6. Getting the governance of the circular economy right: Checklist for Action and Scoreboard

Moving towards a circular system is an opportunity for rethinking production and consumption patterns; improving environmental quality and resource efficiency; creating new business models; promoting citizens and business acceptance and awareness on the circular economy through awareness change; and boosting innovation, as identified by surveyed cities and regions (OECD, 2020[1]). All actors have a role to play in the transition towards the circular economy: policymakers can use several policy levers, ranging from strategy development to capacity building, economic incentives and regulation, amongst others. As such, the transition is not just a way to optimising the present linear system, using green and clean techniques for production. It is about changing relations across value chains and identifying synergies across sectors.

The circular economy can be implemented if proper governance conditions are in place. As such, the Checklist for Action, based on 12 key governance dimensions, provides guidance to governments to promote, facilitate and enable the circular economy. While this Checklist is devoted to cities and regions, these dimensions can be applicable at all levels of government. The 12 dimensions are grouped into three clusters corresponding to the complementary roles of cities and regions as promoters, facilitators and enablers of the circular economy (Figure 6.1; Table 6.1):

  • Promoters: Cities and regions can promote the circular economy acting as a role model, providing clear information and establishing goals and targets, in particular through: defining who does what and leading by example (roles and responsibilities); developing a circular economy strategy with clear goals and actions (strategic vision); promoting a circular economy culture and enhancing trust (awareness and transparency);

  • Facilitators: Cities and regions can facilitate connections and dialogue and provide soft and hard infrastructure for new circular businesses, in particular through: implementing effective multi-level governance (co-ordination); fostering system thinking (policy coherence); facilitating collaboration amongst public, not-for-profit actors and businesses (stakeholder engagement) and adopting a functional approach (appropriate scale).); and

  • Enablers: Cities and regions create the enabling conditions for the transition to a circular economy to happen, e.g.: identify the regulatory instruments that need to be adapted to foster the transition to the circular economy (regulation); help mobilise financial resources and allocate them efficiently (financing); adapt human and technical resources to the challenges to be met (capacity building); support business development (innovation); and generate an information system and assess results (data and assessment).

The checklist is based on an extensive literature review on the governance of the circular economy, and draws on the key framework provided by the OECD Principles on water governance and their related governance indicators and self-assessment framework (2015[2]; 2018[3]). The Checklist also includes insights from several case studies on the circular economy carried out in select cities and regions (2020[4]; 2020[5]; 2020[6]).

The Checklist for Action is accompanied by the OECD Scoreboard on the Governance of the Circular Economy, which helps governments identify the level of advancement towards the implementation of each of the 12 governance dimensions, distinguishing across: i) newcomers, when the governance condition is planned or in development; ii) in progress, when the governance condition is in place and not implemented, or in place and partly implemented; iii) advanced, when the governance condition is in place, functioning and objectives are achieved. The scoreboard can be used on a voluntary basis by interested countries, regions and cities, according to the objective of the assessment itself. As such, governments can also assess specific dimensions. The tool is not meant to benchmark countries, regions and cities .A visual representation of the Scoreboard is provided in Figure 6.2. The in depth description of the methodology is provided below in this Chapter.

In their aim to promote the circular economy, governments can act as a role model for businesses and citizens. This can be done through: i) clarifying roles and responsibilities; ii) promoting a circular economy strategic vision; and iii) raising awareness and transparency.

Clear roles and responsibilities should be established in terms of who does what in policymaking (e.g. priority setting and strategic planning) and implementation (e.g. financing and budgeting, data and information, stakeholder). Some cities, for example, have started their transition under the leadership of deputy mayors with clear roles and responsibilities in promoting and implementing a circular economy (e.g. Groningen, Paris). Others have created dedicated offices to the circular economy (Chapter 2). This can pave the way for the government to act as a role model, leading by example.

There are several ways through which a city or region can lead by example, such as: prevention of waste generation (e.g. plans to prevent waste production; reducing the use of paper or banning one-use plastics like cups in municipal events and daily activities), the promotion of the use of secondary materials and sustainable products and the introduction of circular economy principles in the construction of roads and buildings. The government can also adopt business models shifting from ownership to services (e.g. product-as-a-service model through public procurement: pay for a lighting service adapted to the municipality’s needs rather than buying light bulbs and appliances; lease a furniture service instead of buying specific furniture, etc.) and adopt green public procurement (GPP), including circular economy principles (e.g. reuse, durability, reparability, purchase of second-hand or remanufactured products).

For instance, since 2015, the city of Amsterdam, Netherlands, has been implementing the Learning by Doing Programme that aims to show with empirical examples that the circular economy is profitable in all aspects, by convening the different city departments and diverse stakeholders to define policy actions. For the celebration of the 2020 Olympic Games, the city of Tokyo, Japan, aims to rent and lease materials after the games. It is important to clearly communicate to the citizens the goals, all of the circular initiatives that are being promoted by the city or regional council and the progress made (e.g. percentage of one-use plastic saved in one year, etc.).

