The regulatory push toward a circular economy: How policy is forcing change
The shift to a circular economy is becoming unavoidable as regulation tightens. What was once voluntary innovation is turning into mandatory compliance, with new rules reshaping how products are designed, made, and managed at end of life. Businesses that treat regulatory pressure as a catalyst for transformation, rather than a burden, can reduce risk, unlock innovation, and gain a lasting competitive edge.
Circularity will be the status quo by 2035. But how will we get there?
The transition will be driven by a combination of regulations and market forces. We call this the Push and Pull of circular transformation. In this article, we’ll discuss the Push.
> READ PART 2: The market pull toward a circular economy: Why demand is rising
Regulation will compel invention
Up until now, circular economy innovation has largely been a voluntary exploit. Incentives to act have ranged from market disruption, cost reduction through resource or waste management, new revenue streams or pressure from customers and stakeholders.
However, the days of opt-in circularity look numbered. Regulations are rapidly evolving from a fuzzy indicator of what lies ahead into hard-edged guidelines with clear and present implications.
Broad-brush parameters are being replaced with mandatory actions that will directly change the way that products are designed, manufactured, sold and disposed of. Companies that ignore or pay lip service to these new regulations can expect financial penalties and reputational damage.
A wave of circular regulation is coming to shore. How can business leaders surf these new guidelines to achieve innovation and growth, when burying their heads in the sand dunes is no longer an option?
Fair warning: what to expect in 2026 and beyond
Note: Dates are accurate as of January 2026
1. Visibility and transparency with the EU Corporate Sustainability Reporting Directive (CSRD)
Timeline: Large EU companies under the Non-Financial Reporting Directive (NFRD) began reporting in 2025. All other large EU companies must report in 2028, while listed SMEs and large non-EU companies join in 2029.
The aim of the CSRD is to turn circularity from a ‘nice to have’ into a core strategic and financial imperative. The directive will make it compulsory for companies to publish detailed, audited reporting on resource use. Importantly, this insight can be scrutinised by investors and customers, as well as regulators. Companies will need to disclose policies, impacts, targets and performance related to designing, manufacturing, taking products to market and recycling.
Where’s the incentive?
The requirement for detailed metrics on circular performance provides leaders with actionable data to manage costs, risks and revenue – shining a light on the business value of circularity. Companies that build robust circular data capabilities early can shape narratives, improve decision-making, and differentiate themselves before reporting becomes table stakes.
2. Practical measures with the EU Circular Economy Act (CEA)
Timeline: Adoption anticipated for late 2026.
The CEA is designed to make it easier for companies to drive circularity by greasing the wheels of demand and supply. The act will establish a single market for secondary raw materials, make recycled content more commercially attractive and codify rules for waste and by-products, especially in sectors such as packaging, electronics and chemicals.
Rather than add red tape, the act specifically sets out to remove barriers to free movement of recycled materials and harmonise procedures to encourage recycling and reuse.
Where’s the incentive?
Product design will increasingly determine compliance and competitiveness. Forward-looking companies can redesign offerings and business models – such as product-as-a-service – before constraints harden.
3. Financial impact with Enhanced Packaging and Plastic Waste Regulations
Timeline: Enforcement started in 2025, with stricter measures scheduled between 2026 and 2030.
Regulations such as the EU's Packaging and Packaging Waste Regulation (PPWR) and the UK's pEPR (packaging Extended Producer Responsibility) will shift financial responsibility to producers for packaging waste by levying fees to cover the full cost of household packaging waste collection, sorting and recycling. The aim is to mandate higher recycled content and enforce recyclability by 2030. The standards will introduce strict labelling to signpost material composition and the correct disposal method – making it easier for consumers to sort their household waste.
Where’s the incentive?
The regulations will increase pressure on packaging costs, materials and supply chains. For forward-minded producers, packaging innovation will become a lever for cost reduction, brand differentiation and circular value capture.
4. National coordination with the UK Circular Economy Strategy
Timeline: Scheduled to arrive in 2026.
The new strategy aims to replace the UK’s ‘throwaway society’ with a more coordinated national approach to circularity, spanning waste reduction, materials efficiency and resource resilience. The government also hopes that transitioning to a circular economy will generate new employment opportunities, enhance supply-chain resilience and reduce dependence on imported materials.
Where’s the incentive?
Alignment between UK and EU regulation will increasingly affect cross-border operations. Businesses operating in the UK can pilot circular models that scale across markets.
5. Harnessing data with Digital Product Passports (DPP)
Timeline: Starting with batteries, textiles and construction in 2027, additional product categories will be phased in by 2030.
Digital Product Passports will require standardised, accessible data on product composition, sourcing and lifecycle impacts in the EU. Each passport will share valuable details such as materials, origin, repair history and recyclability, incentivising improved design for longer life, efficient reuse and better-informed consumer choices. Information will help the market to track value and close loops from sourcing to end-of-life.
Where’s the incentive?
Data infrastructure becomes a prerequisite for market access. Companies that master product data can unlock new services, secondary markets and platform-based models.
Time to get out ahead of compliance
Regulators have set out the direction of travel for the circular economy. While timelines vary, it feels certain that all businesses – and especially those that operate in or with Europe – will need to advance their circular capabilities by the end of 2027 at the latest.
That leaves a critical window to get up to speed and then start developing business models that will be compliant, commercial and strategically competitive.
The organisations that succeed will be those that:
- Treat regulation as a market signal, not a burden
- Invest early in capabilities, data and pilots
- Use compliance as a foundation for circular innovation and growth
Seize the day - or concede ground
Organisations that delay on circularity will be forced into reactive responses under increasing time and cost pressure. They will watch their proactive competitors translate proactive compliance into sustained competitive advantage.
Regulatory momentum is accelerating, but so too is the opportunity it creates. Circular economy regulation is changing the market rules, creating new sources of value and revenue, and disproportionately rewarding those early movers who are bold enough to act with foresight.
The question for leaders is not whether circular regulations are coming. It’s whether they’ll be ready to use them to their advantage when they arrive.
