The secure supply of materials and driving sustainable products manufactured in Europe – with special focus on steel and other metals – stand out as two of the decisive factors that will mark the evolution of the circular economy in the coming years, according to the Strategy Environmental Watch Report on the Circular Economy prepared by Ihobe, through the Basque Ecodesign Center.
The document contains the 10 key points in 2026 in that regard; it also identifies the main market, technological and regulatory challenges that will condition the transformation of companies in the short term and will steer the transition towards a circular economy. Ihobe produces it annually through the Basque Ecodesign Center, a private-public partnership initiative driven by the Basque Government and industrial companies; its aim is to generate and transfer knowledge on the circular economy to the business value chains of the Basque Country.
In addition to supply security and self-sufficiency in materials, which are being cemented as strategic aspects for European industrial competitiveness in the light of international tensions, the report also highlights the dependency on critical resources and the disruptions to the global value chains. In this scenario, the circular economy – entailing ecodesign and the recovery of materials – ceases to be a mere environmental tool to become a lever for economic sovereignty.
In tandem, the European Commission is seeking to drive the demand for ‘Made in Europe’ sustainable products, based on financing instruments, on green public procurement and on future regulatory developments aimed at bolstering industrial resilience, reducing external dependencies and stimulating clean technologies and low-carbon production. Thus, the European economic identity is strengthened and there is less dependency on products from outside the EU, generally produced with less stringent environmental requirements.
Transparency focused on valuable information
Additionally, there is the regulatory streamlining process led by the European Commission to reduce regulatory pressure on companies – particularly SMEs – and to bolster their competitiveness, while they continue to implement the legal measures arising from the European Green Deal. Accordingly, despite the streamlining and moratoriums, companies must continue to adapt to multiple environmental regulations in areas such as corporate reporting, due diligence, ecodesign and product transparency, consumer protection, decarbonisation and controlling industrial emissions.
The report also stresses the importance of voluntary ESG reporting for SMEs; that will allow them to assess their governance, social and environmental performance, and to facilitate their integration in sustainable value chains, along with their access to financing and to market opportunities linked to the green transition. In the Basque Country, the BasqueESG programme is one of the transformative projects of the Industry Plan 2030, which seeks to support Basque companies, fundamentally SMEs, in this reporting, in a context of growing pressure towards sustainability becoming opportunities.
As regards the product, the rolling out of the digital product passport is seen as a key instrument to improve transparency, comparability and circularity, as it introduces criteria of durability, repairability and recyclability; it also helps to combat greenwashing and to open up opportunities for new circular business models.
Europe, towards sovereignty in raw materials and technologies
Furthermore, the European Union is working on setting up a single market for secondary materials, with harmonised quality, traceability and safety criteria. It is thus seeking to remove regulatory barriers, drive innovation in recycling and bolster European strategic autonomy, by promoting a more competitive, efficient and resilient production system.
Within this process, steel and metals are priority given their strategic role in European industry and given the need to close the gap between supply and demand of secondary materials, by using circularity strategies to make the sector more competitive. In line with the European framework, the Basque Government has included the transformative Basque Zirkular Metals project in its Industry Plan 2030; the aim is to support Basque companies from the metal sector in their circular transition.
The report also covers how the European Commission is driving programmes to encourage companies to advance in decarbonisation and the circular economy by means of strategic projects and financing mechanisms, such as the European Competitiveness Fund and the Strategic Technologies for Europe Platform. In the Basque Country, special mention should be made of the new tax relief mechanisms of the provincial governments and the Basque List of Clean Technologies, resulting in corporation tax deductions of 35%.
Finally, the transition towards a circular economy must go hand in hand with the digital transformation by means of technologies such as the Internet of Things (IoT), big data, data analytics and artificial intelligence. Digitalisation has reached corporate reporting, the digital product passport and the digital labelling of chemical products; it fosters the integration of the single market via initiatives such as the future circular economy regulation and the digital system of the CBAM, i.e., Carbon Border Adjustment Mechanism, which is a European Union measure that sets a price on the CO₂ emitted during the production of certain imported goods, such as steel and aluminium.
About the Report
Ihobe produces the Strategy Environmental Watch Report on the Circular Economy: 10 Key Points for 2026 annually, through the Basque Ecodesign Center, a private-public partnership initiative drive by the Basque Government and 19 of the leading Basque companies; its aim is to generate and transfer knowledge on the circular economy to the business value chains of the Basque Country.
These are the 10 key points of the circular economy for 2026:
Source: Ihobe
