Will the EU propose the most far-reaching reporting standards yet?

One of the European commission’s more controversial decisions under president Jean-Claude Juncker’s Better Regulation initiative was to scrap the European Union’s circular economy package last year.

MEPs and the outgoing environment commissioner Janez Potočnik protested vocally until the new first vice-president of the commission (and regulatory hawk) Frans Timmermans pledged to re-introduce a “more ambitious” circular economy package with a much broader economic scope than the previous one, which had focused mainly on recycling targets.

Four commissioners will be responsible for the new package: Timmermans himself, along with the environment, internal market and competitiveness commissioners. They have launched a public consultation and are expected to publish new legislative proposals by the end of the year.

One of the parliament’s most radical proposals is that the EU develop and introduce a “binding lead-indicator and a series of sub-indicators” to measure resource intensity by 2019. These would apply at member-state and industry-level and aim to quantify the lifecycle impact of goods produced in or imported to the EU in every sector. They could well involve individual companies having to account for the footprints of all their products in the way they are required to audit their finances. This is ambitious and will be subject to much lobbying.

The complexity of rolling out a series of mandatory reporting metrics (to be accompanied by targets) within five years across 28 countries cannot be understated. If adopted these could form the most far-reaching set of reporting standards the EU has ever proposed, applying to virtually every product that Europeans buy.

The parliament’s circular economy lead, the centre-right MEP and former Finnish environment minister Sirpa Pietikäinen, is keen to emphasise the maxim that “what gets measured gets managed”. She is open to debate about the best metrics to pick, but firm that they must be mandatory.

 “As with accounting rules, the main point is to choose the set of indicators that most parties can agree to, and then to apply [them] across member states and different sectors. If each company reported their financial flows according to their own preferred system, and if this reporting was voluntary, none of that data would be comparable or meaningful.”

Pietikäinen’s view is echoed across the political spectrum, with the Socialists and Democrats’ lead on the circular economy, Massimo Paolucci, believing strongly that “binding targets on resource efficiency are needed and that the eco-design directive must be reformed”.

Catherine Bearder, a British Liberal Democrat MEP and champion of the circular economy, is more specific, saying that “domestic material consumption [the metric most commonly used by Eurostat] is a good starting block but there is room for improvement”. Even Nigel Farage’s Europe of Freedom and Direct Democracy group appears to support tougher EU action.

But there are concerns over the risks of oversimplification. Dustin Benton, who advises the circular economy taskforce for the Green Alliance think tank, acknowledges weight-based metrics based on domestic material consumption (which simply look at the weight of total resources needed to generate a unit of national GDP) are insufficient and suggests we should be more honest about what metrics can and can’t do.

“Businesses want to know which footprint to optimise for, but this is really a value judgment. Do you care about climate change more than local water scarcity? There’s no ‘always right’ answer. So we’ll need a range of metrics. We can make these relatively easy to calculate by using sector averages, or relatively hard by requiring companies to audit their supply chains and report to a statistics authority.”

Matt Prescott meanwhile, former CEO of Robertsbridge and current managing director of Mint Environment, wants the EU to focus more on fostering business innovation: “The circular economy does not need KPIs, it needs encouragement and freedom to experiment, innovate and flourish.”

Whatever happens, the parliamentary vote next week and the commission’s legislative proposal are only the beginning of a process that could define this commission’s work programme and Europe’s approach to sustainable development.