Monitoring Progress towards a Resource-Efficient and Circular Economy

2. Defining a circular economy to guide the monitoring of progress

A variety of policy frameworks, targets and specific policy instruments have been developed and implemented at sub-national, national and multilateral levels. Several countries have developed strategies, roadmaps and policy packages that address resource efficiency using a circular economy approach. Resource efficiency and circular economy objectives may also be included in national reform programmes or in national innovation strategies.

Several high-profile multilateral initiatives have emerged. The G7 Alliance on Resource Efficiency was established at Schloss Elmau in 2015 and has been built upon by the adoption of the Toyama Framework on Material Cycles in 2016, and the Bologna Roadmap in 2017. In 2017, G20 governments established the ongoing G20 Resource Efficiency Dialogue. The Circular Economy Action Plan released in 2020 forms one of the main building blocks of the 2020 European Green Deal. Resource productivity and the circular economy are one of the top priorities for the work of the OECD on environmental policies (OECD, 2019[2]; OECD, 2022[3]). Similarly, the OECD Recommendation of the Council on Resource Productivity aims to encourage sustainable resource management and limit environmental impacts associated with the use of resources (OECD, 2008[4]).

The type and scope of the information needed to support CE policies depend on how a CE is defined and on the purpose for which the information is needed, such as policy development, policy monitoring and evaluation, awareness raising, communication, participation. They also depend on whether the information is to be used in international work or to support national or regional policies and initiatives.

CE policies can address a breadth of topics and mechanisms. It is therefore important to clarify the scope of the monitoring and its statistical boundaries, and to build a consensus on a common language and a definition that can guide the monitoring of progress at international level and the development of a harmonised indicators framework that interested countries can adapt to their own circumstances.

2.1. Scope and objectives of policies for a circular economy

Countries can have different rationales to increasing resource efficiency and establishing a circular economy. Hence the scope of CE objectives and policies varies across countries.

CE policies typically cut across environmental issues and policy domains. They are often seen as a means to address other environmental issues (e.g. climate change), improve supply security of energy and materials, and increase resource efficiency in production and consumption. Whilst environmental objectives are most prevalent, social and economic objectives are also considered key components of a CE. A transition to a CE is increasingly seen as an opportunity to make an economy more sustainable, competitive and resilient.

CE policies can cover different types of materials and products and many different aspects of the life cycle of materials and their value chains, ranging from material extraction and product design to production and consumption processes, innovation and trade. Waste and materials management, material recovery and raw material consumption are usually core elements, together with energy efficiency for some countries. Water management and water use efficiency are also sometimes considered, in particular in countries where freshwater resources are scarce. Other aspects often considered include eco-design, green public procurement (GPP), innovation, repair and reuse. Hence, the interlinkages, level of alignment and trade-offs between CE policies and other policies addressing these issues need to be well understood.

The monitoring of progress and the statistical measurement need to take into account the economic, environmental and social dimensions of a CE and its levels of application, including the macro, meso and micro levels, as well as the way materials flow through the economy, and between the economy and the environment. It is furthermore important that the data and statistics produced for different dimensions and levels complement each other and are coherent with each other.

2.2. The concept of a circular economy

The concept of a CE is multi-dimensional. It relates to other concepts and principles, including but not limited to, the so-called R-framework that distinguishes different strategies listed from the “most circular” to the “least circular” (see Box ‎2.1), the concept of resource productivity or resource efficiency1 and sustainable materials management. It focuses on the circularity of the material flows2 and on the socio-economic and environmental benefits that arise from it, the ultimate goal being to lower natural resource extraction and decrease environmental and social impacts without an associated reduction of economic output. A CE is understood to be restorative and regenerative by design and to gradually achieve a decoupling of economic growth from the consumption of finite resources, while meeting human and societal needs.

Box ‎2.1. The R Framework and the circularity ladder

The number of ‘R’s featured in the R Framework has evolved over time, from the Japanese Government’s ‘3R Initiative’ (reduce, reuse, recycle) in 2004, to the European Union’s waste hierarchy in its 2008 Waste Framework Directive featuring four Rs (reduce, reuse, recycle, recover), to ten Rs which constitute the 2017 “Circularity Ladder” (Potting et al., 2017, p. 5[5]):

• Smarter product use and manufacture (R0-R2):

  • R0 Refuse: Make product redundant by abandoning its function or by offering the same function with a radically different product.

  • R1 Rethink: Make product use more intensive (e.g., through sharing products, or by putting multi-functional products on the market).

  • R2 Reduce: Increase efficiency in product manufacture or use by consuming fewer natural resources and materials.

• Extended lifespan of products and their parts (R3-R7):

  • R3 Reuse: Reuse by another consumer of discarded product which is still in good condition and fulfils its original function.

  • R4 Repair: Repair and maintenance of defective product so it can be used with its original function.

  • R5 Refurbish: Restore an old product and bring it up to date.

  • R6 Remanufacture: Use parts of discarded product in a new product with the same function.

