Natural resources
Transitioning away from waste
If we want to live in a future where the environment remains intact, we will need to drastically reduce the amount of waste we produce. This is why KfW and other partners have been investing billions in the European circular economy for more than six years. KfW’s two circular economy experts, Katrin Reich and Bettina Dorendorf, spoke about current developments in Germany and Europe.
Katrin Reich
is Senior Advisor for European Affairs in the General Secretariat of KfW.
KfW wants to raise public awareness of the circular economy as a topic. How, specifically, is it going about that?
KATRIN REICH. KfW has been committed to implementing the circular economy concept for many years with financing and promotional offers in Germany and abroad. In 2019, we also founded the Joint Initiative on Circular Economy (JICE) together with leading European promotional banks.
In addition to KfW, the initiative includes the European Investment Bank (EIB), Poland's Gospodarstwa Krajowego (BGK), France's Caisse des Dépôts Group (CDC) with its investment bank Bpifrance, Italy's Cassa Depositi e Prestiti (CDP), Spain's Instituto de Crédito Oficial (ICO) and the Netherlands' InvestNL (since 2024). With a joint funding target of EUR 16 billion by the end of 2025, we want to increase awareness of the importance of the circular economy and improve the framework for investments - and, in the future, jointly contribute to establishing the circular economy as a game changer in Europe. We have already exceeded this funding target today.
In late 2024, JICE prepared a recommendation paper for the European Commission. It includes measures to strengthen the investment climate for the circular economy.
Bettina Dorendorf
is Senior Sustainability Officer for the SME Bank & Private Clients business division
What exactly does the transition to a solid waste-free economy with fewer raw materials mean?
BETTINA DORENDORF: Our economy currently operates mostly linearly: i.e. raw materials are mined, used in production processes, and disposed of at the end of the product’s useful life - creating solid waste. The circular economy is the counterpart to the linear economy.
It is primarily about keeping natural resources and materials in the economic cycle as long as possible and reusing them at the end of a product’s life cycle. In this way, raw material requirements can be decoupled from economic growth and dependence on raw material imports can be reduced.
Made from water and waste
The German company Bio-Lutions pays Indian farmers for their agricultural waste which they use to produce tableware and packaging material.
How is the circular economy defined?
DORENDORF: The German Circular Economy Act focuses on waste management and recycling. The concept of the circular economy - for which there is not yet a uniform, widely accepted definition - extends significantly further: it refers to the entire value chain. This broad understanding is also the basis of Germany's circular economy strategy.
The circular economy starts with the design of products: the way in which products are designed has a decisive impact on whether they are repaired, for how long they are used and whether the raw materials used, or, in the case of modular design, entire product components can be reused at the end of the product's life cycle.
Final inspection of refurbished smartphones
Over the years, Berlin-based company Rebuy has grown from a small recommerce platform for PC and console games to an internationally operating company. Refurbished electronic items come with a 36-month warranty. The combination of warranty and price advantage over new goods keeps many satisfied customers coming back.
The efficient use of scarce natural resources is a given. What are some of the other benefits of the circular economy?
REICH: The circular economy also contributes to preserving biodiversity and reducing greenhouse gases. Experts from the International Resource Panel have been saying since 2019 that approximately half of global GHG emissions and approximately 90% of biodiversity loss are caused by the extraction and processing of natural resources. *(Source: International Resource Panel, Global Resources Outlook 2024).
Other benefits include the increase in domestic value creation, as the circular economy is increasingly seen as an opportunity to increase companies’ competitiveness. The reasons for this are lower raw material costs, less dependence on raw material imports, and the potential for innovative business models.
What progress has been achieved in recent years?
REICH: In recent years, the underlying conditions for the circular economy have developed positively: awareness of the importance of the circular economy - in particular as a contribution to raw material independence - has increased noticeably. And politically, too, the circular economy is increasingly becoming the focus of attention - we are experiencing a great regulatory dynamic. numerous new legal regulations were triggered by the European Commission’s Circular Economy Action Plan from 2020, and their implementation also affects companies in Germany.
A bag cleans up
The Hamburg-based start-up Wildplastic won a special prize at the KfW Award for its business model of producing rubbish bags from recycled plastic waste from Asia and Africa.
What are concrete examples of legal regulations that have a positive impact on the transition to a circular economy?
DORENDORF: New regulations relate for example to the ecodesign of products that considers the entire value chain or the introduction of a digital product passport for construction products to encourage the reuse and recycling of materials. A new packaging regulation aims to improve the recyclability of packaging. Consumer rights have also been strengthened, for example, with a directive on the right to repair.