Developing a strategy on the circular economy would serve to build a robust vision, define priorities and allocate funds. The vision would help overcome the fragmentation of existing initiatives and go beyond political cycles. The strategy should build on: i) an analysis of stocks and flows; ii) map the existing circular economy-related initiatives; iii) clear and achievable goals, actions and expected outcomes; iv) budget and resources; v) a shared understanding and co-creation with stakeholders to build consensus and vision; vi) monitoring and evaluation framework (Figure 6.3). The strategy should also be linked with different sectoral strategies (e.g. climate change, waste, energy, etc.).

The strategy can be initiated by a specific municipal or regional department, taking the lead in performing a variety of activities, such as engaging stakeholders and co-ordinating municipal and regional departments. Examples of leading departments are available in Chapter 2.

The circular economy maximises the use of stocks (assets, capitals) comprising natural, human (work and acquired skills), cultural (material and immaterial), financial and manufactured capitals. Measuring the quality and quantity of these stocks is key. (Stahel in OECD (2020[7])). Several cities and regions carry out metabolism analyses as one of the first steps for developing a circular economy strategy. For example, the urban metabolism study in Paris aimed to assess its material flows (Circular Metabolism, 2017[8]). The analysis aims to: i) develop deeper knowledge on the material flows in the city or region; ii) identify the city’s priorities based on the analysis of consumption and production trends and material flows; iii) identify key sectors potentially able to implement circular economy principles and practices. The municipality could establish co-operation ties with the university to carry out the analysis, which should be regularly updated. The scale at which the analysis could be carried out could overcome the city’s administrative boundaries and cover the metropolitan area and region for example.

Mapping existing circular initiatives would help identify circular sectors, learn from existing experiences and explore potential cross-sector synergies and their common features. In general, it is possible to identify key sectors (e.g. built environment, tourism, food, etc.) that could generate relevant economic, environmental and social impacts; and establish priorities and possible partners, as well as activities that can be relevant in shifting from a linear to a circular system (e.g. eco-design, services rather than ownership). Mapping can be carried out through an online platform to upload initiatives and register projects in the field of the circular economy. It could take the form of an open-source database. It can be also carried out through offline platforms, gathering inputs from stakeholders through regular meetings, surveys, interviews and public consultations. A communication campaign to reach out to all stakeholders will be needed. Some examples of mapping circular initiatives include the city of Austin, United States (US), that created a directory of businesses allowing customers to participate in the circular economy (Austin’s Circular Economy Story, 2020[9]). In the region of Flanders, Belgium, Circular Flanders is mapping the range of financing instruments available for the circular economy (OVAM, 2019[10]). Circular Oslo-Circular Regions applies a multi-stakeholder methodology and technology to map circular initiatives and identify environmental, economic and social impact. This methodology will be replicated within the Circular Regions Network and the data collected will be open source (Circular Oslo - Circular Regions, 2020[11]).

The strategy should define clear and achievable goals and actions. As highlighted in Chapters 1 and 2, generally speaking, the goals are related to achieving environmental, economic and social impacts. The strategy can establish specific goals by type of activity and sector.

For the actions to be implemented, it is important to consider human and financial resources. As such, the administration should ensure adequate financial resources by linking the strategic plan to multiannual budgets and mobilising private sector financing, if need be.

The circular economy is a shared responsibility across a range of stakeholders, who need to be involved from phase zero of the strategy to build consensus and vision. The implementation of the circular economy strategy is not just the responsibility of the municipality or a regional government. Innovative thinkers and motivated entrepreneurs can be consulted to start pioneering activities, for example in the agro-food and bioeconomy sectors. Architects, urbanists and representatives from the creative industry sector can help in the eco-design and the built environment, etc. (e.g. designers can help the early stage of a strategy on the circular economy, identifying appropriate materials and link the demand and how people tend to use resources). As such, cities or regions leading the circular transition should create participation spaces for stakeholders throughout the different implementation phases of the circular economy strategy, such as multi-stakeholder fora, workshops, breakfast meetings on the circular economy, etc. To engage properly stakeholders, inspiring guidance can be retrieved from the OECD Checklist on stakeholder engagement for inclusive water governance (OECD, 2015[12]):

  • Mapping all stakeholders that have a stake in the outcome or are likely to be affected, as well as their responsibility, core motivations and interactions.

  • Defining the ultimate line of decision-making, the objectives of stakeholder engagement and the expected use of inputs.

  • Using stakeholder engagement techniques, ensuring the effective representation of all stakeholders in the process.

  • Allocating proper financial and human resources and sharing needed information for result-oriented stakeholder engagement.

  • Regularly assessing the process and outcomes of stakeholder engagement to learn, adjust and improve accordingly.

  • Embedding engagement processes in clear legal and policy frameworks, organisational structures/principles and responsible authorities.

  • Customising the type and level of engagement to the needs and keep the process flexible to changing circumstances.

  • Clarifying how the inputs will be used.

Regularly monitoring the progress of the strategy’s implementation and evaluate its impacts, it is important to make improvements and communicate the results to the public. As such, several output indicators can be taken in into account, such as those indicated in Chapter 5:

  • Waste diverted from landfill (T/inhabitant/year or %).

  • CO2 emission saved (T CO2/capita or %).

  • Raw material avoided (T/inhabitant/year or %).

  • Use of recovered material (T/inhabitant/year or %).

  • Energy savings (Kgoe/ inhabitant/ year or %).

