Monitoring Progress towards a Resource-Efficient and Circular Economy

3. The conceptual monitoring framework

The main purpose of the conceptual monitoring framework is to organise thinking about indicators, to identify relevant metrics and to ensure that nothing important gets overlooked. It reflects the integrated and cross‑cutting nature of a CE while organising the indicators in a way useful to decision-makers and the public. It is supported with a statistical framework, consistent with the System of Environmental-Economic Accounting (SEEA) where possible, to help structure and combine underlying statistics, to link CE terms and definitions to the terms and definitions used in official statistics, and to ensure coherence among data sets (UNECE, 2024[1]).

Analysis around the conceptual monitoring framework is expected to also identify the needs for capacity building in developing countries and emerging economies, to consolidate and strengthen their information base on waste and material flows, R strategies and related environmental impacts.

3.1. Scope

The conceptual framework covers all dimensions of a CE and the whole lifecycle of materials, products and services. The principles applied in drawing it up were:

• A balanced coverage of the main dimensions of a circular economy and of their main features, aligned with the CE definition in chapter 2.

• The identification of key aspects for which indicators are needed, i.e. those that are of common relevance to resource efficiency and circular economy policies in OECD member and partner countries and beyond.

• A structure and indicators that could be applied at different levels and geographical areas (multilevel monitoring).

For practical reasons, the monitoring scope in this report focuses on “materials” in line with material flow analysis and accounting, i.e. mineral resources (metallic and non-metallic industrial minerals), biomass, and energy carriers (e.g. coal, oil, gas). Particular attention is given to materials whose extraction, processing, use and disposal are internationally significant, in both economic and environmental terms. This is in line with the definition of the OECD Council Recommendation on Resource Productivity (OECD/LEGAL/0358) and the definition of “material resources” used by the UNEP International Resource Panel. The physical and the monetary aspects of a CE are both considered.

Water resources and energy (beyond energy carriers) are covered to the extent that they are part of an integrated approach to the entire resource cycle and the associated environmental impacts. It is recognised that sustainable use of freshwater and energy resources is conceptually part of a CE. Bulk water flows and circular use of water resources are not within the scope of this report but can easily be integrated by government agencies or national statistical offices. National and international sets of environmental and sustainable development indicators include water-related indicators that can be used for this purpose complemented with circularity indicators. The same applies to energy use and energy efficiency.

3.2. Structure

The conceptual framework combines the main features of a CE with the basic principles of accounting and the pressure-state-response (PSR) model used in environmental reporting and assessment. It has four components centred around the material life-cycle and the economy’s production and consumption functions, and describes the interactions with the environment – the natural asset base and environmental quality –, policy actions and the derived socio-economic opportunities that contribute to a just transition (Figure ‎3.1).

Given the breadth of the topics that need to be covered within the four components, a further structuring is applied by defining indicator themes and topics (Table ‎3.2).

Figure ‎3.1. Conceptual monitoring framework – building blocks

Note: The framework combines the main features of a CE with the basic principles of accounting and the pressure-state-response (PSR) model used in environmental reporting and assessment. It draws on the frameworks used for OECD environmental indicators and green growth indicators, and is inspired by the CE frameworks used in countries (e.g. the Netherlands) and the EU.

3.2.1. Material life-cycle and value chain

This component describes the various stages of the material life-cycle and value chain, from raw material inputs to solid waste outputs, materials use in production and final consumption and the R strategies in place to keep the value of materials in the commercial cycle for as long as possible. It reflects key features and major outcomes of a CE, considering the circularity principle and the various CE mechanisms.

Related indicators show how materials enter, flow within and (eventually) leave the economy. They should lend themselves to being linked to reference values (benchmarks, thresholds, baselines, objectives, targets) and to environmental issues, including climate change, toxic contamination, biodiversity, natural resource management. As a rule, main indicators on the material life cycle should also lend themselves to being related to indicators on responses and actions and to indicators on opportunities to help linking responses to results obtained as a first step in monitoring the effectiveness of policies. They are to be complemented with information and indicators on the factors that drive demand for materials (population growth and structure, household size, economic growth and structure, income levels, final consumption expenditure) and on which policy levers can act.

Given the breadth of the topics to be covered, this building block is further structured around three themes:

• The material basis and productivity of the economy, i.e. indicators on the level and characteristics of materials supply and their use in the economy or in industries, paying particular attention to material inputs, including domestic extraction and imports, material consumption, including domestic material consumption and raw material consumption (footprints), and material accumulation in the economy (stocks, addition to stocks), as well as indicators relating materials use to GDP, value-added or other socio-economic output variables through intensity or productivity ratios.

