Circular Economy – Analysis of Circular Metrics

The linear economy, based on extraction – production – use – disposal, is becoming environmentally unsustainable due to the unlimited exploitation of natural resources and the large generation of solid waste from production and consumption in general. In order for us to minimize this impact and generate an effective paradigm shift, we need to accelerate the transition towards a circular and low-carbon economy. The circular economy proposes a change in the way we consume, where we must rethink, from product design, to our relationship with raw materials and waste discarded after use.

 

To assist in this process, metrics were developed to measure and quantify circularity in companies, regardless of their type, activity and size.

 

Based on document on circular metrics developed by WBCSD, we carried out an analysis of the main metrics used in the market, considering the costs, benefits and methodologies adopted in each of them.

 

The “circular” metrics typically disclosed by companies can be divided into three categories:

 

1 – Operational efficiency metrics – standard performance metrics that can be tracked even before a corporate sustainability program is adopted. Examples include resource efficiency, energy, water and waste consumption. (metric used by 44% of the companies interviewed)

2 – Sustainability performance metrics – verify environmental and social impacts of the company's activities and products. Metrics include greenhouse gas emissions, engaged local actors or impact on biodiversity. (49% from companies)

3 – Circular value creation metrics – track how the business is improving through circularity initiatives. Metrics include circular revenue, circular percentage of portfolio and value preserved. (7% of companies)

 

There is a tendency for companies to adopt operational efficiency and sustainability reporting indicators before circular value creation indicators.

 

The 4 most used frameworks to measure company circularity were highlighted:

 

1 – Material Circularity Indicator (MCI) – tool developed by the Ellen MacArthur Foundation and Granta Design in 2015 that calculates the quantity and intensity of circulation at the product and/or company levels (circular and restorative flows). The tool also allows you to compare your performance with the average in your sector.

2 – Life Cycle Assessment (LCA) – this tool, created in the 1960s and updated over the years, is not considered a tool dedicated to the Circular Economy. It helps to evaluate the environmental or social impacts of a product system at each stage of its life cycle (from raw material extraction to end of use). Once measured, it provides insights into how to minimize the natural and social impact of capital, as well as offering insights into how to improve circularity.

3 – Circular Economy Toolkit (CET) – tool developed by the University of Cambridge in 2017 identifies and evaluates the potential improvement in the circularity of products. As for tools, it also provides recommendations for improvement at each stage of the life cycle.

4 – Circular Economy Indicator Prototype (CEIP) – tool developed by Griffiths and Cayzer in 2016 evaluates the circularity performance of the product in the context of the Circular Economy. The CEIP gives an overall score (%) and a radar diagram of performance at each stage of the life cycle.

 

Here we have some recommendations for defining a common framework to be used by companies to measure performance in the circular economy. These recommendations, which can also serve as principles for the framework, should be understood as a checklist and not a menu:

  1. Boost circular business performance
  2. Reach specific audiences depending on the company’s objectives
  3. Consider a comprehensive scope of sustainability
  4. Ensure flexibility and inclusion
  5. Adopt a phased approach to onboarding capital
  6. Build on existing structures and pattern
  7. Drive culture change and provide guidance

 

Metrics for Circularity

 

  • ACV or LCA

 

According to the authors Coelho Filho; Saccaro Junior and Luedemann in the text on Life Cycle Assessment as a Tool td_2205.pdf (ipea.gov.br), we have the following description for LCA, its benefits and methodologies:

 

LCA – Life Cycle Assessment or LCA:

Life cycle assessment (LCA) is a management tool created to compute inputs and outputs of a production system, with the aim of evaluating the environmental performance of products during the various stages of their life cycle. In 1997, ISO 14040 Environmental Management – Life Cycle Assessment – Principles and Structure was launched. A series of other standards have been published until the last one, ISO 14044:2006 with the requirements and guidelines for carrying out an LCA study.

 

Benefits:

The main objectives of ACV are to improve the environmental performance of production processes and assist in the creation of sustainable products (ecodesign)

 

** Paula Melton, editor of BuildingGreen, does not consider LCA to be a good green marketing tool, since it cannot claim that one product is more sustainable than another. What can be said is that a product or service can improve its environmental performance and indicate in which areas of the product's life cycle this is possible and desirable. **

 

Logic of the LCA methodology:

 

The life cycle assessment is generated in four steps:

1- Scope definition and objectives

2- ACV Inventory Analysis (ICV) – quantitative stage. Currently there are several databases to acquire information about indirect data (background) such as Ecoinvent database, USLCI database, ELCD and the GaBi database

3 – Impact assessment (IACV) – stage where ICV data – Life Cycle Inventory – is transformed into quantifiable environmental impacts for each input/product/waste flow of the production process. There are several LCIA - Life Cycle Impact Assessment methods, where all 5 stages of the LCIA process – classification, characterization, normalization, weighting and aggregation – are considered, among them the RECIPE, Eco-Indicator 99 Eco-Indicator 99 (sphera.com) of the GaBi system and CML-IA, EDIP2003, IMPACT2000+ and IMPACT WORLD,TRACI,EPS2000

4 – Interpretation – relates ICV and AICV data and proposes recommendations for improving the process within the determined scope of the analysis. At this stage, sustainability indicators can be proposed for critical points of environmental vulnerability (ISO, 2006; 2010).

