Circular economy indicators for businesses

According to the United Nations Environment Programme, the total consumption of resources could more than double between 2015 and 2050, putting the planet’s capacities under immense pressure. The circular economy offers a response to this situation in the form of new models, which aim to improve the management of resources by using and reusing them as efficiently as possible, thus reducing waste production and the need to extract raw materials.

Meanwhile, more and more businesses are exploring new business models that incorporate the principles of the circular economy. These businesses need an increasing number of indicators to measure their degree of circularity and its effects on the environment, to guide their approach and strategies. Faced with these challenges, the members of Entreprises pour l’Environnement (EpE) and the Institut National de l’Economie Circulaire (INEC) initiated a project for circular economy indicators in business. Several joint working groups collected the experiences of member businesses. This publication draws on that project, as well as about 22 case studies, to illustrate possible solutions to these questions in concrete terms.

The first section of the report describes the reasons that prompt businesses to measure their circularity and answers fundamental questions, namely the how, why and for whom of assessment. The second section draws on a review of existing work on the topic to identify available tools and outline their limitations in the business world. The third section presents an analysis of the indicators used by EpE and INEC member businesses. The fourth section combines the previous elements to offer simple recommendations for selecting the circular economy indicators that are best suited to each business and purpose.

KEY MESSAGES :

The circular economy and businesses

The circular economy offers a means of rising to major environmental challenges throughout society. For businesses, the circular economy also helps reduce environmental, sourcing and regulatory risks throughout the value chain that can impact a business’s image or operations, while boosting value creation via differentiation and innovation.

An increasing number of businesses are embarking on circular economy initiatives and, as a result, need indicators to measure their impact.

Current metrics

As the situation stands today, there is no recognised method for measuring how effectively a country or business is transitioning to the circular economy, nor are there holistic tools to help guide the process (European Environmental Agency, 2016).
The organisations and researchers focusing on circular economy indicators have primarily conducted work at regional or product level—business-level studies are few and far between. (p 36 Current possibilities and limits of tools available to businesses).

The product-based approaches are useful for managing and promoting a product or product range. However, these indicators rarely account for all the business’s impacts (sourcing and office operation, for example) or the use of its products (such as pooling and sharing), and do not measure its contribution to overall progress toward a circular economy.

Analysis of the indicators used by businesses

To produce this analysis, a survey of EpE and INEC member businesses was conducted on about 40 sustainable development reports, from various sectors, which identified over 160 indicators. The key knowledges from this analysis:

  • Businesses are already implementing a wide variety of indicators selected based on their strategy, existing practices, business sector, area of activity, resources measured and environmental targets.
  • The indicators identified mainly focus on information related to waste (60%) and, to a lesser degree, products and product use (eco-design, lifespan and share of sales).
  • Operational indicators are frequently used compared to financial indicators.
  • The environmental impact indicators gauge the consequences of business operations and the shift toward circular approaches.

Recommendations for businesses on developing indicators

Better than a rigid framework, EpE and INEC offer an approach to enable each business to identify the most relevant indicators for them:

  • Identify the business’s materials priorities by studying its operations, resources used and the various steps – both current and potential – in the lifecycle of its products and services;
  • Ensure that the indicators are tailored to the business’s strategy and update them over time;
  • Select a set of indicators that represents the relevant aspects of the circular economy and pinpoint the types of rebound effects that may curb the positive impact of circularity;
  • Stimulate employee engagement and involve stakeholders while developing the indicators and ensure they are properly incorporated into operational processes.