Explainer: Circularity metrics, LCA & reporting — the concepts, the economics, and the decision checklist

In 2025, global circularity fell to just 6.9%—down from 9.1% six years prior—even as recycling volumes increased by 200 million tonnes between 2018 and 2021 (Circle Economy & Deloitte, 2025). This paradox reveals a fundamental truth: recycling alone cannot solve the resource crisis when virgin material consumption grows faster than circular infrastructure. Meanwhile, the EU's Corporate Sustainability Reporting Directive (CSRD) now mandates that companies with €450M+ turnover and 1,000+ employees disclose circularity metrics under ESRS E5, transforming what was once voluntary best practice into regulatory obligation. For sustainability professionals navigating this landscape, understanding how to measure, report, and act on circularity data has become mission-critical—not just for compliance, but for capturing the $883 billion to $1.5 trillion in new revenue potential that circular business models represent in the United States alone (Ellen MacArthur Foundation, 2024).

Why It Matters

The circular economy represents a systemic shift from the linear "take-make-dispose" model toward one where materials retain value through multiple use cycles. Yet despite growing awareness and policy momentum, we are moving backward: humanity consumed 500 billion tonnes of materials over the past five years—nearly equal to total consumption during the entire 20th century (Circularity Gap Report, 2025). High-income countries use six times more materials per person than low-income nations, and over one-fifth of recyclable materials still end up in landfills or incinerators.

This disconnect between intention and outcome stems largely from measurement failures. Organizations cannot manage what they do not measure, and traditional accounting frameworks systematically undervalue circular strategies. Life Cycle Assessment (LCA) provides the methodological foundation for quantifying environmental impacts across product lifecycles, while circularity metrics translate those impacts into actionable indicators. Together, they form the backbone of credible sustainability reporting—but only when implemented with rigor and aligned to emerging standards.

The economic stakes are substantial. Companies that master circularity measurement can identify cost savings from material efficiency, de-risk supply chains dependent on volatile virgin resources, access preferential financing terms from sustainability-linked lenders, and differentiate products in markets where consumers increasingly demand transparency. Conversely, organizations that treat measurement as compliance theater—producing reports without operational change—face mounting reputational and regulatory risk as scrutiny intensifies.

Key Concepts

Life Cycle Assessment (LCA)

LCA is an ISO 14040/14044-standardized methodology for evaluating the environmental impacts of a product, process, or service across its entire lifecycle—from raw material extraction through manufacturing, distribution, use, and end-of-life management. A complete LCA comprises four phases: goal and scope definition, life cycle inventory (LCI) analysis, life cycle impact assessment (LCIA), and interpretation.

The methodology enables comparative analysis between product alternatives, identification of environmental hotspots, and quantification of improvement opportunities. However, traditional LCA was designed for linear systems and struggles to capture the benefits of circular strategies like reuse, remanufacturing, and cascading material applications. This limitation has driven the emergence of integrated frameworks.

Circular Life Cycle Sustainability Assessment (C-LCSA)

Research published in the Journal of Industrial Ecology (Luthin et al., 2024) proposes C-LCSA as a fourth-dimension extension to traditional life cycle sustainability assessment. The framework integrates Circularity Assessment (CA) alongside environmental LCA, Life Cycle Costing (LCC), and Social LCA (S-LCA) to provide a holistic sustainability picture. Publications combining LCA and circularity assessment increased from a single study in 2017 to 15 in the first ten months of 2024 alone, signaling rapid methodological development.

Material Circularity Indicator (MCI)

Developed by the Ellen MacArthur Foundation, the MCI measures how restorative material flows are for a product or company, ranging from 0 (fully linear) to 1 (fully circular). The indicator accounts for recycled and reused content in inputs, the proportion of materials that can be recovered at end-of-life, and the utility factor reflecting product lifespan versus industry average. MCI is now integrated into LCA software platforms including openLCA with Ecoinvent databases.

ESRS E5: Resource Use and Circular Economy

Under the EU's CSRD, companies conduct double materiality assessments to determine which ESRS standards apply. For those where circular economy is material—expected for most manufacturing, retail, and resource-intensive sectors—six disclosure requirements apply:

Requirement	Description
E5-1	Policies for managing circular economy impacts and opportunities
E5-2	Actions and resources allocated to circular strategies
E5-3	Measurable targets linked to waste hierarchy layers
E5-4	Resource inflows: virgin vs. circular, renewable vs. non-renewable
E5-5	Resource outflows: products, waste by type and destination
E5-6	Anticipated financial effects from circular economy risks/opportunities

ISO 59000 Series

The International Organization for Standardization released new standards in 2024-2025 addressing circular economy terminology (ISO 59004), business model implementation guidance (ISO 59010), and circularity measurement frameworks (ISO 59020). These provide globally harmonized definitions critical for interoperable reporting and benchmarking.

