Last March, the European Commission published a proposal for a directive on corporate environmental claims.
(Green Claims Directive). Its aim? To protect consumers against misleading environmental communications (greenwashing).
This regulation poses a fundamental new challenge for companies: to be able to prove their environmental achievements using scientific methodologies and indicators that are simple, reliable, shared and understandable by all. Circular business models are not exempt from this need to measure the positive impacts of their implementation.
The circular economy is an essential lever for transforming our economic system towards a model that respects planetary limits. In this context, measuring circularity is essential to give visibility and materiality to the economic and environmental benefits it generates, and thus prove the relevance of circular economic models.
Companies also need standardized methodologies for measuring the circular economy, so that their extra-financial reporting complies with European regulations (i.e. Taxonomy, CSRD). Finally, companies must be able to rely on circularity measurement methods to meet the expectations of their multiple stakeholders (customers, consumers, NGOs and investors) when it comes to communicating their progress in the transition to a circular economy.
However, companies face many obstacles when it comes to measuring the circularity of their products, their processes and their organization as a whole:
- Firstly, still too few managers are able to properly define the circular economy and grasp the links between the circular economy, resources, carbon and biodiversity.
What's more, the debate on corporate measurement and reporting today 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 (companies and the public sector). This lack of understanding translates into strategic ambitions for the circular economy that are ill-suited to the challenges of organizations' activities. A reality that does not encourage economic players to measure their progress in the circular economy.
At the same time, organizations are also facing :
- A lack of resources : any measurement and evaluation approach requires the mobilization of human, technical and financial resources to gather the necessary data and develop the relevant digital and information tools to monitor and visualize progress. Measuring the circular economy therefore requires a substantial internal investment.
- A lack of methodology: companies lack recognized, scientific methodologies for measuring circularity, such as those that exist for climate change (e.g., the Greenhouse Gas Emissions Assessment). Added to this is the absence of a common language for the circular economy, resulting in a proliferation of sometimes irrelevant circularity indicators. Many of us are still wondering, and rightly so, what we should be measuring when we talk about the circular economy, what are the impacts we should be prioritizing, and what are the major issues we should be tackling first?
The result is a lack of common published data, which prevents aggregation and comparison of circular economy strategies.
However, if we take the financial sector as an example, the definition of standards is essential to help identify projects that contribute to the transformation of our linear economic model towards a circular one. Shared indicators/KPIs common to a value chain or sector would enable us to direct investments towards the most virtuous projects, and accelerate the transition to a circular economy.