DRAFT AIM BRIEFING/DISCUSSION PAPERCIRCULAR ECONOMY

1. BackgroundIn July 2014 the EU Commission adopted a communication in an ambitious drive towards a fundamental transition from a linear to a more circular economy. Instead of extracting raw materials, using them once and throwing them away, the new vision is for a different economic model: keeping materials in productive use for longer. The Communication outlines how new growth and job opportunities could emerge from a more efficient use of resources. Greater efficiency will be driven by innovative design, better performing and more durable products and production processes, forward-looking business models and technical advances to turn waste into a resource. The Communication is underpinned by a review of relevant waste legislation (waste framework directive, landfill directive, packaging and packaging waste directive). Complementary communications have been adopted on: A Green Employment Initiative, A Green Action Plan for SMEs and Resource Efficiency Opportunities in the Building SectorThe waste legislation review seeks, among other things to:

increase recycling/re-use of municipal waste, and ambitious targets per material for packaging waste,

phase-out landfilling by 2025 for recyclables, reduce food waste generation by 30% by 2025, increase cost-effectiveness of Extended Producer Responsibility schemes by defining minimum

conditions, harmonise and streamline calculation of the targets and improved reliability of key statistics, improve overall coherence by aligning definitions and removing obsolete legal requirements.

2. Relevance for the branded goods industryBranded good manufacturers are supportive of the concept of a circular economy; it makes both environmental and economic sense to manage scarce resources carefully and to re-inject them into the economy rather than letting them go to waste. AIM member companies are taking their responsibility seriously to make progress towards the goals outlined in the draft communication, from responsible raw material sourcing, efficient production processes, more sustainable product design, inspiring more sustainable consumer behaviour and contributing to efficient waste management. The Commission is to be commended for attempting to set an overall coherent framework for all the different policy strands of a circular economy.

Given the impact of the concept of a circular economy on various areas of activity in the branded goods industry, it is important for AIM to have a more detailed position on the overall concept and the related legislative proposals and initiatives.

3. Areas of relevance and contribution of branded goods industry

3.1 Design and innovation for a circular economyAccording to the EU Commission, “circular economy approaches design out waste and typically involve innovation throughout the value chain, rather than relying solely on solutions at the end of life of a product.”[…] “An important starting point is the design of production, processes, products and services”.

The Communication mentions a list of potential actions, such as light weighting, durability, energy/material use reduction (efficiency), substitution, creation of secondary raw material markets, green public procurement, eco-design, incentives for waste separation/collection, lending/sharing as an alternative to owning products. The Commission will focus on research and innovation for the circular economy under Horizon 2020. It also aims for a more coherent product policy with resource efficiency criteria.

AIM contribution:Research and innovation lie at the heart of the branded goods industry. Constant innovation to anticipate and respond to consumer and societal trends is what keeps a brand relevant. Branded goods manufacturers have long invested in resource-efficient production processes and products, and are continuing to do so in light of scientific evidence and evolving consumer demand and policy frameworks. All of the activity areas outlined by the Commission are recognised by AIM members as relevant contributions to the circular economy, on the proviso that they continue to encourage innovation to adapt branded consumer goods to constantly changing societal needs, and that they refrain from setting unjustified barriers for production/products – which, if not mirrored globally – can lead to serious disadvantages for European industry’s competitiveness due to higher costs caused by disproportionately demanding standards. AIM supports high standards for resource efficiency, reflecting life-cycle knowledge and scientific evidence, but would advocate a gradual approach to introducing them to make sure European industry is not at a disadvantage in the global market.

3.2 Unlocking investment in circular economy solutionsTo encourage investment in circular economy innovation and its take-up, the Communication advocates transparency on environmental and societal impacts of companies to help investors take the appropriate decisions. The recently adopted directive on non-financial reporting is listed as an example. Reference is also made to environmental tax reform in EU Member States, resource stress tests for companies and green public procurement, as well as funding for circular economy projects.

AIM contribution:AIM members agree that transparency of companies’ impact on the environment and society, as part of their Corporate Social Responsibility, helps companies and investors make the right choices. The vast majority of AIM’s corporate members are already reporting to GRI or similar standards, and this is becoming the norm in the branded goods industry. In this context it is important to take into account the capacity of SMEs to cope with transparency requirements; the threshold set by the Commission for non-financial reporting is welcomed by AIM as it exempts smaller businesses from these obligations.

3.3 Harnessing action by business and consumers and supporting SMEsThe Communication states that “business and consumers remain the key actors in the transition to a more circular economy”, and “consumers should be empowered to make informed choices through better information on green credentials of different products”.It lists a number of initiatives which could be scaled up, such as sustainable sourcing standards, environmental foot-printing, product information to consumers, green claims, etc.