  • R7 Repurpose: Use discarded product or parts of it in a new product with a different function.

• Useful application of materials (R08-R09):

  • R8 Recycle: Process materials to the same (high-grade) or lower (low grade) quality.

  • R9 Recover: Incineration of materials with energy recovery.

Figure ‎2.1. A Circularity Ladder

Source: (PBL, 2018[6])

The transition towards a CE is not limited to certain materials or sectors. It is a systemic change that affects the entire economy, involves all products and services and is associated with the development and uptake of new business models.

A circular economy operates at different inter-related levels:

• The micro level: consumers, products, firms.

• The meso level: economic activity sectors, industries, cities, sub-national governments. This level also includes eco-industrial parks, networks and clusters.

• The macro level: national economies, countries, as well as supranational entities such as the European Union.

Progressing towards a CE requires the involvement of many stakeholders:

• Governments, who formulate policy objectives and framework conditions that promote changes in the economy and in the society and that ensure policy coherence for a more resource efficient and circular economy.

• Businesses who produce goods and services and are the final responsible entity of making decisions about production conditions and private investments within given framework conditions.

• Consumers who purchase the goods and services produced and whose demand and behaviour are important drivers of a circular economy.

• Other stakeholders such as NGOs that act as advocates of a circular economy and whose actions help raise awareness and facilitate the sharing of information.

There is no single definition nor terminology for characterising a CE. Its meaning varies across countries and literature. It depends on the objectives pursued and on the policies put in place. Most definitions in use have in common the principle of circularity and the goal of moving away from the traditional linear business models to more circular ones. A core view of a CE is that it can be defined relative to a traditional linear economic system, i.e. one that focuses on “closing” resource loops of current linear resource value chains. A second, slightly broader, view of a CE stresses the importance of “slower material flows”, either within an economy with some degree of material circularity, or within an economy that is more linear through product life extension. The third, and broadest, view of a CE is one that involves a more efficient and sustainable use of natural resources, materials, and products within an existing linear system, also including waste prevention (see Explanatory notes on page 17).

2.3. Mechanisms for a circular economy

CE mechanisms may take place at different levels, including different government levels, different firm/sector levels and different geographical areas. They may also cover different time horizons depending on countries’ policy objectives.

The OECD distinguishes several mechanisms that contribute at varying degrees to a CE (Figure ‎2.2). These mechanisms can be related to the R framework (Potting et al., 2017[5]) and to the CE model and circularity strategies used in the Bellagio principles.3

• Closing resource loops seeks to prevent waste from being generated by substituting virgin materials and new products with secondary raw materials (i.e. from recycled industrial or household waste) and second-hand, repaired or remanufactured products.

• Slowing resource loops seeks to slow down consumption and demand for primary raw (virgin) materials by extending the life of existing goods usually thanks to more durable product design. This can be achieved by building long-lasting products that are easy to repair and the ownership of which can change during their lifecycle.

• Narrowing resource loops and flows seeks to increase resource efficiency, either by decreasing the total amount of resources used per unit of output or by making better economic use of existing capacity, and achieve a more efficient use of natural resources, materials, and products, either through the development and diffusion of new production technologies, the increased utilisation of existing assets, or shifts in consumption behaviour away from material intensive goods and services. Narrowing a resource flow does not necessarily imply circularity in the form of loops. It can also be implemented within a linear business model by producing products with less materials and thus achieving a higher or equal output with less material input.

CE strategies may also encompass a transition to a bio-based economy with mechanisms that seek to substitute non-renewable materials with sustainably produced renewable materials (European Commission, 2018[7]).

A transition to a CE could be seen as involving any process that leads to lower rates of natural resource extraction and use, and to lower negative environmental and social impacts. To the extent that it goes without an associated reduction of economic output, a CE transition can thus result in improved resource efficiency and decoupling.

Figure ‎2.2. Mechanisms and features of a circular economy

Source: Adapted from (McCarthy, Dellink and Bibas, 2018[8])

2.4. A headline definition

Due to the great variety in CE definitions, it is important to agree on a common language and define a circular economy in a way that guides the development of a harmonised indicator framework. Such a definition should point at the key elements of a CE but be general enough to serve both measurement and policy needs.

This is best achieved by a hierarchy of definitions that help converge around common key features, whilst giving sufficient flexibility to further adapt to different needs and circumstances, and to different levels of application (e.g. global, regional, national, sub-national, sectors, industries or firms, products). This hierarchy comprises a headline definition4, which is accompanied by simple explanatory notes and references to the mechanisms and strategies underlying a CE, as well as details to guide statistical measurement.

The headline definition highlights three interrelated features of a CE, starting with a distinctive feature that refers to maintaining the value of materials in the economy for as long as possible, thus linking to the circularity principle, whilst ensuring a positive outcome to society. The two other features dwell upon particular aspects that link to the concepts of resource productivity and resource efficiency and to the ultimate objective of a CE and whose monitoring is essential: the preservation of natural capital (natural resources, environmental quality) and human health.