  • Water savings (ML/inhabitant/year or %).

Practices enhancing transparency and information can: remove cultural barriers in recycling and reuse of materials; promote a trustworthy environment for companies to co-operate along the value chain; increase social acceptance; and lead to more conscious choices, creating a market for circular products and services.

Promoting a circular economy culture would consist of raising awareness on the circular economy among citizens, businesses and relevant actors and encourage sustainable production and consumption practices. This can be done through targeted communication, such as:

  • Communication campaigns to show the impacts of the circular economy (compared to a linear system), how citizens and different actors can contribute to it and share success stories.

  • A dedicated website to share knowledge and good practices concerning the circular economy.

  • Events for knowledge sharing, networking and the promotion of the circular economy at the local level, as well as conferences and seminars in schools and universities.

  • Use of social media to provide quick updates and information on the topic and related events.

For example, the city of Valladolid, Spain, organises “circular weekends”, during which entrepreneurs connect with each other and join forces on circular projects (OECD, 2020[6]). The London Waste and Recycling Board (LWARB), United Kingdom (UK), has started recruiting circular economy ambassadors in different companies and local authorities to share the benefits of the circular economy for each economic sector and to raise awareness at the workplace (LWARB, 2017[13]). In North Karelia, Finland, a regional co-ordination group organises seminars in different topics related to the circular economy for raising awareness. Several cities and regions use online platforms, such as an online portal on the circular economy (Paris, France) and waste-related information in real time (waste operators in North Karelia, Finland). The city of Austin, US, created a materials marketplace to foster secondary materials exchanges; Phoenix, US, developed an online Recycle Right Wizard to provide recycling information to local residents.

Certificates, labels and awards can enhance trust and lead to more conscious production and consumption choices. Local and regional governments could consider introducing a label for local circular activities, for example related to food (e.g. restaurants), construction or other sectors. The introduction of these labels could be a means to incentivise businesses to produce, make and distribute according to circular economy principles while providing consumers with information to make conscious consumption choices. Awards can also incentivise businesses, non-governmental organisations (NGOs) and civil society to contribute to the transition to a circular economy. Criteria for labelling could be formulated following detailed studies by universities and research centres. They could include: the use of recycled materials; development of life cycle analysis; a plan for material transformation; eco-design, etc. There are several examples of labels and certificates granted when products are produced locally, with little or no packaging, reduced energy consumption, waste properly treated according to the best available options, etc. For example, the French Roadmap for the Circular Economy includes the deployment of voluntary environmental labelling in five pilot sectors (furnishing, textile, hotels, electronic products and food products). More precisely, it aims to provide higher visibility of the existing environmental labels, such as NF Environment in France (a collective certification label for producers that comply with environmental quality specifications) and the European ecolabel, as well as the development of a quality label for second-hand products (French Government, 2018[14]). The Amsterdam Made certificate was developed at the request of the Amsterdam City Council. Its main objective consists in informing consumers about products that are made in the Amsterdam area, while simultaneously seeking to boost creativity, innovation, sustainability and craftsmanship. OrganiTrust® is a worldwide certification body that issues certificates on the circular economy in the following sectors: food contact material, personal care and cosmetics, furniture, toys, textiles and fabrics, electronics, building materials, medical safety equipment and household chemicals and detergents. Moreover, it also provides this certification to some service activities, such as transport, construction, telecommunications, cleaning and parking. Once the product or service has achieved the certification, it must be renewed annually (Organi Trust, 2019[15]).

The circular economy transition calls for co-operation between stakeholders and citizens, across levels of government and public offices. Cities and regions can play the role of facilitators by: i) implementing effective multi-level governance co-ordination; ii) enhancing policy coherence and systemic thinking; iii) fostering stakeholder engagement; and iv) adopting a functional approach to identify the appropriate scale for action.

Co-ordination across levels of government is important to address common circular economy-related issues; align objectives; and avoid asymmetries or lack of information between the actors at the local, regional and national levels. The following tools could be taken into account:

  • Ad hoc co-ordination bodies, such as committees, commissions, agencies or working groups.

  • Ad hoc meetings for city-province-region-state co-ordination.

  • Joint projects on the circular economy.

  • Shared databases and information systems.

  • Contracts/deals with the national government as tools for dialogue, for experimenting, empowering and learning.

Examples of co-ordination across levels of government include: the Spanish national circular economy strategy, which created an inter-ministerial body that includes the national government, the Autonomous Regions and the local governments through the Spanish Federation of Municipalities and Provinces (FEMP); and the Public Waste Agency of Flanders (OVAM), which in 2018 set up a national platform for the circular economy, through which the top levels of federal and regional environment departments, economy/innovation departments and finance departments meet twice a year to decide on common action in priority policy fields (OECD, 2020[1]). In the Netherlands, the Circular City Deal, promoted by the city of Amsterdam in 2016, aims to strengthen co-operation across cities and the national government. The section below on the role of national governments provides further insights on the vertical co-ordination.

The variety of actors, sectors and goals makes the circular economy systemic by nature. It implies integration across often siloed policies (e.g. environmental, regional development, agricultural, industrial policies). Synergies across climate adaptation policies and plans, mobility, land use and service provision could benefit from the implementation of circular economy principles, whereby resources are used at their foremost and waste is minimised. A systems approach refers to a set of processes, methods and practices that aim to affect systems change. For cities and regions, this approach implies:

  • Developing a vision and related strategies to transform the system in the face of changing circumstances.

