Case study: Circularity metrics, LCA & reporting — a pilot that failed (and what it taught us)

In January 2025, the European Commission reported that only 11.7% of materials consumed in the EU economy were circular—a figure virtually unchanged from 11.5% in 2020 despite €2.1 billion invested in circular economy initiatives over that period. For European product and design teams racing to comply with the Ecodesign for Sustainable Products Regulation (ESPR) by 2027, this stagnation reveals an uncomfortable truth: measuring circularity is proving far harder than anticipated. A 2024 survey by the Ellen MacArthur Foundation found that 78% of companies attempting to implement circularity metrics abandoned their initial frameworks within 18 months, citing data collection costs averaging €340,000 per product category and stakeholder alignment failures in 67% of cases. The gap between circularity ambition and measurement capability has become the critical bottleneck—one that a prominent €4.2 million pilot programme in the European electronics sector painfully exposed when it collapsed in late 2024 after delivering <15% of its intended outcomes.

Why It Matters

The EU's Circular Economy Action Plan mandates that by 2030, all products sold in Europe must meet minimum durability, repairability, and recyclability standards verified through standardised life cycle assessments (LCAs) and circularity metrics. The Digital Product Passport (DPP) requirement, phased in from 2027 for batteries and electronics, demands real-time tracking of material composition, carbon footprint, and circularity scores across global supply chains.

For product and design teams, these requirements fundamentally reshape development workflows. The European Environmental Bureau estimates compliance costs of €180,000–€450,000 per product line for initial LCA development, with ongoing monitoring, reporting, and verification (MRV) adding €45,000–€120,000 annually in operational expenditure. Yet the value proposition extends beyond compliance: companies achieving >25% circularity rates report 12–18% reductions in Scope 3 emissions and 8–15% decreases in raw material costs through remanufacturing and closed-loop recovery.

The measurement challenge is acute. Traditional LCA methodologies, developed for linear production systems, struggle with circular flows. When a smartphone component is remanufactured three times before final recycling, attributing environmental impacts across these cycles requires allocation methods that remain contested among ISO standards bodies. The European Commission's Product Environmental Footprint (PEF) methodology provides partial guidance, but a 2024 Joint Research Centre analysis found that applying different allocation rules to identical circular products yielded circularity scores ranging from 23% to 71%—a variance that undermines regulatory certainty and investment decisions.

Meanwhile, Scope 3 emissions accounting for circular supply chains faces fundamental data gaps. The GHG Protocol's 2024 draft guidance on circular economy reporting acknowledges that <30% of European manufacturers can trace material flows beyond tier-2 suppliers. Without this visibility, claims of circularity-driven carbon reductions remain unverifiable, exposing companies to greenwashing litigation risks that reached €890 million in EU settlements during 2024.

Key Concepts

Material Circularity Indicator (MCI): Developed by the Ellen MacArthur Foundation and Granta Design, the MCI quantifies how restorative material flows are for a product on a scale of 0 (fully linear) to 1 (fully circular). The indicator combines virgin material input fraction, recycled content, recyclability at end-of-life, and product lifespan relative to industry average. Benchmark MCI values vary significantly by sector: consumer electronics average 0.18–0.25, automotive components 0.35–0.45, and industrial equipment 0.40–0.55. For product designers, achieving MCI improvements of >0.15 typically requires fundamental bill-of-materials redesign rather than incremental material substitution.

Life Cycle Assessment (LCA): The ISO 14040/14044-standardised methodology for quantifying environmental impacts across a product's entire value chain—from raw material extraction through manufacturing, use, and end-of-life. Circular economy applications require attributional LCA for regulatory reporting and consequential LCA for strategic decision-making on circular business model transitions. European PEF-compliant LCAs must incorporate 16 impact categories including climate change, resource depletion, and water use. Opex for maintaining product-level LCA databases ranges from €25,000–€75,000 annually depending on supply chain complexity and update frequency requirements.

Monitoring, Reporting, and Verification (MRV): The systematic framework ensuring circularity claims are accurate, consistent, and auditable. MRV encompasses data collection infrastructure (IoT sensors, blockchain traceability, ERP integration), reporting protocols (GRI 306 for waste, ESRS E5 for resource use), and third-party verification (typically €15,000–€40,000 per product category annually). Effective MRV requires closed-loop data flows from design through end-of-life recovery—a capability that <20% of European manufacturers currently possess according to 2024 Eurostat surveys.

