CESD #2. From Global Value Chains (GVC) to a Global Circular Economy: Mapping the Journey

The second dialogue stream analyzed mechanisms embedding circularity in Global Value Chains (GVC), notably the business, policy, knowledge and finance ecosystem of GVCs, inspiring a conducive Circular Economy (CE) narrative feeding into the G/T20 process. It built on the engagement and leading role of GVCs in global trading and in the recent global economic and trade disruptions caused by the COVID-19 pandemic, as well as on multilateral policy dialogues and commitments on the circular economy. In addition to this, it focused on analyzing challenges with regard to the integration of circularity into value chains, on identifying scalable tools and approaches as well as on analyzing mechanisms scaling-up circularity and devising context-sensitive strategies for their broad implementation.

Five key messages with regards to priority actions were identified over the course of four dialogue sessions:

Governance / enabling environment

  • Develop international and multi-level regulatory frameworks, standardization schemes and multilateral collaborations; these are essential pre-conditions for the transition to a more Circular Economy.
  • Develop and agree on a globally applicable CE-related terminology and labelling; discussions must be shifted from “waste” towards “resources”.
  • Develop regulations / design pertinent trade policies; revise trade agreements ensuring that circularity spreads along all segments of the supply chain (and the processes within these segments are all transparent); ensure that firms, having a large stake at this transition, follow the CE principles.
  • Apply strong due diligence for primary raw materials and devise mechanisms to monitor supply value chain violations in the lower tiers of the supply chain. Ensure that due diligence legislation covers upstream suppliers and holds buyers / downstream producers in the Global North accountable.
  • Enhance the Extended Producer Ownership schemes; shift from “Responsibility” to “Ownership”.
  • GVCs encourage important technology transfers to developing countries and enable their participation in global trade, despite the pandemic which caused profound disruptions in supply chains, leading to the change of perspectives to more localized / regionalized / nationalized (instead of global) approaches.
  • Provide consumers with the right information to help decision-making between buying a service or a product.

Culture- and site-specific needs

  • Understand and adapt to the different local requirements, preparedness, readiness and cultural backgrounds for the CE transition between developed and developing countries to have the best-fit CE solutions successfully applied in other contexts. Well-performing solutions in the Global North may not be applicable in the developing world.
  • Direct adoption of Circular Economy practices by the Global South may require additional effort since certain value chains are based on the informal sectors and the lack of infrastructure, know-how or technology may hinder the transition.
  • Understand and assess the environmental leakages (and / or externalities) that could further support the need for a faster transition.
  • Consider the social dimension and the risks that informal and unregulated sharing economy practices might bring e.g., unfair remuneration and treatment of community groups.
  • Ensure transparency in GVCs, fair pricing, proportionate distribution of the costs and social acceptance between countries / regions and for all community members which are all critical factors for well-performing sharing economy models.

Education, knowledge-sharing and skills

  • Promote the exchange of knowledge to all relevant and affected (by the transition) stakeholders (i.e., multistakeholder approaches for settings standards, educating consumers). Need for structural changes in education, communication, etc. Invest in building the trust between all parts interacting in the sharing economy.
  • Invest in building (labor) skills, in sharing knowledge and know-how in modernizing infrastructure and in developing the basis for technology uptake.
  • Actors in GVC networks can more easily ensure that suppliers and consumers follow CE principles, despite that GVCs have led to more complex production systems.

Financing

  • Provide the right mix of incentives and taxes for the CE transition and collaborations. Ensure a bold and swift response from the governments i.e., through regulations, laws, incentives.
  • Ensure governmental / municipal investments in infrastructure and services to engage with the consumers, making them part of the circular economy system.
  • Stabilize and decouple the profitability of recycling / second life of certain products from raw materials; currently, this factor depends on the market price and the outlook / future price of raw materials; profitability of recycling is strongly influenced by taxes and price policies.

Digital transformation

  • Make use of the digital transformation momentum that can speed up the circular transition.
  • Globalize the EU’s Digital Product Passport.

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