• The management efficiency of materials and waste, and the circularity of material flows with reference to R strategies and CE mechanisms when possible. Examples include indicators on waste generation (by source, by type); recycling rates; circular use rates; shares of secondary raw materials in material inputs or consumption; renewable content of material used in production processes, products diverted from the waste stream (repaired, remanufactured, reused); materials leaving the economic cycle, i.e. waste going to final disposal.

• Interactions with trade and globalisation (international dimension of a CE), i.e. indicators on exports and imports of materials, second-hand goods, end-of-life products and waste, the physical trade balance and the material intensity of trade.

Indicators under this component could also be grouped in line with the CE mechanisms (closing resource loops, slowing resource loops, narrowing resource flows).

Data availability permitting the selected indicators should be able to:

• distinguish between primary and secondary raw materials;

• distinguish between materials stemming from non-renewable natural assets (or technical materials) and materials stemming from renewable natural assets (or bio-based materials)1.

• capture developments in materials that raise specific concerns as to:

  • their environmental significance, i.e. their significance with respect to natural resource management and waste and materials management issues, and to the environmental consequences of their production, use or end-of-life management. Examples include pollution from mismanaged products and materials, such as electric and electronic equipment and plastics.

  • their economic importance, i.e. their significance with respect to economic development, supply security, international trade. Examples include strategic raw materials such as certain metals and rare earths, food or energy carriers.

Material-specific indicators provide important information to assess progress in key supply chains.

Relevant indicators can be derived from sets of material flow and resource productivity indicators and from sets of environmental, green growth and sustainable development indicators, complemented with new and improved indicators that capture the circularity of material flows in the economy and in production and consumption processes. Underlying data can be derived from material flow analyses and accounts, waste statistics and accounts, product statistics and trade statistics. The availability of physical supply and use tables (PSUT) would be an advantage, as well as the availability of material-specific flow accounts.

When monitoring policies that promote the circularity and efficiency of water and energy use, related indicators can easily be added under this component.

3.2.2. Interactions with the environment

This component describes major environmental and natural resource implications, considering the full lifecycle of materials. It links to the ultimate goal of a CE: the preservation of natural capital (natural resources, environmental quality) and human health.

The economic activities that drive materials use have a range of environmental consequences. Some of these consequences can be attributed directly to resource provision (e.g. greenhouse gas (GHG) emissions from extraction and processing of primary materials), while others are indirectly linked to resource use, such as air pollution caused by the combustion of fossil fuels (Box ‎3.1).2

Box ‎3.1. Environmental implications of materials management and use

Different material resources have different characteristics and the activities associated with their extraction, management and use have different environmental implications and potential impacts. Ore mining can cause air and water pollution, waste generation and pressures on biodiversity and habitats. Refining mined ores into metal is energy and water intensive. Fossil fuel exploitation results in pollution and habitat disruption at the extraction sites and carbon dioxide emissions when used in combustion. Non-energy uses of fossil fuels for example in plastics or chemicals have a different set of environmental implications, including the pollution of environmental systems by persistent plastic waste and toxic contamination by chemicals. Unsustainable production of biomass, i.e. farming, fishing and forestry, can contribute to land cover changes, the loss of ecosystem services, biodiversity loss and soil degradation. Deforestation can lead to increased soil erosion, habitat destruction and loss of biodiversity, whilst depleting carbon sinks and thus contributing to global warming (OECD, 2019[2]).

Table ‎3.1. Potential environmental impacts by material group

Material Group	Potential environmental impacts
Biomass (for food and feed)	Intensification of land use, land cover change, soil degradation, groundwater contamination, disintegration of nutrient cycles, food chain contamination through pesticides, acidification, loss of biodiversity, habitat loss, water use, eutrophication, GHG emissions
Wood	Intensification of land use, soil erosion, loss of biodiversity, forest degradation, habitat alteration, carbon sink depletion, air and GHG emissions (e.g., fuel wood), desertification, alteration of watersheds
Fossil energy carriers	Air pollution, CO2 and other GHG emissions, habitat alteration, overburden, toxic chemicals for processing, water use
Metals and metal ores	Irreversible ecosystem change (entropy generation), toxicity, habitat alteration, mining overburden, air and GHG emissions, water use, tailings, radioactivity
Industrial minerals	Irreversible ecosystem change (entropy generation), toxicity, habitat alteration, mining overburden, air and GHG emissions, wastewater, tailings
Construction minerals	Loss of biodiversity, habitat alteration, CO2 emissions (e.g., from cement manufacturing), transport intensity, sealing of land area, soil compaction

Note: Potential pressures and impacts from material extraction, processing and use. Does not consider impacts from EoL management.