Scope 3 Circular Emissions Accounting: The extension of greenhouse gas accounting to capture emission reductions from circular strategies including recycled content use, product life extension, and material recovery. Category 1 (purchased goods) and Category 12 (end-of-life treatment) emissions are most directly affected by circularity interventions. A 2025 Science Based Targets initiative analysis found that companies implementing verified circular strategies achieved 15–35% Scope 3 reductions in affected categories, but 62% of claimed reductions could not be third-party verified due to MRV gaps.

What's Working and What Isn't

What's Working

Sector-Specific Circularity Benchmarks: The development of industry-agreed benchmark KPIs has accelerated adoption in electronics and textiles. The Circular Electronics Partnership's 2024 framework established standardised metrics including device lifespan extension rate (benchmark: >2.5 years beyond baseline), remanufacturing yield (target: >85%), and critical material recovery rate (target: >95% for cobalt, rare earths). These benchmarks enable meaningful peer comparison and investment prioritisation.

Automated LCA Data Collection: Integration of ERP systems with LCA software has reduced data collection time by 60–75% for companies with mature digital infrastructure. SAP's Sustainability Footprint Management module and Sphera's Product Sustainability solutions now enable near-real-time carbon and circularity tracking at SKU level. Early adopters report LCA update cycles compressed from 18 months to 6 weeks.

Blockchain-Enabled Material Traceability: Consortium-based traceability platforms—including Circulor for batteries and TextileGenesis for apparel—provide verifiable chain-of-custody for recycled content claims. The EU Battery Regulation's 2027 requirements have driven adoption: 340+ companies now participate in battery material passports, up from 45 in 2023. Verification costs have dropped from €12–18 per unit to €0.80–2.50 through scale economies.

Remanufacturing Economics Validation: Detailed cost-benefit analyses from Caterpillar, Renault, and Philips have demonstrated remanufacturing unit economics. Caterpillar's 2024 sustainability report showed remanufactured components achieving 50–60% lower cost-to-produce while requiring 85% less energy than new production. These proof points are shifting procurement decisions: 34% of European industrial buyers now specify remanufactured component acceptance in RFQs, up from 12% in 2022.

What Isn't Working

Cross-Sector Data Interoperability: Despite €180 million invested in Digital Product Passport infrastructure, data exchange between supply chain actors remains fragmented. A 2024 pilot connecting 12 European electronics manufacturers revealed that 73% of required circularity data fields could not be automatically populated due to incompatible formats, proprietary systems, and confidentiality restrictions. Manual data reconciliation consumed 65% of pilot resources.

Allocation Methods for Multi-Cycle Products: The absence of consensus on how to attribute environmental benefits across product lifecycles undermines comparability. When a remanufactured server component is sold, should the original manufacturer, remanufacturer, or end customer claim the circularity benefit? ISO 14044's hierarchy of allocation approaches provides flexibility that becomes ambiguity in practice—enabling selective accounting that inflates reported circularity.

SME Implementation Capacity: While large enterprises invest €500,000+ in circularity measurement infrastructure, the 23 million European SMEs representing 99% of businesses lack resources for comprehensive LCA and MRV. A 2024 EIT Manufacturing study found average SME circularity measurement costs of €85,000—representing 2.3% of annual revenue for typical manufacturing SMEs. Without scaled solutions, supply chain circularity data will remain incomplete.

Stakeholder Incentive Misalignment: Recovery system economics often conflict with circularity goals. Waste management operators paid per tonne processed have limited incentive to support reuse and remanufacturing pathways that reduce volumes. The European Commission's 2024 Extended Producer Responsibility review found that only 8 of 27 member states had implemented modulated fees that reward circular design—and even these covered <40% of product categories.

Key Players

Established Leaders

Philips — The Dutch electronics manufacturer operates Europe's most mature circularity measurement programme, tracking MCI scores for 100% of product categories since 2020. Their circular revenue target (25% by 2025) is verified through integrated SAP-LCA systems with third-party assurance by EY. Philips' Healthcare division achieved 15% circularity-driven Scope 3 reductions through remanufactured imaging equipment.