AIM contribution:Branded goods manufacturers are actively engaged in initiatives on the topics referred to by the Commission. AIM-PROGRESS, our global responsible sourcing programme, seeks to converge and elevate sourcing requirements from the branded goods industry, reduce conflicting demands on our common supplier base and deliver continuous improvement throughout the supply chain (www.aim-progress.com). AIM member companies are also actively engaged, directly or via their sector associations, in the EU pilots to deliver a common methodology for environmental foot-printing of products/organisations. AIM is supportive of an EU-wide approach to harmonise methodologies across Europe, and also internationally. One of the deliverables of the EU pilots is agreement on how to best communicate environmental information to consumers, based on commonly agreed EU principles (listed

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in the Communication for Building a Single Market for Green Products). These principles are supported by AIM and echoed in our Common principles for consumer information jointly adopted with the European Consumer Organisation BEUC, as well as in our joint project on Smarter Logos. AIM is also involved in the multi-stakeholder dialogue on environmental claims (MDEC) under the European Consumer Agenda. We are advocating a co- or self-regulatory approach, based on already existing structures at national level, but would welcome convergence of national guidelines/rules to provide business certainty. EU-wide compliance criteria for environmental claims would make sense. Whilst accurate and easy-to-understand consumer information is paramount for consumers to take an active role in promoting sustainability, there is often still a gap between consumers’ stated intentions and what they actually do. The EU Commission is currently looking at how behavioural science can be used for smart policy-making, and what are the opportunities to “nudge” consumers to change their consumption habits. The branded goods industry, because of its consumer insights and marketing expertise, can play an active role in inspiring consumers towards more sustainable and healthier lifestyles. We have set up the AIM-NUDGE initiative to foster such approaches within the industry, and to make it easy and desirable for consumers to change habits towards more sustainable ones.

3.4 Modernising waste policy and targets: waste as a resourceThe Commission has published legislative proposals to revise the Waste Framework Directive (WFD), the Landfill directive and the Packaging and Packaging Waste Directive (PPWD). The objective is to minimise landfill, increase reuse/recycling, develop markets for high-quality secondary material and align calculation methodologies for recycling.

AIM contribution:Branded goods manufacturers’ attention has been focused mainly on the waste streams relevant for their products, in particular the packaging waste stream, food waste and marine litter.

Packaging WasteAIM was actively involved in discussing the 1994 Packaging and Packaging Waste Directive, together with EUROPEN, and is now also taking an interest in the current review of this piece of legislation. AIM supports the EUROPEN [insert link to EUROPEN paper or joint PCF paper] views on the need for EU-wide harmonised requirements for Extended Producer Responsibility (EPR), the proposed new calculation methodology, national packaging design requirements and the proposal to use delegated acts to amend the PPWD objectives.

As branded goods manufacturers we are particularly concerned that an updated definition of EPR may lead to industry becoming the paymaster for the entire cost of waste management, including littering (which is outside brand manufacturers’ control); instead, allocation of financial contributions for all actors should be based on their respective roles and responsibilities. We are also worried that focusing efforts on waste prevention through encouraging Member States to set national packaging design requirements will undermine the Internal Market for packaging and packaged goods, as this will de facto create conflicting national pack design requirements (more detailed comments on this point can be found here – link to be inserted).

Food WasteAIM is supportive of FoodDrinkEurope’s food waste reduction initiative “Every crumb counts”, in which many of our members are engaged. Similarly, there are a number of joint manufacturer-retailer ECR platforms at national level in Europe, who have elaborated best practices for food waste reduction, in which AIM members are actively engaged. A food waste reduction target would send a clear signal that the topic is receiving heightened attention and galvanise additional action.

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Marine LitterAIM agrees with the EU Commission that full implementation of the EU waste legislation (current and future) would already deliver significant marine litter reductions. Marine litter is in many cases a symptom of poor waste management infrastructure and it is the responsibility of national governments to ensure implementation of relevant legislation. A dedicated reduction target would indeed set a clear signal and would be in line with the RIO+20 commitment. Brand owners’ engagement over the years has been through co-financing Extended Producer Responsibility (EPR) schemes for the collection, sorting and recovery/recycling of (packaging) waste, reaching, in some countries, outstanding results. In addition, through light-weighting of products and packaging, brand manufacturers have significantly reduced the quantities of material necessary to keep products safe and user-friendly. Consumer information campaigns on correct waste disposal and anti-littering have also contributed to waste prevention. There is no doubt that through these activities industry has managed to avoid massive amounts of waste reaching the marine environment via rivers and via unprotected landfill sites. And more is being done, such as littering prevention through public awareness campaigns to promote consumers’ sorting/collection of waste as a resource and avoid littering (e.g. on-pack, web-based); waste prevention through continued resource-efficient product/packaging design.

3.4 Resource efficiency targetThe Commission proposes a non-binding resource efficiency increase target of 30% by 2030. Under a business as usual scenario resource efficiency would already increase by 15%, so a 30% target is not considered too ambitious and would deliver the necessary signal to Member States to develop appropriate measures.

AIM contribution:AIM has not discussed this point – would brand manufacturers agree with the Commission’s proposal?

4. Summary of main message

Will be added once the main text is agreed.

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