Business Metrics To Assess Circularity Introduced
For the first time, companies will be able to assess how successful they are in transitioning to a circular economy. The Ellen MacArthur Foundation and Granta Design announced the findings of the Circularity Indicators Project and the release of a web-based assessment tool that can be used by businesses to track their progress in moving to circular models at an event in London this month.
The business advantages of the circular economy have been accepted by large numbers of companies globally and there are a wealth of examples of businesses implementing circular economy principles into their models and products. There has also been work outlining the size of the opportunity, most notably the Ellen MacArthur Foundation’s Towards the Circular Economy report series, which identified a USD 1 trillion opportunity for businesses worldwide in adopting a circular economy.
However, companies are accustomed to using metrics and tools in all aspects of their business to assess, track and measure their progress and development both in specific areas and at a company level. For many businesses, effectively implementing circular economy requires the ability to make those assessments. Until now, there has been no established method or metric for assessing the effectiveness of the circular economy projects implemented by companies.
To address this, the two-year Circularity Indicators Project was set up with the aim to provide a set of indicators that could estimate circularity in both specific products and at a company level. The project brought together European businesses, expert designers and leading academics to support the development, testing, and refinement of the measurement approach and to ensure its robustness and relevance economy-wide.
The main indicator produced is the Material Circularity Indicator (MCI) on a product basis, which takes into account: the amount of virgin, recycled and reused materials and components in the production process, how long and how intensely the product is used relative to its industry (taking into account repair and maintenance), the destination of the products and its parts after use, and how efficiently the product can be recycled.
The MCI is presented as a value between 0 and 1 where a higher level of circularity is indicated by a higher number. The release of this assessment tool will mean that for the first time companies can look at individual products to assess their circularity and to track progress in creating circular products. The tool is applicable to products that are made from non-renewable material sources and fit into technical cycles.
The assessment system also facilitates the use of optional complementary risk and impact indicators, and company level indicators. The complementary risk and impact indicators can be used alongside the MCI to offer insights into potential risk in relation to business priorities and how changing circularity impacts other areas of business interest. Company level indicators are an aggregation of the MCIs for all product types within that business.
The Material Circularity Indicator and accompanying indicators are a set of unique tools that can be utilised in the design, reporting and evaluation phases of a product or collection of products. The company-level indicators and potential extensions might also be used in research, rating and evaluation of companies, policy making or education.
The full Circularity Indicators methodology, together with a project overview report and a collection of non-technical case studies, are now available for download from the Project’s website. In addition, an Excel-based model illustrating the functioning of the methodology is available and allows to test the product-level MCI in a simple case.
In addition to the methodology, the Project has contributed to the development of a commercially-available web-based system that will provide businesses with the tools required to track their progress in transitioning their products into a circular economy-based business model. This tool is based on the product-level methodology and has been developed by Granta Design, and integrated within their existing MI:Product Intelligence package.
The Circularity Indicators Project was a two-year long research initiative funded by the European Commission’s Life financial instrument.