Potential Impacts of the European Union's Circular Economy Policy on Japanese Manufacturers

While the European Union's (EU) Circular Economy policy package includes various aspects, such as waste treatment, plastics recycling, reduction of food waste, and remanufacturing, it is essentially an industrial and employment promotion policy. In regard to the promotion of circular businesses, including remanufacturing, product-service system (PSS), and digital platforms, this policy may change the shape of the EU market and the core of market competition. However, many Japanese manufacturers are not aware of the difference between the circular economy and the traditional 3R (reduce, reuse, and recycle) policy and are unfamiliar with the impacts on business competition. The objectives of this paper include an analysis of the EU's Circular Economy (CE) policy and its potential impacts on the Japanese manufacturing industry (as a representative of a non-EU manufacturing industry). First, we summarize the EU's CE Policy and analyze its meaning. Second, as examples of CE implementation, we introduce Ecodesign Directive "Directive 2009/125/EC" and the European companies, Siemens and Veolia. Then, we discuss the implication of EU's CE policy; its double-layered structure, the different attitudes toward CEs among European and Japanese companies, and some notes taken from a CE that may be of importance to Japanese manufacturers. Companies are suggested to be proactively integrate sustainability with their main business activity. Finally, this paper points out key enabling technologies. While there are a lot of technologies related to ecodesign, process technologies, business strategy and planning, and digital technology, an indispensable technology for realizing a CE, is life cycle engineering, which synthesizes a sustainable circulation system, by integrating the technologies mentioned above. We also illustrate a hypothetical scenario in which the traditional manufacturing industry transforms into a life cycle value creating industry.