The European legislative package on critical raw materials (Critical Raw Materials Act), created in 2024, is intended to contribute to the secure and sustainable supply of critical natural resources needed for digitalisation, green energy and the security and defence industry.
In 2026, the European Commission is planning another comprehensive legislative package and a comprehensive framework for the transition of the European economy to a circular economy with the Circular Economy Act. The intent is to decouple the consumption of raw materials from economic growth.
'KfW’s environmental programme is KfW’s key promotional product for the circular economy.'
What is Germany’s position?
REICH: The European regulations are gradually being transposed into German law. The Federal Government's circular economy strategy from autumn 2024 is currently setting a new framework for the circular economy. In addition to providing funding for the implementation of the strategy, KfW is to be used more heavily as an innovation and investment bank and as a co-venture capital provider. The creation of a raw materials fund in autumn 2024 by the Federal Government, which KfW was tasked with implementing, also underlines the political importance of the circular economy.
These developments sound promising - what about measurable progress towards a circular economy?
REICH: Despite all the momentum at the regulatory level and companies' high levels of motivation, the transition to a circular economy is stalling. Secondary raw materials obtained from recycling processes still play only a minor role in production - the proportion of secondary raw materials used in the EU was 11.8% in 2024 (Eurostat) and has stagnated for several years. At a global level, this proportion has actually fallen: according to the Circularity Gap Report 2025, the proportion was 6.9% in 2024 and is down from previous years: in 2018, it was 9.1%.
Valuable cargo
Solar modules are a real source of raw materials when recycled properly. Silver in particular is lucrative.
What is preventing the EU from progressing further? Are there any other challenges?
DORENDORF: The transition of economic processes to a circular economy is multi-layered and involves complexity on numerous levels: because business models, potential and processes differ from industry to industry. The challenges include the following topics:
The transformation requires a redesign of traditional value chains and thus a high willingness to innovate. It is cost- and time-intensive - from product design and manufacturing to setting up new value chains - reverse logistics and efficient recycling techniques. New forms of cooperation between companies must be established, as well as the creation of suitable digital systems (e.g. in the field of logistics) in order to reliably map the material flows over the product life cycle. The circular economy must become competitive. Moreover, creating new markets for secondary raw materials also requires fair pricing.
This is because today, primary raw materials are still much cheaper, as the costs of environmental pollution or loss of biodiversity arising from the extraction of primary raw materials have not yet been priced in, but are largely borne by the general public. On the other hand, the costs for the complex production and processing of secondary raw materials are fully priced in.
Also needed is a widely accepted approach to measuring circularity in the form of performance indicators to facilitate the comparability of projects and business models. The creation of targeted training and further education as well as research is also important. Last but not least, it is important to strengthen the knowledge and mindset for the transition to circular production processes and consumption patterns.
_rs_text_image_landscape_small.jpg)
The future of waste management
The digital platform developed by Hamburg-based start-up Resourcify helps companies generate real value from waste.
Where in the value chain can KfW make a real contribution?
REICH: Access to targeted financing and promotional funds is an important success factor in advancing the circular economy and enabling investment. We offer promotion and financing for all stages of the value chain - from design to efficient waste recovery - for start-ups and established companies. I would like to highlight two examples in particular where we are supporting the circular economy:
KfW’s environmental programme is KfW’s key promotional product for the circular economy. It was just recently restructured as a response to the Federal Government's new circular economy strategy. Measures for the efficient and circular use of resources are now even more in focus. For example, we are promoting investments in resource-saving production processes, as well as measures for the extraction of secondary materials and investments in the recovery of raw materials. Financing for waste and wastewater management is also available.
KfW also offers solutions for complex and large-scale projects - whether as part of individual financing or via IPEX-Bank, which specialises in export and project financing.
'In Germany, a very active start-up scene develops innovations in the circular economy'
Is promoting innovation also an important aspect?
DORENDORF: Absolutely. Innovative business models shape the implementation of the circular economy. In Germany, a very active start-up scene develops innovations in the circular economy: According to figures from the Start-up Monitor by the Circular Republic network, the circular economy initiative from UnternehmerTUM, 2,500 start-ups are currently active in the circular economy sector in Europe. Germany is second behind the United Kingdom, with close to 500 circular economy start-ups (EUR 5.7 billion in financing capital).