What's Working

Sector-Specific Implementation Frameworks

The construction sector leads circular economy adoption, with 38% of LCA studies incorporating multiple circular strategies. One Click LCA has emerged as the dominant platform for architecture, engineering, and construction (AEC) firms, enabling Environmental Product Declaration (EPD) generation that increasingly includes MCI metrics. The Australian Packaging Covenant Organisation (APCO) has established sector-wide targets driving measurable circularity improvements in packaging design.

The automotive industry benefits from the Catena-X Product Carbon Footprint Rulebook, providing standardized methodologies for calculating and sharing emissions data across complex supply chains. Together for Sustainability (TfS) guidelines serve a similar function for the chemical sector, enabling consistent Scope 3 accounting that incorporates circular material flows.

Digital Product Passports

The EU's Digital Product Passport (DPP) regulation, with batteries as the first product category requiring compliance, creates infrastructure for tracking materials through multiple use cycles. Companies like Concular (construction materials) and KWOTA (secondary materials) have built platforms enabling this traceability, transforming circularity from abstract concept to verifiable attribute.

AI-Powered LCA Automation

Emerging platforms including Devera, CarbonBright, and Ecochain are democratizing LCA for small and medium enterprises previously unable to afford traditional consulting-intensive assessments. Devera's AI automates data extraction from procurement systems, while CarbonBright enables real-time integration with enterprise resource planning (ERP) software. The LCA software market, valued at $230-565 million in 2024-2025, is projected to reach $695 million to $1.76 billion by 2030-2033, growing at 12-17% CAGR (Fortune Business Insights, 2025).

What's Not Working

Methodological Inconsistencies

Despite emerging standards, significant harmonization gaps persist between sectors. Construction firms use different allocation methods than electronics manufacturers, making cross-industry benchmarking unreliable. Temporal aspects receive insufficient attention: current ISO standards do not adequately address carbon capture dynamics in circular systems, and the timing of emissions versus removals matters significantly for climate impact.

Data Availability and Quality

LCA databases predominantly model linear systems, systematically underrepresenting circular pathways. A lithium-ion battery LCA reveals the scale of the problem: virgin material extraction accounts for 43 times the battery weight, while waste generation equals 92 times the battery weight—values often excluded from simplified circularity calculations (International Journal of Life Cycle Assessment, 2023). Companies frequently rely on industry averages rather than supplier-specific data, introducing substantial uncertainty into Scope 3 emissions and circularity metrics.

Recycling as the Default Strategy

Circular economy discourse overemphasizes recycling while underinvesting in higher-value strategies. Recycling is, by definition, the "least circular" option in the waste hierarchy—reuse and repair retain far more embedded value. Yet only 2% of LCA studies examine water efficiency and additive manufacturing impacts, while end-of-life planning (27.8%) and resource efficiency (32.5%) dominate attention. Textile circularity exemplifies the challenge: just 0.3% of textiles undergo fiber-to-fiber recycling globally, with most "recycled" textiles downcycled into insulation or cleaning cloths.

Measurement Theater

The gap between reported circularity and actual environmental outcomes widens when organizations optimize for metrics rather than impacts. A company can increase its MCI by sourcing recycled materials from distant suppliers, generating transport emissions that overwhelm the circularity benefit. Without lifecycle thinking integrated into circularity assessment, metrics become exercises in greenwashing rather than genuine improvement.

Key Players

Established Leaders

PRé Sustainability (SimaPro): The gold standard for research-grade LCA, used by academics and consultants requiring maximum methodological flexibility and database coverage. SimaPro supports ISO 14040/14044 compliance and integrates with major impact assessment methods.

Sphera (GaBi): Enterprise-focused platform particularly strong in German manufacturing contexts. GaBi offers deep technical analysis capabilities, life cycle costing integration, and robust multi-standards support for automotive, aerospace, and chemical sectors.

One Click LCA: The undisputed leader in construction and building materials, with over 300,000 datasets and native integration with Building Information Modeling (BIM) software. One Click LCA also provides CSRD compliance pathways and automated EPD generation.

Ellen MacArthur Foundation: The nonprofit has shaped global circular economy discourse through frameworks including Circulytics (company-level circularity assessment) and the Material Circularity Indicator. Their Circular Startup Index catalogs innovative companies driving the transition.