 

Costs:

Consultants specializing in ACV – (Consultant value only upon request)

Life Cycle Assessment (LCA) (acvbrasil.com.br)ACV Brasil – Software

Life Cycle Assessment – EnCiclo

Circular Economy Consulting – Upcycle (upcyclebrasil.com.br)

 

SICV

The National Bank of Life Cycle Inventories (SICV Brasil) is a database created by IBICT – Brazilian Institute of Information in Science and Technology – to house Life Cycle Inventories (ICVs) of national products. The system is a database manager that aims at a consolidated set of Brazilian inventories, which directly implies increasing the competitiveness of the national industry linked to better environmental performance of products and services. It allows different users from different sectors, such as government, industry, academia, to maintain their inventories within the same link called a “Node”. These links are connected to form an LCA data network, based on a globally integrated information structure.

 

 

CTI – Circular Transition Indicator:

Quantitative and flexible system, easy to implement, with the objective of identifying risks and opportunities to determine circular priorities and define objectives.

The methodology allows companies to measure circularity at all levels, from the product level to the entire business, so that companies can use the indicators at the level that best suits their activity. With CTI, it is possible to empower companies in their circular transition, allowing them to better understand their potential for the circular economy.

 

To optimize the accessibility and usability of CTI, a partnership was established with Circular IQ to develop the CTI online tool: www.ctitool.com. This tool structures the data and calculates results by indicator. It also helps companies obtain the data they need from value chain partners without raising privacy or confidentiality concerns.

Any company, regardless of its size, sector or position in the value chain, can use this model. As such, the selection of relevant indicators varies from company to company.

 

** The system is not intended to replace the current sustainability systems used by the industry; it provides an additional perspective on performance in terms of circularity.

 

Historic:

When analyzing the various systems for calculating circularity, such as Material Circularity Indicator and the Circulytics, of the Ellen MacArthur Foundation, the Circle Scan and the Circularity Gap Report Initiative, of Circle Economy 6, or the Circularity Check, from Ecopreneur.eu, it was concluded that there was a need for an internal and quantitative analysis approach in addition to the qualitative self-assessment of circularity carried out by these methodologies. Based on material flows, CTI integrates water, renewable energy and added value within the company, in order to generate a multidimensional perspective of its circular performance.

 

** CTI complies with the circular economy principles of Ellen MacArthur Foundation:

– Eliminate waste and pollution from the beginning

– Keep products and materials in use

– Regenerate natural systems

 

Benefits for companies:

CTI provides companies with insight into their performance in terms of the circular economy, enabling them to:

– Identify circular opportunities and linear risks.

– Establish a baseline and track progress made in your circular transition

– Respond to customers and external stakeholders

– Start value chain dialogue on shared circular priorities

– Attract new business

 

Logic of the CTI methodology:

CTI provides the following menu of indicators:

Close the Cycle  – A company’s ability to close material cycles is at the heart of this methodology. Consequently, companies begin their assessment with these indicators:

  • % circular inflows (by material flow)
  • % circular output streams (by material flow)
  • % water circularity
  • % of renewable energy.

 

The circularity percentage is based on the average of the weight-weighted circular inlets and circular outlets, divided by the total mass of the inlets and outlets.

 

Optimize the Cycle – These indicators illustrate companies' performance in maximizing resource efficiency, in addition to safeguarding material cycles. The module includes two indicators:

  • % of critical materials
  • % of recovery type (reused, repaired, rehabilitated, remanufactured, ..)
  • Circulation of water on site (reuse and recycling on premises)

 

Value the Cycle  – This module provides insight into the value created by circular activity. Relates material flow indicators to conventional financial metrics:

  • Productivity of circular materials
  • CTI revenue (revenue per product, revenue per circularity level per product or group of products)

 

Costs:

professional package (basic) – 7,500 euros/year or 18,000 euros/3 years

premium package 12,500 euros/year or 30,000 euros/3 years

 

  • Circulytics - Ellen Macarthur Foundation

 

Circulytics:

Tool made available free of charge by Ellen Macarthur Foundation to measure the degree of circularity of a company’s entire operation. The tool supports a company's transition to the circular economy, regardless of industry, complexity and size.

 

Benefits:

1- Supports decision-making and strategy development for adopting the circular economy

2- Provides transparency and generates brand value for investors and customers about a company’s circular economy adoption – if the company chooses to publicize it

3- Demonstrates strengths and areas for improvement

4- Measures the circular economy performance of the entire company – not just its products and material flows

5- Allows, year after year, to monitor progress towards the circular economy goal

 

Logic of the Circulytics methodology:

Circulytics measures the circular economy performance of all of a company's operations using a series of comprehensive indicators. They are divided into two categories. Within each category, the indicators are grouped into 11 themes. Each theme receives a weight that represents its empirical significance in the transition to a circular economy, and in the Results category it depends on the type of company being evaluated.

 

Categories:

1- Enablers – essential aspects to enable a transformation throughout the company. The following topics are considered for any company:

– Strategy and Planning

– Innovation

– People and Skills

– Operations

– External Engagement

 

2- Results – measuring the company’s circularity. Each company is evaluated by subdivisions of the themes in the Results category, based on relevance to each business:

– Products and Materials

- Services

– Fixed Assets

- Water

- Energy

– Finance

 

 

By Beatriz Sigaud

CEBDS Volunteer

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