Choosing and applying the right metrics will steer your organization towards circularity. We take a look at some of hurdles you’ll encounter – and suggest how to overcome them.
Being circular is no longer an option but an imperative. In order to meet the UN’s Sustainable Development Goals – especially number 12: responsible production and consumption – every company must shift from a linear to a circular, waste-free business model, based upon re-use, recycling and renewables. Whether selecting the Circular Transition Indicators (CTI) or other metrics, you must ensure you use the right measurements for your business, to provide insights that can foster innovation and show investors and other stakeholders that your organization is on a path to circularity. Regardless of your organization’s circular maturity, the CTI framework is relevant and can provide a foundation for emerging circular economy disclosures, with investors demanding such metrics in annual financial and sustainability reports.
The data challenge
Gathering circular data on your company’s material use, re-use, refurbishment practices or recycling is a relatively new activity for many organizations. Establishing your specific data needs – and how to acquire this information on an ongoing basis – is one of the first steps in the transition to circular. Although some of the data may already have been collected for other purposes like procurement or reporting, a significant amount may not be readily available, possibly located deep in the supply chain and difficult to extract from suppliers and other business partners. Even if information is accessible, it may not be in the right format to calculate the metrics. Frameworks like the CTI acknowledge that certain details – like recovery of products at end of life – are currently hard to find, and therefore suggest alternative, practical approaches. This might include using more generic data such as sector, regional or national averages for products or product groups. Over time, as circular economy targets and reporting become mainstream, the goal should be to share information with other players swiftly and securely, within the boundaries of confidentiality (for instance, bill of material details are considered highly sensitive). New technologies like blockchain should help to overcome some of the fears over sharing, bringing additional security. Companies can, however, be transparent on the actual metrics they generate and the methods used.
Getting help along the way
Although companies are experienced with traditional financial and operational performance metrics, they may need assistance integrating circular measurements into their plans and reporting. The CTI offers a detailed user manual, periodically updated, including any new indicators. Additionally, companies can ask the CTI Academy for further support in the form of live and recorded webinars, training materials, instruction videos and case studies from peer industries. A free online tool guides companies through the assessment and helps users reach out to internal stakeholders and value chain partners for data. Another option is to seek third-party help from trained CTI implementation partners – such as KPMG.
From measurement to action
Metrics are there to guide your actions. Once you’ve acquired the appropriate data and started to track circular performance, you need to integrate these findings into decision-making, including ongoing monitoring, to drive continuous improvement by becoming steadily more circular.
Key metrics like energy and water usage, recycling, use of ‘virgin’ resources, re-usability, waste and emissions will aid your reporting and help you gauge your circular status and progress. Metrics also provide insights into the use of critical materials and ways to improve recycling, refurbishment, reuse or composting. And you can also link circularity with financial information to track how much of your revenue comes from circular activities – and then compare the results with industry averages.
The indicators can also be used to start conversations with suppliers and other partners on how to become more circular, as well as with customers to better understand their expectations. Of course, the CTI process does not stop after calculating the performance. A seven-step model guides your circular action plan for innovation, to ensure continuous improvement. The circular measurement landscape is constantly evolving, with new metrics and reporting requirements emerging. In our forthcoming blog, The next wave of circular metrics, you can hear about some of the latest developments – and consider how to keep abreast of these changes.