2025 in review – Circular economy

In 2025, the circular economy entered a period of realignment and practical testing. Excitement around circular innovation persisted – from new protocols to battery partnerships – but so did the hard reality of cost, scale, and structural barriers. 

This was a year in which circularity’s promise encountered its practical limits, and in response organisations, regulators, and investors alike began recalibrating strategies toward implementation over rhetoric.

From aspiration to structured action

The World Business Council for Sustainable Development (WBCSD) launched a new protocol to guide companies through the circular economy transition, moving the conversation from philosophical ambition to systematic transformation planning. This work answers key questions around sequencing, decision criteria, and performance measurement that dominated corporate circularity discussions throughout the year.

This signalled a broader theme of 2025: the circular economy is no longer theoretical. Organisations are being pushed to devise clear pathways to implementation, with measurable outcomes and accountable metrics.

Regulation tightens – and costs become visible

Regulatory action continued to shape commercial realities. In the UK, extended producer responsibility (EPR) reforms remained a flashpoint, with major retailers signalling they were likely to pass increased compliance costs onto consumers – a potential issue for public acceptance and consumer trust.

Meanwhile, the UK also extended electronic waste fees to online marketplaces, challenging digital platforms to take on lifecycle responsibility for products sold through their networks.

These regulatory moves reinforced the message that circular compliance is now enforceable policy, not voluntary soft talk, but that also means companies are grappling with how to fairly distribute costs across supply chains and customer segments.

Fashion: incremental shifts or systemic reinvention?

The fashion sector offered one of the year’s most vivid case studies in circular tension, leading CSO Futures to ask whether fashion might be on the cusp of a circular reinvention.

Several brands took ambitious steps. Gap Inc., Houdini, and Target partnered with recycled polyester specialist Syre to advance textile-to-textile recycling – a rare example of cross-brand materials innovation at scale.

Luxury houses also moved upstream. Chanel expanded into materials recycling, signalling greater vertical integration of circular capabilities.

And more apparel brands embraced business models decoupling revenue from new product manufacture, including resale, rental, and repair services.

Still, structural headwinds persisted. Recycled plastics remain decades and hundreds of billions away from cost parity with virgin materials – a stark reminder that circular inputs are still economically challenged without supportive policy or innovation breakthroughs.

Infrastructure: industrial circularity gains traction

Amid mixed progress in consumer goods, infrastructure investments provided some of the year’s most promising signals. Ingka Group (IKEA’s parent) backed a new recycling plant in Belgium, designed to bolster regional circular capacity for key materials.

In automotive, Jaguar Land Rover reported £100m in revenue from circular initiatives, proving that reuse, remanufacturing, and materials recovery can deliver real commercial value when embedded in industrial operations.

These industrial examples matter because they move circularity beyond CSR pilots and into balance sheets.

Closing the loop on critical materials

2025 also saw renewed attention on closing resource loops for materials beyond consumer products. Two developments particularly underscored this.

Microsoft began recycling rare earth elements from data centre hardware, tackling one of the most challenging areas of technological circularity.

The Ellen MacArthur Foundation formed a new battery circularity partnership focused on advancing reuse, remanufacturing, and materials recovery across electric vehicle and energy storage value chains.

These initiatives reflect an important trend: circular strategies are spreading into capital-intensive sectors where resource scarcity and strategic supply risk are highest.

Investment gaps and lost momentum

Yet despite pockets of progress, a sobering theme emerged. A major report highlighted persistent gaps and a loss of investment momentum in circular economy funding — particularly in recycling infrastructure, innovation scaling, and high-impact technologies.

Executives pointed to economic uncertainty and competing priorities — especially climate adaptation and digital transformation — as factors squeezing circular investment. As a result, the pace of system-level circular scaling slowed at a moment when broader value chain disruption is urgently needed.

An uneven transition in motion

By the end of 2025, the circular economy was unquestionably more visible and actionable than five years prior. Protocols, partnerships, regulation, and early commercial wins demonstrated that circularity is not a fringe sustainability topic – it’s a strategic transition with economic consequences.

Yet progress was neither linear nor evenly distributed. Regulatory costs surfaced just as infrastructure investment softened; pilot innovation blossomed even as system scaling lagged; industrial circularity advanced while consumer product loops remained partially closed.

For sustainability leaders, the lesson of 2025 is pragmatic: circular economy progress will demand both systemic coordination and targeted execution, from policy design and supplier engagement to capital allocation and materials innovation. The circular transition is underway – uneven, unfinished, and yet undeniably real.