* Many other indicator sets relevant to circular economy but not explicitly labelled as such exist. This includes intergovernmental work by the OECD, UNSD, UNEP and the UNDP. A more detailed review of circular economy indicators can be found in the 2016 report by the European Academies' Science Advisory Council (EASAC).

Macro level metrics

At European and national levels, circular economy metrics are usually compiled by statistical offices and they use data from economy-wide material flow accounts, macroeconomic data, and waste data (including waste flows and recycling rates). Such tools help to provide an overview of the material intensity of a given economy or sector, accounting for the domestic consumption of natural resources as well as the export and import of goods. These methods of accounting have been in-use since before the wide adoption of the circular economy concept. The EU Monitoring Framework for a Circular Economy, for instance, builds upon both the pre-existing Raw Materials Scoreboard and Resource Efficiency Scoreboard. All three rely upon economy-wide material flow accounts (EW-MFA), a Eurostat environmental economic accounting tool which accounts for the use of materials at the national level, for the EU and its Member States.

Figure 1 – Material flows in the EU-28 from 2014 (Mayer et al 2018)

Based on Eurostat data and some estimates, figure 1 illustrates material flows in the EU-28 economy: the share of materials which re-enter in the cycle provides an insight of circularity in the EU economy. Further visualisations of the indicators for the circular economy in the European Union are available on Eurostat website.

Some countries have developed specific approaches to monitoring progress towards the circular economy at national level. All these initiatives are based on material flow accounts and waste management data. In several monitoring tools, resource and waste data are complemented with wider macro-economic data. For example, the Japanese system includes the size of rental markets, the French system includes data on employment in circular economy, both the Chinese and the EU systems include the value added of recycling industries, and the EU system also includes data on patents and on Green Public Procurement. The EU and Chinese indicator systems are covered in more detail in two separate interviews as part of this newsletter. 

Business and product focused tools

National and sectoral level analysis, using national material flow accounts, do not provide a suitable level of detail for businesses and their products. Business or product focused metrics have been also developed, in view of tracking material flows through supply chain analysis, building on tools such as bill of materials and life cycle assessment (LCA). These business metrics generally also consider core elements underpinning the circular economy, such as product design, collaborative business models, reverse logistics and wider system conditions, which can be assessed in either quantitative or qualitative terms. For example, the Circularity Indicators, developed by the Ellen MacArthur Foundation and Granta Design, focus on material flows in a business or product using the concept of “Material Circularity Indicator”. The indicator is based on production inputs, use phase utility, waste destination and efficiency of recycling, and requires a detailed bill of materials. Further complementary indicators cover factors such as material price variation, energy use and carbon emissions.

These tools are offered to businesses aiming to improve operations, product design and procurement decisions, as well as to support internal reporting. Data might also be useful externally to allow benchmarking, rating or labelling of companies or their products. These tools can be used to deliver competitive advantage, either through material savings or in the positioning of a product on the market in terms of circularity criteria.

Sustainable development and Beyond GDP

Developing suitable circular economy indicator metrics is not without challenges. One issue is that while the transition to a circular economy is closely linked to Europe’s wider climate agenda and sustainable development goals, according to the 2030 Agenda for Sustainable Development, a major emphasis on materials would not reflect social and broader environmental considerations. Another issue relates to the scalability of private sector initiatives, which might appear circular at the business level, but may not be sustainable if scaled economy wide. For example, efficiencies gained in the production of a single unit or product might be offset by a net increase in consumption overall - as described by Jevon’s Paradox. Additionally, viable opportunities for systemic change may not be tracked by relying purely on material-based indicators, as factors such as supply chain re-organisation and social entrepreneurship might play critical roles.

National level circular economy indicators can provide valuable complementary indicators to GDP, by providing an indication of the sustainable use of materials by an economy and its environmental impact at country level. A deeper analysis of national policy measures can provide best practices contributing to circular economy, sustainable development and wellbeing.