Article

In March, the European Commission published a proposal for a directive on companies' environmental claims (the Green Claims Directive). Its aim? To protect consumers against misleading environmental communication (greenwashing).

This regulation creates a fundamental new challenge for companies: being able to prove their environmental achievements using scientific methodologies and indicators that are simple, reliable, shared and understood by all. Circular business models are no exception to this need to measure the positive impacts of their implementation.

The circular economy is an essential lever in transforming our economic system into a model that respects planetary boundaries. In this context, measuring circularity is indispensable if the economic and environmental benefits it generates are to be made visible and tangible, and the relevance of circular business models thereby demonstrated.

Standardised methodologies for measuring the circular economy are also expected by companies so that their non-financial reporting complies with European regulations (i.e. the Taxonomy, CSRD). Finally, companies need to be able to draw on circularity measurement methods in order to meet the expectations of their many stakeholders (clients, consumers, NGOs and investors) when it comes to reporting progress on their transition to a circular economy.

Yet companies face numerous obstacles in measuring the circularity of their products, their processes and their organisation as a whole:

• First, far too few executives are able to define the circular economy correctly or grasp the links between the circular economy, resources, carbon and biodiversity.

What is more, the debate on corporate measurement and reporting currently focuses on climate issues, without taking into account the fact that the circular economy is a means of achieving greenhouse gas emission reduction targets for economic players (businesses and the public sector). This lack of understanding translates into circular economy ambitions that are poorly matched to the realities of organisations' activities. That, in turn, does little to encourage economic players to measure their progress on the circular economy.

At the same time, organisations also face:

• A lack of resources: any measurement and assessment exercise requires human, technical and financial resources to gather the necessary data and develop the digital and information tools needed to steer and visualise progress. Measuring the circular economy therefore calls for a fairly substantial internal investment.
• A lack of methodology: companies lack recognised, science-based methodologies for measuring circularity, comparable to those that exist on the climate side (e.g. the greenhouse gas emissions assessment). Added to this is the absence of a common language for the circular economy, which results in a proliferation of circularity indicators that are sometimes of little relevance. Many of us are still, quite rightly, asking what should be measured when we talk about the circular economy, which impacts should be pinned down first and which major subjects should be tackled as a priority.

The upshot is an absence of common published data, which prevents aggregation and comparison of circular economy strategies.

Yet if we take the financial sector as an example, setting standards is essential to identify the projects that contribute to shifting our linear economic model to a circular one. Shared indicators and KPIs common to a value chain or a sector would make it possible to channel investment towards the most virtuous projects and accelerate the scaling up of the circular economy.