Written by Timothée Pasqualini, Research Analyst

Although the circular economy has gained strong momentum with its holistic and sustainable principles, the global economy is still less than 8.6% circular and it is only getting worse, according to Circle Economy’s latest Circularity Gap Report report. Circular is one of the seven system transformations, the World Benchmarking Alliance has identified as crucial to achieving the United Nations Sustainable Development Goals, along with social and energy and climate, for example.

So what exactly do we mean by circular?

Organisations, such as the Ellen MacArthur Foundation and the World Business Council on Sustainable Development, are working hard to understand the benefits and challenges that a circular economy entails and how to effectively address those. The Ellen MacArthur Foundation defines the three key principles of a circular economy as follow:

1.      Design out waste and pollution (at early stage of product conception)

2.      Keep products and materials in use

3.      Regenerate natural systems (particularly at the soil and nutrient level)

No alt text provided for this image

A circular economy or business models strives to keep products and materials in a loop, retaining the highest value as long as possible. On this diagram by the World Economic Forum, there are four possible loops (‘repair’, ‘maintain’, ‘refurbish’, ‘recycle’). Ideally, designers and engineers need to prioritize the smallest loop possible (‘repair’ here) conserving a high product value. This means the recycling loop is the last and least desirable one (but still better than the linear direction to the landfill), as it means products are physically broken down through energy-intensive processes.

The good news is that the savings potential are huge, with the EU estimating that 600 billion euros annually could be saved by EU businesses for instance and that companies across most industries are already committing to circularity. BASF in the chemical sector, fertilizer producer Yara, and phone maker Fairphone already implement, to various degrees, circular principles into the design of their products. In the textile industry, the Sustainable Apparel Coalition, gathering over 250 brands and organisations, recently launched the Policy Hub for Circular Economy too.

There is more good news – implementing circularity often has more to do with changing business models and practices, requiring little highly complex and innovative technology. The challenge is that adopting these new business models can be extremely disruptive for many companies, and is further hindered by financial/accounting practices that are adapted to our current linear and wasteful economy. Of course, technical improvements, if not radical design changes, will also be required in many cases.

Circularity goes far and wide

At the World Benchmarking Alliance, we believe that a wide application of circularity becomes increasingly necessary and should not be limited to a niche set of companies. This is why we have identified 750 companies, spanning a dozen of industries, that will be benchmarked on their circular efforts.

As a preliminary work and to dig deeper into the circular economy’s current practices, we are conducting a scoping study with the support of Laudes Foundation (formerly C&A Foundation) to understand what the best circular metrics and indicators are already available to companies, particularly in the textile sector, and assess whether the environmental and social impact of circularity is properly considered by these metrics, seeking to anticipate negative unintended consequences for instance. In addition, the scoping study will investigate to what extent transparency, and more specifically, public disclosure mechanisms, can be used to overcome the lack of incentives to create data, standards and science-based targets around circular business models. The outcome of this study will be a set of recommendations on how to use public disclosure to accelerate the shift to a regenerative and restorative system.

Learning fast from fast fashion

The report will primarily focus on the textile industry, a sector with massive environmental and social impact and where various circular initiatives already exist. With its complex global value chains and mass production systems, understanding how to accelerate the textile sector’s shift to circular economy through transparency will be useful and practical work, and should help us gain insights replicable to the other sectors.