By Olga van Meeteren (Circular Metrics Researcher at Circle Economy)
Becoming circular is an increasingly popular business idea—and while this is a positive development, companies wrongfully advertising themselves as contributors to a circular economy—‘circular-washing’—must be avoided. Nonetheless, companies that truly incorporate more circular practices can both economically and socially profit from such a sustainable business model, including a spark in GDP growth and an increase in job availability, as well as contributing to climate breakdown prevention. Keeping materials in use and closing loops can also mitigate pressing issues such as the use of conflict minerals—minerals mined in circumstances that violate human rights—and critical materials—high-demand materials used in many different products with hidden risks in supply and few substitutes. The benefits are clear—and while companies looking to 'go circular' is certainly progress, adopting only one circular strategy—such as recycling—will provide limited environmental benefits. When companies put their efforts solely on increasing their circularity—without the equally-important priority of cutting environmental impacts—they enter the territory of so-called 'circularity for circularity's sake'.
This reality may be a hard pill to swallow: according to new research, creating closed material loops alone does not ensure a sustainable business! Consider a business that only uses recycled materials, yet designs products with very short lifetimes that are tossed away at end-of-use without a second thought. These kinds of goods lead to greater waste accumulation, carbon emissions and lost recycling potential. The threat is that circular businesses may be incorrectly slapped with the 'sustainability stamp of approval', failing to keep in mind that the circular economy is a means to an end—a way of achieving sustainability—and not vice versa.
Sustainability is reached when the following three perspectives are considered: economic, social and environmental. Although the circular economy is a means to sustainability, circular metrics often lack the social perspective and differ in scope and focus. All these differences can lead to diverging results, creating ambiguity and discrepancies within the circular economy metrics landscape.
How can businesses ensure their circular actions benefit the planet and people in addition to their reputations? There are a number of things to keep in mind. First of all, to recognise the value of clear metrics for circularity that help chart a course for change. Secondly, tackling the challenges posed by—often still missing—social metrics and avoiding tunnel vision on ‘reduce, reuse, recycle’. And lastly, prioritising tighter loop strategies over looser options and embracing a more holistic view. Circular economy methodology is still in its development phase: companies are taking different actions with scattered approaches. The result: metrics for circularity—methods to assess circularity—take varying approaches, have varying levels of detail and disparate connections to sustainability. Yet, metrics are key for a company’s transition towards a circular economy.
Between 1970 and 2010, resource extraction has tripled globally: growing from 22 billion to 70 billion tonnes. If the linear way of doing business continues, humankind will need three earths to support its wants and needs in 2050. As the additional threats of climate change and biodiversity loss increasingly come to the fore, companies face pressure to change their traditional ways of production. Along with environmental concerns, social issues, from poor working conditions to inequality and poverty, are gaining attention as well.
Increased attention towards sustainability issues has brought greater regulations and social pressure—necessitating proper metrics that ensure the strategies adopted by companies lead to desirable outcomes.
We only reach sustainability when the economical, social and environmental pillars are equally considered. In most applications of the circular economy, the social pillar is the least developed and is sometimes neglected. Yet affording little attention to the social dimension of a circular economy can lead to unforeseen consequences. Therefore, using a circularity metric that does not embody all the tenets of sustainability may lead to certain drawbacks and limitations. For example, a business may solely use waste materials as input for their products, but it’s not sustainable if the collection of those materials allow child labour or poor working conditions. Similar issues could arise if a company revamps its business structure but does not afford attention to changing its culture and gaining the support of its customers.
The negligence of the social sphere in business’s circular transitions is gaining traction as a topic, but acceptance of social metrics remains low. The main barrier to social assessments in a circular economy is that companies lack knowledge on how to apply social metrics. The scattered landscape of social metrics poses more problems. Like environmental metrics, varying approaches are present but there is no standardised method yet. On top of that, the social metrics developed so far are too complicated for application: they are either too complex, too academic or not maturely developed enough. One of the challenges for measuring social aspects is that they are difficult to quantify or calculate mathematically—and as we know from our recent Coalition Circular Accounting white paper, only what is measured is managed.
Reduce, reuse, recycle: the holy grail of the circular economy—and in many cases, the extent of its public perception. The R-strategies are known tools that summarise circular strategies. These methods can help create circular business models and slash a company's carbon footprint. They are catchy, but in practice they are often not fully utilised. Most Dutch circular initiatives in 2018, for example, overly focused on recycling. Neglecting Reduce and Reuse strategies—which retain more value—can inhibit potential environmental benefits. Least attention is given to the Reduce principle. Instead of looking at the preservation of materials, one could also look at the preservation of functions: the use of circular business models such as product-as-a-service systems, systems encouraging product multifunctionality or sharing platforms. Pieter Pot sells food in glass jars with a deposit to encourage users to return them, enabling them to reuse the jars and avoid waste. And furniture by Ahrend is designed to be modular, enhancing ease of disassembly and adaptability. Also, it leases its furniture as a service, increasing its lifetime through maintenance and repairing.