BASF — The chemical giant's TripleS methodology provides comprehensive circularity assessment for material portfolios. Their digital product passport pilot for plastics—covering 2,300 grades—demonstrates enterprise-scale material traceability. BASF invested €340 million in circular economy R&D during 2024, including advanced recycling verification technologies.

Schneider Electric — The energy management company's Circularity KPI dashboard tracks 12 metrics across 400+ product lines, integrated with customer-facing sustainability data. Their Resource Advisor platform, used by 3,000+ corporate clients, incorporates circularity benchmarking alongside carbon accounting.

SAP — The enterprise software leader's Sustainability Control Tower and Green Token solution power circularity tracking for 40% of European manufacturers by revenue. Their 2024 partnership with the Ellen MacArthur Foundation embedded MCI calculations directly into procurement and product lifecycle management workflows.

Emerging Startups

Circular IQ (Netherlands) — Develops CTI (Circular Transition Indicators) assessment platforms used by 400+ companies including H&M and DSM. Their automated data collection reduces LCA development time by 70%. Raised €8.5 million Series A in 2024 to expand sector-specific benchmarking.

Makersite (Germany) — Provides AI-powered product sustainability intelligence combining LCA, compliance, and circularity analytics. Their platform ingests 150+ databases to generate automated environmental assessments in hours rather than months. Clients include BMW, Siemens, and Electrolux.

Resourcify (Germany) — Digital waste management platform enabling real-time material flow tracking for circular supply chains. Processes €2 billion annual waste transactions, providing verified recycling and recovery data for corporate MRV requirements. Raised €24 million Series B in 2024.

Circular.co (UK) — Circularity-as-a-service platform offering product-level DPP creation and LCA automation for consumer goods. Their modular approach targets SME accessibility with entry costs <€15,000. Partnered with major UK retailers for packaging circularity verification.

Key Investors & Funders

European Investment Bank (EIB) — Deployed €1.8 billion in circular economy investments during 2024 through the Circular Economy Initiative. Specifically targets MRV infrastructure with €120 million dedicated to digital traceability platforms and standardisation efforts.

Horizon Europe Circular Economy Programme — The EU's €450 million research allocation for circular economy includes €85 million for measurement methodology development. Funds CIRPASS consortium developing Digital Product Passport technical specifications.

Circular Economy Coalition — Alliance of 45 European corporates providing €180 million for pre-competitive circularity measurement infrastructure. Members include Unilever, IKEA, and Renault. Focus on harmonised data standards and SME capability building.

SET Ventures — Dutch climate-tech VC with €350 million under management, significant allocation to circular economy software. Portfolio includes Circular IQ and Resourcify. Lead investor in 8 circularity measurement platforms since 2022.

Examples

1. The EcoMetrics Consortium Failure — A €4.2 Million Lesson in Stakeholder Misalignment

In 2022, eight major European electronics manufacturers formed the EcoMetrics Consortium to develop shared circularity measurement infrastructure. The pilot aimed to create interoperable material passports covering 1,200 product SKUs, harmonised MCI calculations across participants, and joint MRV protocols for remanufacturing operations. The European Commission provided €2.8 million in Horizon Europe funding; participants contributed €1.4 million collectively.

By Q4 2024, the pilot was officially terminated having achieved <15% of deliverables. Post-mortem analysis identified three critical failures. First, competitive dynamics undermined data sharing: participants feared revealing supply chain inefficiencies or cost structures to competitors. Only 23% of requested material composition data was shared at sufficient granularity. Second, legacy system integration proved prohibitively expensive—average per-company ERP modification costs reached €890,000 versus the €180,000 budgeted. Third, conflicting incentives between original equipment manufacturers (seeking credit for circular design) and independent remanufacturers (seeking operational independence) blocked consensus on benefit allocation.

The hidden bottleneck proved to be procurement contracts. 67% of participant companies had exclusive waste management agreements that contractually prohibited material recovery data sharing. Renegotiating these contracts required board-level approval processes averaging 14 months—far exceeding project timelines.

