T

Circular Metrics
Landscape Analysis

MAY 2018

A joint report on the current landscape of circular

metrics use and recommendations for a common
measurement framework

1 Innovation and Technology (EIT) under grant agreement No

This activity has received funding from the European Institute of
TC2018A_2.1.4-CirMet_P308-1A. This European body receives support from the Horizon 2020 research and innovation programme.
Executive summary
Background

The circular economy conversation has taken off in the last few years. With its recent proliferation
came the adoption of unique definitions, frameworks and ways of measuring it around the world.
Measuring progress in the circular economy is challenging and what and how adopters of circular
economy practices decide to measure it depends a lot on their objective, scope and audiences. 74% of
interviewees indicated that their company use their own framework for measuring circularity.
Therefore, the cacophony of circular metrics popping up across sectors and geographies has created
an environment of competing and often conflicting indications of actual circularity progress achieved.

This report aims at understanding the current landscape of circular metrics globally. It constitutes the
first phase of WBCSD’s Metrics and Measurement workstream which final aim is to achieve harmony
in how individual companies measure their progress in the circular economy. This workstream is part
of WBCSD’s Factor10 program on the circular economy.

Circular metrics in business – key findings

• Scope: The scope of the circular economy was inconsistent across interviewees, with one
exception: all respondents mentioned “materials” as a part of the circular economy.
Interviewees frequently referenced “water” and “energy” but not unanimously.
• Level of measurement: 76% of respondents are evaluating their circularity at the micro or
company level.
• Value chain and life cycle factors: 48% of the circular metrics identified relate to the internal
operations or processes of a business. 22% and 20% of the circular metrics analyzed qualify
under the Raw Materials and End of Life phases of the life cycle, respectively. Companies rarely
use Design, Distribution and Use phase indicators.

Based on the 39 interviews conducted, the key intended audiences and reasons for measuring
circularity were identified.

Why are businesses measuring circularity? Who are the intended audiences?
1. Drive business performance or strategy 1. Top management
2. Justify achievement externally 2. Customers
3. Integrate circularity across the business 3. Employees
4. Manage risks associated with the 4. Investors
existing linear business 5. Regulators
model 6. Reporting bodies
5. Know the impact of their circular 7. Suppliers
activities 8. NGOs

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Measuring circularity outside of the private sector

The private sector is not the only actor interested in measuring its progress against circular economy.
Governments are adopting circular economy roadmaps and action plans with metrics and indicators in
them. Non-governmental organizations have established their own metrics and certification schemes
related to circularity. Lastly, there have been numerous studies published out of academia on how to
measure circularity and its associated impacts. The consistency in the metrics and methodologies to
each of these approaches rarely overlap or complement one another.

Challenges and enablers for developing a common framework to measuring circularity

Challenges Enablers
• Storytelling and effective • A common framework to understand
communication of circular initiatives and communicate about the circular
• Accounting for environmental, social economy
and economic impacts of circularity • Regulators and policy makers
• No consensus on the definition of the • Internal management
circular economy • Success stories through the framework
• Data availability • Inclusion of academic institutions to
• Internal management & culture ensure credibility and rigor
change

Looking forward to the development of a common framework for measuring circularity at the company
level, the Circular Metrics working group should consider the following recommendations:

7 Recommendations for a framework to measuring circularity

1. Drive circular business performance

2. Target specific audiences depending on company objectives
3. Cover a comprehensive sustainability scope
4. Ensure flexibility and inclusion
5. Adopt a phased approach to incorporating capitals
6. Build upon existing frameworks and standards
7. Drive culture change and provide guidance

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Contents
Executive summary.....................................................................................................2
Introduction ...............................................................................................................5
Methodology ..............................................................................................................5
The value for business in measuring circularity ...........................................................6
Circular metrics in business.........................................................................................9
Measuring circularity outside of the private sector ...................................................16
NGOs & Academia.................................................................................................16
Governments ........................................................................................................17
Challenges and enablers ...........................................................................................23
Recommendations for a common framework on measuring circularity ....................25
References ................................................................................................................29
Annex .......................................................................................................................31
Framework Comparison Table ..............................................................................32
Project Background ...............................................................................................33
Acknowledgements ..............................................................................................34
Media information ................................................................................................35

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Introduction
A circular economy calls for the decoupling of economic growth and resource consumption. Evolving
over decades from multiple schools of thought such as industrial ecology and biomimicry (among
others) the circular economy conversation has taken off in the last few years. With its recent
proliferation came the adoption of unique definitions, frameworks and ways of measuring it around
the world.

Measuring progress in the circular economy is challenging. What and how a company, organization or
government chooses to its contributions towards a circular economy depends on its objectives, scope
and intended audiences. Even within the private sector, the indicators, methodologies and target
audiences for circular metrics vary greatly. The cacophony of circular metrics popping up across
sectors and geographies has created an environment of competing and often conflicting indications
of actual circularity progress achieved.

As part of WBCSD’s circular economy program, Factor10, the Circular Metrics workstream aims to
achieve harmony in how individual companies measure their progress in the circular economy. This
report concludes the first phase of the Circular Metrics workstream, aiming to understand the current
landscape of circular metrics globally. Based on the findings and recommendations, the workstream
working group will begin development of a consensus-based framework for how to measure
circularity at the company level. This second phase will begin in the second quarter of 2018.

PwC provided technical and strategic support for the circular economy metrics landscape for WBCSD only and solely for the
purpose and on the terms agreed with WBCSD in relation to its engagement letter dated 8 May 2018. PwC accepts no liability
(including for negligence) to anyone else in connection with this content.

Methodology
WBCSD and PwC conducted the circular metrics landscape analysis between November 2017 and April
2018. The information and data collection for the process included 39 company interviews (including
18 Factor10 members), 8 additional interviews with NGOs, governments and academia and review of
140 annual reports and 25 other relevant sources. The span of the research covered 15 sectors and five
continents. The graphic above shows the geographic spread of the interviews and annual reports
reviewed, based on company
headquarters (despite most
operating globally). The global
span of the analysis was
subject to identifying
companies that were both
active in practicing the circular
economy and willing to share
their experiences. As such,
most of the interviewees
worked for companies
headquartered in Europe. Figure 1 - Global reach of landscape analysis

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The value for business in measuring
circularity
Figure 2 - CE frameworks cited
Companies are already measuring how their 74%
circular initiatives are creating financial value.
They are finding circular processes and
products can reduce costs, enhance customer
and employee relationships, differentiate from
competition and spur innovation. However, the
24%
circular economy represents something a bit
different to each company across geographies
5%
and industries. 3% 3% 3%

Most companies have their own definition of

the circular economy. In fact, 74% of
interviewees indicated that their company had
their own framework for measuring circularity.
The next most referenced circular economy
framework was Ellen MacArthur Foundation’s
“butterfly diagram” at 24%. Interviewees rarely referenced other frameworks, such as McKinsey’s
ReSOLVE, Cradle to Cradle and the 9R framework. The graph above highlights the percentages of the
frameworks referenced by each of the 39 interviewees.

This indicates that because the circular economy as a concept is relatively vague and amorphous,
companies are shaping and framing the concept based on how it is most material to their core business.
The number of unique frameworks and definitions on the circular economy will present a challenge to
creating a consensus-based framework for measuring circularity in the next phase.

Based on the 39 company interviews, there are five main reasons why businesses are interested in
measuring their circularity:
1. Drive business performance or strategy
2. Justify achievements externally
3. Integrate circularity across the business
4. Manage risk associated with the existing linear business model
5. Know the impact of their circular activities

The chart on the next page demonstrates the percentages of respondents that referenced that driver
as a reason for measuring circularity. Thus, the numbers do not sum up to 100%.

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Figure 3 - Reasons for measuring circularity

77%
67%

49%

28% 28%

Drive Business Justify Achievements Integrate across Business Risk Management Know Impact
Perofmrance/Strategy

DRIVE BUSINESS PERFORMANCE OR STRATEGY: The most referenced reason (77% of interviewees) for
measuring circularity in business is driving business performance or strategy. Companies increasingly
see the circular economy as a value driver, recognizing the financial opportunity in reevaluating the
business model. This is found in companies with advanced maturity in circularity. To achieve this, a
business must not only incorporate circularity into their sustainability strategy but also their corporate
strategy. In a couple of companies interviewed, executive compensation is tied to circular metrics;
highlighting the investment that businesses are taking towards circularity.

JUSTIFY ACHIEVEMENTS EXTERNALLY: 67% of interviewees cited the importance of justifying circular
achievements externally as a reason for measuring circularity. Company representatives mentioned
the need to credibly and consistently disclose or report on circular initiatives to relevant stakeholders,
including (in order of highest to lowest importance): customers, investors, regulators, reporting bodies,
suppliers and NGOs. Companies are using circular metrics to communicate to their customers.

Internal audience External audience

82%

62%
56%

28% 26% 23%

15% 10%

Top Mgmt Employees Customers Investors Regulators Reporting Bodies Suppliers NGOs

Figure 4 - Target audience of CE metrics

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INTEGRATE CIRCULARITY ACROSS THE BUSINESS: 49% of interviewees cited the need to integrate
circularity across the company as a reason for adopting circular metrics. To effectively integrate circular
economy principles into a company’s mission or strategy, it must incorporate those elements into its
operations and performance management systems. To get a company’s business units to buy into a
shift towards circularity, the metrics and goals should be applicable to teams and individuals and foster
improvement over time. Businesses have found that using circular metrics can change products and
processes over time, creating real financial value for the organization overall. In fact, a recent WBCSD/
BCG study found that 97% of survey respondents indicated that the circular economy drove innovation
and made the company more efficient and competitive. 51% stated that the circular economy activities
already add to company profits.

MANAGE RISK ASSOCIATED WITH THE EXISTING LINEAR BUSINESS MODEL: A report published by the
WBCSD in 2017 found that approximately 20% of respondents stated that risk management was a
driver for their company adopting circular business models. Our interview process resulted in a similar
28% indicating that risk management was a reason their company is interested in measuring circular
performance. Examples of “linear” risks that companies aim to mitigate include commodity price
volatility, resource supply security, brand value and reputation and business continuity.

KNOW THE IMPACT OF THEIR CIRCULAR ACTIVITIES: One of the surprising results of the landscape
analysis was that only 28% of company representatives indicated that they measured their circular
performance to understand the broader impacts of their circular activities (e.g. environmental and
social). This highlights the primary focus business has on the financial opportunities of the circular
economy, with environmental and social opportunities taking a more secondary role as drivers.
Acknowledging that not all circular solutions have net positive environmental and social impacts, it will
be important to ensure that the incentives that a circular framework establishes does not come at the
cost of natural, social or human capital.

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Circular metrics in business
As mentioned in the previous section, most companies have their own definition and framework of
how they understand the circular economy. Consequently, the metrics and scope of those metrics that
they adopt also varies.

Scope
The scope of the circular Figure 5 - CE metric elements (in scope)
economy was not consistent
across interviewees, with one 100%
exception: materials.
Interviewees always cited 76%
materials as an element that a 63%
circular measurement
framework should include.
Energy (76% of interviewees) and
water (63%) were typically
18% 3% 3% 3%
referenced but not unanimously.
Almost half of interviewees Materials Energy Water Emissions Land Mineral Governance
stated that their company Elements
includes materials, energy and
water within the scope of the circular economy. Other elements that companies mentioned are
included in their circular metrics include emissions, land, mineral elements and governance, but much
less so.

It’s important to note how a company’s sector or position in the value chain impacts what and how it
measures its contributions towards a circular economy. For example, a chemical company may not
only be interested in how its own operations are circular but also know how their products enable
products down the value chain to achieve circularity. This is a drastically different reason to
measuring circularity that an investor may take, prioritizing the circularity of a portfolio based on
financial, environment and governance metrics of each portfolio company.

Consider the following anecdotal examples of how the key metric can vary across industries. These
indicators are neither comprehensive nor consistent across all industry players. The main message is
to note the diversity in priorities that a common framework would have to resolve.

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 Table 1 - Sector priorities

Levels of measurement
As circular economy is a broad concept, it includes several stakeholders. These stakeholders have
different roles in the economy and society and so have different objectives. When working on circular
economy, it is relevant to identify different goals and related action plans according to which
stakeholder we are (i.e. which level of analysis is appropriate):

• Macro: this is the highest level where cities, countries and international agencies reside
• Meso: it represents all inter-industries and inter-firm networks
• Micro: this is the level where companies and consumers stand
• Nano: this is the lowest level of analysis possible at which stand products and components. Not
all researches and publications include this level as the related goals and actions must be taken
by the higher level

Table 2 - Levels of circular metrics

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Within the private sector specifically, circular metrics take on three levels: nano, micro and meso. Each
one is comprised of a series of the level beneath it. Table 3 details the scope of each level and lists a
few industries that level may apply to.
Table 3 - Circular metric levels in the private sector

Level Scope Industries

Nano Resource, component, product or process Agriculture, Construction,
Micro Company portfolio of Nano level or company Manufacturing, Utilities,
input-output analysis Technology, Chemicals,
Automotive, Retail
Meso Company portfolio of Micro level Finance, Real Estate

A company may measure circularity at more than one level. For example, a widget company may
measure the circularity of each widget type and then aggregate the types at the company level to
understand how its portfolio performs overall. Further, an investor may want to understand the
circularity of its investment portfolio by aggregating each company’s individual circular performance
within it.

The results of the interview process revealed that most Figure 6 - Results of circular metric levels cited
companies are evaluating their circularity at the Micro or
company level (76%). This may be done by either aggregating
product or service totals or calculating the resource inputs Nano
19%
and outputs of the entire company.
Meso
5%
19% of interviewees stated that they measure the circularity
of their products or services (Nano level). 5% of those survey
Micro
indicated that they measure the company’s circularity at the
76%
Meso level. This means that they evaluate the circularity of
their portfolio, which consists of multiple companies or Micro
entities.

Value chain and life cycle factors

In addition to resolving the scope and level differences in circular metrics, a common framework for
measuring circularity at the company level will need to resolve the nuances caused by the position in
the value chain or life cycle.

The graphic below highlights both how circular metrics (both internal and external) can vary along the
life cycle (or value chain) as well as the relative proportions of the metrics that are in use today. There
are a couple of noteworthy findings here:
• 48% of the circular metrics identified relate to the internal operations or processes of a
business. Examples of such metrics include “relative” resource efficiency (i.e. energy efficiency
or energy consumption per unit) indicators or “absolute” indicators (i.e. renewable energy
consumed). Given the alignment of these types of metrics with regular operational
performance metrics, it’s unsurprising that these appear the most frequently in the analysis.

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 • 22% and 20% of the circular metrics analyzed qualify under the Raw Materials and End of Life
phases of the life cycle, respectively. Indicators such as materials consumption, recycled
content and hazardous materials are common Raw Materials indicators. Waste diverted from
landfill, tons recycled and product volumes taken-back are typical examples of End of Life
indicators.
• Design, Distribution and Use phase indicators are rarely used (6%, 1% & 4% respectively).
These indicators require the company to integrate more advanced levels of life cycle thinking
into their performance management and reporting systems.

Figure 7 - Circular metrics along the life cycle

Industry factors
The graph below again illustrates the use of different environmentally-focused indicators disclosed in
annual reports, depending on a company’s industry. Although based on a small sample, it’s clear that
indicators depend on the materiality of the environmental issue to that company, industry and
geography. For example, water efficiency indicators are likely to be more material to an Indian
chemical company than they may be to a British financial services company. This suggests that a
framework for measuring circularity should recognize the relative criticality of some metrics over
others, depending on industrial or geographical contexts.

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Figure 8 – Environmental indicator types by industry. Source: Review of 140 annual reports of worldwide companies

Air emissions
Water
Product
Energy
Materials
Waste

Heavy manufacturing
Light manufacturing

Leisure

Financial Services

Industrial conglomerates

Healthcare
Chemicals & Pharmaceuticals

Energy & Utilities

Transport & Logistics

Retail & Consumer

Professional Services

Technology, Media & Telecom

Construction & Real Estate

Evolving metrics on the circular economy

Companies are at different stages of maturity with respect to their ambitions in the circular economy.
Many are beginning their circular journey by weaving a circular economy narrative into their current
operations. A smaller portion is integrating circular thinking into their sustainability strategy, taking a
more ambitious step in their circular journey. Few companies have reevaluated their corporate strategy
to base it on circular principles.

Table 4 - Circular metric phases

Beginner Intermediate Advanced

Circular Strategy Circularity not formally Circularity integrated in Circularity integrated in
Ambition recognized sustainability strategy corporate strategy
Circular Metrics Operational Efficiency Sustainability Circular Value Creation
Performance

Given this evolution, there is a trend for companies to adopt operational efficiency and sustainability
reporting indicators prior to circular value creation indicators. Recognizing the differences in how
companies define and communicate about the circular economy, the “circular” metrics disclosed by
companies can be broken into these three categories:

• Operational efficiency metrics are often standard performance metrics that may be tracked
even before a corporate sustainability program is adopted. Examples include resource
efficiency, energy consumption, water and waste.

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 • Sustainability performance metrics take it a step further by looking at some of the
environmental endpoint and social impacts of company activities and products. Example
metrics include greenhouse gas emissions, local stakeholders engaged or biodiversity impact.
• Circular value creation metrics track how the business is improving through circularity
initiatives. Example metrics include circular revenue, circular percentage of portfolio and
preserved value. Figure 9 - Breakdown of circular metrics identified

Circular
Although not a representative sample of the
value
broader business community, the chart adjacent creation,
indicates the types of “circular” metrics that 7%
companies analyzed. This data is based on the 140
sustainability reports analyzed. Circular metrics Operational
were only counted if the company referenced that Sustainability efficiency, 44%
performance, 49%
metric in the context of the “circular economy”.

