Measuring progress in the transition towards a circular economy

Over the past years, there has been a growing realization that pressing environmental problems and economic instabilities ask for fundamental change in our current patterns of production and consumption. The concept of the circular economy (CE) has been promoted across the globe by governments and other societal actors as an innovative resource efficiency approach with large potential of contributing towards the transition to more resilient societies. While theoretical advances in CE conceptualization have aided CE implementation in practice, it is not yet clear if the concept can live up to the potential ascribed to it and how actors can be guided towards its implementation. Arguably, sound CE impact measurement represents a crucial step in this process.

A recent review by Saidani et al. (2017) holds that CE measurement is generally under-developed in academia yet also in practice with no widely used methods. Ghisellini et al. (2014) found indicators to be best developed at macro level meaning nations and sectors. Indeed, governments worldwide - in Europe as much as in China - are main drivers of CE through so called circular public procurement. This role model function makes evidence of positive impacts particularly relevant not at last to further spur diffusion with actors at other levels.

Our review of the existing CE measurement systems at national level revealed these to have alarming shortcomings. Most notably, almost exclusively effect indicators are used which offer no perspective on CE system formation as it progresses over time. This is problematic, particularly as effects of CE can have large delays 1) owed to the delayed and dispersed nature of environmental impacts, and 2) in sectors with products with longer lifetime, for example construction it can take several decades before effects become measurable.

We propose that innovation sciences literature can serve to address common shortcomings of CE macro level indicators. Despite the widespread assumption that innovation is central for CE development (Murray, 2015), other related disciplines such as industrial ecology dominate the newly emerging field which can be seen from the types of material and energy flow indicators prevailing in CE macro-level measurement. We infer indicators from the ‘functions of innovation systems’ approach (Hekkert et al. 2007) which is widely used to measure key activities in an innovation system in various phases of its development.

This enables us to form three key categories essential for the building up of a CE system: motivations, capabilities, and permissions. As illustration, entrepreneurial experimentation which is considered the starting point in a forming innovation system (function 1), serves us as point of departure for building indicators in the category motivation. Hence, we measure activities and intermediate outcomes and thereby progress in CE system formation rather than end-states. This is crucial for CE indicators being able to function not only as performance measure but implementation guidance. We show how our indicator set can be linked with various key theoretical CE underpinnings. The central CE principle of keeping resources circulating at highest possible value (Reike et al., 2017) is incorporated to measure various quality levels attained in the process of CE formation. Finally, we present a first empirical application of the indicator set in two sectors comparing results for Germany, the Netherlands and the UK. We conclude that more theoretical development in measurement is required along with better recording of CE data to increase the potential for CE indicator sets to function as guidance for implementation rather than purely for effect confirmation.