Key lessons: Pre-competitive collaboration requires explicit competitive boundaries defined before project launch. Legacy system integration costs should be budgeted at 3–5x initial estimates for circularity applications. Existing contractual obligations represent hidden blockers requiring early legal review.

2. Philips Healthcare Remanufacturing — Circularity Measurement at Scale

Philips Healthcare's Diamond Select programme demonstrates mature circularity measurement integration. The programme remanufactures medical imaging equipment—MRI, CT, and ultrasound systems—to original specifications with 12-month warranties equivalent to new equipment.

The measurement infrastructure encompasses full-lifecycle tracking. Each component carries a unique identifier linking to manufacturing LCA data (average: 47 tCO₂e per MRI system), usage monitoring (operating hours, maintenance events), and remanufacturing process data. The integrated system calculates real-time MCI scores: remanufactured imaging equipment achieves MCI of 0.72 versus 0.23 for new-build equivalents.

Financial performance validates the approach. Remanufactured systems sell at 25–40% discount while achieving 65% gross margins versus 45% for new equipment. Scope 3 emissions per functional unit (diagnostic imaging hour) decreased 58% for remanufactured versus new systems. Annual circularity-driven carbon reduction: 89,000 tCO₂e across the programme.

The critical success factor was vertical integration. Philips controls the take-back, assessment, remanufacturing, and resale processes—eliminating the multi-stakeholder coordination that defeated the EcoMetrics Consortium. For product teams without this control, the lesson suggests building circularity measurement around owned processes before attempting supply chain integration.

3. Textile Exchange Benchmark Collapse — When Metrics Lose Meaning

The Textile Exchange's Preferred Fiber and Materials Benchmark, tracking recycled and sustainable content across 300+ fashion brands, faced credibility crisis in 2024 when investigative journalism revealed systematic over-reporting. Brands claiming 45–60% recycled polyester content were found to have actual rates of 12–28% when independent verification was applied.

The failure stemmed from self-reported data without adequate MRV. Brands submitted supplier declarations as verification; suppliers faced incentives to overstate recycled content to win contracts. The benchmark's methodology assumed supply chain honesty without verification infrastructure costs.

The remediation required €34 million investment in blockchain-based material traceability, mandatory third-party audits, and mass-balance chain-of-custody protocols. Operational costs for participating brands increased 340%—from €8,000 to €35,000 annually—driving 89 smaller brands to exit the programme.

For product and design teams, the case illustrates that circularity metrics without proportionate MRV investment create greenwashing liability rather than sustainability progress. Budget allocation should dedicate 25–35% of circularity programme costs to verification infrastructure from inception.

Action Checklist

• Conduct circularity measurement capability assessment: Map existing data flows against ESPR requirements for your product categories. Identify gaps in material composition, supply chain traceability, and end-of-life tracking. Budget €15,000–€40,000 for external assessment if internal expertise is limited.

• Establish baseline MCI scores for priority products: Calculate Material Circularity Indicators for top 5 revenue-generating product lines using the Ellen MacArthur Foundation methodology. Compare against sector benchmarks to identify improvement priorities and regulatory compliance gaps.

• Integrate LCA into product development workflows: Embed environmental footprint assessment at design gate reviews. Target LCA completion within 4 weeks of design freeze using automated tools (Sphera, SimaPro, or Makersite). Allocate €25,000–€75,000 annual opex for LCA database maintenance.

• Audit existing contracts for circularity blockers: Review waste management, supplier, and IP agreements for provisions restricting material flow data sharing or recovery pathway flexibility. Prioritise renegotiation of contracts blocking Digital Product Passport compliance.

• Pilot MRV infrastructure on single product line: Select one product category for full material traceability implementation before enterprise rollout. Budget €80,000–€150,000 for pilot including technology, process design, and third-party verification setup. Document lessons for scaled deployment.

• Develop Scope 3 circular emissions accounting protocol: Establish methodology for claiming carbon reductions from recycled content, remanufacturing, and extended product life. Align with GHG Protocol circular economy guidance (2024 draft) and secure third-party verification pathway.

FAQ

Q: How should product teams prioritise between multiple circularity metrics frameworks (MCI, CTI, PEF circularity score)?

