Towards a More Comprehensive Assessment of Socio-economic Impacts of Circular Economy Policies

Why this study? Introducing the context

By the middle of the 2010s, Circular Economy (CE) concepts were adopted by several municipalities and national governments worldwide as a response to the new emphasis in sustainability and public policy on natural resource efficiency. The European Commission (EC) has a decade of experience crafting CE policies, including the first (2015) and the second CE Action Plans (2020), the latter broadening the policy perspective from buyers and sellers of goods and services to societal transformation in line with the European Green Deal and other policies (e.g., European Pillar of Social Rights).

To our knowledge, there are currently no studies analysing how and what socioeconomic impacts were included in the Impact Assessments (IAs) and evaluations of the past EU CE policies. However, there are various studies analysing CE policies at the EU level. In their work, Calisto Friant, Vermeulen and Salomone (2021) concluded that EU policies did not incorporate sufficient measures regarding the social and cultural aspects of circularity and focused on recycling technologies and innovations. Another recent study established that there is progress on quantification of relevant impacts including integrating more types of impacts (Danciu, Martens and Marneffe, 2024).

To help improve a selection of a wider range of socioeconomic impacts in the EU CE policy assessment, a team of Visionary Analytics together with Dr Martin Calisto Friant and Dr Thomas B Fischer carried out a study ‘The Social Impacts of EU Circular Economy Policies’ (SIMCEP) contracted by the Joint Research Centre, European Commission. Here is what we found.

A new typology from the State-of-the-art Literature Review of socioeconomic impacts of CE policies with a focus on Europe

Following a systematic literature review of 128 relevant documents, a typology of 12 socioeconomic impact categories of CE policies was developed. We found that employment related aspects dominate, making up 40% of the identified impacts within the literature. Most frequently discussed within this category was a change in the number of jobs, in particular an increase in the number of jobs. Multiple non-employment  socioeconomic areas impacted by CE were found, with the most discussed being health and well-being (17%, e.g., quality of life, human health impacts of increased pollution), followed by social justice and distributional impacts (14.9%).

The typology takes into account not only impacts that can be quantified (e.g., impact on wages) but also implications which are of a qualitative nature (e.g., social bonds and networks, community cohesion, consumer behaviour), providing a more straightforward link to other policy domains or horizontal policy goals that are relevant to the EU. To add, the typology can be dissected based on the different types of policies (i.e., types of policy instruments, normative policy objectives, economic sectors, and products). This approach provides a practical way to see the intersections between a variety of CE-related policies and the potential impacts, providing different angles for the investigation  (e.g., impacts studied per particular economic sector or policy instrument).

Figure 1. The 12 categories and subcategories of socioeconomic impacts in the dataset of 128 documents. This graphic shows the relative prevalence of the subcategories vertically within each category.

Analysis of the socioeconomic impacts in the EU impact assessments and evaluations

The developed SIMCEP typology was applied to a dataset of EU IAs and evaluations published between 2012 and 2023 to analyse the socioeconomic impacts within their texts. A qualitative thematic analysis using deductive coding in line with the typology was applied and supplemented by keyword mining. We found that all socioeconomic impact types from the typology were present in IAs and evaluations except for one (data or information related risks, namely personal data privacy). The impacts  were not all covered in the same levels of detail, with their depth and scope in terms of impact sub-categories varying, and some being missing altogether. All but two of the 33 IA and evaluations included socioeconomic impacts in their analysis. The number of missing impact sub-categories suggest that opportunities exist to consider broader socioeconomic impacts in the upcoming IAs and evaluations.

In line with the prevalence of the topic in the literature, employment dominated, making up 40% of all impacts, found in 27 of the 33 analysed documents. Within employment, change in the number of jobs was again most frequently discussed, making up over 70% of identified employment-related impacts, with an increase in employment win sectors (e.g., manufacturing, plastics, agricultural, waste) and a decrease in others (e.g., agri-food, raw materials).

Other employment-related impacts included improvements in occupational health and safety, with an improvement to health and safety of workers deemed the most likely, for example within the waste management industry and due to a reduction of workload due to digitalisation. Similarly, improvements in labour rights were identified, with a reduction in child labour due to an improved rules enforcement regime against illegal shipments of waste outside of the EU. Additionally, impacts related to improvement in labour rights, change in skills for employment were identified, with, for example, a shift in employment from the manufacturing sector to repair, refurbishing and remanufacturing potentially requiring new workforce skills.

What should be done? Study recommendations

To further strengthen socioeconomic IAs and evaluations of the EU CE policies, nine recommendations were developed. These include a more improved focus on the transparency of describing the methodologies used as well as expanding the quantitative (e.g., social life cycle assessments) and qualitative models (e.g., beneficiary assessments) used. To add, it is recommended to use the developed typology and expand the types of socioeconomic impacts considered going beyond employment. As such, within employment, IAs should also examine aspects such as wage effects, skills, work quality, instead of purely focusing on the change in the number of jobs. More attention should be paid to regional distributional effects (between and within MS) and those outside the EU, as well as to the SME related impacts. Importantly, synergies with the socioeconomic objectives set out in the EU policies need to be incorporated. Lastly, the identified socioeconomic impacts should also be monitored, along with other economic and environmental impacts.

Interested in learning more?

Check out the full study results here: Final study report. If you still have questions, drop us a line!