Report

The Circular Economy Act (CEA) is one of the most eagerly awaited pieces of legislation of the 2024-2029 European mandate. Led by the European Commission, it aims to make the Union a global leader in the circular economy: securing supplies of secondary raw materials, reducing dependence on imported virgin resources and strengthening industrial competitiveness in a context of growing geopolitical tension.

Circul'R welcomes the ambition. But between the current text and genuinely transformative circularity, several essential pillars are still missing. Here is our analysis and our recommendations, drawn from the field and from a consultation with 33 member companies of the Circul'R Club.

What is the Circular Economy Act?

The Circular Economy Act is a regulatory initiative of the European Commission aimed at building a European single market for secondary raw materials. In practice, it means creating the conditions for recycled, reused or remanufactured materials to circulate freely and efficiently within the Union, much as the single market has done for goods and services.

The text sits within a broader regulatory ecosystem: the ESPR ecodesign regulation (2024), the CSRD sustainability reporting directive (2024), the PPWR packaging regulation (2025) and the Critical Raw Materials Act (2024). The CEA is meant to provide the circular backbone that gives this whole set coherence.

Circul'R is directly involved in this European workstream: since late 2025 we have joined the coordination group of the European Circular Economy Stakeholder Platform (ECESP), alongside 23 other expert organisations, with direct access to the European institutions in order to shape the design of the Circular Economy Act and the Clean Industrial Deal.

What the Circular Economy Act gets right

The CEA pushes in the right direction on several counts: building a secondary materials market, strengthening traceability, incentivising recycling. At a time when 95% of industrial leaders consider circularity strategic for their organisation (World Economic Forum/Bain, 2025), a clear regulatory framework is something companies are strongly asking for.

On substance, economic actors are aligned: 97% of the companies consulted by Circul'R believe regulation should play an important or very important role in promoting circular business models. The signal is unambiguous.

The blind spots in the current text

1. Recycling is not enough: circular business models are missing

The current text focuses almost exclusively on recycling. Yet circular business models - repair, reuse, rental, product-as-a-service - are the real engines for reducing resource use and creating sustainable local jobs. Explicit support for them is essential to balance the European strategy.

What we observe in the field: companies that shift towards service or reuse models cut their material footprint by 30 to 60% depending on the value chain, far beyond what improving recycling rates alone would allow.

2. The circular material use rate: an insufficient indicator

The CEA's central indicator - the circular material use rate, or recycled material use rate - is useful but incomplete. It measures the share of recycled materials in the economy, but says nothing about:

• total resource consumption (a country can recycle better and consume more).
• the impacts generated outside the EU, where most raw materials are extracted.

This partial view risks producing circularity in name only, with no real reduction in the planetary footprint.

Circul'R's 3 recommendations

Recommendation 1: Explicitly support circular business models

Repair, reuse, rental and product-as-a-service models must be treated as levers in their own right and not as positive side effects of recycling. This means:

• Differentiated taxation: reduced VAT on repair services and refurbished products, extended depreciation for equipment dedicated to remanufacturing.
• Investment support (CAPEX aid, R&D) targeted at the shift towards these models.
• Financing for circular infrastructure: sorting platforms, refurbishment workshops, remanufacturing capacity.
• Transparency standards: repairability indices harmonised at European level, mandatory labelling.
• Awareness campaigns to lift the cultural barriers to second life (the idea that "refurbished = lower quality" remains a real commercial obstacle).

Recommendation 2: Set a European target for reducing the material footprint

This is the most structuring measure missing from the CEA. A binding material footprint reduction target would make it possible to:

• Make sufficiency at source the first lever, ahead of recycling.
• Make the framework consistent with real impacts, including those generated outside the EU.
• Complement the circular material use rate by capturing the gains from reuse, repair and ecodesign.
• Base decisions on reliable, comparable life cycle assessments (LCAs), thereby limiting unverifiable circularity claims.
• Stimulate industrial innovation by giving a clear direction to companies investing in new models.

A key figure to remember: according to the Ellen MacArthur Foundation, applying the circular economy to the four main industrial materials (cement, steel, plastic, aluminium) could cut the GHG emissions associated with their manufacture by 40%, affecting close to half of global industrial emissions.

84% of the companies consulted by Circul'R consider it relevant or highly relevant to adopt such a target at European level.

Recommendation 3: Put in place a genuinely incentivising fiscal and regulatory framework

The current imbalance is structural: a new product made from virgin materials often remains cheaper to produce than a circular one. As long as that gap is not corrected, circularity will remain a virtuous but uncompetitive choice. The CEA should help to:

• Tax the negative externalities of the linear model and ease the tax burden on circular solutions.
• Set common European standards for the repairability, disassembly and durability of products, without which the single market remains fragmented.
• Introduce binding circularity targets with digital traceability mechanisms (product passport).
• Make public procurement exemplary: circular purchasing quotas, preference for second-life products in public tenders.
• Train companies in circular models, since skills remain the weak link in many value chains.

What Circul'R is already doing in the field

These recommendations are not theoretical. Circul'R is testing them with companies, notably through:

• The Circular Industry Coalition, run in partnership with CEA-ISEC and supported by the DGE (French Ministry for the Economy and Finance), which is working to secure access to critical secondary materials (aluminium, copper, rare earths) and to build competitive French industrial recycling value chains.
• The Circular Finance Coalition, which brings together France's leading banks around financing the transition: it demonstrates that a dedicated financing framework can make circular investments profitable where they previously were not.

These initiatives show that combining regulation, innovation and cross-sector cooperation is the only viable path to circularity at industrial scale.

In summary: what the Circular Economy Act must include

The Circular Economy Act can become a founding text for European industrial sovereignty, provided it follows the circular logic through to the end:

1. Recognise circular business models as pillars of the transition, and not as a niche option.
2. Set a material footprint reduction target, to steer sufficiency at source.
3. Put in place a fiscal, regulatory and financial framework that makes circularity competitive against the linear model.

Economic actors are ready: 97% of them are calling on regulation to play a major role. It is now for the European institutions to answer that mandate.

Circul'R stands ready to support the Commission and European stakeholders in shaping a Circular Economy Act that matches the scale of the challenge.