Although the R-strategies can be used to make a business more sustainable, they are centred around material efficiency. While this does cut waste production and pollution, does it slash environmental impact overall? Products may be very efficiently remanufactured and recycled, but at the cost of high energy use or excessive transportation. Many circular metrics are aimed at increasing material efficiency and the circulation of materials, but this is only a part of achieving environmental benefits. Using metrics that are only based on the R-strategies leads to a narrow scope for measuring environmental impact: many environmental aspects, from biodiversity and mineral depletion to toxicity and even climate change, are not adequately addressed.
Recycling is often misconstrued by the public to be the core tenet of circularity, despite it being the least sustainable circular strategy. The recycling rate of materials is never 100%, which means it creates waste, and material downcycling dampens value. Next to Reduce, Reuse is considered the most sustainable strategy for a circular economy. Reusing products or materials prevents raw material extraction—thereby slashing potential energy use from this extraction or from recirculation processes. In contrast to recycling, it prevents waste, which is in line with the vision of circularity. Additionally, preventing waste by reducing raw material use and minimising a product’s weight—as less weight means less material—is also one of the most effective strategies.
To Reduce and Reuse accordingly, companies need to take a critical look at the design of their products. It makes sense: prevention is better than a cure. Products need to be designed to favour the most sustainable loops, such as reuse, repair and refurbish. Only when the products reach their end-of-use, remanufacturing and repurposing can step up. And here recycling and incineration for energy recovery can be appropriate as a last resort.
Incorporating these weighing factors into metrics for circularity may stimulate practitioners to implement the most impactful strategies—and become truly sustainable in the process.
To support businesses in becoming circular and sustainable, the following lists strategies that ensure both have been developed.
As you can see, shows of 'circularity' aren't necessarily enough to truly contribute to sustainability, especially if the metrics given above are underexplored in companies' plans. However, each step forward is better than standing still. Recycling, while less impactful than Reducing or Reusing, still trumps following traditional linear business models. But don't stop there, and rather take a critical—and holistic—view of how your business can become increasingly circular and sustainable.
Metrics are useful for benchmarking, tracking progress and learning. Companies may be tempted to quantify the exact effects and benefits of adopting certain strategies, but impactful changes can already be made without calculations. If you decide to take the bicycle to work tomorrow, you know you are decreasing your emissions by leaving the car at home. Measuring is managing, but don’t lose your instinct when changes can be made quickly.
Luckily, strategies do exist that can help ensure your circular business is sustainable. Different sectors, for example, should prioritise different strategies. For the waste management sector, minimising and downcycling waste is the most effective strategy, while the healthcare sector—characterised by strict hygienic regulations—can reduce hazardous waste as its key strategy. Even in the same industry, circular economy strategies can differ per business and product type. For instance, looking at increasing resource effectiveness, a pillow manufacturer can focus more on leasing to extend the lifetime of their pillows while a food packaging manufacturer can focus more on the use of reusable packaging.
Companies can also use circular economy metrics for different purposes. For a company that is starting to dive into the circular economy, a metric that creates awareness for its opportunities would be most suitable. A company that already has implemented and managed circular practices for a while can use metrics to benchmark its products or to track its progress. The level of maturity in circularity is also reflected by certain metrics, where one requires the input of hard quantitative data—such as a bill of materials or actual kilograms—while the other allows you to tick yes/no options.
The bottom line: being circular does not ensure your business is sustainable. Achieving sustainability is a complex process and simplifying it to pursuing circularity in isolation can cause several problems to crop up. Businesses can avoid this by including more social metrics, prioritising tighter loops and broadening their scope of action beyond R-strategies. Becoming a circular and sustainable business requires a critical and holistic view— but choosing strategies and metrics that suit both your industry and your business is an effective first step.
This blog is based on the Industrial Ecology master's thesis of Olga van Meeteren at Leiden University and TU Delft and her circular metrics internship at Circle Economy.
About metrics at Circle Economy
Metrics are crucial: they can be used to create awareness for circular opportunities, identify solutions and chart a course of action. Circle Economy knows that metrics matter: click here to read our report on Circular Metrics for Business.