  • Mobilising a broad range of actors to achieve a common good rather than narrow institutional interests.

  • Facing constant adjustment throughout the policy cycle, with implications on how institutions, processes, skills and actors are organised.

For this to happen, certain conditions should be in place, such as the existence of a champion committed to change; capacity to experiment; ability to engage with internal and external stakeholders; and sufficient resources to delay a business-as-usual approach (time, capital, etc.). Understanding problems and needs requires identifying underlying gaps and synergies across sectors and actors and connecting the dots (Hynes, Lees and Müller, 2020[16]). Municipal or regional departments should co-ordinate in order to: strengthen synergies across departments to avoid duplications, overlaps and grey areas; clarify targets and expectations of the circular economy initiatives; and develop a common narrative throughout the departments, while aligning targets.

There are several international experiences to foster co-ordination across municipal departments (horizontal). The cities of Melbourne (Australia), Oulu (Finland) and Toronto (Canada) created dedicated horizontal working groups (Chapter 2). The city of Toronto created a Cross-Divisional Circular Economy Working Group which is now comprised of 11 divisions to co-ordinate and increase the capacity of city divisions for implementing the circular economy initiatives. The working group’s mandate is to provide informed input, ideas and feedback during the development of the city’s circular economy initiatives. Convening this cross-divisional groups helps the city identify sector-related trade-offs as they move forward with circular economy implementation.

According to the OECD (2015[12]), “collaboration between institutions, organisations or citizen fora to combine resources and competencies in relation to a common project or challenge to solve can take place at various scales and they are often characterised by a joint agreement of the stakeholders involved to share the risks and the benefits”. Local or regional governments can facilitate information, experience exchange and agreements amongst public, not-for-profit actors, knowledge institutions and businesses to foster synergies and innovation. For example, academic research could be related to local needs towards a circular economy transition and connected with the local productive ecosystem of small- and medium-sized enterprises (SMEs).

Cities and regions can:

  • Engage with academia and research centres to build knowledge, experiments and carry out specific analyses on flow, stocks and material input and outputs.

  • Find solutions to close, narrow and slow the loops, for example digitalising information and data.

  • Create interactive online platforms to encourage stakeholders to exchange information with each other on their needs and monitor the activities and updates of the platform.

  • Provide opportunities for collaboration through multi-stakeholder platforms.

  • Stimulate demand for new solutions (e.g. modular buildings) to be developed through conjoint actions between knowledge centres and business sector.

  • Identify possible pilots and experimentations that would involve R&D and university departments, based on the needs of the municipality or regional government (e.g. circular activities in sectors such as mobility, tourism, food, waste, bioeconomy, etc.).

  • Collect academic and business proposals to put in place circular activities with social impact and consider support for implementation (e.g. financial support for students).

  • Create coworking spaces for cross-fertilisation amongst several actors.

For example, the city of Phoenix, US, created together with Arizona State University a Resource Innovation and Solutions Network (RISN) incubator for accompanying businesses in the shift towards the circular economy.

A functional approach goes beyond administrative boundaries of cities and regions and leads to finding solutions at the most relevant and appropriate scale. As such, the circular economy can reinforce and create opportunities across urban and rural areas, as well as close or narrow loops at regional levels. Cities and regions can also support initiatives at the micro level (e.g. neighbour or districts) in order to test experiments and pilots. Some actions to foster these linkages can consist of: exploring possible scales to implement the circular economy principles and demonstration projects (e.g. a neighbourhood, a city district, industrial parks, the metropolitan area, the surrounding rural areas, etc.); identifying industrial and urban symbiosis opportunities; or evaluating partnerships with local or metropolitan service operators to apply circular economy principles (e.g. waste and water services, infrastructure).

Local governments can facilitate neighbourhood or community-based plans and initiatives, which in most cases are experimental in nature. Identifying places, areas and communities to experiment and share tools among neighbours for small-scale initiatives can be a first step to foster change at the local level, test the viability of circular initiatives with a lower risk, stimulate the creation of new ideas and circular business models and share knowledge on circular economy practices. In Paris, France, since 2010, the Urban Lab has accompanied more than 200 experiments and consolidated a methodology to support effective experimentation in four main stages: i) definition of the experimental project and its evaluation; ii) search for the experimental site; iii) deployment of experimentation; and iv) evaluation and transformation. To facilitate access to these experimental sites, the Urban Lab is based on a legal framework that has been working over ten years, including a public space occupancy agreement and a ready-to-use legal framework (Paris&Co, 2019[17]).

Local and regional administrations have a key role to facilitate an urban-rural dialogue in order to involve farmers, SMEs, consumers, businesses and knowledge institutions in the circular transition and foster new cross-cutting solutions (e.g. some key sectors include the bioeconomy, food, biomass, construction, agriculture and chemistry). This would strengthen a territorial approach of the circular economy, integrating rural areas as part of the solution, in order to foster regional changes in production and consumption practices. There are international experiences connecting urban-rural areas in this field. Kitakyushu City, Japan, has established a food-recycling loop between rural-urban areas, while in Tampere, Finland, eco fellows are co-ordinating rural-urban partnerships related to biogas. They work as a hub that brings together different actors that have not been in contact before (farms, power plant operators, logistics etc.) (Chapter 3).

