Despite a welcome and significant rise in sustainability awareness and activity from consumers, progress on circularity, which requires a fundamental shift in thinking from waste management to resource management, remains slow. To truly embrace a circular economy, we need to transition from a linear take-make-waste model into a circular model where all material outflows become new material inflows.
The challenge is that we can’t simply recycle our way out of this crisis. Globally, we produce over 2 billion tonnes of solid waste annually, enough to fill 1,933 Olympic-sized swimming pools every single day. Only 19 per cent of this is recycled and looped back into manufacturing processes, with most of this recycling being secondary recycling (downcycling).
Put simply, not enough products are being designed for circularity, and consumers are the ones paying the price.
The recently introduced EU Regulation 2025/40 on Paper and Packaging Waste (PPWR) outlines measures to shift producer mentality and inspire innovation in packaging minimisation and sustainable design. In Ireland, compliance is facilitated through sector-specific extended producer responsibility (EPR) schemes, allowing producers to partner with organisations that meet recycling targets on their behalf, charging a proportional fee for recovery and administration. This EPR scheme applies to various sectors and product types across the EU, including waste electrical and electronic equipment and single-use plastics, with member states having the autonomy to identify problematic products and scale regulations accordingly.
While the EPR system has been successful in achieving sector-specific and product-specific outcomes, it has raised several barriers to driving circularity and encouraging a shift to a circular model.
Firms need to see circularity as an opportunity for transformation and revenue growth
Historically, many organisations have viewed waste regulations as compliance liabilities rather than opportunities to cut costs and generate profit, like the treatment of plastic bag levies, which charge a flat fee based on tonnage without encouraging waste reduction. While organisations have improved data quality on waste tonnages, they remain disconnected from actual collection and recycling efforts, leading to the loss of valuable resources that could be reintegrated into manufacturing to lower new material costs. This disconnect has resulted in missed cost-saving opportunities.
Secondly, where organisations are incurring significant liabilities related to packaging waste, producers have been driven to share these costs between a decrease in margin and increased costs for consumers through mechanisms such as deposit return schemes. As a result, it has not yet driven the culture shift that regulators were hoping for, where an opportunity to save on your EPR liabilities and waste management costs would in turn self-fund research and development into more sustainable product material inputs.
Our recent Future Consumer Index research, involving over 22,000 consumers globally, including 500 in Ireland, reveals that while sustainability is important, nearly 72 per cent of respondents want healthier, sustainable products to be more affordable. Additionally, 83 per cent believe brands should take responsibility for making their products more sustainable without passing on extra costs to consumers. By failing to invest in sustainable products and packaging, many producers risk eroding their competitive advantage.
Lastly, regulations have unintentionally driven siloed approaches to product development. While sector-specific waste reduction targets have created economies of scale and pooled resources for recovery, the siloed approach has hindered cross-sector collaboration, preventing the reuse of waste products as material inputs in other processes. For instance, construction waste can be repurposed as aggregate for new roads and fly ash from coal combustion can partially replace cement in concrete.
Businesses must shift from a compliance-driven mindset to one that sees circularity as an opportunity for transformation and revenue growth. This involves designing for circularity, adopting a systems thinking approach and collaborating with policymakers to align economics.
To succeed, businesses should be proactive and consider these three approaches.
Firstly, designing for circularity enables organisations to improve resource efficiency and cut costs by minimising waste and raw material use. It enhances brand reputation and customer loyalty by showcasing a commitment to sustainability, while ensuring regulatory compliance and avoiding penalties. Additionally, by promoting repairability through eco-modulation, organisations can generate revenue by selling spare components to consumers unable to afford full replacements.
Secondly, systems thinking enables organisations to manage complexity, navigate uncertainty, balance trade-offs, and avoid biases that hinder targeted strategy development. It fosters cross-sector collaboration on waste minimisation by identifying overlaps in material outputs and inputs, creating new revenue opportunities through product line development and selling material outputs to organisations in need of them as inputs.
Finally, it’s essential to align economics with a compelling business case for change. Finance is the backbone of the economy, influencing production and procurement decisions. The flow of financial resources, managed by key institutions, determines which ideas are funded and supported. By linking EPR liabilities to product recyclability rather than just material waste, organisations can justify investments in R&D for material alternatives that lower financial liabilities.
While circularity poses challenges, organisations that view it as a differentiator can future-proof themselves through new revenue streams, reduced waste management costs, improved logistics via efficient packaging, and diversified product offerings.
Derarca Dennis is a partner and Sustainability Services Lead at EY Ireland and Ryan Barrett is a manager in Climate Change and Sustainability Services at EY Ireland