In the Loop: Litigation and the circular economy

Circular economy transition is a key pillar of sustainability strategy, particularly for consumer goods, food and retail companies, which absorb more than 90% of global agricultural output and account for 75% of municipal waste. The imperative to increase product longevity, preserve our natural resources and reduce waste is clear. Operationally, commercially and ethically.

Organizations are responding with ambitious and innovative circular design, manufacturing and reverse logistics strategies. Volvo was able to save over 4,800 tonnes of CO2 by remanufacturing over 33,000 parts. Global beauty company Natura is incorporating native Ucuuba seeds into new product lines to support Amazon conservation. IKEA’s buy-back and resale scheme is extending the life of its iconic flatpack furniture. To name but a few such intiatives.

There's no shortage of initiatives, but successful transition to a circular economy also relies on measuring meaningful progress in a methodologically sound and holistic manner, and providing accurate, reliable information to facilitate informed purchasing decisions. A virtuous loop of innovation, effort and data that turns ideas into real, sustainable results. This is proving challenging for companies in all aspects of sustainability.Consumers and regulators are scrutinizing claims regarding the sustainability of products, services and their producers. And there are new mandatory reporting laws in Europe and, increasingly, elsewhere codify ESG transparency and accountability principles are being codified into law.

Regulatory enforcement risk and litigation risk is bound to rise as a result, with specific questions and implications for the circular economy. DLA Piper’s own research data indicates the scale of the actual and perceived risk:

• 75% of global consumer goods, food and retail companies have reported a rise in actual or threatened circular economy-related litigation in recent years.
• 48% of industry leaders report the threat of regulatory investigation and litigation as the biggest barrier to more ambitious action on sustainability.

There are potential contentious issues across all stages of the circular economy lifecycle. From marketing and advertising claims and product/service offers and materials certification through to consumer rights, product safety and data protection, particularly at product disposal.

These shouldn’t create barriers to transition. It’s possible – and necessary – to manage risk while maintaining progress.

In this mini-series we identify enforcement and litigation issues amplified by the circular economy, including regulatory proceedings, private litigation, class actions, contractual disputes and competitor actions.

Part one examines product development. The circular economy is a group effort and often requires collaboration between suppliers, customers and peers to execute circular design and manufacturing solutions. As a result, companies need to be alive to regulatory scrutiny over alleged/apparent anti-competitive activity and information exchange. The complexity of certifying recycled material inputs, and evidencing associated marketing and advertising claims, across an entire product lifecycle are also growing sources of private litigation, regulatory enforcement and reputational risk. Our lawyers will share what you need to know.

Part two explores product performance. A shift from fast disposal to thoughtful repair is core to the circular economy and has gained currency as consumers struggle with the rising cost of living and become increasingly aware of ESG issues. With rights of repair now becoming established in law, class actions targeting original equipment manufacturers represent a growing threat. Our lawyers will highlight your obligations and risks.

Part three focuses on product waste. Avoiding waste is mission critical to the circular economy. New business models, processes and digital platforms enable products reaching end of life to be refurbished, remanufactured, repaired, and resold. A significant potential risk gap may exist between used and new products. Where old is made new, safety, fraud and data privacy concerns drive disputes with consumers and regulators. Our lawyers share insights to help you prepare.

These articles have been developed using the results of an independent global research survey, carried out by research consultancy Censuswide, among 600 C-Suite executives from consumer goods sectors (namely fast-moving consumer goods (FMCG), fashion, food and beverage, and retail). Respondents were interviewed across key global markets including the UK, France, Germany, US, Japan and Australia.