The definition is designed for use in international work and can also serve as a reference for interested countries. Its explanatory notes may be revised and supplemented as the CE mechanisms and strategies in countries take shape and develop.

 

Headline definition
A circular economy is an economy where: the value of materials in the economy is maximised and maintained for as long as possible the input of materials and their consumption is minimised the generation of waste is prevented and negative environmental impacts reduced throughout the life-cycle of materials.
Explanatory notes
“Materials” are understood to include natural resources and the materials and products derived therefrom, i.e. materials at all points throughout their life-cycles (based on OECD/LEGAL/0358).1 The “value of materials in the economy” is understood to encompass the value for society as a whole, taking into account economic efficiency, environmental effectiveness and social equity. “Maintaining the value for as long as possible“ links to the circularity concept and to the higher level R strategies that help close and slow material loops in the economy, such as reuse, repair or remanufacturing. “Minimising the input of materials and their consumption” links to the concepts of resource productivity and resource efficiency. It is understood to contain both: a quantitative dimension, e.g. reducing the quantity of materials extracted from natural resources (virgin materials/primary raw materials, unused extraction) and the quantity of materials used whether from domestic origin or from imports; a qualitative dimension, e.g. reducing the use of materials that are potentially damaging to the environment or whose production and consumption processes have negative environmental impacts, and improving the productivity of materials use at all stages of their life-cycle. It links to the preservation, restoration and regeneration of natural assets. Improved resource productivity will also reduce demand pressure on natural resources more generally, and thereby contribute to more secure supplies of natural resources for everyone (OECD/LEGAL/0358). The “life-cycle of materials” is understood to include all phases of the material cycle such as extraction, transportation, product design, manufacture, final consumption/use, reuse, end-of-life, recovery and final disposal, as well as the associated waste management activities and R strategies. By referring to the life-cycle of materials, i. Waste prevention at all stages of the life-cycle is reflected and the importance of higher level Rs is highlighted. N.B. Waste minimisation and waste prevention entail a quantitative and a qualitative dimension. They encompass activities that reduce both the quantity and the hazardous character of wastes. The scope of waste minimisation is broader than that of waste prevention in that it includes recycling and (if considered appropriate) incineration with energy recovery. Waste minimisation is understood to mean: “preventing and/or reducing the generation of waste at the source; improving the quality of waste generated, such as reducing the hazard, and encouraging re-use, recycling, and recovery.” (OECD Definition) (OECD, 2000[9]) Waste prevention is understood to encompass (a) Strict Avoidance, (b) Reduction at Source and (c) Product Re-use. (OECD Definition) (OECD, 2004[10]). It occurs before products/materials are identified or recognised as waste. Strict Avoidance involves the complete prevention of waste generation by virtual elimination of hazardous substances or by reducing material or energy intensity in production, consumption, and distribution. Reduction at Source involves minimising use of toxic or harmful substances and/or minimising material or energy consumption. ii. All associated environmental impacts are reflected, including impacts on natural assets, on climate, on air, water and soil quality, on biodiversity, on human health, as well as underlying pressures in terms of emissions or discharges of pollutants, greenhouse gases, wastewater, and other residuals from production and consumption processes, including natural resource residuals (e.g. unused extraction).

1. This is in line with the definition of “resources” used in the OECD Council Recommendation on Resource productivity (OECD/LEGAL/0358) and the definition of “material resources” used by the UNEP IRP, i.e. biomass (like crops for food, energy and bio- based materials, as well as wood for energy and industrial uses), fossil fuels (in particular coal, gas and oil for energy), metals (such as iron, aluminium and copper used in construction and electronics manufacturing) and non-metallic minerals (used for construction, notably sand, gravel and limestone) (International Resource Panel, 2019[11]).

Notes

← 1.  Resource productivity refers to “the effectiveness with which an economy or a production process is using natural resources” In line with the Recommendation by the OECD Council on Resource Productivity (OECD/LEGAL/0358) the term “resource productivity” is understood to contain both a quantitative dimension (e.g. the quantity of output produced with a given input of natural resources) and a qualitative dimension (e.g. the environmental impacts per unit of output produced with a given natural resource input).

← 2.  In line with the Recommendation by the OECD Council on Resource Productivity (OECD/LEGAL/0358) the term “material” is understood to include natural resources and the materials and products derived therefrom.

← 3.  Elaborated by the European Environment Agency (EEA) and its “Bellagio process” on monitoring progress in Europe’s circular economy (in partnership with the Italian Institute for Environmental Protection and Research - ISPRA). (EEA, 2021[13])

← 4.  The headline definition and its explanatory notes used in this report, are inspired by existing CE definitions in particular previous definitions used by the OECD (McCarthy, Dellink and Bibas, 2018[8]), the definitions used by the European Commission and the European Environment Agency (EEA), and the suggested definition for measurement initially proposed by the UNECE-TF, as well as input from meetings of the OECD RECE-XG and the UNECE-TF.