Deloitte & Circle Economy: Publishers of the annual Circularity Gap Report, providing the authoritative global benchmark for economy-wide circularity measurement and the newly launched Circularity Gap Report Dashboard for policymakers.

Emerging Startups

Devera AI: Brings artificial intelligence to LCA automation, enabling product companies and e-commerce platforms to generate assessments from existing procurement data without specialist expertise.

Concular: Pioneering Digital Product Passports for building materials in Germany, enabling circularity verification in construction projects through blockchain-secured material tracking.

Circu Li-ion: Luxembourg-based startup targeting industrial battery upcycling with capacity to process 3 billion batteries by 2035, addressing one of the fastest-growing circular economy challenges.

Banyan Nation: India-based company using AI to produce post-consumer recycled resin at scale, supplying Unilever and Renault while processing over 30,000 tonnes of plastic annually.

Sorted: UK startup deploying AI-driven material sorting technology that increases recovered material value by 77% compared to conventional facilities.

Key Investors

EIT InnoEnergy: Europe's most active investor in circular economy and resource conversion technologies, with over 70 deals supporting the energy transition.

Breakthrough Energy Ventures: Bill Gates-backed fund investing in hard-to-decarbonize sectors where circular strategies offer emission reduction pathways.

Closed Loop Partners: US-based investment firm focused exclusively on circular economy infrastructure, from materials recovery facilities to circular supply chain software.

European Innovation Council (EIC) Fund: Public investor providing patient capital for deep-tech circular economy startups requiring longer development timelines.

Sector-Specific KPI Benchmarks

Sector	KPI	Laggard	Average	Leader
Packaging	Recycled content (%)	<15%	25-40%	>60%
Packaging	Design for recyclability	<50% of SKUs	70-80%	>95%
Construction	MCI score	<0.2	0.3-0.5	>0.7
Construction	Demolition waste diverted	<50%	70-85%	>95%
Electronics	Take-back participation	<10%	20-35%	>50%
Electronics	Recycled materials in new products	<5%	10-20%	>35%
Textiles	Fiber-to-fiber recycling	<1%	2-5%	>15%
Textiles	Design for disassembly	<5% of products	10-25%	>50%
Automotive	End-of-life recovery rate	<85%	90-93%	>97%
Automotive	Secondary materials content	<20%	25-35%	>50%

Examples

1. Interface: Pioneering Circularity in Flooring

Interface, the modular carpet manufacturer, has embedded circularity into operations since the 1990s. Their ReEntry program recovers used carpet tiles for recycling, while the Carbon Neutral Floors program extends to full lifecycle accounting. By 2024, Interface achieved 76% recycled and bio-based content across its product portfolio and reduced absolute greenhouse gas emissions by 96% compared to 1996 baselines. The company publishes third-party verified EPDs for all products and uses LCA to guide material substitution decisions, demonstrating how measurement drives operational change rather than merely producing reports.

2. Philips: Circular Revenue at Scale

Philips has committed to generating 25% of revenue from circular economy offerings by 2025, including refurbished medical equipment, product-as-a-service contracts, and take-back programs. Their Diamond Select refurbished imaging systems undergo complete remanufacturing to like-new performance at 15-30% lower cost than new equipment. Philips tracks circularity through MCI assessments, with CT scanners achieving scores above 0.8—among the highest for complex electronics. The company's circular revenue reached €2.1 billion in 2023, proving that circularity metrics can translate into material financial outcomes.

3. Tarkett: Closing the Loop in Flooring

Tarkett, a global flooring manufacturer, operates the industry's most comprehensive take-back infrastructure. Their ReStart program has collected over 100,000 tonnes of post-use flooring since launch, with materials recycled into new products or downcycled into other applications. Tarkett publishes Material Health Statements alongside EPDs, disclosing chemical composition to enable future recycling. Their LCA-based eco-innovation process screens new products against circularity criteria during development, preventing linear designs from reaching market. By 2024, 64% of Tarkett's products incorporated recycled content, with recycling rates for vinyl flooring reaching 85% at end-of-life through controlled take-back channels.

Action Checklist

• Conduct double materiality assessment to determine if ESRS E5 applies to your organization and which circular economy impacts, risks, and opportunities are material
• Map existing data sources for resource inflows and outflows across procurement, manufacturing, and waste management systems; identify gaps requiring new collection infrastructure
• Establish baseline metrics for current circular material content, waste generation by type, and recovery rates by destination to enable credible target-setting
• Select appropriate LCA software based on sector needs, technical capacity, and reporting requirements—prioritize platforms with built-in circularity indicators like MCI
• Align targets to waste hierarchy by setting measurable goals for prevention, reuse, and remanufacturing before recycling; avoid metric optimization that ignores lifecycle impacts
• Integrate circularity into product development through eco-design screening during early-stage R&D rather than retrofitting assessment to finished products
• Build supplier engagement programs to collect primary data for Scope 3 and circularity metrics, replacing industry averages with verified supplier-specific values
• Prepare for assurance requirements by documenting methodologies, maintaining audit trails, and securing supporting evidence including waste manifests and supplier declarations
• Monitor regulatory evolution including EU CSRD Omnibus changes, ISO 59000 adoption timelines, and emerging sectoral frameworks relevant to your industry

FAQ

Q: How do circularity metrics differ from carbon footprint measurements?

