Circular Economy (CE) is rapidly gaining momentum as the world’s leading advocacy associations (e.g. WBSCD) and governmental bodies (e.g. European Commission) recognise this approach as a way of boosting business and economies without exploiting resources at a rate that exceeds the Earth’s capacity. The central tenet of a circular economy is to move away from the currently predominant ‘take-make-use-waste’ practices of the linear approach towards continuous cycles where the value embedded in products, materials and resources is preserved.

Why should the current linear system be replaced?

Global raw materials use is nowadays approaching 100 billion tonnes and is projected to double by 2060. Conversion of raw materials into useful goods, buildings, infrastructures and services did not only contribute to global economic growth—which has quadrupled in the last 50 years—but also to the rise of greenhouse gas (GHG) emissions, resource scarcity, waste generation, air and water pollution, and biodiversity loss. Reports highlight that 55% of the current GHG emissions are associated with energy production while a staggering 45% with material handling to make goods for the economy. While a rising number of efforts to curb emissions have been focusing on the critical role of renewable energy sources and energy-efficiency measures, little attention has been paid to address the issues of material handling and recirculation.

Material handling inefficiency and the inability to return used materials to the system present great risks both for the global economy and for actors in the manufacturing sector. Price volatility, trade bans, changing legislative and customer demands, and instability of the supply chain represent the greatest risks. Unsurprisingly, a failure to recirculate materials and goods is estimated to cost nearly USD 380 billion in losses for manufacturing actors in the EU alone, related to the inefficiencies of production processes, cost of scrap utilisation, loss of precious metals (e.g. the case of not returned electronics) or inability to sustain long term relationships with customers.

What opportunities are CE practices envisioned to bring?

With these considerations, a CE is seen as a new model that aims at boosting economic benefits while sustaining natural resources through material and goods recirculation, resource efficiency and waste and pollution minimisation. At a manufacturing level, CE can be achieved by pursuing several CE actions, often called CE strategies, which require complex transformations of business models, products, manufacturing processes and value chain activities. 

A broad range of CE strategies for manufacturing companies can be implemented, such as product as service offerings with a focus on intensified use of products (e.g. product pooling and sharing); virtual offerings with a focus on dematerialisation of products; resource efficient manufacturing and transport; offerings for product upgrade, repair, remanufacturing and recycling with a focus on extending the product’s use and lifetime and recirculating materials. The adoption of CE strategies can bring major economic and environmental benefits, such as the reduction of resource use, waste and emissions, improved cost-efficiency, increased market presence and customer satisfaction, and job creation. As a result, the circular transition is seen as a condition for a more sustainable world. But, is this an axiom that needs no questioning? A closer look might be needed.

Is any CE strategy intrinsically sustainable?

Numerous scientific publications and organisational reports provide concrete examples of the benefits generated by a number of CE strategies. Agrawal et al. (2012), for instance, show the economic benefits and lower environmental impact of a leasing model for printers compared to a sale model, while Sundin and Lee (2012) demonstrate a one-third reduction in total carbon footprint as a result of a remanufacturing activity for inkjet cartridges. In the case of a Chemical Leasing service—which relies on purchasing chemicals based on functionality rather than volume—Schwager et al. (2016) report a decreased consumption of chemicals by 30%, together with reduced costs and improved working conditions in the food processing sector.

Alongside the benefits, however, the literature also provides documentation about some negative consequences of introducing CE strategies. Agrawal et al. (2012) conclude that leasing for carpets is economically beneficial, however environmentally worse (as opposed to the findings for printers); Lonca et al. (2018) report that the use of re-treaded tyres increases fuel consumption of the vehicle due to a higher rolling resistance. A reuse strategy for electronic and electric goods might not always be beneficial from an energy consumption point of view, since older equipment might not be as energy-efficient as the new one.

