How circular is a value chain? Proposing a Material Efficiency Metric to evaluate business models

Abstract

The concept of Circular Economy is a principle aiming to improve sustainable development by reducing resource use and impact on ecological systems. An increasing number of companies are applying this theory on design strategies and business models in order to close, slow and narrow material loops. To highlight the importance, guide practitioners, and evaluate the progress of circular economy, a high number of circularity metrics (C-metrics) have been developed. However, little attention has been given to creating a connection between quantification of circularity and environmental performance. Existing metrics also do not highlight the interplay between micro (product), meso (industrial symbiosis), and macro (regional) level circularity. Moreover, existing metrics do not capture all material loops and do not adopt a value chain perspective on material flows.To improve the connection between C-metrics and environmental performance, a framework connecting circular economy strategies and material flows was developed. Based on this framework, a material flow-based C-metric was designed aimed at converting mechanisms of closing, narrowing and slowing material loops into a single-point value. To evaluate its feasibility, the metric was tested on three circular business models that represent all three mechanisms in a value chain perspective. The results showed that the metric is feasible in more situations than existing metrics and that the circularity value is highly dependent on assumptions. In future studies, the metric should be tested and compared to Life Cycle Assessments on multiple system levels to ensure that it generates valid results. Furthermore, user input assumptions should be standardized to ensure metric reliability.