The Circularity Gap Report 2026 Has Put a Price on What We're Wasting.

Renata Daudt
Jun 1
6 min read

Here Is What It Means for Packaging.

The Circularity Gap Report 2026 landed earlier this year, and one number stopped me in my tracks:

€25.4 trillion.

That is the estimated value lost every single year because of how we produce, use and throw away materials. To put it in perspective, that figure is close to 31% of global GDP. For every three euros of economic value created, roughly one euro disappears somewhere along the way.

I spend my days working with businesses on packaging strategy and sustainability compliance, and when I read this report, I kept thinking about how much of that lost value runs straight through packaging. The materials, the manufacturing, the end of life, etc. Packaging sits right at the intersection of almost every problem this report is describing.

What the Circularity Gap Report 2026 is actually measuring

The report is published annually by Circle Economy, in collaboration with Deloitte. This edition introduces a new concept called the Value Gap, and it is a genuinely useful way to think about the problem.

The Value Gap measures avoidable economic value lost through linear economic practices. Things like material waste, premature disposal, underutilised assets, energy losses and the environmental costs that never show up in market prices. It is not measuring environmental damage in abstract terms. It is translating inefficiency into money, which makes the scale of the problem much harder to ignore.

The global circularity rate currently sits at just 6.9%. That means 93.1% of materials entering the global economy come from virgin sources. Almost nothing is coming back into the system in a meaningful way. The report makes clear that this is not a niche environmental problem. It is a structural economic one.

Where the value is actually going

The report identifies five pathways through which value is lost. Here is a quick summary of each, because they matter for how you think about packaging.

End-of-life waste is the largest single pathway, accounting for around €10 trillion in lost value. This is where products and materials are discarded before their value is fully used. When something ends up in a landfill, everything that went into producing it, such as the labour, the energy, and the raw material, is gone. For packaging, this is the most direct connection. Most packaging is designed to be used once, and most of it is never recovered. In Australia, we are seeing this play out in real time, only around 18% of plastic packaging is currently being recycled, and the economics of the recycling system itself are under pressure. I went into this in detail in a recent post on Australia's plastic recycling market failure and why EPR is the policy fix.
Energy losses account for €8.7 trillion, spread across the entire energy system from extraction through to end use. This one hits packaging hard. Producing primary aluminium, for example, requires roughly 14 times more energy than recycling it. Glass is similarly energy-intensive to produce from raw materials. Every tonne of packaging material that ends up in landfill rather than being recycled means that energy has to be spent again from scratch. Circular economy packaging is partly an energy efficiency story, and this pathway shows exactly how large that story is.
Consumption of fixed capital sits at €5.2 trillion. This covers the gradual deterioration of long-lived assets like infrastructure, machinery and buildings. It is relevant to packaging production facilities and, just as importantly, to the recycling and recovery infrastructure that packaging relies on to actually be circular. When that infrastructure deteriorates or becomes obsolete, the recyclability claims on the pack become increasingly theoretical.
Processing losses total around €904 billion. These are materials wasted during fabrication and manufacturing (trim waste, defect rates, off-spec material) that cannot be recovered. Every packaging production line generates some version of this. Reducing it is both a circularity and a cost issue.
Food losses and waste come in at €650 billion. Packaging exists in large part to protect food through the supply chain. When packaging choices make food harder to protect, or when the packaging itself cannot be recovered at the other end, it contributes directly to this figure. The relationship between material choice and end-of-life performance is exactly what the Ellen MacArthur Foundation explored in their recent report on paper-based flexible packaging, which I broke down in this post on what their findings mean for Australian brands.

The part that I think packaging businesses need to sit with

The report makes a point that I have been thinking about since I read it. Value loss is not mostly happening at the margins through small inefficiencies. It is baked into the design of the current system. The take-make-waste model is not a series of individual mistakes. It is the model working exactly as it was designed to work.

For packaging specifically, this shows up in a few ways.

Packaging is often designed for the point of sale, not for what happens afterwards. Recyclability, material recovery, compostability and reuse are treated as secondary considerations when the whole point of circular packaging design is to make those the primary criteria from the start.

I covered a real example of this design-first thinking in the post No Compliance, No Sales, where a completely fibre-based packaging solution was developed for 41 different guitar shapes without compromising on protection or compliance.

The report also flags that GDP does not measure value retention, only value creation. This has real consequences for how packaging decisions get made at a business level. If the metrics your business uses do not capture what happens to your packaging after it leaves the customer's hands, you are making decisions with an incomplete picture.

The Value Gap is essentially an argument for measuring things differently. Not just what gets produced, but what gets preserved.

My honest take on the report

I think the Value Gap framing is genuinely useful. Translating environmental inefficiency into euros is the kind of argument that lands in a boardroom in a way that "reduce your footprint" sadly often does not. It gives businesses a business reason to act, on top of an ethical one.

The 6.9% circularity figure is confronting. It means the circular economy is not really happening at scale yet. The intention is there, the frameworks are being built, but the actual flow of secondary materials through the global economy is still tiny.

For packaging, I think the most important insight from this report is that end-of-life is where the most value is being lost. This puts packaging design right at the centre of the conversation. Recyclability assessment, material selection, design for disassembly, and compostability where appropriate. These are not nice-to-haves anymore, they are where the economic opportunity is.

The report concludes that closing the Value Gap requires coordinated action across businesses, financiers and policymakers. I agree with that, but I also think individual businesses have more agency here than they sometimes realise. The choices you make about your packaging today determine where it ends up in the system, and the system is what it is because of millions of those individual choices.

A practical starting point

If you want to understand where your packaging sits in relation to these issues, the starting points are fairly consistent regardless of industry or product category.

Know your materials. Do you have a complete picture of what your packaging is made from, including all components, inks, adhesives and coatings? This is the foundation of any recyclability or carbon assessment. If you are not sure where to begin, the free packaging audit checklist on our website is a useful starting point.
Know your recyclability status. In Australia, this means understanding the PREP tool (the Packaging Recyclability Evaluation Portal) which is the industry-endorsed method for assessing whether packaging can be recovered through Australia's kerbside recycling system. In Europe, PPWR sets out its own recyclability criteria, and they are not the same as PREP. If you sell into multiple markets, you need both assessments. Our packaging compliance services cover both.
Know your carbon footprint. With AASB S2 rolling out, your customers will be asked for Scope 3 data, which means they will be asking their packaging suppliers for emissions data associated with specific materials and formats. If you are a supplier, you need to be ready to provide it. If you are a brand, you need suppliers who can. We walk through exactly how this works on our packaging carbon footprint service page.