Replacing virgin material sources with recycled materials offers a great opportunity within CE to minimise overall environmental impact. However, the issues of high energy intensity and utilisation of polluting chemicals in the recycling processes, the compromised quality of a recycled material, and the missing social responsibility of recycling practices (e.g. e-waste recycling practices in developing countries) point to the fact that none of the CE strategies can be assigned a positive contribution to sustainability ‘by default’. Therefore, the CE cannot be seen as a successful means towards sustainability if no positive contribution is achieved. This being the case, what is needed to understand the sustainability benefit of a CE implementation? Supported by scientific literature, the answer is a case-by-case sustainability assessment.

What is a sustainability assessment and its role in revealing a contribution to sustainability?

To define how well any action will or does contribute to sustainability, a sustainability assessment should be undertaken. The aim of a sustainability assessment is twofold. Firstly, to support the identification and integration of relevant sustainability issues into decision-making when developing or monitoring a proposed action. Secondly, to help assess the sustainability performance of a proposed action in light of other actions to enable its improvement or termination. Following one of the discourses of sustainable development—the terms sustainable development and sustainability are often used interchangeably—sustainability is viewed as the pragmatic integration of societal development and environmental goals, which was popularised as a triple bottom line approach for sustainability.

The triple bottom line approach implies an integrated consideration of environmental, social and economic issues for any proposed action or strategy if it aims at solving a number of these issues. Accordingly, it might address such environmental issues as resource depletion, air and water pollution and waste generation, social issues of unequal pay, unfair and unsafe working conditions, and economic issues of cost-inefficient operations or poor quality products. Therefore, when it comes to the CE, to assess how well a particular CE action will contribute to sustainability, the action’s performance from the economic, environmental and social perspective should be assessed. While several approaches for a CE assessment have been proposed in the past years, considerable challenges from both theoretical and practical perspective exist, as discussed next. 

“Whether and how a CE strategy positively contributes to sustainability, is not just a matter of ‘fitting’ the strategy under a CE umbrella, but also of a sustainability-oriented design and measurability”

Avenues for putting a circular economy into perspective

The first type of approach to CE assessment concentrates on indicators, indexes and metrics to assess the ‘circularity’ of actions, be it the scope of a whole organisation, products or materials. Perhaps, the most widely known metric is the Material Circularity Indicator (MCI) proposed by the EMF, which relies on measuring the mass flow of input materials—including non-virgin—product utilisation rate, destination after use and efficiency of recycling. MCI gives a value between 0 and 1, where higher values indicate a higher circularity. Despite a relative simplicity, this indicator—as many others focused on assessing ‘circularity’ (for a comprehensive collection, see Saidani et al., 2019)—faced several questions, specifically related to whether this type of metrics can provide a link between CE and sustainability, i.e. show how sustainable a particular CE action is. One of the major insufficiencies of the proposed metrics is a failure to measure a wide number of sustainability-related aspects beyond materials and cost, such as water consumption, air, water and land pollution, social aspects of health and safety, fair treatment and community support, and more.

The second type of CE assessment concentrates on assessing the sustainability impacts of proposed CE actions. While a life cycle assessment (LCA) method can be employed to measure environmental impact of certain CE strategies, numerous publications reveal that LCA is challenging when assessing CE strategies focused on sharing, pooling or subscription model. Additionally, there seems to be no unified approach to measuring CE impact from a threefold perspective, i.e. environmental, social and economic. The third type of assessment proposes key performance indicators for sustainability, which cover triple dimensions of sustainability and are useful to assess the performance of separate or combined CE strategies. Leading performance indicators proposed by Kravchenko, Pigosso and McAloone (2019) are especially useful for early design stages of CE strategy development and can be used as ‘hands-on’ by industrial practitioners. While being useful for internal decision-making, the approach relies on extensive data collection and some indicators might not be suitable for external communication.

With all the complexity embedded in CE development and implementation, and in understanding and operationalising sustainability, perspective is of ultimate importance. When embracing the CE and its contribution to sustainability gains, this means asking questions as: what kind of CE action is envisioned, what it entails and who is engaged? What are the sustainability issues a proposed CE action aims at solving? How to scope sustainability to make it more operational and allow its permeation into decision-making process? What assessment approach to use – going beyond measuring ‘circularity’ towards a holistic assessment of environmental, economic and social dimensions of sustainability?

By Maria Kravchenko (maria7krawka@gmail.com)

March 2021

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