The current global tariff situation and resulting supply chain volatility and price increases send a clear signal: The era of seemingly limitless availability of materials and products is over. Companies that rely on global supply chains are increasingly having to deal with geopolitical uncertainty and price turbulence. Risk and resilience are becoming primary aspects to future proof the organization.
The challenge, however, also presents a significant opportunity: The transition to a circular economy offers a way forward. Circularity offers independence, innovative strength, and sustainability. In the current macroeconomic climate, the business case for circularity is increasingly attractive.
In Europe, circularity is additionally driven by the EU’s EcoDesign for Sustainable Products Regulation (ESPR). It obliges companies to make products more sustainable, repairable, and resource-efficient — thus specifically promoting those who rethink and act at an early stage.
ESPR, which entered into force in July 2024, forms the cornerstone of the European Commission’s approach to more environmentally sustainable and circular products by improving their circularity, energy performance, recyclability, and durability.
It considerably extends the scope of application in comparison to Directive 2009/125/EC, shifting the focus from energy efficiency to broader sustainability across the entire product life cycle. It is intended to play a central role in developing a strong, well-functioning single market for sustainable products in the EU.
The EU’s EcoDesign Regulation
The ESPR enables the setting of performance and information rules — known as ecodesign requirements — for almost all categories of physical goods. It aims to:
- Improve product durability, reusability, upgradability, and reparability
- Enhance the possibility of product maintenance and refurbishment
- Make products more energy- and resource-efficient
- Address the presence of substances that inhibit circularity
- Increase recycled content
- Make products easier to remanufacture and recycle
- Set rules on carbon and environmental footprints
- Limit the generation of waste
- Improve the availability of information on product sustainability
For groups of products that share enough common characteristics, the framework allows horizontal rules to be set.
The ESPR also contains these new measures:
- Digital Product Passport: A digital identity card for products, components, and materials, it will store relevant information to support product sustainability, promote their circularity, and strengthen legal compliance.
- Destruction of Unsold Consumer Products: Introducing a ban on the destruction of unsold textiles and footwear opens the way for similar bans in other sectors if evidence shows they are needed. It will require large and, eventually, medium-sized companies across all product sectors to disclose annual information on unsold consumer products on their websites, such as the number and weight of products they discard and their reasons for doing so.
- Green Public Procurement: Public authorities in the EU spend around €1.8 trillion purchasing works, goods, and services. The ESPR will help steer these funds in a more sustainable direction by enabling mandatory Green Public Procurement rules to be set for specific products. Under those rules, public authorities that purchase the products concerned will be required to purchase products that meet the highest levels of performance in terms of sustainability and circularity. This has the potential to significantly boost demand for sustainable products and, in turn, further incentivise companies to invest in this area.
In the first work plan, adopted on April 16, 2025, the European Commission gives priority (over the next three years) to certain product groups, notably final products (textiles and apparel, tires, furniture, and mattresses) and intermediate products (iron, steel, and aluminium). ICT and energy-related products will continue to be addressed under existing directives or upcoming reviews.
Opportunity for Transformation
Compliance with the ESPR is a legal obligation but also an opportunity for companies to systematically rethink their products, processes, and business models. The required change is profound: It requires technical audits, data collection along the supply chain, document transparency, and external audits.
The entire business ecosystem will be involved in this transition. Internally, it will involve organizations’ technical departments, marketing, sales, procurement, and GRC. Externally, it will involve supply chain partners. Forward-thinking companies will be able to use the ESPR as a lever to strengthen their competitiveness, differentiate themselves in the market, and credibly meet the expectations of customers, investors, and regulators.
ESPR Applies Globally
The ESPR’s reach extends far beyond EU borders. Any company wishing to place a product on the European market must comply with the requirements of the regulation, regardless of where it is manufactured. For manufacturers from non-EU countries, this means they must fundamentally revise their product designs, their traceability systems, and their information transparency.
Looking to the future, the ESPR could become a reference standard at the international level, helping to redefine the rules of global trade and promote a circular and sustainable economy on a global scale.
Technology as an Enabler
IT for circularity describes how IT products and services can support the circular economy (e.g., by enabling efficient resource management or reducing waste). The use of advanced data management and analytics and the IoT enables organizations to track, trace, and optimize the life cycle of products, ensuring they are reused, refurbished, or recycled rather than discarded.
Many tech vendors are offering advisory, advanced technologies, and even AI-enabled solutions to support their customers in improving both their environmental impact and contribution to a more sustainable, circular economy as well as generating efficiencies, advancing supply chain resilience, and reducing risk. Increasingly, aspects around the latter are becoming key drivers for circularity initiatives.
IDC is launching a research project to examine the current status of tech vendors’ strategies, solution offerings, customer projects, and benefits achieved from supporting their customers’ initiatives towards circularity. If you’d like to know more or would like to participate, please get in touch.