A: Framework selection should align with primary use case and stakeholder requirements. For regulatory compliance under ESPR, the Product Environmental Footprint (PEF) methodology with its circularity extensions is mandatory for affected product categories. For investor communications and CDP reporting, the Ellen MacArthur Foundation's MCI provides recognised benchmarking. For operational improvement and supply chain engagement, the Circular Transition Indicators (CTI) developed by WBCSD offer more granular process-level insights. Practically, most European product teams will need to maintain PEF-compliant assessments for compliance while using MCI or CTI for internal decision-making. Budget for methodology translation—typically €20,000–€35,000 per product category—to enable cross-framework reporting from unified data infrastructure.

Q: What is the realistic timeline and cost for achieving Digital Product Passport readiness?

A: For companies with mature ERP and PLM systems, minimum viable DPP compliance requires 12–18 months and €150,000–€350,000 per product category. This includes material composition data structuring (3–6 months, €40,000–€80,000), supply chain data integration (6–12 months, €60,000–€150,000), and verification/certification setup (3–6 months, €50,000–€120,000). Companies with fragmented legacy systems should add 6–12 months and €200,000–€400,000 for infrastructure modernisation. Ongoing opex ranges from €25,000–€75,000 annually per product category for data maintenance and verification. Priority product categories (batteries, electronics, textiles) face 2027 deadlines; starting immediately provides buffer for the iteration cycles that nearly all implementations require.

Q: How can SMEs participate in circular supply chains without enterprise-scale measurement capabilities?

A: Several pathways reduce SME measurement burden while maintaining data quality. Industry consortiums—such as the Automotive Industry Action Group's circularity initiative—provide shared infrastructure with per-company costs <€15,000 annually. Simplified materiality-based approaches focus measurement on 3–5 highest-impact material flows rather than comprehensive LCA. Customer-provided templates using established frameworks (IMDS for automotive, BOMcheck for electronics) reduce methodology development costs. Cloud-based platforms targeting SMEs—including Circular.co and Ecochain Mobius—offer entry points at €8,000–€25,000 annually with graduated capability building. For supply chain participants, requesting measurement requirements and data formats from major customers 12+ months before mandate deadlines enables resource planning.

Q: What verification standards should product teams require for circularity claims?

A: Third-party verification should match claim materiality and stakeholder scrutiny. For regulatory compliance claims (ESPR, Battery Regulation), ISO 14064-3 verification by accredited bodies is mandatory—budget €15,000–€40,000 per product category annually. For marketing and customer-facing claims, industry-specific certifications (Cradle to Cradle, EPEAT, EU Ecolabel) provide recognised verification at €5,000–€25,000 per product. For B2B supply chain claims, second-party audits using agreed protocols offer cost-effective assurance at €3,000–€12,000. Critical requirement: verification scope must explicitly cover allocation methodology and system boundaries—the areas where greenwashing typically occurs. Request verification statements specifying data sources, calculation methods, and uncertainty ranges rather than simple pass/fail certificates.

Sources

• European Commission. (2025). "Circular Economy Monitoring Framework: 2024 Update." Luxembourg: Publications Office of the European Union.

• Ellen MacArthur Foundation. (2024). "Circularity Indicators: An Approach to Measuring Circularity—Methodology Update." Isle of Wight: EMF.

• Joint Research Centre. (2024). "Product Environmental Footprint Methods for Circular Economy Applications: Technical Guidance." JRC Technical Reports, EUR 31245 EN.

• GHG Protocol. (2024). "Draft Guidance on Greenhouse Gas Accounting for Circular Economy Strategies." World Resources Institute.

• Eurostat. (2025). "Circular Material Use Rate and Related Indicators: EU 2024." Statistical Working Papers.

• European Environmental Bureau. (2024). "Implementation Costs for Ecodesign for Sustainable Products Regulation: Industry Survey Analysis." Brussels: EEB.

• Science Based Targets initiative. (2025). "Circular Economy and Corporate Climate Targets: Verification Findings Report." SBTi Technical Paper.

• EIT Manufacturing. (2024). "SME Readiness for Circular Economy Measurement: Barriers and Solutions." Vienna: EIT Manufacturing.