Cities and regions can act as enablers of the transition, providing the conditions for the circular economy to happen in practice. To this end, cities and regions can: i) adapt and update regulatory instruments to foster the transition to the circular economy; ii) mobilise and efficiently allocate financial resources for circular economy initiatives; iii) develop training programmes to foster human and technical capacities; iv) support business innovation; and v) generate an information system and assess impacts of policies and strategies.

The transition to the circular economy would require proper regulation in key sectors such as waste, water, food and building and construction, to name a few. Identifying available tools (such as specific requirements for land use), environmental permits (e.g. for decentralised water, waste and energy systems) and regulation for pilots and experimentation would clarify potential regulatory uncertainties across different legal entities, gaps and future needs. This could imply a dialogue with the national government when the responsibility goes beyond that of cities and regions. Also, it would be key to identify cases in which it is possible to adapt the regulation (e.g. land use, permits) at the local level. For example, the city of Amsterdam, Netherlands, developed tenders for land allocation, primarily for new-build projects (Roadmap Circular Land Tendering, city of Amsterdam, 2019) and supported the creation of a circular neighbourhood, the Circular Buiksloterham. Once one of the most polluted areas in the city, it is now turning into a circular area for living and working. The type of innovations and solutions promoted by these experiences in terms of urban planning and land tendering (e.g. circular construction, change of land use) helped overcome the actual administrative, legal and financial obstacles that they face.

GPP regulations could be supportive of eco-efficiency and eco-design, reducing the negative environmental impacts of public purchases at the local level. GPP can steer the market and should be systematically implemented.

International examples can inspire innovative procurement for the circular economy in cities and regions (Chapter 2). Key actions include:

  • Establishing clear requirements in tenders to foster efficient material use and reuse, quality and maintenance (e.g. use of secondary materials in publicly purchased goods). For instance, the city of Ljubljana, Slovenia, and the city of Paris, France, have adopted a scheme for responsible public procurement and introduced environmental criteria in tenders.

  • Applying the life cycle analysis to look beyond short-term needs and consider the longer-term impacts of each purchase. The analysis provides broader evidence on the importance of dimensions besides price that should be taken into account to make procurement decisions more circular.

  • Stimulating a dialogue between the main actors, the procurement officials and potential contractors, in order to incorporate circular requirements for suppliers and design tenders to promote circularity. This would strengthen the relation across suppliers, those in charge of preparing the tenders and those who manage the contracts once in place. According to Wijkman (2019[18]), “if cities increase their demands specifically for circular solutions, it naturally becomes more attractive for designers and producers to offer circular products and services. However, procurers often lack the knowledge of how to incorporate relevant circular requirements for suppliers and how to design tender documents to promote circularity. The same is often true among market players like designers, manufacturers and retailers. Hence, to make circular procurement possible, a dialogue between the main actors – the procurement officials and potential contractors – will be crucially important. Such a dialogue goes against the conventional practices within public procurement”.

  • Carrying out market analysis and stimulating demand. Pre-tenders can help with the pre-analysis of the market and stimulate innovation, avoiding tenders that do not receive any offer from the market. For example, Italy launched the framework contract on “integrated energy management services” for heating services including improved energy efficiency, consumption reduction and CO2 emission avoidance. At that time, pre-procurement market consultations were carried out, using online questionnaires addressed to businesses and the main trade associations (OECD, 2014[19]).

  • Stimulating a dialogue among the governmental departments (e.g. economic, environmental, urban planning and waste departments) involved in promoting the circular transition can be key to overcome capacity and co-ordination gaps within the procurement area.

  • Considering divide public tenders into lots that enable SMEs and local self-employed workers to participate can be a way to upscale innovative circular projects. For example, Austria, through its’ Action Plan on Public Procurement Promoting Innovation, calls for public authorities to procure in lots and define qualification and award criteria in a way that gives SMEs a chance to participate in competitions. The Korean government prioritises the purchase of technology products developed by SMEs. The federal government in Germany has recently launched a tool that uses algorithms, public statistical data, information of the specific industry on the procurement in question to suggest the best way to split tenders into smaller parts (OECD, 2018[20]).

  • Creating a monitoring and evaluation framework for GPP to analyse procurement policy results, enabling the city to incorporate the lessons learned in the design of new procurement policies and regulations. For example, the city of Toronto, Canada (OECD, 2020[1]) has developed a Circular Economy Procurement Implementation Plan and Framework to use its purchasing power as a driver for waste reduction, economic growth and social prosperity.

Cities and regions can facilitate access to finance and broaden the range of financial instruments for supporting circular businesses, considering the available funding options and budget capabilities, from grants to venture capital. For example, the city of Amsterdam, Netherlands, used revolving funds to support more than 65 projects related to climate, sustainability and air quality for a total of EUR 30 million (C40 Cities, 2016[21]). Moreover, the LWARB supports circular businesses through the Circular Economy Business Support Programme. This venture capital and growth capital fund supports circular economy SMEs that are already in the market (LWARB, 2019[22]). Circular economy principles could become evaluation criteria in funding related to local or regional development and innovation.

