How do companies measure and forecast environmental impacts when experimenting with circular business models?

Abstract

Many companies have innovated their business models in their attempts to transition towards a circular economy. However, the label ‘circular’ does not necessarily mean better for the environment. How do companies measure the environmental performance of their business models? And as they alter them for a circular economy, how do they forecast the potential environmental impacts? These questions are important to better understand the impacts of circular business models. This study sets out to answer these questions through 29 semi-structured interviews and 39 survey responses, with business developers, managers, product designers and consultants from more than 10 industries. The results reveal that while most participants measure the impact of their current business models, they do not forecast the future impacts of their circular business ideas before implementation. The most popular measurement method was rules of thumb, followed by life-cycle assessment (LCA) or LCA-based tools. A lack of data, increased uncertainty during experimentation and a lack of knowledge are the common barriers that keep the participants from measuring environmental impacts. We also found that startups give a lower priority to measuring impacts than large corporates. However, despite the latter having more resources to measure impacts, results from impact assessment might not lead to direct design improvements in the same design cycle. An overarching finding was that the extent of positive impact of circular business models remains uncertain for many participants. Future research can work on developing methods or frameworks that resolve these issues.