Trading Services for a Circular Economy

This report by the International Institute for Sustainable Development (IISD) and the Finnish Innovation Fund Sitra examines the role of services trade in transitioning to a circular economy. Based on a survey of 96 firms and 16 in-depth interviews, the report identifies key services—such as IT, R&D, and waste management—that enable circular business models. It analyzes the modes of service delivery, the impact of digitalization, and the regulatory barriers that hinder the international exchange of these services, ultimately proposing an integrated trade policy approach to support global resource efficiency.

• A significant proportion of firms providing services related to the circular economy are small or micro-sized enterprises, with 61% of service providers having fewer than 20 employees. Despite their size, these firms show an unusual degree of internationalization; around 50% of these small or micro-sized firms report having a subsidiary in a foreign country.
• The most frequently traded services related to the circular economy include IT services, R&D, leasing or rental services without an operator, maintenance, repair, and installation services, and sewage and waste collection services. For 65% of the responding firms, these service exports account for more than 10% of their annual turnover.
• Digital delivery (Mode 1) and commercial presence via foreign subsidiaries (Mode 3) are the primary methods for exporting circular economy services. Over half of the providers use digital means, while approximately 45% utilize foreign subsidiaries.
• Regulatory divergence is the most prominent barrier to trade in circular services, with over 25% of respondents citing differences in regulations. Specifically, 20% of firms noted that diverging regulations on waste trade, secondary materials, or carbon dioxide accounting created significant obstacles.
• Digitalization is a critical enabler of the circular economy, allowing for the creation of new services like ride-sharing and the more efficient cross-border delivery of traditional engineering services. However, this reliance on data creates new policy challenges regarding data flow restrictions, localization requirements, and the energy intensity of IT infrastructure.
• The report advocates for an integrated approach to trade liberalization, suggesting that the benefits of removing tariffs on circular goods (such as waste, scrap, or second-hand items) would increase if the associated services are liberalized simultaneously.
• The transition to a circular economy is driven largely by customer demand, which over 50% of firms identified as the largest growth factor. Other drivers include general regulations (20%) and extended producer responsibility (EPR) schemes (10%).
• The report highlights that the international trade system, specifically the WTO, can support the transition through the Technical Barriers to Trade (TBT) committee and the Committee on Trade and Environment (CTE), as well as through the implementation of the Trade Facilitation Agreement.

APA

International Institute for Sustainable Development (n.d.). Trading Services for a Circular Economy. https://www.iisd.org/system/files/2020-10/trading-services-circular-economy.pdf

Chicago

International Institute for Sustainable Development. Trading Services for a Circular Economy. n.d. https://www.iisd.org/system/files/2020-10/trading-services-circular-economy.pdf.

Wikipedia

{{cite report |author=International Institute for Sustainable Development |title=Trading Services for a Circular Economy |url=https://www.iisd.org/system/files/2020-10/trading-services-circular-economy.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{internationalinstituteforsustainabledevelopmentndtrading, author = {{International Institute for Sustainable Development}}, title = {{Trading Services for a Circular Economy}}, institution = {International Institute for Sustainable Development}, url = {https://www.iisd.org/system/files/2020-10/trading-services-circular-economy.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }