Why companies need to adopt circular metrics in order to plot a faster course towards a sustainable, waste-free future.
Just 8.6 percent of the world’s economy is circular. Which means the vast majority of our production and consumption continues to use up the planet’s resources and cause waste, pollution and CO2 emissions. A circular economy will play a critical part in reversing this trend, by introducing a virtuous loop of longer product lives, re-use and recycling of materials. But we won’t get there by simply tweaking our current business models. Nor will our traditional measurements and metrics be up to the task. They only evaluate economic outputs and fail to assess sustainability performance.
Metrics aren’t just a way of tracking progress and reporting. They also help us think differently and stimulate innovation, by opening our minds to different ways of sourcing, producing and providing goods and services. If we know that our business will be assessed on its circularity, we’re more likely to build longevity and recycling into initial product design, create energy-efficient manufacturing processes that use fewer resources, and shift to as-a-service provision rather than ownership.
Emerging circular metrics
There are a number of emerging circularity metrics, guidelines and ratings including the Sustainability Accounting Standards Board (SASB), the Global Reporting Initiative (GRI), and e.g. Circulytics from the Ellen MacArthur Foundation or the (draft) ISO circularity metrics taxonomy. In particular, the World Business Council for Sustainable Development (WBCSD) has developed the universal Circular Transition Indicators (CTI) – co-authored by KPMG and taking direct input from companies across multiple industries. The CTI enable a self-assessment of circular performance across procurement, design and recovery, at business unit, site or product level and are agnostic to where a company is positioned in the value chain. And they also establish a link between circularity and financial performance. Measurements include share of renewable or recycled materials and renewable energy, percentage of products designed for recovery versus proportion actually recovered, recycling rates, water circularity, critical materials, percentage of sales from circular processes, and many more.
Universal and sector-neutral
By using the indicators, companies can better understand how to become more circular and prioritize actions that will bring the greatest gains. The metrics are size and sector-neutral – although industry-specific guidance is expected in the near future. And they’re flexible enough to be useful to Chief Sustainability Officers, innovation managers, strategy consultants, designers, engineers, procurement officers or value chain managers. A wide range of organizations, from multinationals to family-owned businesses, have already adopted the CTI, creating a common language of circular performance for investors, regulators, consumers and other interested stakeholders.
In our next blog, Becoming circular – faster, we’ll discuss which metrics to adopt and how to integrate circular measurement into the organization, with a particular focus on the challenges in gathering new types of circularity data.