KfW supports business founders and start-ups with a variety of approaches: KfW is a co-initiator of the Start-up Platform and supports entrepreneurs with modern tools and content. The flagship programme for start-ups is the ERP start-up loan StartGeld (67), with the special feature that KfW takes on 80% of the credit risk. In addition, the ERP promotional loan for start-ups and succession for start-ups as well as the ERP promotional loan for SMEs (365/366) are also available for start-ups.
Our KfW subsidiary KfW Capital also supports young, innovative start-ups through its investment in European venture capital and venture debt funds. Start-ups working in the circular economy sector can also benefit from this.
How important is digitalisation?
REICH: Digitalisation plays a key role in the successful implementation of the circular economy. The life cycle of products is at the heart of creating digital product passports and material passports. Digital processes are also a mandatory requirement for the organisation of reverse logistics to manage return processes. Relevant measures can be implemented with KfW’s ERP promotional loan for digitalisation (511) and ERP promotional loan for innovation (513), which were launched in July 2025.
What needs to happen for measurable successes to become visible?
DORENDORF: Strong arguments for accelerating the implementation of the circular economy are evident: The circular economy can make a major contribution to coping with the scarcity of raw materials and, at the same time, to protecting the environment and climate change mitigation as well as preserving biodiversity. At the same time, the transition to a circular economy has potential for technological and business innovation. In order for this transformation to succeed, many stakeholders must work well together. KfW is actively accompanying and supporting the implementation with its wide range of options.
Published on KfW Stories: 27. August 2025..
Further information
List of the ten 'R' strategies of the circular economy with three examples related to Germany:
1. Refuse
We consume more than we need. Much goes unused. “Refuse” means rejecting unnecessary and unsustainable products and instead using fewer goods as often as possible.
2. Reduce
The central idea of the circular economy is to do more with less (natural resources). To achieve this, products must be manufactured and used more intelligently.
This means minimising the use of materials and the production of waste in the manufacture and use of products (e.g. through lighter packaging, durable products).
3. Reuse
Overcoming the linear “take-make-waste” approach (pertinent example: fast fashion) and instead extending the life of products through reuse (e.g. second-hand clothing, reusable bottles).
4. Repair
Moving away from the throw-away culture: Creation of repair-friendly products for a longer useful life, affordable repair solutions (including right-to-repair/ecodesign)
Repairing defective products to extend their useful life (repairing electronic devices, furniture).
5 Refurbish
General overhaul is the process of restoring and upgrading an old or discontinued product to its original function.
Damaged components are replaced so that a refurbished product is created (e.g. Backmarket/refurbed).
6. Remanufacture
Remanufacturing of old parts for reuse in a new product with the same function. Remanufacturing is used for aircraft parts, engines, components, office furniture and medical equipment
7. Recycle
Processing of solid waste into new raw materials (e.g. glass, paper, plastic)
8. Recover
Extraction of energy or raw materials from solid waste that cannot be recycled.
- Waste-to-energy plants: There are numerous plants that extract energy from solid waste, such as the waste incineration plant in Hamburg.
- Biogas plants: Companies such as “Biogas Nord” produce biogas from organic waste in Germany.
- Metal recovery: Companies such as “ALBA Group” recover valuable metals from electronic scrap.
9. Redesign/repurpose
Upcycling turns a discarded product into a new one with a different function - a growing trend, for example using used truck tarpaulins for functional unique bags.
10. Rethink
Every product and system can be considered in terms of how to reduce its environmental impact.
- It is a matter of questioning existing consumption habits and business models in order to reduce resource consumption: e.g. choosing products with less packaging, benefiting from car-sharing offers.
Current developments in the legal framework with relevance for the circular economy
In political terms, the issue of the circular economy has experienced a significant re-evaluation in recent years and is increasingly becoming the focus of regulatory activities. European legislation - shaped by the EU Circular Economy Action Plan (2020) - is characterised by high dynamics and its implementation also affects German companies.
The German economy has set itself the ambitious goal of becoming climate-neutral by 2045, and the circular economy plays a crucial role in this ambition. The framework is the circular economy strategy adopted by the German Federal Government in December 2024, which is now being implemented.
Since its publication in 2020, the European Commission’s EU Circular Economy Action Plan has been gradually implemented through specific legal regulations, e.g. on topics such as product design (Ecodesign Directive), circularity in production processes (Battery Regulation, Construction Products Regulation), and the consumer perspective (Directive on the right to repair or the EU Green Claims Directive to prevent greenwashing).
Below is a summary of important conditions in the legal framework relevant to the circular economy.