Source: adapted from (OECD, 2015[12])

This building block is structured into two themes reflecting:

• The physical evolution of natural assets recognising that a declining asset base constitutes a risk to growth and well-being. Examples include material extraction rates and changes in natural resource stocks, depletion ratios and regeneration rates (for renewable resources), freshwater abstraction for material extraction, processing and use, as well as natural resource residuals (unused extraction).

• The environmental and human health impacts due to materials extraction, processing, use and end-of-life management, including impacts on climate, on air, water and soil quality, on biodiversity, human exposure to these impacts, and the underlying pressures. Examples include material output flows such as greenhouse gas emissions, the carbon footprint of priority materials (e.g. plastics, food), discharges of pollutants and other residuals from production and consumption processes (e.g. air emissions, water discharges) and related effects on human health, impacts from material extraction, processing, use and end-of-life management on land, habitats and species (terrestrial and marine).

Relevant indicators can be derived from sets of environmental, green growth and sustainable development indicators, with some adjustments to be fit for CE purposes. Underlying data can be derived from environmental monitoring systems (e.g. air, water), environment statistics and environmental accounts (e.g. material flow accounts, natural asset accounts, air emission accounts, water accounts, land accounts), complemented with data from earth observation.

When monitoring policies that promote the circularity and efficiency of water and energy use, additional indicators can easily be added under this component.

3.2.3. Responses and actions

This component describes policy responses (environmental, economic, sectoral, social) and other societal responses and actions that could favour a resource-efficient and circular economy, including measures to change awareness and behaviour and to create new socio-economic opportunities (e.g. new markets, education and training, innovation) that help ensure a just transition.

Related indicators cover the variety of policy tools that can encourage a transition towards a CE by setting the right framework conditions, provide incentives towards substituting away from scarce environmental resources and environmentally harmful products, and fostering innovation, productivity and human capital. This includes economic, regulatory and information instruments and partnerships. As a rule, indicators on responses and actions should lend themselves to being related to indicators on the material life cycle and to indicators on opportunities to help linking responses to results obtained as a first step in monitoring the effectiveness of policies.

The measures to be considered are structured as follows:

• Measures to support or incentivise circular use of materials, promote recycling markets and optimise design. Examples include:

  • Taxes, subsidies and regulations supporting circular business models, (e.g. sharing or product-service-system models); and instruments encouraging reuse, through second-hand markets, repair and remanufacturing.

  • Downstream policy instruments that create incentives for recycling and enhance sorting at source, such as extended producer responsibility (EPR) schemes, deposit-refund and Pay-as-You-Throw (PAYT) schemes.

  • Upstream policy instruments that help restrain demand for primary materials, make recycled materials more price competitive and incentivise design for circularity, extended lifespans, recycling & dismantling, such as recycled content targets, taxes on materials and products that raise particular concerns (e.g. plastics), circular (and green) public procurement, reforms of subsidies encouraging unsustainable use or extraction of materials, bans and guidelines on substances that restrict recycling.

• Measures to improve the efficiency of waste management and close leakage pathways such as investments in waste management infrastructure, waste collection and sorting; anti-littering instruments, including bans or taxes on frequently littered items (e.g. plastics); and instruments that enhance sorting at source, including bans or taxes on landfilling and incineration.

• Measures to boost innovation and orient technological change for more (efficient and) circular material lifecycles, enhanced recycling, and reduced leakage of residuals to the environment. Examples include: R&D budgets of governments and businesses; development and international diffusion of CE technologies (e.g. patented inventions related to recycling and secondary raw materials).

• Target setting and planning, including resource productivity and recycling targets, targets on recycled content, waste reduction and prevention, landfilling; and the availability of CE plans and strategies.

• Measures to strengthen domestic and international financial flows for a CE and reduced leakage of residuals to the environment. Examples include: Business investments in CE activities; government budgets allocated to CE objectives; Official development assistance (ODA) and Foreign Direct Investment (FDI) dedicated to CE activities.

• Measures to inform, educate and train, including product and packaging-oriented information instruments and measures such as eco-labelling, certification schemes; integration of CE issues in school curricula and professional training.

Related indicators could also be grouped according to the type of instruments (economic, regulatory, etc.), the targeted objective as described above or in line with the CE mechanisms (closing resource loops, slowing resource loops, narrowing resource flows).

It is recognised that the policy tools and measures listed above do not all lend themselves to being measured by indicators, and that their effectiveness strongly depends on implementation and is context specific. Also, the mere presence of a certain policy only partially informs about progress towards a CE but helps identify trends in policy development and areas where further actions or responses may be needed.

3.2.4. Socio-economic opportunities

This component describes the social and economic outcomes of a transition to a resource efficient and circular economy, taking into account aspects of economic efficiency and social equity that are central to a just transition.

