The European Union is gearing up for a momentous year in its journey towards a circular economy. In 2025, several long-awaited regulations will bear their first fruit, marking a major shift in the existing regulatory framework. While some will deliver immediate results, others will shape the playing field in the years ahead.
And it is just about time.
According to the Circularity Gap Report 2024, the global circularity rate has dropped to an all-time low of 7.2%. One major contributor to this decline is outdated legislation that continues to support the linear economy.
But there’s hope. By reimagining these regulatory frameworks, the European Union can foster an economic landscape for circular business models to flourish. Tried and tested in the EU, these initiatives can serve as blueprints for other regions, creating a truly global impact.
Here are three circular economy regulations set to redefine the business landscape in 2025—and why they matter.
1. The EU Circular Economy Act
This year, one of the top priorities of Jessika Roswall, the EU’s new Commissioner for Environment, Water Resilience and a Competitive Circular Economy, will be the development of a new Circular Economy Act.
The EU Circular Economy Act will aim to promote recycling, reduce waste and improve resource efficiency—building upon the EU’s earlier efforts, such as the 2020 Circular Economy Action Plan. European Commission President Ursula von der Leyen has emphasised the importance of creating market demand for secondary materials and establishing a single market for waste, especially for critical raw materials like copper and lithium. The act will also work to harmonise and streamline circular economy policies across Member States, allowing circular innovations to reach beyond the confines of their home countries.
Although specific details about the Circular Economy Act remain scarce, more information will become available in 2025. As the new legislation takes shape, this marks a crucial moment for businesses to act. Companies that adapt now will stay ahead of the curve—complying with future regulations while gaining a competitive edge.
Key steps include increasing the use of secondary materials in production, exploring circular business models like Product-as-a-Service (PaaS), and preparing for potential Extended Producer Responsibility (EPR) schemes. These proactive measures can position businesses to thrive in a more circular and sustainable economy.
2. The Ecodesign for Sustainable Products Regulation (ESPR)
In 2025, the Ecodesign for Sustainable Products Regulation (ESPR) will take centre stage as a key initiative in the EU’s sustainability agenda. This ambitious regulation aims to set standards for the environmental performance of products throughout their entire life cycle—from design to disposal.
Formally adopted in 2024, the ESPR will receive its first major update in 2025 with the introduction of the first Working Plan. This plan will provide a list of products subject to ecodesign requirements. These will likely include metals, textiles, furniture, tyres, detergents, paints, solar panels, smartphones and other electronics.
A key component of the ESPR is the Digital Product Passport (DPP), a tool designed to enhance product transparency. DPPs provide detailed information about products, including the materials they are made from and the associated environmental impacts across the entire supply chain. Initially applied to products listed in the first Working Plan, DPPs will eventually be extended to other product categories, expanding their impact over time. For businesses, DPPs will improve circularity by facilitating repair and resale services. Meanwhile, consumers will gain the insights necessary to make informed decisions about products that land in their shopping carts.
As a framework regulation, the ESPR will continue to evolve until 2030, gradually encompassing more products under its eco-design rules. Companies that adapt early—by preparing for DPP requirements and aligning with circular practices—will be well-positioned to thrive in this new era of sustainable production.
3. The Corporate Sustainability Reporting Directive (CSRD)
The Corporate Sustainability Reporting Directive (CSRD) will be a pivotal initiative in 2025. This directive mandates businesses to identify circular economy-related risks and opportunities, develop strategies, establish performance metrics, and implement data collection systems to track performance.
This year, approximately 11,000 large companies will report on their circular economy performance for the first time, based on data collected in 2024. Additionally, the CSRD’s reporting requirement will be expanded to include other large companies that meet specific criteria, which must start collecting data for reporting the following year.
Small and medium-sized enterprises (SMEs) might not face reporting obligations until 2027, but they shouldn’t take this as an excuse to relax. Setting up the necessary data-collection infrastructure takes time. For SMEs, 2025 offers the perfect opportunity to examine their supply chains and pinpoint data gaps, thus future-proofing their operations.
While the CSRD focuses on transparency rather than mandating action, it’s a crucial first step towards ‘greening’ corporate practices. By gathering and sharing information on their circular economy performance, companies can identify areas for improvement, enhance resource efficiency, and build trust among increasingly environmentally conscious consumers and investors.
Other key initiatives to watch in 2025
In addition to these major legislative efforts, 2025 will see a wide range of smaller yet equally important circular economy and sustainability initiatives on the agendas of European policymakers. These initiatives are set to address critical issues such as greenwashing, packaging waste, and resource efficiency.
Here are three more initiatives to keep an eye on:
While these new policies can accelerate Europe’s green transition, their success hinges on participation from businesses and consumers alike. European policymakers may set the rules, but achieving true impact requires collective action.
As these initiatives continue to take shape in the coming year, businesses that proactively tackle the new rules will not only ensure compliance but position themselves as leaders in circularity. In Europe’s transition to a circular economy, the goal is clear—and together, we can win the game.
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