributed diffusely and in low concentrations in products and are therefore associated with high operational and transaction costs to acquire the recyclate. In view of the fact that critical raw materials are sometimes tied up in products for long periods of time and the aim of promoting secondary and reuse, in addition to the availability of recyclates over time, the shipment of waste streams containing critical raw materials must also be taken into account in order to make sufficient quantities available for the economic operation of recycling plants.
3) Circular Economy as a prerequisite for climate protection
The establishment of a Circular Economy offers many sectors the opportunity to make an important and necessary contribution to climate protection. Extending the useful life of products and materials, using recycled raw materials or by-products and using non-recyclable waste to generate energy are already making an important contribution to reducing greenhouse gas emissions. The same applies to raw materials from biomass and, in the future, to the use of other alternative raw materials such as CO2, which will be indispensable for the necessary establishment of carbon cycles. Measures for
circular value creation take effect at different stages of design, processing, production, distribution, use and recycling processes. For example, longevity, reuse, repair and recycling each have an effect on reducing greenhouse gas emissions from products at different points in the value creation cycle. The product and its life cycle, including transportation emissions, should be considered holistically
However, there is not yet a uniform international understanding of how the effects of circular measures can be systematically integrated into the carbon footprints of countries and companies. At company level, this primarily concerns emissions that occur in Scope 3.
At the same time, large quantities of municipal waste are still being landfilled in many EU Member States and are not being used for material or energy recovery. By ending the landfilling of recyclable and organic waste, more raw materials can be recovered for the cycle and, by using the energy content of waste that is no longer recyclable, a building block can be added to the local energy supply with electricity and heat. National emissions trading systems, for example for thermal waste treatment, which are operated in parallel with European emissions trading, always harbor the risk that companies in Germany will be disadvantaged in European competition or that waste streams will be the subject of cross-border shipments for supposedly cheaper but ecologically disadvantageous disposal. The aim here must be a uniform European pricing system for greenhouse gas emissions from all relevant disposal processes that is suitable for promoting decarbonization economically, without carbon leakage and market distortions, and in compliance with the waste hierarchy.
4) Digital circular value creation
The digital penetration of production, products and services is taking place worldwide. The positive combination of digital technologies and the use of data with the further development of the Circular Economy is therefore a prerequisite if Germany is to remain globally competitive as an industrial location. Digitalization is not a parallel development to the Circular Economy, but an integral part of it in all phases of the value chain.
There are still many "blind spots" and unanswered questions in German industry and administrationespecially in comparison to other economic areas:
▪ What happens to products and materials over their entire life cycle?
▪ What is the composition of material and waste flows and how can they be monitored sensibly and efficiently?
▪ Which companies - especially SMEs - still need support in digitizing their production and product-related data?
▪ What can a standardized digital infrastructure at authorities look like for improved enforcement?
▪ How can it be ensured that goods and raw materials can be moved throughout the entire cycle in standard transportation and logistics flows and thus be made available to the cycle?
The following digital technologies can provide solutions:
▪ Digital twins that make waste streams anticipatable, measurable and controllable, thus creating new possibilities for sorting and recycling.
▪ Trading platforms and databases supported by artificial intelligence (AI) that bring together supply and demand for circular products, product components and raw materials.
▪ Digital Product Passports (DPP), which make data for circular value creation transparent and interoperable and enable networking of the players involved in the cycle (companies, authorities, consumers).
As part of the European Green Deal, the foundations for the creation of DPPs were laid in numerous circular economy policy acts. The anchoring of the DPP in the Ecodesign Regulation provides the framework for this. In the coming years, it will be important to establish cross-industry compatible infrastructures for data exchange and to aggregate targeted information at material or product level that is also compatible with Industry 4.0 applications. In addition to general regulatory requirements for data transparency, incentives should also be created to develop new and data-driven business models. What is needed here is a flexible and holistic information system that creates an internationally connectable data space for the German economy, which favors the application of digital technologies and enables new ways of circular value creation.
In this context, the following key aspects should also be considered: data security, which is of great importance and at the same time offers opportunities for digital developments in Germany; the protection of business secrets, whereby the DPP should disclose as much data as necessary and as little as possible; and the harmonization of legislation, as the DPP should, for example, be synchronized with existing (analogue) regulations on product labelling.
5) Governance and stakeholder involvement for good regulation
The value creation model of the Circular Economy is based on a system perspective of economic activity that encompasses the maximum value retention of products, materials and resources in the entire value creation cycle. The central pillars of the Circular Economy are therefore product design geared towards recyclability, the availability of renewable energy for production and recycling processes and the existence of business models based on the circular concept. The aim of the Circular Economy is to conserve raw material resources, reduce CO2 emissions and minimize the impact on ecosystems, thereby decoupling growth from the burden on natural capital. This makes it clear that a political governance structure corresponding to this concept must be designed and stringently coordinated across departments. The implementation of circular value creation must be accepted as an industrial and location policy task and become part of very different policy areas in order to work out and address existing conflicts of objectives between different sustainability goals
The new framework legislation for circular value creation in the European single market primarily addresses product characteristics and therefore also the use of raw materials, production processes and reporting and declaration obligations. This is accompanied by the realization that circular markets require an empirical understanding of circular performance throughout the entire life cycle, recyclability and the measurability of shares of Circular Economy Raw Materials, accounting of effects on climate protection, digital architecture and data transfer for digital product passports and the reporting of key figures on the circular performance of companies.
In order to shape these market-determining parameters, the European framework legislation provides for the creation of a large number of delegated and implementing acts. In addition, standardization mandates at EU level are to be used for standardization. In view of their great importance for the success of circular value creation, scarce human resources and the required technical expertise, managing these tasks appears challenging but essential. The involvement of the affected stakeholders in
the design of market conditions for circular production, products and services via transparent and lean processes will determine whether the EU's goals associated with the transformation to a Circular Economy can be achieved. Legislation as well as standardization must be interlinked in such a way that legal certainty is created for companies and at the same time sufficient space is guaranteed for the creation and design of new and internationally compatible markets.
Imprint
Federation of German Industries (BDI)
Breite Straße 29, 10178 Berlin www.bdi.eu
T: +49 30 2028-0
Lobby registration number: R000534
Editorial team
Dr. Claas Oehlmann
Managing Director BDI Circular Economy Initiative
T: +49 30 2028-1606 c.oehlmann@ice.bdi.eu
BDI document number D2048