We are living through a sustainability paradox. On paper, the transition seems to be in full swing: new regulations have been rolled out, reporting standards are in place, and a thriving ecosystem of consultancies, start-ups, and frameworks promises greener (and more circular) business practices. From the Global Reporting Initiative (GRI) and Sustainability Accounting Standards Board (SASB) standards and to EcoVadis and Carbon Disclosure Project (CDP), the infrastructure for sustainability accountability has never been stronger.

Yet, beneath the surface, systemic change is lagging behind. The heavy lifting of redesigning products, rethinking business models, and transforming supply chains remains slow and fragmented. As the Circularity Gap Report 2025 reveals, global circularity has fallen again, from 7.2% to 6.9%. This contradiction points to a sobering truth: the circular economy today is more about measurement than transformation. We have perfected the art of tracking the linear economy, but we have fallen short of disrupting it—and this must change.

This disconnect between record-level sustainability reporting and real-world stagnation is further reflected in recent global reviews. According to the UN’s Sustainable Development Goals Report 2025, only about 18 per cent of SDG targets are on track, while nearly half are stagnating or regressing. This proves that increased transparency can sometimes mask a widening "credibility gap" between stated goals and actual policy and implementation.

Regulation: Compliance over transformation

Regulation is intended to shift incentives, yet the rapid expansion of reporting obligations has inadvertently given rise to a 'compliance industry'. Firms are pouring resources and funding into disclosures and 'box-ticking' rather than the uncertain work of value-chain redesign.

This risk is being amplified by recent political shifts. In December 2025, the European Parliament adopted an 'omnibus package' that substantially narrowed the scope of sustainability accountability, including the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). While the EU argues this change is to cut complexity and increase competitiveness, by raising thresholds so only the largest firms are captured and removing mandatory climate transition plans, these changes have diluted the potential 'trickle-down' effect that would have driven better circular practices among SMEs.

Against this background, recent legislative measures, such as the Packaging and Packaging Waste Regulation and the Single Use Plastics Directive, the EU will soon launch its Circular Economy Act in 2026 to address structural barriers, create a Single Market for waste and secondary raw materials, and foster demand for circular products, services and solutions. As a first step, a pilot focused on the plastics recycling industry has been established.

While such recycling initiatives are welcome and offer a useful way to “test the waters” before scaling up to more complex R‑strategies higher in the circularity hierarchy, a narrow focus on these low-tier circular measures risks reinforcing a system where progress is tracked through increasingly detailed reporting rather than meaningful change. As research from the University of Twente shows, current EU disclosure regimes often emphasise low-impact, end-of-life activities such as recycling and waste diversion. This emphasis does little to address the root causes of overproduction and poor product design, leaving the underlying linear nature of the system largely intact.

A counter-model: Radical transparency

Against this backdrop of regulatory dilution, Patagonia’s recent 'Work in Progress' report stands out. Rather than offering a glossy success story, the company foregrounds failures, trade-offs, and unresolved problems.

This approach amounts to a form of 'radical transparency'. By openly discussing where the company falls short, including the structural limits of what a retail brand can achieve in isolation, Patagonia reframes this progress as an iterative, often uncomfortable process rather than a sequence of certifiable wins. This contrasts sharply with the broader industry trend of strategic omission, such as reporting only easily quantifiable Scope 1 and 2 emissions while downplaying the complex realities of Scope 3 supply chain impacts. Patagonia demonstrates that internal honesty can be a more powerful driver of change than meeting the minimum requirements of a weakened regulatory floor.

A recently released whitepaper authored by Circle Economy and the Iberostar hotel group, in collaboration with UN Tourism, is another example of industry transparency. It examines key challenges in the circular transformation of the hospitality industry and invites industry stakeholders to join forces in overcoming them. By openly communicating not only its successes but also the barriers it encountered, Iberostar provided a realistic roadmap for peers walking along the same path.

A roadmap for systemic impact

To move from the illusion of progress to real-world impact, the policy and corporate architecture must evolve:

• Prioritise meaningful outcomes over disclosure: Policy must move beyond mere transparency. Liability frameworks and standards should reward upstream circular interventions such as design for durability, modularity and reuse, rather than just calculating waste reduction or recycling rates, which should be seen only as a starting point for higher-order circular R-strategies, not the end goal.
• Measure value, not volume: Circularity metrics should shift from “tonnes collected” to measures of service intensity, material productivity and product lifetime. Standards bodies must prioritise these higher-order indicators to incentivise high-impact strategies such as remanufacturing and product-as-a-service models. Metrics should be comparable, auditable and aligned with wider environmental and social objectives to ensure they drive genuine systems change.
• Normalise corporate honesty: Radical transparency should be viewed as a governance practice, not a PR stunt. Funders, investors and procurement processes should reward reporting that acknowledges setbacks, inviting the scrutiny necessary to accelerate collective learning and course-correct. Reporting requirements must be robust enough to deter greenwashing while enabling constructive, verifiable disclosure.
• Make natural capital non-negotiable: Policy and corporate frameworks should treat biodiversity, water and land impacts as must-have considerations. Circular strategies must be assessed for effects on natural ecosystems, freshwater resources and land use, with indicators and safeguards that prevent the externalisation of environmental harm across geographies and supply chains.
• Strengthen Scope 3 measurement and embed socio-economic inclusivity: Stricter, standardised measurement of scope 3 emissions is essential to capture true supply-chain climate impacts. Equally, circular policy must incorporate socio-economic dimensions, including employment quality, wage gaps, gender equity and the rights and participation of Indigenous and other disadvantaged groups. Procurement, investment and regulatory incentives should favour interventions that deliver both environmental benefits and inclusive economic outcomes.

Conclusion

We stand at a critical juncture where the 'reporting ceiling' is rising just as the 'regulatory floor' is dropping. We are currently better at counting than at changing, a predictable outcome of a system that rewards clear, auditable outputs over messy, systemic outcomes. Until we align regulation, metrics, and corporate culture to privilege high-value circular strategies, we will continue to advance fastest on paper while remaining frustratingly linear in the real economy.

To this end, local governments have a pivotal role to play: moving beyond compliance to create enabling policy and investment frameworks that steer and de-risk circular business models, from zoning and permitting to public procurement and finance instruments. In doing so, they can encourage and crowd in private investment into circular transition initiatives rather than treating circularity as a reporting exercise alone. Businesses, in turn, need to work in symbiosis with government—co-designing policies, sharing data, and piloting new models—so that a nurturing ecosystem emerges in which meaningful circular change can actually take root.

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Circle Economy equips stakeholders to put circular strategies into action through expert guidance, training, and collaboration. Our programmes—ranging from advisory support and coalition building to train‑the‑trainer initiatives—build capacity across sectors. In 2025, under the Circular City Centre (C3) project for the European Investment Bank, we supported 30 EU cities in developing circular strategies, roadmaps, and investment‑ready projects. If you’d like to learn more about our projects or explore how we can support your circular transition, get in touch.