Creating financial incentives would support businesses and a behavioural shift. An option would be, for example, to create a scheme to offer subsidised loans to SMEs or credit guarantees to circular economy companies, in co-operation with private and semi-public financial institutions (e.g. banks, business funds). The idea would be for the municipality/public fund to compensate the financial institution for part of the interest rates or provide guarantees on collateral, to attach a value to the “public good” created by circular economy companies. Other tools are: rewards to companies through the corporate income tax (e.g. based on the waste generation level, water and energy consumption, use of recycled materials as raw materials); reduced value added tax (VAT) on products labelled as circular (e.g. easy to recycle and reuse, proximity).

Training programmes can be distinguished between training for public administrations and those for the private sector and civil society, to enable business opportunities and raise awareness. Training can be related to technical issues for specific sectors, from agro-food to construction and demolition, or to the use of tools for enhancing the circular economy, from creating ad hoc strategies, to improving GPP.

Circular economy strategies, projects and proposals in cities are often based on experimentation and pilots. This is both an opportunity for creating new knowledge and information, but also a challenge in terms of the human and technical capital needed to design and implement sustainable, efficient and effective circular economy policies. One way for cities to share knowledge and build capacities is through city-to-city learning, offered by dedicated networks.

In the context of the development of a circular economy strategy, a first step for cities and regions would consist in reviewing and analysing the required skills and capacities for:

  • Setting a circular economy strategy that is realistic, result-oriented, tailored and coherent with national and regional objectives.

  • Co-ordinating across different levels of government, ensuring complementarities and achieving economies of scale across boundaries.

  • Engaging stakeholders in the planning process of circular economy strategy.

  • Ensuring adequate financial resources by linking strategic plans to multi-annual budgets and to mobilise private sector financing.

  • Collecting and analysing data, monitoring progress and carrying out evaluations.

Training can also provide entrepreneurs and employees with deeper knowledge and tools to succeed in their circular projects and discover business opportunities in a circular economy. For example, the Public Waste Agency of Flanders (OVAM), Belgium, as part of Flanders Circular offers a Masterclass on Circular Economy. In four half-day sessions, participants discover the opportunities for their business in a circular economy. The Glasgow Chamber of Commerce, UK, has organised workshops and events to build capacity and share good practices among businesses aiming at transitioning to the circular economy.

Innovation in the circular economy is not only related to sustainable technologies but also new partnerships (public-private) and new business models. Local and regional governments can support market innovation and business development through a variety of initiatives, such as:

  • Creating spaces for experimentation. Cities and regions could provide experimental spaces that could also be labelled (e.g. Circular Innovation Spaces) to attract stakeholders, such as entrepreneurs and scientists. For example, Amsterdam’s “free zones” provide suitable spaces to test decentralised renewable electricity generation and smart grids.

  • Stimulating demand by being a launching customer. Cities and regions can be the first customer to stimulate demand and encourage business in small companies and start-ups. More specifically, circular design products and technological solutions (e.g. in the recycling processes) need demand to be in the market. The local/regional government can stimulate this demand by seeking for solutions. If the solution provided by a project is successful, the municipality or region can invest in it, being the first customer of innovative products and goods. For example, the Dutch national government applied the Circular Challenge Project: the government supports financially profitable business cases and can act as a “launching customer” (Ministry of Infrastructure and the Environment/Ministry of Economic Affairs, 2016[23]). The Start-up in Residence (San Francisco, US) connects start-ups and businesses to provide solutions to the city’s problems through transparent selection processes.

  • Creating stakeholder networks for material chains. Cities or regions can provide stakeholder networks with the opportunity to develop business plans and fund new innovative ideas. For example, in Tilburg, Netherlands, a network for the textile sector aims to facilitate exchanges among entrepreneurs, producers, retailers, as well as educational institutes, local governments and banks. It is key to share experiences across experts in each sector (e.g. tourism, construction, waste, etc.) to have a better understanding of what can be done, where the gaps are and how they can be overcome.

  • Creating incubators to promote circular economy projects. An incubator could support innovative projects related to the circular economy by: providing management and business assistance; promoting connections with strategic partners in the private, public and academic sectors; facilitating access to financial opportunities (investors, loans, public programmes); and providing a physical space for the projects to develop. For example, London set up a programme called Advance London to start up and scale up businesses related to the circular economy, while Paris created Paris & Co to promote innovative sustainable solutions for the city and enhance the science-industry co-operation.

  • Establishing a single window for the circular economy for businesses. This window should offer all services, information and administrative support regarding circular economy projects for businesses, to reduce transaction costs for entrepreneurs and SMEs willing to be part of the transition. The initiative Start-up Slovenia, established in 2014, mobilises a network of mentors from various backgrounds to provide entrepreneurs and young firms with tailored advice. Nowadays some start-ups also work within the circular economy field (OECD, 2019[24]).

A wide range of data can support the monitoring and evaluation of policies, programmes and strategies, as well as help reach a better understanding of what the circular economy is and improve policymaking and implementation. For instance, in the case of the building sector, data on materials for construction would help understand what kind of materials are used for building and how they can be used in the future (Chapter 3). Mapping empty buildings would help avoid new constructions and plan alternative use of existing ones; mapping input and output of material flows would help establish priority actions.