“Intermediate” companies with a sustainability

focus use a broad range of metrics, richer than
that of the "Beginner" companies focusing on
operational efficiency only. In the next phase of
circular ambitions, companies with a value-creation focus tend to adopt a focus on product-related
metrics in addition to internal performance KPIs. Consequently, the scope of their metrics is larger
and involves other stakeholders more directly. The chart below highlights how metric types change as
a company advances in their circular thinking.

Figure 10 - Circular metric types by company maturity

3% 6%
20% 7%
22% Communities
Customers
24% 14% Biodiversity

65% Air emissions

19%
Product
28% 4%
5% Materials
Water
33% 6%
28% Energy
16% Waste

OPERATIONAL EFFICIENCY SUSTAINABILITY PERFORMANCE VALUE CREATION

14
The table below provides more details of how circular-related metrics can change as a company
moves from operational efficiency aspirations to value creation ones. The table below is not
comprehensive and is meant to be more demonstrative.

Table 5 - Sample circular metrics by category

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Measuring circularity outside of the
private sector
Since early 2010s, initiatives have been launched at a higher speed at all levels. First, states have
developed the concept and adapted it to the challenges they faced. China and Japan first promoted
Circular Economy by implemented dedicated laws.

Since then, countries all around the world – and in particular the European Union – have launched
programs aimed at preserving resources, promoting reuse and recycling and using digital technologies
to create sustainable value.

Public sector-driven initiatives and frameworks can impact circularity measurement at company level
in two ways. At a more basic level, by creating awareness on the topic and providing macro-level
guidelines and roadmap (e.g. the recently published roadmap on Circular Economy of the French State).

At a more advanced level, States or supranational unions like the European Commission can actively
establish reporting guidelines and measurement principles that companies will have to comply with.
Regulations can either set principles and rules, or rather provide incentives; the latter approach is
chosen for instance while organizing ERP (Extended Producer Responsibility) schemes: by setting
financial incentives related to a % of recycled material content, an ERP scheme can indirectly create an
incentive for private companies to measure such KPI and take operational decisions on how to
maximize its value.

Besides public sector-driven initiatives, other bodies such as NGOs or academia can also contribute to
the debate on Circular Measurement by proposing frameworks and approaches the private sector can
actively collaborate on or at least consider while setting own standards.

NGOs & Academia

Several frameworks have been created and can be used by any stakeholders to measure the
performance of their projects. As there are multiple frameworks used all around the world, we have
decided to highlight 4 major ones:

• The Material Circularity Indicator (MCI): it calculates the quantity and intensity of circulation
at product and/or company levels (circular and restorative flows). The tool also allows to
compare your performance with your industry’s average

• The Life Cycle Assessment (LCA): it is not a tool dedicated to Circular Economy. It helps
evaluating the environmental or social impacts of a product system at each step of its life cycle
(from raw material extraction to end of use). Once measured, it provides insights of how to
minimize the natural and social capital impacts

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 • The Circular Economy Toolkit (CET): it identifies and assess the potential improvement of
products’ circularity. As for the tools above, it also provides recommendations of improvement
on each step of the life cycle

• The Circular Economy Indicator Prototype (CEIP): it evaluates a product circularity performance
in the context of Circular Economy. The CEIP gives an overall score (%) and a radar diagram with
performance of each life cycle step

The table on the next page provides more details into each of these circular measurement frameworks.
Table 6 - Circular measurement frameworks

Governments
Governments, both national and municipal, typically adopt circular metrics at the macro level. Their
aims of such policies may drive improved performance in resource consumption, economic
development, environmental stewardship and/or job growth. Policymakers have a critical role in
accelerating circular economy uptake. Typical policy levers used in stimulating circular economy
activities include public procurement, taxes (i.e. landfill tipping fees) and incentives (i.e. end of life
return schemes). The table below provides some examples of government indicators identified.

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 Table 7 - Summary of CE metrics in government

This section provides some detail on select circular economy policies from around the world and
discusses how it relates to the metrics conversations in the private sector. This is not an exhaustive list
of national circular economy policies but a sample snapshot of these initiatives globally.

China, Japan and the European Union were some of the first national governments to adopt circular
economy policies. Since then, other nations, researchers and companies have understood the
importance of circular economy and have launched national roadmaps or similar circular economy
development policies.

Figure 11 - Global snapshot of select CE policies

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European Union
The objective of the European Commission is to transform the economy and make it more sustainable.
To do so, these metrics are tightly followed to measure the progress made and the remaining efforts
to be done. The European Commission built up a set of 10 indicators based on the stages of the lifecycle
of resources, products & services:

• EU self-sufficiency for raw material (% key materials used in EU that are produced within EU)
• Green public procurement (% major public procurements that include environmental
requirements)
• Waste generation (waste generation per capita / per GDP unit)
• Food waste (amount generated)
• Overall recycling rates (% municipal waste)
• Recycling rates of specific waste streams (% overall packaging waste / electronic equipment /
bio waste…)
• Contribution of recycled materials to raw materials demand (% secondary raw material on
overall raw material demand)
• Trade in recyclable raw materials (imports & exports of selected recyclable raw materials)
• Private investments, jobs and gross value added (amounts in the circular economy sectors)
• Patents (number of patents related to waste management & recycling)

China
China was one of the first country to implement circular economy principles in its law i.e. its 11th five-
year plan. It defined its ambition:
• Eco-design and cleaner production strategies and actions
• Eco parks and networks with positive impact on regional economy and environment are
promoted
• Sustainable production and consumptions activities are promoted to create a recycling-
oriented society

To measure progress on these goals, the Chinese government have identified some KPIs that are still
followed today:
• Resource output rate comprising indicators such as output of main mineral resource or energy
• Resource consumption rate including energy consumption indicators (e.g. per unit of GDP,
added industrial value, unit of product), water withdrawal, water consumption
• Integrated resource utilisation rate referring among others to recycling rates, water reuse
ratios…
• Waste disposal and pollutant emissions including for instance amount of industrial solid waste
for disposal, COD emissions
• Carbon emissions and ecological characteristics

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Japan
Figure 12 - Relationship of Japanese CE laws
As in China, Japan has implemented laws based
on circular economy principles. Japan has also
created a framework to monitor the progress
made and the impact on the Japanese economy:
• Resource efficiency including indicators
measuring the recovery of resources
• Material flows by weight measuring the
flows within Japan and between Japan
and the rest of the world (Sankey
Diagram)
• Resource productivity, recycling rates and
disposal rates indicators with revised
targets for 2020 as part of material flows
metrics
• Societal efforts metrics including size of
market for rental and leasing of goods, surveys of consumer awareness and actions related to
circularity
• General indicators such as capita generation of waste

India
On its side, India has not enforced dedicated law on circular economy but instead has launched multiple
programs with specific goals. The overall objectives of these programs can be classified in 4 categories:
• Environment & climate change
• Food & agriculture
• Cities & construction
• Mobility & vehicle manufacturing

As for the other Asian countries, several frameworks have been created to follow the performance of
these programs:
• Zero Defect Zero Effect model targets MSMEs and small business to produce products with
zero defect (0 waste, 0 non-compliance) and zero effect (0 air pollution, solid waste…)
• E-national Agriculture Market is a digital portal for all stakeholder of the agriculture supply
chain to access best practices on the market (i.e. resource use)
• Faster Adoption & Manufacturing of hybrid & electric vehicles in India (FAME) scheme was
launched by the Department of Heavy Industry to support demand-driven R&D to achieve
desirable target solutions and increase the domestic capacity of product & technology
development
• The Smart Cities and Clean India missions aim at promoting sustainable housing, building green
cities with decent quality of life and sustainable environment

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Brazil
Figure 13 - PPCS Key Priorities
South America has decided some years ago to align on
the UN initiative for sustainable production and
consumption. Among them, Brazil has soon identified
the importance of having a sustainable way of
producing and consuming, particularly in a context of
high growth.

In 2011, Brazil launched its National action plan on

Sustainable Production & Consumption (PPCS). Its key
priorities are listed in the graphic to the right. While
launching this action plan, Brazil also set clear goals to
reach within 5 to 9 years:

• +50% sustainable consumers in the mid class by 2014

• 20 sustainable procurement processes implemented in public administration by 2014
• Embed social-environmental responsibility with long-term strategies by 2014
• +20% recycling by 2015 and +25% more by 2020
• Encourage 50% of retailers to implement sustainable procurement policies by 2014
• +20% sustainability performance of construction in terms of water, energy, waste management
and sustainable procurement by 2020
Setting these goals was a way for Brazil to follow its action plan and quickly be able to identify any gap
or delay.

Jordan Figure 14 – Jordan’s SCP 3 pillars

In Middle East, Jordan too has
launched its National strategy and
action plan for Sustainable
Consumption & Production, based
on the UN initiative for sustainable
production and consumption, as in
Brazil. Launched in 2016, the plan
has 3 pillars, as exhibited in the
adjacent figure.

These pillars are inspired from some

notions of circular economy. Indeed,
the Jordan government has decided
to base its action plan on circular
economy to tackle the main threats
that the country currently face.

In cooperation with the SwitchMed

project, Jordan has listed several
KPIs that needed to be collected and analysed during the whole length of the action plan. Each pillar
has its own KPIs:
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• On Agriculture / Food production:
o Amount of water and energy used in irrigation
o Number of certified farmers/food manufacturers achieving environmental standards
o Ratio sustainable agricultural land to all agricultural lands
o Pesticides or fertilizers emissions to land
o Number of businesses, products and services certified in the green or organic labels and
other environmental label schemes
• On transport:
o Amount of energy involved in getting the product to its markets
o Ratio of passengers traveling by public transport
o Ratio of citizens owning zero-emission and/or Electric Plugins and/or hybrid cars
• On waste management:
o Proportion of waste sent to landfill sites
o Amount of methane captured and flared off, or fed into biogas engines to generate
power
o Re-use of waste
o Number of waste management companies

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Challenges and enablers
Interviewees identified many enablers and challenges for successfully developing a common
framework for measuring circularity at the company level. These open response questions were noted
and categorized to provide a clearer picture of the biggest opportunities.

Challenges
➢ Storytelling and effective
communication of circular initiatives Story Impact Definition Data Internal
telling measurement availability management
has proven to be a challenge for many
companies. The framework must 6 6
resonate with internal audiences 7
such as top management or 9
employees across different business 10
units. However, it must also strike a
cord with NGOs, policy makers and
investors so that they understand
how the framework creates value for them.
➢ It’s one challenge to measure a company’s circularity. It’s another one to measure (and value)
the environmental, social and economic impact of those circular activities. Translating “total
circular procurement” or even “tons recycled” into endpoint indicators and impacts is not
straightforward and can be an art as much as a science. However, it is critical to account for
both positive and negative impacts (including rebound effects) that result from circular
initiatives to establish a credible framework.
➢ The many distinct definitions of the circular economy will be a significant challenge in the
beginning of the next phase of the project. However, establishing consensus across this first
hurdle is critical to the future success of the project.
➢ The availability of data is a challenge tabled in most corporate sustainability metric
conversations. Circular economy metrics are no exception. The creation of new metrics that
have evolved from earlier sustainability or operational performance indicators makes this even
a greater challenge.
➢ Internal management, or education and culture change, will be a challenge in integrating the
circular metrics across a company. It will be critical to adopt metrics that drive individual,
business unit and company performance improvement over time. This requires buy-in from top
management and acknowledgement from employees that they have a role to play in the larger
circularity of the company.

23
Enablers
➢ Establishing a common framework
for how businesses across industries 7
and value chains can understand and 6
communicate the circular economy 4
would be a big step in moving 3
2
towards measuring it. This may wind
up being the biggest challenge A common The role of Internal Story telling Academic
alongside creating a common framework authorities management involvement
definition. Establishing a shared
framework for business allows exceptional companies to stand out from its peers, allowing
investors to make more informed decisions and policymakers to better understand how to
drive the private sector towards circularity.
➢ Regulators and policymakers can also be a way to improve the chances of success for a new
circular measurement framework. Collaborating with key public sector stakeholders may
improve uptake of the eventual framework. One of the companies interviewed had their
circular measurement framework adopted by a national government, facilitating that
company’s ability to report to national agencies easier.
➢ Considering it was one of the biggest challenges anticipated, it’s no surprise that internal
management is one of the most cited enablers for a common circular measurement
framework. The framework should strive to effectively empower employees to take on their
roles in moving their company towards circularity.
➢ If the framework can allow companies to communicate with both internal and external
stakeholders, or tell a story, it would amplify the chances of its success. Opportunities for
doing this include establishing a clear link to company missions statement and policies or
creating success stories.
➢ Inviting notable academic institutions to participate in the development of the framework
would ensure credibility and rigor. Many companies interviewed mentioned ongoing
collaborations they had with universities on the topic and shared their positive experiences in
what the academics brought to the discussion. Similar to having regulatory or policy
representatives participating in the development process, invited academic institutions would
strengthen the conversation by challenging assumptions that might otherwise go unchecked.

24
Recommendations for a common
framework on measuring circularity
There are seven recommendations for consideration when developing a framework for measuring a
company’s 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. Failure to integrate
all recommendations may limit the applicability and uptake of the framework.

According to the outcomes of the landscape analysis, a common framework for measuring circularity
at the company level should:
1. Drive circular business performance
2. Target specific audiences depending on company objectives
3. Cover a comprehensive sustainability scope
4. Ensure flexibility and inclusion
5. Adopt a phased approach to incorporating capitals
6. Build upon existing frameworks and standards
7. Drive culture change and provide guidance

1. Drive circular business performance

An effective circular economy measurement framework must not only drive the company to become
“more circular” but also spur financial growth. The circular economy represents a “means to an end”
as opposed to the end goal itself. As such, circular framework indicators should drive improvements in
financial, environmental and social performance over time, not circularity itself. For example,
measuring circular revenue or circular percentage of portfolio metrics would drive strong financial
performance through circularity.

An important distinction the framework should make is to distinguish between a company’s circular
performance within its own operations (“processes”) and its “products” and/or “services” that enable
their customers and others down the value chain to improve their circularity. Products and processes
are interrelated and each have implications on a company’s overall circularity. While both processes
and products both have impacts and dependencies on the environment and society, the magnitude,
types and company control may vary between them. This draws parallels with the three scopes of the
Greenhouse Gas Protocol. What a company monitors and manages within their own operations should
be understood in context with the impacts and dependencies the company has on the environment,
economy and society. This would require agreement on attribution of those impacts and dependencies
across the whole life cycle.

2. Target specific audiences depending on company objectives

Companies should be able to communicate their circular performance to both internal and external
stakeholders. A company may decide to include their circular metrics on their integrated performance
dashboard for employee reference, in their integrated or sustainability reports for reporting bodies
and investors, or in customer-targeted communications. Although executive management, customers

25
and employees are often the main target audiences for circular metrics, a company should be able to
effectively communicate their circular performance with their priority stakeholders, such as regulators.

3. Cover a comprehensive sustainability scope

To honestly measure its circularity, a company should account for the financial, environmental and
social aspects of its circularity. Only measuring the financial performance of circular activities may come
at the cost of increased environmental or social burdens, and vice versa. For example, a company
should not be rewarded for sourcing recycled content when child labor is used in the recovery and
processing of that material.

Similarly, the framework should account for all resource inputs and outputs in its performance
measurement process. Most importantly, the framework will account for the circularity of products
and services put onto the market. Secondly, the scope of the natural resources that the circular
framework should consider: materials (including minerals, soil, waste, etc.), energy (including air
pollution and emissions) and water (including wastewater). Claiming to be “circular” without
accounting for these natural resources and all three pillars of sustainability opens a company up to
potential public scrutiny.

4. Ensure flexibility and inclusion

The development of a circular measurement framework must ride the thin line between flexibility and
standardization to ensure comparability without discouraging mainstream business from moving
towards circularity. The framework should apply to companies of all industries, value chain positions
and maturity levels in their circular thinking. Recognizing and adapting to the differences in how
companies measure performance when they are a financial services company versus a manufacturing
company is critical. Additionally, two companies at different positions in the same value chain may
have two different ways of measuring circularity or impacts. For example, a chemicals company may
want to measure how their product enables circularity in another product downstream; whereas a
finished good manufacturer would want to also understand how circular their product is. However, the
boundary around the processes and products/services being measured must be consistent. One
interesting example of categorizing the private sector to account for various roles in the circular
economy is ABN-AMRO’s classification of Producing companies, Facilitating companies and Customer-
oriented companies.1 (ABN-AMRO, 2017)

The framework should also be inclusive. To encourage pickup of the framework, it should highlight
leaders in the circular economy without discouraging the companies just beginning their circular
journey in measuring their performance over time. For example, the framework may allow companies
to measure the circular performance internally and decide whether they disclose this value in their
annual reporting and communications. Alternatively, the framework may normalize performance
values per industry as opposed to companies in general.

1
(ABN-AMRO, 2017)
26
Product or service and portfolio circularity are intimately related. Thus, the framework should permit
measurement of circularity at the product level, without obligation. As product manufacturers and
service providers increasingly adopt portfolio approaches to driving sustainability and circularity, the
circular measurement framework should embrace it. Ultimately, a company is better able to drive the
circularity of their portfolio if it understands what’s going on at the product level. However, taking the
additional steps to understand the circularity of each product may be cost prohibitive or irrelevant for
some companies. As such, companies should be encouraged to measure circularity at the product or
service level but not be required to do so.

5. Adopt a phased approach to incorporating capitals

There are many aspects with which a company should understand its performance in the circular
economy. Some of those aspects are easier than others to quantify today. Consequently, the
development and launch of the framework should occur in phases. This allows well-understood and
higher priority aspects of the circular economy to be measured and monitored in the short-term
while more complicated and less developed metrics are identified and integrated into the framework.