1. Ecodesign
The new Ecodesign Regulation (EU) 2024/1781, part of the EU Green Deal, has been in force since 18 July 2024 and marks a significant step towards a more sustainable product policy by setting ecodesign requirements for sustainable products. It applies directly in every EU Member State (transition period of 2.5 years).
It applies to all physical goods placed on the market or put into operation within the Union, including components and intermediate products. It is accompanied, among other things, by extended information obligations and the introduction of digital product passports and an EU register (specified in a delegated act).
2. Batteries
The new Battery Regulation (EU) 2023/1542, part of the Green Deal, has been in force since 17 August 2023 and changes regulations for placing on the market, labelling, collection, treatment and disposal of all types of batteries. The aim is to design the life cycle of batteries sustainably in order to improve the circular economy, resource use and efficiency, and minimise the negative environmental impact of batteries, making a contribution to achieving climate neutrality. In Germany, the previous Battery Act (BattG) will be replaced by the Battery Law Implementation Act (BattDG) on 18 August 2025.
3. Construction products
The amendment of the EU Construction Products Regulation (EU) 2024/3110 (“CPR 2024”) entered into force on 7 January 2025 and will gradually replace the previous Construction Products Regulation (EU 305/2011 - “CPR 2011”).
Among other things, the regulation lays down rules on proof of the environmental sustainability of building products and introduces a digital product passport system for building products. Among other things, the regulation aims to promote the circular economy in the construction sector.
The construction industry now has one year to familiarise itself with the amended legal framework before the new law becomes widely applicable on 8 January 2026.
4. Consumer rights: Environmental advertising
The Empowering Consumers Directive (EU) 2024/825 (EmpCo Directive) came into force on 26 March 2024 and must be transposed into national law by the EU Member States by 27 September 2026. The Directive includes stricter rules for environmental advertising and stricter rules for the use of sustainability labels. It aims to protect consumers from misleading environmental claims in environmental advertising and to enable informed purchase decisions.
This Directive is set to be supplemented by the Green Claims Directive against greenwashing.
5 Greenwashing
The Green Claims Directive aims to stop greenwashing by setting concrete standards for supporting environmental claims, thereby protecting consumers from misleading practices
Update (20 June 2025): The European Commission surprisingly announced its intention to withdraw its proposal for the Green Claims Directive - which was just about to enter negotiations on the final shape - even before the last round of negotiations with Parliament and Member States could begin. It stated the potential bureaucratic burden on SMEs as the reason.
6. Packaging Regulation
The new Packaging and Packaging Waste Regulation (EU) 2025/40 came into force on 11 February 2025 and is being gradually implemented in the Member States (in Germany by the German Packaging Act ("VerpackG").
The regulation, which applies to all types of packaging and all economic operators, replaces the existing directive. Among other things, the regulation sets targets for the reduction of packaging waste and stipulates that packaging is recyclable, reusable or compostable and that the use of pollutants is minimised. A target quota for the use of recycled materials will also be introduced (e.g. from 2030: 30% for plastic bottles).
7. Right to repair
Directive 2024/1799 on the promotion of the repair of goods came into force on 30 July 2024 and is part of the European Green Deal. As a directive, it must be transposed by the Member States into national law by 31 July 2026 at the latest. The directive strengthens consumers’ right to have products repaired, thereby extending the life of products and reducing solid waste. It initially refers to individual product groups, such as household appliances, vacuum cleaners and data storage products. In addition to strengthening the circular economy, it contributes to reducing electronic waste and reducing the environmental footprint of consumer goods.
8. Critical raw materials
The European Critical Raw Materials Act (2024/1252, 2024/90330) came into force on 23 May 2024. It is a package of regulations and part of the new European Commission’s Clean Industrial Deal. The planned measures are intended to contribute to a secure and sustainable supply of critical raw materials, as well as to digitalisation, green energy and the security and defence industry and, overall, the transformation towards a circular economy by decoupling economic growth from the consumption of raw materials, including by strengthening secondary raw material markets. It anchors concrete percentage targets for covering the raw material requirements from the EU, including recycling rates.
9. Circular Economy Act
For 2026, the European Commission is planning a comprehensive legislative package: the new Circular Economy Act planned for 2026 - as part of the Clean Industrial Deal - is intended to set a comprehensive framework for the transition of the European economy to a circular economy. The intent is to decouple the consumption of raw materials from economic growth.
Data protection principles
If you click on one of the following icons, your data will be sent to the corresponding social network.
Privacy information