Digitalisation plays an important role in this case, as big data, the Internet of Things and blockchain tools can provide real-time information, enable material traceability and foster reuse through online platforms and applications. Cities and regions can generate open data sources, make collected data publicly accessible, understandable and updated regularly. For example, the Circular City Data Programme is a project promoting a collaboration between start-ups, city agencies and larger firms to collect, produce, access and exchange circular data aiming to build new and sustainable social, economic and environmental models in New York City, US (New Lab City, 2019[25]).

The local or regional government can take into account the following types of data:

  • Environmental data (e.g. resources, waste and circulation processes), flows (water, energy, products, food, transportation, information, people) and social data (circular jobs created).

  • Data on empty buildings, materials used for construction and waste streams.

  • Data on circular economy existing initiatives, as well as laws and regulations that can foster the transition from the linear to the circular economy.

Cities and regions can play an important role in the transition towards a circular economy given their ability to enable new business models, such as those within the framework of the sharing economy. They play a central role in key infrastructure sectors such as waste prevention, management and recycling, urban transport and water supply and sanitation. Regions, on the other hand, hold responsibilities on regional development, industrial policy and economic growth, amongst others. However, to achieve circular economy goals, subnational governments need to be supported by an enabling framework that national governments can establish effectively.

National governments can accompany the transition. Regulatory, financial and economic instruments are needed to transition to the circular economy. It is crucial to set the right policy and regulatory frameworks in place at all levels. For example, there are relatively few instances of regulatory requirements on the eco-design of products that seek to promote material efficiency or circularity. Eco-design regulations should go beyond energy-related areas and consider materials and typology of products in a broader perspective (Ekins et al., 2020[26]). The OECD (2016[27]) shows that extended producer responsibility (EPR) schemes can increase incentives for eco-design. In order to decrease material use and prevent pollution, some countries have employed single-use plastic bags.

It is important to correct misleading incentives, remove harmful subsidies and count environmental externalities in the pricing. Taxes on the extraction or use of natural resources are rarely implemented. Even where they are (e.g. Denmark, Sweden and the UK), they have had limited effects on encouraging more efficient resource use and recycling of secondary materials due to low tax rates (Söderholm in Ekins et al. (2020[26])). A renewal in the taxation of emissions and natural resource consumption and directing tax incomes to lighter taxation of employment and entrepreneurship would greatly facilitate and enhance the transition, as well as identify subsidies with harmful environmental impacts (Wijkman, 2019[18]). Environmentally related taxes are increasingly being used in OECD economies and can provide significant incentives for innovation, as firms and consumers seek new, cleaner solutions in response to the price put on pollution. These incentives also make it commercially attractive to invest in R&D activities to develop technologies and consumer products with a lighter environmental footprint. Some of the tools available are: environment-related taxes, fees and charges (increase the cost of polluting products or activities); tradeable permits (used to allocate emission or resource exploitation rights); deposit-refund systems (places a surcharge on the price of potentially polluting products and is refunded when returned successfully, avoiding waste generation) (OECD, 2020[28]). The OECD (2016[29]) calls for applying mixes of policy instruments to ensure a coherent set of incentives for resource efficiency along the product value chain.

The education sector is also identified as a major booster for the dissemination of circular economy principles. Circular economy principles can be integrated in career training programmes of teachers, senior and middle management, public officials, etc., as well as in educational programmes in schools and academic curricula.

Countries pursuing the circular economy can promote research that aims to foster innovation and technology acquisition, while increasing the competitiveness of the industrial sectors. Focusing on research and innovation creates solutions – in products, services, business models, consumption/use, behaviour – with lower emissions and resource intensity. Countries could support digital and robotic circular options that improve recycling through traceability and sorting of materials and rationalise circular business models. However, both public, commercial and private data sources pose significant regulatory and ethical challenges.

National strategies on the circular economy can help cities and regions develop their own vision based on common targets and objectives, as well as learn from one another. The circular economy can be a game-changer for countries, regions and cities if able to put in place integrated and interconnected policies. In most of the cases, a circular economy represents an emerging concept, difficult to understand. Projects and programmes, sometimes very ambitious in theory, cannot be easily carried out in practice: this may be due to the lack of specific skills and human resources; financial resources or incoherent regulation across levels of government. Learning by doing, though, can help rethink the overarching governance and economic models that would lead to a transition from a linear to a circular economy. Therefore, any attempts are worth the effort to create the right incentives, stimulate innovation and generate adequate data and information. Exchanging practices across levels of government can help investigate and overcome obstacles.

The OECD Scoreboard on the Governance of the Circular Economy is intended as a self-assessment tool based on the 12 key governance dimensions that would enable a circular economy system to take place. Transitioning from a linear to a circular economy requires governance conditions to be put in place, from regulation to financing, information sharing, stakeholder engagement and policy evaluation, amongst others. While the identified governance conditions are not exhaustive, understanding whether these conditions exist and are well implemented is key for policymakers to assess what works, what does not and what can be improved.

