Collecting more waste via source separation waste collection systems is an essential part of increasing resource efficiency, achieving European recycling targets and closing the loop in a circular economy. Huge variation in the capture rates of packaging waste (paper, plastic, metal, composite material and glass) exists in Europe, even between municipalities with similar characteristics, which suggests there is great potential to increase the amount of these materials that can be recovered. In order to assess the environmental impacts linked to higher collection rates, a Life Cycle Assessment model was built that considers the reduced need for virgin materials as the system's loops are closed. An extra 18 million tonnes of waste could be collected annually in Europe if best practice collection strategies were to be deployed, leading to a 13% reduction in greenhouse gas production associated with the packaging and packaging waste. Although high collection performance is crucial for efficient resource use, improving source separation waste collection systems alone will not be enough to achieve recycling targets; material losses must be reduced throughout the value chain, i.e. at the sorting and recycling stages. By evaluating the circularity and environmental implications of current waste management, it can be shown at which points in the system the most improvement needs to be made for each material in order to facilitate the transition towards a circular economy.