Germany’s approach to the circular economy has shifted from environmental idealism to strategic necessity.
There is a compelling case that circularity is no longer about “being green”. It is about whether Germany can maintain its industrial sovereignty in a world where competition for resources is intensifying.
Germany has virtually no domestic raw materials, yet it has built one of the world’s most resource-intensive industrial economies. The figures are stark – more than 90 per cent of its critical raw materials are imported, while 23 of the 48 materials assessed recorded “high to very high” import concentration in 2023.
This is more than an economic inconvenience. With 68 per cent of its energy needs imported and more than 90 per cent of its rare earth supplies coming from China, Germany faces genuine strategic vulnerability.
Although Germany was an early pioneer in circular economy thinking, it has squandered that advantage.
The acknowledgement that the country has “lost its former pioneering position” and now “lags behind in a European comparison” should serve as a wake-up call. This is not merely about falling behind competitors – it is about surrendering an advantage in an area where leadership in technology standards, infrastructure and business models will prove decisive.
The circular economy is fundamentally an organisational and cooperative system. The technical challenges – AI-powered sorting, digital product passports and remanufacturing processes – are formidable, but they may not be the greatest obstacle.
The real challenge lies in persuading stakeholders across value chains to share information and coordinate their efforts. A machine manufacturer must design products for disassembly today, knowing the value of that decision may only be realised decades later. Likewise, consumers must be willing to return products at the end of their useful lives.
These are not technical challenges. They are collective action problems that Germany’s fragmented industrial structure may struggle to overcome.
The Product-as-a-Service model represents perhaps the most profound transformation. Strategically, it offers German industry a significant opportunity. In emerging markets without established recycling infrastructure, German companies could build competitive advantages based on reliability and service quality – strengths that cannot easily be replicated through price competition alone.
The question is whether German companies will embrace this model voluntarily or be compelled to do so.
Germany’s National Circular Economy Strategy, adopted in December 2024, “provides a framework”, but whether it delivers genuine momentum will depend on the policies, incentives and investment conditions that follow.
This points to a more fundamental issue. Germany’s political system, shaped by coalition governments and regional interests, has historically struggled to implement ambitious industrial transformation.
The circular economy will require substantial upfront investment while creating both winners and losers across industries and regions. Whether policymakers have the resolve to manage that transition – particularly when many of the benefits may take years to emerge – remains uncertain.
Even so, the economic potential is considerable. The circular economy already employs 310,000 people and generates €105 billion in revenue. Deloitte and the Federation of German Industries (BDI) estimate it could contribute an additional €12 billion in annual value added while creating 180,000 net new jobs.
These are far from marginal figures.
The authors could, however, have placed greater emphasis on the competitive dimension. As the European Union introduces digital product passports and minimum recycled-content requirements, companies that develop these capabilities early will enjoy cost and speed advantages. German industry has long excelled at adapting quickly to regulatory standards – a strength it should once again leverage.
The opening example comparing a hydrogen fuel cell vehicle, which requires 41,000km to offset its production emissions relative to a petrol-powered car, is revealing, though perhaps misplaced.
It illustrates the tension between technological solutions and genuinely circular approaches. Hydrogen may yet play an important role, but circularity directly addresses resource dependency without demanding the vast infrastructure investment that hydrogen requires.
The challenge of developing scalable, practical solutions for small and medium-sized enterprises is where the greatest innovation opportunity lies. Automated disassembly, quality assurance for remanufactured components and digital product passports must function effectively in factories across Baden-Württemberg and North Rhine-Westphalia.
The raw materials that will sustain Germany’s industrial future are not hidden in distant mines. They already exist within the country’s buildings, infrastructure and products.
Germany’s “anthropogenic deposits” – the materials accumulated throughout its built environment – represent a strategic resource comparable to any natural mine. Unlike conventional mining, however, urban mining demands coordination, sustained investment and a fundamental rethinking of economic relationships.
The circular economy is no longer a niche sustainability concern. It is central to whether Germany can preserve its industrial identity in a world where resources are becoming increasingly contested.
The technology already exists, or is within reach. The economic case is compelling.
What remains uncertain is whether Germany’s political and industrial institutions can overcome inertia and act with the urgency the moment demands.
Germany faces a clear choice: shape the future of circular industrial production or become dependent not only on imported raw materials, but also on the standards and systems that govern their use.
The window to make that choice is closing faster than many realise.
The views expressed here are the personal opinion of the writer and do not represent that of Twentytwo13.
