Construction and the circular economy

The construction industry sits at the crossroads of rapid urbanisation and the urgent demand for more sustainable, resource-efficient practices. With buildings accounting for 50% of resource extraction and 35% of waste within the EU[1], the construction sector has become a primary focus of the EU’s green transition. At the centre of this agenda is the move away from linear consumption and towards a ‘circular economy’, which prioritises reuse and longevity and seeks to reduce the environmental impact across the product lifecycle.

Central to ‘The European Green Deal’, which sets out a pathway to ‘transform the EU into a modern, resource-efficient and competitive economy’ and to become the first climate-neutral continent, is the Circular Economy Action Plan (the ‘CEAP’)[2]. Adopted in March 2020, the CEAP promotes the design, use, and manufacture of low carbon and waste-reducing products, with a strong emphasis on circularity and optimised lifecycle performance across all sectors, including construction.

The CEAP has led to recent regulatory reforms, most notably the new EU Construction Products Regulations (the ‘EU CPR’)[3] and the Ecodesign for Sustainable Products Regulation (the ‘ESPR’), which entered into force on 7 January 2025 and 18 July 2024 respectively[4]. Together, these reforms are expected to establish sustainability requirements relating to durability, repairability, and recyclability and raise environmental standards across products categories, including those used in construction. We consider both of these reforms in further detail below.

From linear to circular – what is changing?

Generally speaking, in a linear construction model, materials are extracted, used, and ultimately discarded as waste at the end of a building’s lifecycle, with the building material waste often sent to landfills or subjected to suboptimal recycling. This approach contributes significantly to carbon emissions, resource depletion, and environmental degradation. Conversely, the circular economy seeks to prevent the production of waste from the onset – for the construction industry, this means embedding circularity from the design phase onward, encouraging modular design and material reuse, selecting materials with lower embodied carbon, and prioritising building methods that can be disassembled, reused, or recycled.

EU Construction Products Regulations:

One of the key tools supporting the circular transition in construction is the revised EU CPR – this is a foundational pillar in the EU’s Green Deal and the shift towards a circular economy and restructures how construction products are defined, marketed, and monitored. The revised EU CPR updates Regulation (EU) 2019/1020, repeals Regulation (EU) 305/2011, and introduces measures aimed at standardisation, sustainability, and technological adaptation, introducing tools such as the Digital Product Passports (the ‘DPPs’) which provide transparent environmental and traceability data throughout the supply chain. The DPPs will provide detailed information on a product’s environmental footprint, origin, composition and end-of-life potential, helping developers, contractors, and clients to make informed, sustainable procurement decisions. Other important developments include: (i) an expanded definition of ‘construction product’, which now covers ‘formed and formless physical items, including its packaging and instructions for use, or a kit or assembly combining such items’, which are intended for permanent incorporation into construction works within the EU; (ii) mandatory sustainability standards, which for the first time, allow the European Commission to set minimum environmental performance standards for construction products, aiming to drive demand for sustainable materials and promote circular economy principles; and (iii) enhanced market surveillance and compliance oversight, increasing scrutiny on manufacturers and importers, which will have direct implications for contractors and procurement teams sourcing materials from EU suppliers.

Eco-design for Sustainable Products Regulations:

In parallel, the ESPR, which replaces the Ecodesign Directive (2009/125/EC) that applied mainly to energy related products, is a flagship initiative under the EU’s CEAP and a key driver in the transition towards a more sustainable, resource-efficient market. The ESPR introduces a new legal framework under which products, including construction products, must meet minimum environmental performance standards for durability, reparability, and recyclability to be placed on the EU market – significantly altering procurement strategies and the need for compliance checks.

The ESPR will apply to a growing number of products, including construction products, requiring manufacturers to design with sustainability in mind. The ESPR will have significant implications for construction product manufacturers, suppliers, and procurers.

The implementation of the ESPR is structured through multi-annual working plans. The first Working Plan[5], the ‘Ecodesign for Sustainable Products and Energy Labelling Working Plan 2025-2030’, was adopted on 16 April 2025 and outlines the initial group of materials and product categories (including iron, steel, and aluminium) to be prioritised for ecodesign requirements ‘based on their potential to contribute to the EU’s climate, environmental and energy efficiency objectives’.

Practical implications

It is essential that contractors, developers, and insurers understand the commercial, legal, and compliance implications of these reforms – not only to meet regulatory obligations but to futureproof their operations and align themselves with changing market and investor expectations.

This shift will have practical implications not only for construction companies operating within the EU but also companies outside the EU that source products from EU markets and will face growing pressure to demonstrate compliance with circular standards. This includes but is not limited to material selection which must now account for performance under sustainability standards, not just technical functions, ensuring product data is accessible for lifecycle assessments, and adapting design processes to prioritise reusability and longevity. Furthermore, it may be necessary for contractors to collaborate with their suppliers at an earlier stage to assess DPPs data. We also expect to see increased demand from clients and developers for circularity to be embedded into project proposals.

Commercial and legal considerations: staying ahead of the circular shift:

Whilst the UK is no longer bound by EU legislation, the updates remain highly relevant for UK construction businesses operating in or trading with the EU. Although regulatory divergence may grow, we expect thematic convergence – particularly around carbon reduction, material reuse, and supply chain transparency – and it would not be a surprise for similar provisions to come into force in the UK in the future given the push towards Net Zero.

Contractors and their insurers will need to assess how circular construction materials perform over time, particularly where recycled, reused, or modular components are involved. Liability for non-compliance with environmental standards, product traceability obligations, and long term performance risk will require careful allocation in contracts and updated insurance wording. Early engagement with DPP-related systems and practices and reviewing procurement processes will be critical to ensuring compliance with the regulations – those that act early, embedding sustainable design practices, tracing material inputs, and collaborating across the supply chain will be best placed to manage risk, meet client expectations, and deliver value in a more resource-conscious regulated market.

If you require legal advice on circular construction practices, the impact of the revised EU CPR or related regulatory developments, our team of construction, insurance, and environmental law specialists is here to assist

[1] Buildings and construction – European Commission

[2] Circular economy action plan – European Commission

[3] Construction Products Regulation (CPR) – European Commission

[4] Ecodesign for Sustainable Products Regulation – European Commission

[5] ESPR and Energy Labelling Working Plan 2025-30 | Environment