The OECD scoreboard offers to cities and regions undertaking the assessment:

  1. 1. An overview of the current situation concerning 12 governance dimensions, to make decisions based on facts and clear objectives. The scoreboard allows countries, regions and cities to evaluate whether the necessary enabling conditions are in place, could be improved or missing.

  2. 2. Guidance for improvement: Governments carrying out the self-assessment will be able to identify the policy areas in which action is needed to promote, facilitate and enable the circular transition. Once the main challenges have been identified, the scoreboard can help governments identify the relevant policy actions to make progress from newcomers to advanced. The scoreboard allows governments to identify their level of advancement towards each of the identified governance conditions at the time of the evaluation (baseline) and measure progress over time.

3. A tool for dialogue, since the self-assessment is based on a multi-stakeholder participative process (see section “How to carry out the self-assessment”). The multi-stakeholder process on which the self-assessment is based can help improve policies and tools thanks to the feedback received and proposals for improvement. It can also help raise awareness of the opportunities of circular transition and build consensus on the main challenges and potential ways forward.

The OECD Scoreboard on the Governance of the Circular Economy is the result of several consultations with stakeholders and experts. Nonetheless, this represents a first attempt to accompany governments towards the transition. Further development can be foreseen in the future (Box 6.1).

To carry out the self-assessment, the following procedure is recommended (Figure 6.5): i) identify the lead team to co-ordinate the self-assessment; ii) set objectives and scope of the assessment; iii) map stakeholders; iv) organise targeted workshops with key stakeholders to perform the assessment, and; v) repeat the process once a year.

  • Identify the lead team to co-ordinate the self-assessment. To ensure the achievement of a successful self-assessment process, a lead team should be clearly identified to co-ordinate the whole process. It can be a municipal or regional department, a dedicated office or agency, etc. In practice, the lead institution should have the convening power to gather stakeholders and to thoughtfully plan and manage the entire self-assessment process. In addition to ensuring knowledge and capacity to carry out the assessment, the lead institution should be motivated and able to promote and put in practice the proposals for change, as a result of the assessment. The lead institution should also take into account the need for human and financial resources to carry out the assessment and organise multi-stakeholder workshops.

  • Set objectives and scope of the assessment. Several objectives can trigger the assessment of the OECD Scoreboard on the Governance of the Circular Economy. The self-assessment is a tool for dialogue among stakeholders to identify policies and governance instruments that are performing well or where adjustments are needed. More specifically, the self-assessment can be carried out to: promote collective thinking among stakeholders; share knowledge and address asymmetries of information across governments and stakeholders; foster learning across stakeholders involved in the circular economy; identify gaps in existing policies, institutions and instruments; develop critical thinking on who does what and how.

  • Map stakeholders. Horizontal co-ordination (across departments) is important to get in-depth information about the current work in specific areas that can be related to a circular economy system. Collectively responding to scoreboard questions can be a way to raise awareness among the government structures, engage new areas with the circular transition and avoid siloes. Beyond governmental departments, public, private and non-profit actors can improve the quality and representativeness of the self-assessment process. It would be important to also take into account their responsibilities, core motivations and interactions. The lead team responsible to co-ordinate the assessment should then map and engage stakeholders in the assessment and take into account input to define priorities and actions.

  • Organise targeted workshops with key stakeholders to perform the assessment. The workshops can be platforms in which stakeholders can share, compare and confront their views and achieve consensus. Stakeholder groups have a key role as “do-ers” of the circular economy. The number of meetings may change depending on the opportunities for stakeholders to provide input in between the workshops and to build consensus on the assessment and actions needed. During each workshop:

    • Allow time to present the OECD scoreboard dimensions and key concepts.

    • Discuss and agree on the score for the level of advancement achieved for each governance dimension. For each governance dimension in the scoreboard, the respondent should enter in the cell on the right of each table a score or “not applicable (N/A)”, when information is not available or not applicable. The potential scores that may be given for each question range from 1 to 6 or N/A, corresponding respectively to:

      • Newcomers: Planned (1); In development (2).

      • In progress: In place, not implemented (3); In place, partly implemented (4).

      • Advanced: In place, functioning (5); In place, objectives achieved (6).

    • Respondents are encouraged to provide further information considered relevant, or web-links to further document the responses. Also, liaising with statistical offices and other areas producing data is key for the process and future policymaking decisions related to the circular transition.

    • For each dimension, respondents can evaluate how satisfactory the implementation of each governance dimension, by selecting the icon corresponding to the level of satisfaction of the process (not satisfactory; to be improved; satisfactory).

  • Consider repeating this process once a year. The scoreboard can serve as a baseline against which to compare a second assessment, which could occur a year after to verify changes and improvements. Repeating the evaluation annually may help engage stakeholders throughout time. It should be taken into account, though, that changes in governance may take more than one year to be put in place.

The following provide two possible visualisations of the results. Figure 6.6. shows the graph visualisation that provides an overview of the level of circularity of a city or region for each the 12 circular economy governance dimensions of the checklist. This helps identify which dimensions the city or region is better performing and where further action is needed. Figure 6.6 presents the traffic light system visualisation (red for “Newcomer”, yellow for “In progress” and green for “Advanced”) that shows at a glance in which areas the government performing the self-assessment would need to improve.


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