Related indicators capture the development of new markets, trade3 and employment opportunities, changes in supply security or autonomy4, levels of education, skills development (closely linked to the capacity to innovate), and behavioural changes (households, consumers, firms). They also capture new developments, which are not visible through broader recycling and material flow indicators, such as the uptake of new circular business models and industrial ecology/symbiosis initiatives with links to entrepreneurship, and sharing economy initiatives, as well as distributional aspects of CE policies and actions, such as environmental justice.

The indicators are structured around four themes:

• Market developments and new business models

• Trade developments

• Skills, awareness and behaviour

• Inclusiveness of the transition

Table ‎3.2. Overview of framework themes and indicator topics

Framework	Themes	Indicator topics – Aspects to be considered
Material life-cycle and value chain (production and consumption)	The material basis of the economy (level & characteristics of materials supply and their use in the economy)	Material inputs and consumption: share of renewable materials, recyclable materials Material accumulation in the economy
	The circularity of material flows and the management efficiency of materials & waste (with reference to R strategies and CE mechanisms)	Waste generation Contribution of secondary raw materials to material inputs or consumption Contribution of renewable or recyclable materials to production processes Products diverted from the waste stream through repair, remanufacture, reuse Materials diverted from final disposal through recycling and recovery Materials leaving the economic cycle
	Interactions with trade	Material exports, imports, trade balance
Interactions with the environment (environmental effectiveness)	Natural resource implications (physical evolution of natural assets)	Material extraction (used) Natural resource residuals (unused extraction) Changes in natural resource stocks; extraction rates, depletion ratios Water abstracted for material extraction and processing Intensity of use of forest resources
	Environmental quality implications (effects of materials extraction, processing, use and end of life management on environmental conditions and human health)	Impacts on climate and air quality: GHG emissions, carbon footprint of priority materials, air emissions Impacts on water and soil quality: pollutant discharges to water from material extraction & processing; soil contamination due to material extraction & processing and end-of-life management Impacts on biodiversity: land and habitats Impacts on human health: population exposure to air and water pollution, related health effects; exposure to risks from waste management and production sites
Responses and actions (policies, measures, framework conditions)	Support circular use of materials, promote recycling markets and optimise design	Taxes, tax reliefs, transfers, regulations supporting circular business models and the use of repaired, refurbished, remanufactured goods Reform of subsidies encouraging unsustainable use or extraction of materials Circular Public Procurement; Green Public Procurement; Extended producer responsibility, Deposit-refund, Pay-as-You-Throw schemes Design for extended lifespans, for recycling & dismantling Taxes on materials/products raising particular concerns Bans/guidelines on substances that restrict recycling
	Improve the efficiency of waste management and close leakage pathways	Investments in waste management Waste prevention and anti-littering instruments Bans, taxes on frequently littered items (e.g. plastics) Bans, taxes on landfilling, on incineration w/o energy recovery
	Boost innovation & orient technological change for more circular material lifecycles	CE R&D budgets of governments and businesses Development and international diffusion of CE technologies
	Target setting and planning	Targets on: resource productivity, recycling, recycled content, waste reduction& prevention, landfilling CE plans and strategies
	Strengthen financial flows for a circular economy and reduced leakage	Domestic flows: Government & business expenditure on CE activities; government budgets allocated to CE objectives (link to green budgeting) International flows: CE related Official Development Assistance (ODA); Foreign Direct Investment (FDI)
	Inform, educate, train	Product & packaging instruments: eco-labelling, certification schemes, … Integration of CE issues in school curriculae & prof. training Other information and communication instruments
Socio-economic opportunities for a just transition (economic efficiency and social equity)	Market developments and new business models	CE entrepreneurship, goods and services; business models, start-ups, industrial ecology/symbiosis initiatives Employment markets and jobs; Recycling markets
	Trade developments	Trade in CE related goods and services Supply security/autonomy/resilience
	Skills, awareness and behaviour	CE literacy and skills Public opinion on CE issues Behavioural changes (households, consumers, firms)
	Inclusiveness of the transition (distributional aspects of CE policies)	To be defined; to reflect how different territories and population groups are affected or benefit from CE policies and actions (young people, women, vulnerable communities, etc.).

Notes

← 1.  Renewable natural assets also include water from renewable resources. See also section ‎3.1.

← 2.  About half of all GHG emissions are estimated to be related to materials management activities (OECD, 2019[2]), and more than 90% of land- and water-related impacts are estimated to be related to resource extraction and processing (International Resource Panel, 2019[11]).

← 3.  The way trade interacts with material flows creates opportunities or obstacles for a CE.

← 4.  Material autonomy can in some countries be an important driver for moving towards a CE. A CE can create opportunities for reducing reliance on external markets and increasing the resilience to imports of critical raw materials, which is especially of concern for resource importing countries.