Germany's circular economy action programme is lacking ambition – industry association

Germany's industry has criticised a new government action programme to implement the national circular economy strategy for lacking ambition and failing to create more incentives for change. According to industry association BDI, more speed and reliability are required to implement circular business models at scale.

“The key priority now is to firmly establish the circular economy as an industrial policy project,” said Holger Lösch, deputy chief executive of BDI. “Industry needs better investment conditions, greater support for innovation, and the rapid development of functioning markets for circular raw materials,” Lösch said. 

The action programme, which the government adopted on 3 June, is designed to accelerate the development of a circular economy in Germany, in which more products and the materials used to build them are processed to be fed into the economic cycle again. Key elements include a funding programme, a commitment to digitalisation initiatives to improve efficiency, as well as a strategy to bolster public procurement by having publicly owned companies increase their volume of contracts for recycled products every year. 260 million euros from Germany’s Climate and Transformation Fund have been earmarked for the strategy by 2029.

A more circular economy is helping the environment but also strengthens the economy, said environment minister Carsten Schneider. “Germany is a country with few natural resources of its own. That is why we should reuse and recycle raw materials.”

Technical inspection provider TÜV said the action programme marks an important step towards making Germany's economy more circular. However, the association also emphasised that the public procurement strategy could have been stronger, with additional impetus for procurement at the federal level and the enforcement of preferential treatment for the acquisition of secondary raw materials.

Environmental NGO WWF said the programme needs further development to reach the strategy's targets. WWF recommended improvements regarding binding targets for the reduction of primary raw material production and the mandatory implementation of circular public procurement. Other environmental groups had criticised the government's public procurement law when it was adopted in April, arguing that it fails to use an opportunity to harness the immense spending power of public institutions to make basic industries more climate-friendly.

The previous government agreed a circular economy strategy already in late 2024, including overarching 2030 and 2045 targets for lowering primary raw material use, increasing the uptake of secondary raw materials, reducing raw material import dependencies, and cutting waste. Circular economy concepts have increasingly come into focus as a necessary corollary of Germany’s energy transition to increase supply security, reduce costs, and make processes in the economy truly sustainable.

The BDI also published a 170-page report last month underlining the importance of a circular economy approach for Europe’s largest economy, saying the sector is “a strategic driver of growth for Germany as an industrial hub.”

Gross value added from the circular economy could increase more than two-fold by 2045 within existing industrial and value-chain structures, from currently 60 billion euros to as much as 125 billion euros, according to the report. BDI said it estimates that the total additional value added could add up to as much as 880 billion euros by 2045. The report also found that the approach would reduce greenhouse gas emissions by a further 11 million tonnes and cut the cumulative cost of the energy transition by almost 40 billion euros by 2045.

Economic research institute IW said a survey had shown that companies with a clear circularity strategy on average performed better than those without one. Hurdles to improving circularity rates include the traceability of materials used in different product categories and a standardised database that allows the formation of a functioning market for second-hand use, IW added. 

A survey among German companies commissioned by consultancy firm Deloitte showed that about 61 percent of companies said they perceived geopolitical risks as having a "strong" or "very strong" impact on their own value chain. Almost half of the respondents said it is a key or complementary strategic opportunity to increase the resilience of their value chain. For this, companies said they saw the greatest benefits in recycling models, a more regionally focused value chain, and the increased use of secondary raw materials.