Carbon footprints measure greenhouse gas emissions, typically expressed in CO2 equivalents. Circularity metrics measure material flows—specifically, the proportion of circular inputs (recycled, renewable, reused) and the recoverability of outputs at end-of-life. The two are complementary but distinct: a product can have high recycled content (good circularity) but energy-intensive recycling processes (high carbon footprint), or vice versa. Comprehensive sustainability assessment requires both perspectives, which is why C-LCSA frameworks integrate circularity alongside environmental, economic, and social dimensions.

Q: Is LCA required for CSRD/ESRS E5 compliance?

ESRS E5 does not explicitly mandate LCA methodology, but the required disclosures—resource inflows and outflows by type, waste generation by destination, recycled content percentages—align closely with LCA data collection. Companies without LCA infrastructure will struggle to produce credible, consistent, and auditable metrics. Furthermore, ESRS E1 (Climate Change) expects Scope 3 emissions disclosure, which typically relies on LCA databases for upstream and downstream impact estimation. Practically speaking, LCA capability is a prerequisite for comprehensive ESRS compliance.

Q: How can SMEs approach circularity measurement without enterprise-scale resources?

Several pathways exist. First, AI-powered platforms like Devera and Ecochain's Helix offer automated LCA at accessible price points, reducing reliance on expensive consultants. Second, sector-specific tools may provide simplified assessment: the construction sector's One Click LCA, for example, pre-populates much of the data burden. Third, openLCA provides free, open-source software—suitable for organizations with internal technical capacity. Fourth, the EU's revised CSRD scope exempts companies below €450 million turnover and 1,000 employees from mandatory reporting, allowing SMEs to adopt measurement incrementally rather than under regulatory pressure.

Q: What are the biggest pitfalls in circularity measurement?

The most common failures include: (1) optimizing for metrics rather than outcomes, such as increasing recycled content through transport-intensive sourcing that generates more emissions than it saves; (2) relying on industry averages rather than primary data, introducing substantial uncertainty; (3) treating recycling as equivalent to circularity while neglecting higher-value strategies like reuse and remanufacturing; (4) conducting one-time assessments rather than building ongoing measurement infrastructure; and (5) failing to integrate circularity into design processes, producing reports about products that cannot be changed. Avoiding these pitfalls requires embedding measurement into operational decision-making rather than treating it as a compliance exercise.

Q: How will emerging regulations change circularity reporting requirements?

The trajectory is toward mandatory, standardized, and assured disclosure. The EU leads with CSRD/ESRS implementation, though the December 2025 Omnibus agreement reduced scope to approximately 10,000 companies from the originally expected 50,000. The SEC's climate disclosure rules, while focused on emissions, will increase pressure for lifecycle thinking. Digital Product Passports will require verifiable material traceability for batteries (2027), textiles, and electronics in coming years. ISO 59000 adoption will harmonize global terminology. Organizations investing in measurement infrastructure now will be prepared for tightening requirements; those treating current obligations as the ceiling risk costly catch-up later.

Sources

• Circle Economy & Deloitte. (2025). The Circularity Gap Report 2025. circularity-gap.world
• Ellen MacArthur Foundation. (2024). Circulytics and ESRS Mapping. ellenmacarthurfoundation.org
• European Financial Reporting Advisory Group. (2025). ESRS E5: Resource Use and Circular Economy. efrag.org
• Fortune Business Insights. (2025). Life Cycle Assessment Software Market Size & Growth Analysis. fortunebusinessinsights.com
• Luthin, A., et al. (2024). "Circular life cycle sustainability assessment: An integrated framework." Journal of Industrial Ecology. doi:10.1111/jiec.13446
• Springer Nature. (2023). "Improving life cycle assessment for carbon capture and circular product systems." The International Journal of Life Cycle Assessment. doi:10.1007/s11367-023-02272-9
• StartUs Insights. (2025). Circular Economy Report 2025. startus-insights.com
• Tracxn. (2025). Circular Economy Market & Investment Trends. tracxn.com