4 Circularity Metrics Essential to Measure Your Success
Transitioning to a circular business model will help your business gain longevity and maintain a competitive edge in whatever market you are in. However, shifting from a linear to a circular economic model is difficult, and the lack of standardized circularity metrics makes it even more challenging. Below are 4 sets of circularity metrics building blocks that will help you effectively measure your transition to the circular economy
To effectively measure your businesses’ circularity progress, it is essential to use integrate not only relevant metrics – but KPIs that are:
- Easy to understand.
- Easy to collect on a monthly/ quarterly basis.
- Accurate, so you can derive actionable insight that will drive the desired outcome.
- Integrated with current sustainability program metrics so they become common practice.
Business 101 taught us that changes only happen when you can set a goal, align resources toward the goal, and track improvements. When considering the transition to a circular economic model, the immediate questions are:
- How do I measure circularity?
- What goals should be set and what metrics should be attached to each goal?
- How to track that the strategy is sound, the talents are in place, and the resources are lined up?
- What to track to ensure that you are not tweaking a linear model but truly transforming into a circular one?
- What metrics to use to measure the circularity of physical assets? Of water? The flow of materials?
Circularity, at its core, is really a continuation of your sustainability program. However, It requires significant business changes along with the ability to share data across the supply chain. To work, circularity metrics need to be integrated into the enterprise lexicon in order to become an integrated part of your overall sustainability strategy.
The Ellen MacArthur Foundation, the authority of circular economics, rightfully identified the need for standardized metrics. They created their Circularytics methodology with is immensely useful to frame the transition to the circular economy.
“Many businesses are starting to embrace this opportunity, but for the transition to happen at scale and speed they need accurate data and clear analysis,” Andrew Morlet, CEO of the Ellen MacArthur Foundation, said in a statement. “Our ambition for Circulytics is to help any business, in any industry, anywhere in the world, recognize and unlock the potential of the circular economy.”
The Circulytics tool provides a comprehensive structure, as it considers external qualitative factors such as strategy, innovation, talents, operation, and level of engagement with suppliers, consumers, investors, or policymakers, for example. The tool also organizes the quantitative results grouped by sections such as products and material, services, Fixed Assets, water, and energy… A drawback is that you fill out a lengthy questionnaire and wait for the foundation’s team of experts to provide you with a score.
In addition to the Ellen Macarthur Foundation’s work, many companies have stepped up to provide models, structure, and guidance by offering software subscription or consulting engagements. Most of the models understandably evolved from tracking resources across the supply chain. Tools like Circul8 cloud software, or Life Cycle Analysis tools such as or the Sphera GaBi tool are an excellent place to start with tracking circularity metrics, but they are a small piece of the puzzle.
Below are a set of circularity metrics that are recurring across all models that aim to measure how to design waste and pollution out of your production cycle, how to keep products and material in use, how to regenerate natural resources, and how to create new profitable revenue streams.
Circularity Metric # 1: MATERIAL
The process applies to both mechanical and biological cycles. As part of your current sustainability program, you have tracked the material usage across your operation, then you looked at the waste generated by your operation, then you used landfill diversion to reduce your waste footprint. Now you can integrate the circularity of your material with the following calculations
Step 1: Measure the circularity of the inflow of a product.
This corresponds to the percentage of renewable content ( or non-virgin content) by weight. The formula is below
Material Inflow Circularity %=(Volume of renewable material )/(Total volume of material ) X 100%
You will need to duplicate this step for each material that composes a specific product and then take the weighted average. In other words, assuming the inflow of a widget is composed of 2 materials: material A and Material B. To calculate the Material Inflow of the widget you would need to use the formula below:
Material Inflow of Widget=(( Material inflow circularity A × Volume A)+ ( Material inflow circularity B × Volume B))/((Volume A+Volume B))
Step 2: Measure the circularity outflow of a product.
This corresponds to the percentage of outflow material that is recyclable factored in by the actual recycling rate. The formula to use is :
Material Outflow Circularity (%)=Volume of renewable material × Theoretical recycling rate × Actual Recycling rate
If your widget is composed of several materials ( maybe aluminum and plastics for example), then you would need to calculate the circularity outflow of each material that compose a product and take the weighted average. The formula to use is:
Material Outlow of Widget=(( Material outflow circularity A × Volume A)+ ( Material outflow circularity B × Volume B))/((Volume A+Volume B))
Step 3: Measure the circularity of a product.
This last step requires to simply do a weighted average of the 2 previous calculations. The formula to use is:
Product Circularity Index=( Circularity inflow % × Total volume of inflow)+( Circularity % of outflow × Total Volume of Outflow)
Once the calculation is completed for a product, you can repeat to aggregate the calculation for the product line, a business unit, a region, a company.
Circularity Metric # 2: WATER
If your operation requires a lot of water, you already calculated the water consumption of each plant each process, each product, and each business unit.
To introduce the water circularity metrics, you need to measure the percentage of water inflow that is circular and the percentage of water outflow that is circular
Step 1: Calculate the inflow water circularity index.
This corresponds to the percentage of inflow water that is circulated and is derived by using the following formula:
Water Inflow Circularity %=(Volume of withdrawal water that is recirculated)/(Total volume of withdrawal water ) X 100%
Step 2: Calculating the outflow water Circularity Index
In the same way, the circularity outflow is obtained by calculating the total volume of discharge water that is recycled divided by the total volume of discharged water consumed. The formula is
Water Outflow Circularity %=(Volume of the outflow water that is recirculated)/(Total volume of outflow water generated) X 100%
Step 3: Calculating the Water Circularity Index
Finally, to obtain the Circularity of the water index, simply take the average of the circularity inflow and the circularity outflow. The formula is:
Water Circularity Index=(Inflow Water Circularity Index + Outflow Water Circularity Index)/2
Circularity Metric # 3 ENERGY
Your current sustainability program requires you to calculate the energy consumption for your operation and know how to allocate it by business unit, process, line, and product.
The energy circularity element is simply integrating the element of renewable energy as it measures the percentage of renewable energy consumed by your operation.
Renewable Energy Circularity index=(Annual renewable consumption)/(Total annual energy consumption) X 100%
Circularity Metric 4: Circularity Value Index
Transitioning to a circular business model allows enterprises to create new revenue streams by repairing returned goods and reselling into alternative channels or reselling unused capital assets for example. Calculating the value and profitability of those new markets and appending it to the products’ circularity allows you to capture an additional financial component to your circularity KPIs.
Integrating those circularity metrics will help your operation create a common language across different business units, a set of reliable quantitative metrics to measure your operation circular performance, to derive actionable insights, to provide meaningful information for internal steering and decision making, and to help your enterprise embrace circularity
At 1GNITE, we have worked with large corporations to successfully transition them to circularity by introducing new programs, and we have found that what works best is: for corporations to pick and choose from a menu of metrics to devise the KPI that fits their operations. Our experience with transitioning existing operations to a circular economic model allows us to guide you through the process from start to finish. If circularity is a goal for your business, contact us today and let us make the transition to circularity smooth, efficient, and effective.
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