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Measurement and reporting are crucial to the success and growth of the circular economy, requiring clear and standardised evaluation tools. Their absence makes it challenging for companies and governments to assess their impact, monitor progress, and communicate transparently with stakeholders. As seen in recent initiatives, the introduction of standardised indicators and reporting tools is helping to drive the transition towards a circular economy.

ISO standards for the circular economy

While some metrics evaluate specific aspects, creating a standard that measures the circular economy as a whole is a complex challenge. This is evident in the work of the International Organisation for Standardisation (ISO), which, after years of effort, has managed to connect all the dots and establish a global vision with the launch, last May, of three new ISO for the circular economy. These standards − Vocabulary, Principles and Guidance for Implementation (ISO 59004), Guidance on the transition of business models and value networks (ISO 59010), and Measuring and assessing circularity performance (ISO 59020) − provide a comprehensive toolkit for implementing the circular economy, covering principles and measurement, and achieve global consensus by aligning different countries around a shared definition of the circular economy and its principles.

For the first time, ISO standards establish a shared understanding of the vocabulary, implementation, business models, value networks, measurement, and evaluation of the entire industry. However, Jacco Verstraeten-Jochemsen, Director of Circle Economy Consulting, points out that ISO standards present some critical issues. They function somewhat in isolation, lacking connections to earlier initiatives like the Circular Transition Indicators (CTI) or the GRI.

Circularity Gap Metric

Introduced in 2017, the Circularity Gap Metric underpins the annual Circularity Gap Report, a tool that offers a quantitative overview of the global economy's circularity. It employs global indicators to assess how many resources are recycled or reused in comparison to those consumed. As Verstraeten-Jochemsen explains, the Circularity Gap Metric "was developed primarily to raise awareness and bring the issue onto the political agenda, less to be a tool for businesses."

Circular Transition Indicators (CTI) v4.0

The Circular Transition Indicators (CTI) version 4.0, developed by the World Business Council for Sustainable Development (WBCSD), are an advanced example of a measurement tool designed for companies, to systematically monitor their progress towards circularity using a universal, quantitative framework. It targets critical areas such as efficient use of resources, material recycling, and waste reduction. In the 4.0 version, the indicators have been refined to account for the complexities of specific sectors, providing a tailored approach for various types of businesses. However, as Verstraeten-Jochemsen notes, "it is a self-assessment tool for individual companies." A crucial element of CTI is data, which may be readily available, but also hidden in separate pockets of the company, or even situated externally with supply chain partners. To enhance the tool’s accessibility and usability, the WBCSD partnered with Circular IQ to develop an online measurement tool.

GRI 301 e 306

The GRI Standards, developed by the Global Reporting Initiative (GRI), are a widely used sustainability reporting tool adopted by organisations around the world, including many Italian companies for their sustainability reports. Within the GRI 300 category, which focuses on the environment, there are eight existing standards, two of which – GRI 301 and GRI 306 – address the circular economy. GRI 301 focuses on materials, their management, and impact, providing information on weight, volume, recycling, and reuse. Meanwhile, GRI 306 covers waste management, reporting, disposal, and its environmental impact. The GRI system is modular and interconnected, with the other GRI 300 standards addressing energy, water and wastewater, biodiversity, and emissions.

New CSRD regulation and Global Circularity Protocol

Effective from January 2023, the Corporate Sustainability Reporting Directive (CSRD), launched by the European Commission, updates and strengthens the rules governing the social and environmental information that companies must disclose. A wider group of large companies, as well as listed SMEs, will now be required to prepare sustainability reports in line with the European Sustainability Reporting Standards (ESRS). Non-European companies generating more than 150 million euros in the EU market will also need to produce a report. The goal is to enhance transparency regarding companies’ sustainability efforts, thereby helping to build trust among investors and customers.

“The last few years have seen significant progress in the development of standards and frameworks for the circular economy,” Verstraeten-Jochemsen continues. “There have been efforts at regulation and harmonisation compared to what we have seen so far. The first is the introduction of the CSRD, which will become mandatory next year for almost 50,000 companies across Europe. The second is the Global Circularity Protocol (GCP), a new global framework set to be introduced next year, developed by the UN, WBCSD, and One Planet, with the goal of harmonising and not adding complexity. The CSRD sets a high benchmark, but I am pleased to see that the standards within it have been heavily inspired by existing ones, such as CTI and GRI.”

Deloitte's videos and Circle Economy self-assessment tools

To assist companies in navigating these complex scenarios, Deloitte has created the CSRD Series – a collection of twenty-minute video guides covering various related topics, from CSRD risks and opportunities to the EU taxonomy.

Circle Economy's CSRD tool, meanwhile, offers explanations of the CSRD E4/E5 concepts and evaluates a company's preparedness. This tool enables businesses to self-assess their alignment with the European ESRS E5 standard, providing a comprehensive overview of their circular performance and identifying areas of non-compliance or opportunities for improvement.

Image: Andrea De Santis, Unsplash