Using the IIRC structure of the six capitals, a circular performance measurement framework should
address at least financial and natural capital in the first iteration. The next iteration should address
human and social and relationship capital. Lastly, if not incorporated in a second iteration, both
manufactured and intellectual capital in third iteration of the framework.

Another phasing approach should be taken when integrating the circular framework into regular
business performance processes. Companies may wish to start with recycling and waste diversion
metrics, then move to product redesign and ultimately to business model transformation. This is the
process that many companies analyzed have incorporated circular metrics into their performance
dashboard.

6. Build upon existing frameworks and standards

A circular measurement framework should recognize relevant existing standards and frameworks and
build upon them without contradiction or competition. Existing products such as the Global Reporting
Initiative, Natural Capital Protocol and the International Integrated Reporting Council’s (IIRC) <IR>
Framework are widely used by companies (and increasingly so). Building on top of this momentum
would be much more favorable towards circular framework uptake than creating something new that
doesn’t align with these protocols. For example, the circular framework should be consistent with GRI’s
306 Effluents and Waste standard and the World Resource Institute’s Greenhouse Gas Protocol. A
comparison of these existing frameworks and how they relate to the circular economy can be found in
the Annex.

Increasingly, companies need to understand how their business model depends on and impacts
natural, social and human capitals. The framework development team should consider using the IIRC’s
six capitals as a structure for assessing circular performance. These six capitals include: natural,
financial, social and relationship, human, manufactured and intellectual. Although it may not be
necessary to reference all six types of capitals in the framework, particularly in the beginning, the

27
consistency with an existing protocol that is growing in adoption rates across the private sector will
facilitate circular framework adoption and integration.

Figure 15 – International Integrated Reporting Council’s Six Capitals (IIRC, 2018)

7. Drive culture change and provide guidance

A circular measurement framework should also drive company culture change and provide guidance
to facilitate that change. Companies that have been the most effective in changing company culture
towards circularity see a “circular mindset” driven from the top-down initially. Executives should buy
into the concept and demonstrate their commitment to their employees. The framework may include
elements that ingrain circularity into the company culture, such as incorporating it into the mission
statement or developing a corporate or sustainability strategy upon it, tying individual remuneration
to circular performance KPIs or providing education and training demonstrating the value that
circular initiatives create for the company.

28
References
ABN-AMRO. (2017). The Value of All Things: Circularity across sectors. Amsterdam: ABN-AMRO.

Boulding, K. E. (1966). The Economics of the Coming Spaceship Earth. In H.Jarrett.

Bringezu, S., Schütz, H., & Moll, S. (2003). Rationale for and Interpretation of Economy-Wide Materials Flow
Analysis and Derived Indicators. Journal of Industrial Ecology, 43-64.

Circle Economy. (2018). The Circularity Gap Report.

Circular Economy Toolkit. (2013). Retrieved from circulareconomytoolkit.org

Circular Economy: a critical literature review of concepts. (2015). Retrieved from

http://www.ciraig.org/pdf/CIRAIG_Circular_Economy_Literature_Review_Oct2015.pdf

Cradle to Cradle. (2016). Cralde to Cradle Certified, Product standard, Version 3.1.

Department of Heavy Industry Homepage. (n.d.). Retrieved from Department of Heavy Industry:
http://dhi.nic.in/

EASAC. (2016). Indicators for a circular economy.

Ellen MacArthur Foundation. (2016). Circular economy in India: Rethinking Growth for Long-term
prosperity.

European Commission. (2014). European Resource Efficiency Platform. Retrieved from EC.europa:
http://ec.europa.eu/environment/resource_efficiency/re_platform/index_en.htm

European Commission. (2018). Communication from the commission to the European Parliament, the council,
the European Economic and Social Committee and the Committee of the Regions on a monitoring framework
for the circular economy.

Geng, Y., & al., e. (2012). Towards a national circular economy indicator system in China: an evaluation and
critical analysis. Journal of Cleaner Production.

Global Reporting Initiative . (n.d.). GRI G4 Sustainability Reporting Guidelines.

Global Reporting Initiative. (n.d.). GRI Standards Download Center. Retrieved from Global Reporting
Initiative: https://www.globalreporting.org/standards/gri-standards-download-center

Griffiths, P. a. (2016). Design of indicators for measuring product performance in the circular economy. . In R.
H. Setchi, 3rd International Conference on Sustainable Design and Manufacturing. Springer Science and
Business Media Deutschland GmbH.

IIRC. (2018, April 10). Get to grips with the six capitals. Retrieved from Integrated Reporting:
https://integratedreporting.org/what-the-tool-for-better-reporting/get-to-grips-with-the-six-capitals/

International Integrated Reporting Council. (2013). The international <IR> Framework.

Luciana Stocco Betiol, T. H. (2015). The power of public & private consumption for an inclusive green
economy.

M.J, M. (1990). Economics of natural resources and the environment. London.

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Ministero do Meio Ambiente. (2011). Plano de Açao para produçao e Consumo sustentaveir - PPCS.

National Water Mission. (n.d.). Retrieved from Ministry of water resources, river development & Ganga
Rejuvenation: nwm.gov.in

Natural Capital Coalition. (2016). Natural Capital Protocol.

Pradhan Mantri Krishi Sinchayee Yojana. (n.d.). Retrieved from Pradhan Mantri Krishi Sinchayee Yojana,
Department of Agriculture & Farmers Welfare, Governement of India: pmksy.gov.in

PwC. (2016). Navigating the SDGs: a business guide to engaging with the UN Global Goals.

Saidani, M., Yannou, B., Leroy, Y., & Cluzel, F. (2017). How to assess product performance in the circular
economy? Proposed requirements for the design of a circularity measurement framework.

Social & Human Capital Coalition. (2018). The Social & Human Capital Protocol (Draft for Public
Consultation). Geneva: World Business Council for Sustainable Development.

