Trading services for a circular economy

Moving from a linear, extractive produce–use–discard model to a more circular approach brings about significant changes to existing business models. In today’s highly integrated world economy, international trade will play a critical role in enabling this transition by facilitating the diffusion of circular solutions and exploiting international comparative advantages.

From a trade perspective, more attention has been directed towards goods in the circular economy, while much less attention has been paid to the role of services. Yet, services that help keep resources in the system for longer are at the heart of new circular economy business models, and the trade in services has grown significantly more than the trade in goods since 2005.

To fill knowledge gaps around the role of services trade in a circular economy transition, a new report by the International Institute for Sustainable Development (IISD) and the Finnish Innovation Fund Sitra, supported by the Finnish Ministry for Foreign Affairs, has compiled fresh evidence. The report is based on a survey conducted among 96 firms involved in circular economy business models as well as a series of in-depth interviews.

In addition, the report reviews the impact of digitalization on services and services trade and how this relates to the transition to a more circular economy. The report also identifies barriers to the international trade of services relevant to the circular economy and suggests ways in which these barriers might be reduced through unilateral or cooperative trade policy action.