EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.
Recent Searches
The message is clear: resilience and competitiveness will increasingly depend on an organization’s ability to embed circularity across its supply chain. As sustainability expectations intensify, circular economy is no longer a choice but a strategic shift for the years ahead. With resource scarcity, procurement volatility and geopolitical tensions reshaping the landscape, circularity is emerging as the new operating logic. Under the EU’s Circular Economy Action Plan and its expanding regulatory framework, companies must redesign material flows, reinforce resilience and rebuild their circular strategies
Vanessa Müller, Anna Illarionova, Fanny Pirenne and Blanca Hidalgo
Circularity is the backbone of resilient supply chains
Mounting pressures, from resource scarcity and procurement disruptions to geopolitical tensions, are forcing companies to embed circularity into governance, operations, risk management and reporting. Recent insights from the World Economic Forum show that 75% of companies now prioritize circular solutions¹ such as reverse logistics and ecoconception, marking a rise of roughly 40% over the past three years. This shift reflects a wider recognition that restructuring supply chains solely for cost efficiency and justintime performance leave them vulnerable to repeated shocks.
In this environment, organizations that fail to adapt expose themselves to rising operational challenges, greater supply chain fragility, and increasing financial, regulatory and reputational risks.
Vanessa Müller
EY Luxembourg ESG Services and Consulting Banking & Capital Markets Lead
Value creation: two realities, one transition
Operational reality
Companies must reduce dependence on virgin materials², stabilize procurement and redesign material flows.
Strategic reality
Circularity unlocks new pathways: reusability, repairability, remanufacturing, refurbishment and recycling, all aimed at extending product lifecycles and creating competitive differentiation.
Circular practices are no longer peripheral or “niche”. Many companies have already taken concrete steps —from offering free repair services (to extend product use) to implementing closed-loop liquid cooling in data centers where water is captured, filtered and reused rather than discharged— demonstrating that circularity is becoming an integrated business strategy.
The financial sector also plays a role, by directing capital toward circular business models, integrating circularity into lending and investment decisions, and steering financial flows toward reuse‑, refurbishment‑ and recycling‑focused activities.
How it works: Circular business models in practice
Circularity is also becoming central to supply chain risk management. Organizations are conducting impact and gap analyses, identifying material hotspots, integrating lifecycle and maturity assessments, and building internal capabilities through targeted training.
Circularity operates through a combination of:
- Reverse logistics³,
- Eco-conception,
- Lifecycle extension (repair, remanufacturing),
- Reduction of virgin material reliance,
- Recycling and closed-loop processes.
Digital tools are accelerating this shift:
- Traceability systems,
- materials tracking,
- digital product passports; and
- AI‑powered optimization models.
Together, these mechanisms help companies map material flows, redesign products, and meet evolving regulatory expectations. Circularity is therefore no longer limited to environmental gains but is increasingly linked to risk mitigation, cost optimization and long‑term value creation.
Regulatory momentum is accelerating this shift.
- The European Union’s Circular Economy Action Plan (CEAP) → provides the overarching framework driving the transition from a traditional “take–make–dispose” model to a more resource efficient economic system.
- The Ecodesign for Sustainable Products Regulation (ESPR) → sets requirements on durability, repairability, recyclability and environmental performance.
- The Packaging and Packaging Waste Regulation (PPWR) → imposes obligations on reuse, recyclability, composition and reporting.
- Luxembourg’s National Circular Economy Strategy (adopted in 2021)⁴ → provides a long‑term vision and a practical toolbox to embed circular principles across sectors.
In parallel, global frameworks are emerging to harmonize circularity measurement. The Global Circularity Protocol (GCP)⁵ introduced in 2025, aims to offer a consistent methodology for measuring circular performance — much like the GHG Protocol (the global reference for carbon accounting) did with regulatory reporting, risk management processes and strategic communication.
Conclusion: The shift becomes convergence
Circular economy has moved far beyond a peripheral sustainability ambition to become a driver of resilience, competitiveness and long‑term value creation, for all market players.
Summary
The message is clear: resilience and competitiveness will increasingly depend on an organization’s ability to embed circularity across its supply chain. As sustainability expectations intensify, circular economy is no longer a choice but a strategic shift for the years ahead.
Related articles
Preparing for SFDR 2.0: A practical roadmap for fund managers
Published on 20 November 2025, SFDR 2.0 represents a major shift in the EU’s sustainable finance framework by replacing entity-level disclosures with a simplified, product-focused approach.
SFDR Barometer: Are sustainability disclosures up to standard?
The SFDR, introduced by the EU in 2021, aims to improve transparency in sustainable finance. EY Luxembourg’s SFDR Barometer analyzed 595 disclosures to assess alignment with regulatory standards. The study identifies strengths, gaps, and offers guidance to enhance sustainability reporting.
How will action today shape the future of climate and nature?
The EY Environment Strategy targets a 50% GHG emission reduction by the end of FY30 and net zero by FY50. Learn how we're taking action on climate and nature.