UN. (2016). SDG Indicators. Retrieved from UNSTATS: https://unstats.un.org/sdgs/indicators/indicators-list/

UNEP, Switchmed, & EU. (2016). National Strategy and action Plan for Sustainable consumption and
production in Jordan - 2016-2025.

WBCSD & BCG. (2018). The New Big Circle: Achieving growth and business model innovation through
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ZED - Zero defect - Zero effect. (n.d.). Retrieved from Homepage: zed.org.in

30
Annex

31
Framework Comparison Table

32
Project Background
In recent years, the circular economy has increasingly appeared as the new model to pursue sustainable
economic growth. As this momentum of the circular economy has grown, so has the number of
indicators and methodologies for assessing progress. Governments, companies and non-governmental
actors are developing various ways to measure progress towards a circular economy. Companies have
indicated that best practice sharing, business-driven guidance and more consistency is needed across
the circular KPIs and measurement landscape to steer company efforts to provide meaningful
information to their various stakeholders and more convergence on this effort.

Following a stakeholder engagement process of WBCSD members and partner organizations, WBCSD
formed and adopted Factor10, its circular economy program. One of the workstreams under Factor10
is to develop a consensus-based framework for measuring circularity at the company level and
contribute business-driven input into public sector KPI frameworks.

The first phase of the workstream is to develop a landscape analysis of existing circular metrics and
KPIs. This analysis will provide information to project members on: best practices; the metrics
businesses, organizations, and governments are working on; the methodologies used, for whom, and
why; the business value of why companies are measuring circularity; and recommendations for a
common framework. This report is the conclusion of this phase.

The second phase will be to develop a common framework that includes recommendations and
guidance for companies to measure and communicate their circularity. This framework will be
developed through the working group members in consultation with different subject matter experts
and stakeholders. This will be supported by case studies from members pioneering the measurement
of circular economy within companies.

A third phase will involve company pilot tests and feedback collection. Following these initial phases,
additional work will include awareness raising, advocacy and tool development to facilitate framework
use.

33
Acknowledgements
WBCSD Co-authors PwC Co-authors
Brendan Edgerton, Manager of Circular Jan-Willem van den Beukel, Global Circular
Economy Economy Lead
Elena Giotto, Associate of Circular Economy Jean-Baptiste Petit, Manager Sustainable
Performance & Strategy
Vladislava Iovkova, Director at Strategy&
Nur Karapinar, Intern for Corporate
Responsibility Office

WBCSD thanks the following companies for their contributions to the landscape analysis:
WBCSD would first like to thank the following WBCSD Factor10 members for providing their
perspectives: Apple, ArcelorMittal (HQ & Brazil), BASF, CRH, DSM, Enel, KPMG, Michelin, Philips, PwC,
Rabobank, Renault, Saint-Gobain, Solvay, Stora Enso, The Dow Chemical Company, Veolia, Yara.

Secondly, WBCSD would like to thank the companies who generously offered their time and
perspective to strengthen this work: Altarea Cogedim, AXA, Canon, CCU, Coca-Cola Partners EU, Disal,
E.Leclerc, Ecor, FIFCO, Flock, Florex, Groupe Casino, ING, Kering, Lafarge, L'Oréal, Owen’s Corning,
Pernod Ricard, PGGM, Seb, Suez, Umicore, Unilever.

Lastly, WBCSD would like to thank the following organizations and institutions for either providing their
perspective or inviting their members to participate: Accion Empresas, ADEME, Alianza Empresarial
para el Desarrollo, 2ACR, Circle Economy, Circular Economy Platform of the Americas, European Bank
for Reconstruction and Development, Global Reporting Intitiative, International Reference Centre for
the Life Cycle of Products, Processes and Services (CIRAIG), Italian Ministry of the Environment, Mines
Paristech.

PwC provided technical and strategic support for the circular economy metrics landscape for WBCSD
only and solely for the purpose and on the terms agreed with WBCSD in relation to its engagement
letter dated 8 May 2018. PwC accepts no liability (including for negligence) to anyone else in connection
with this content.

This activity has received funding from the European Institute of Innovation and Technology (EIT)
under grant agreement No TC2018A_2.1.4-CirMet_P308-1A. This European body receives support
from the Horizon 2020 research and innovation programme.

34
Media information
World Business Council for Sustainable Development (WBCSD)
WBCSD is a global, CEO-led organization of over 200 leading businesses working together to accelerate
the transition to a sustainable world. We help make our member companies more successful and
sustainable by focusing on the maximum positive impact for shareholders, the environment and
societies.

Our member companies come from all business sectors and all major economies, representing a
combined revenue of more than $8.5 trillion and 19 million employees. Our Global Network of almost
70 national business councils gives our members unparalleled reach across the globe. WBCSD is
uniquely positioned to work with member companies along and across value chains to deliver impactful
business solutions to the most challenging sustainability issues.

Together, we are the leading voice of business for sustainability: united by our vision of a world where
more than nine billion people are all living well and within the boundaries of our planet, by 2050.
www.wbcsd.org

Factor10
The future of business is circular, and there’s no room for waste in it. Factor 10, WBCSD's new circular
economy program, aims to bring circularity into heart of business leadership and practice. Our goal is
to build a critical mass of engagement within and across business to move the circular Economy to
deliver and scale solutions needed to build a sustainable world.

In order to reach Vision 2050 in which not a particle of waste exists, eco-efficiency of materials must
improve by a factor of 10. This target was previously referenced by the Factor10 Institute in 1994 when
they called for the ten-fold improvement in resource efficiency. Learn more about Factor10 at
https://www.wbcsd.org/Programs/Energy-Circular-Economy/Factor-10

Disclaimer:
This report is released in the name of WBCSD. Like other reports, it is the result of collaborative efforts
by WBCSD staff and experts from member companies. Drafts were reviewed by Factor10 Circular
Metrics workstream participants, ensuring that the document broadly represents the majority of
Factor10 members. It does not mean, however, that every member company of WBCSD agrees with
every word. Please note that the data published in the report are as of May 2018.

Copyright © WBCSD May 2018

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