Institutional Arrangements for the Circular Economy

The systemic nature of the circular economy model necessitates the establishment of lasting and sustainable linkages among the actors and stakeholders involved. A successful circular economy requires a high degree of interconnections between the various policy measures targeting circularity. Therefore, the transition to the circular economy requires a deep, systemic change in the way both public and private institutions and entities operate.

The crux of this change – and one of the ultimate goals of the transition – is the achievement of sustained collaboration between the actors and stakeholders along value chains, and between the actors and stakeholders influencing sustainable production and consumption patterns (SDG 12).

On the one hand, this requires strengthening linkages among the stakeholders; on the other hand, it necessitates implementing appropriate incentives to motivate stakeholders to collaborate. A truly circular economic model requires a constant flow and exchange of information and expertise between businesses, public authorities and other relevant stakeholders committed to the principles of the circular economy.

A successful transition to a circular economy requires collaborative links at three levels:

• Collaboration across policy areas: the circular economy benefits from the involvement of multiple areas of policy, including but not limited to environment and economics ministries.
• Collaboration across policy layers: national, regional and municipal governments all are key to the implementation of a circular economy. Given the global nature of supply chains, international collaboration is essential, e.g. for sharing information along value chains and for facilitating peer learning and capacity-building.
• Collaboration across stakeholder groups: the transition to a circular economy requires participation from all parts of society. Knowledge and experience can be leveraged from numerous businesses, research institutes, and non-profit organizations, as well as civil society groups.

Governments have an important role to play in strengthening institutional linkages and collaboration towards a circular economy through various policy interventions and actions.

• A high-level government commitment to the principles of the circular economy (at the level of key ministers) sends strong signals to all stakeholders and can motivate them to engage in collaborative relations.
• A standing inter-agency council or board tasked with coordinating circular economy policy development and implementation, can help instrumentalize such a commitment. Leading representatives of the business community may also be invited to take part in the work of this committee.
• At the regional and municipal levels, top officials of lower-level public bodies can take the lead in motivating stakeholder collaboration and supporting circularity. 9 Circular STEP Accelerating the Transition Towards a Circular Economy in the UNECE Region: Institutional Arrangements

There are many examples of institutional mechanisms that facilitate stakeholder collaboration.

• Circular economy roundtables or working groups can be set up across governments or government departments, and also involve business sector representatives as well as other relevant stakeholders.
• Stable stakeholder networks across value chains can help improve communication along value chains, strengthening linkages across the circular ecosystem (e.g. in light of circular material flows).
• Engagement between actors, stakeholders and the public at large can help boost awareness across society of the benefits of the circular economy, further supporting the transition.

Institutional arrangements that foster stakeholder collaboration among public bodies, businesses, academia and civil society are needed across the different phases of policy formulation, implementation, and subsequent measuring.

• Collaboration is essential for the formulation of circular economy roadmaps, action plans and policies. For example, collaboration in policymaking can help better align the requirements stemming from legislation with their impact on circularity, and in so doing, it can help ensure buy-in for subsequent implementation.
• Collaboration can also support the implementation of circular initiatives, supported by the government’s convening power and instigation of collaboration among stakeholders.
• Finally, institutional arrangements are needed need to maximize the benefits of monitoring and evaluation. Setting specific, measurable, assignable, realistic and time-related (SMART) goals is also a factor enabling collaboration among actors as it provides them with a shared direction and understanding.

The policies and actions targeting institutional change are closely intertwined with other sector-specific, as well as cross-sectoral policies for promoting the circular economy. These include, among others, finance and investment; industry and trade; energy; agriculture and food systems; public health; social affairs and employment; education, science and technology; and finally, digitalization.

What is essential for all forms of institutional change to take place and be sustained is that the public sector leads by example in demonstrating its strong commitment to the transition to circular economy. Furthermore, governments should put in place guarantees that this is a lasting commitment and that there will be policy continuity across political cycles. This is a sine qua non condition for the business sector to take the needed long-term decisions and engage in long-term collaborative relations.

As different countries are at different stages of the circular economy transition, there is ample space for peer-learning and experience sharing. This is, among others, one of the objectives of Circular STEP.