Interview: practitioners on circular design & product-as-a-service (angle 7)

According to the Ellen MacArthur Foundation's 2024 Circularity Gap Report, only 7.2% of materials flowing through the global economy are cycled back into productive use—a figure that has actually declined from 9.1% in 2018. For US-based product and design teams navigating the transition to circular business models, this statistic reveals both the urgency and the complexity of embedding circularity into product lifecycles. In conversations with practitioners across manufacturing, technology, and consumer goods sectors, a consistent theme emerges: the hidden trade-offs between circularity metrics, financial viability, and regulatory compliance often determine whether product-as-a-service (PaaS) initiatives succeed or stall. This article synthesizes insights from industry leaders on how to establish meaningful circular KPIs that drive measurable impact without sacrificing business fundamentals.

Why It Matters

The circular economy represents a $4.5 trillion opportunity by 2030, according to Accenture's 2024 analysis, yet US companies face unique challenges in capturing this value. Unlike the European Union, where Extended Producer Responsibility (EPR) frameworks have matured over decades, the American regulatory landscape remains fragmented across state jurisdictions. As of January 2025, only five US states—California, Colorado, Maine, Oregon, and Minnesota—have enacted comprehensive EPR legislation for packaging, creating compliance complexity for nationally operating brands.

The SEC's Climate Disclosure Rule, finalized in March 2024, adds another layer of urgency. While the rule primarily addresses Scope 1, 2, and 3 emissions, it establishes precedents for material disclosure that increasingly intersect with circular economy metrics. Companies reporting on climate risks must now consider how product lifecycle decisions—from material sourcing to end-of-life management—affect their climate exposure. A 2024 survey by the Sustainable Packaging Coalition found that 68% of US consumer packaged goods companies now track at least one circularity metric, up from 41% in 2022.

The financial stakes are substantial. McKinsey's 2025 analysis indicates that PaaS models can generate 20-30% higher customer lifetime value compared to traditional sales, but only when circular KPIs are properly calibrated. "The companies that struggle," notes one practitioner interviewed for this piece, "are those who optimize for a single metric—like recycled content percentage—without understanding how that choice cascades through their cost structure and customer experience."

Battery recycling exemplifies this tension. The Inflation Reduction Act's domestic content requirements for EV tax credits have accelerated battery circularity investments, with the Department of Energy committing $3.16 billion to battery manufacturing and recycling through 2025. Yet practitioners report that achieving closed-loop battery material flows requires coordinating across vehicle OEMs, battery manufacturers, recyclers, and second-life application providers—each with different definitions of success.

Key Concepts

Battery Recycling: The process of recovering valuable materials—lithium, cobalt, nickel, manganese—from spent batteries for reuse in new battery production. In 2024, US battery recycling capacity reached approximately 180,000 metric tons annually, with projections suggesting a need for 1.2 million metric tons by 2030 to handle the wave of retiring EV batteries. Effective circular KPIs in this space measure not just recycling rates but material recovery efficiency (the percentage of target materials actually recovered), closed-loop recycling rates (materials returned to battery production versus downcycled applications), and carbon intensity of recycling processes compared to virgin material extraction.

Project Finance: A financing structure where debt and equity are paid back from the cash flows generated by a specific project rather than from the sponsor's general balance sheet. For circular economy initiatives, project finance has emerged as a critical mechanism for funding capital-intensive infrastructure like sorting facilities, chemical recycling plants, and remanufacturing operations. The structure allows companies to pursue circular investments without bearing full balance sheet risk, though it requires robust, predictable revenue streams—a challenge when circular markets remain immature.

Extended Producer Responsibility (EPR): A policy framework that shifts end-of-life product management responsibility from municipalities and consumers to producers. In the US context, EPR programs increasingly tie compliance fees to product design characteristics, creating financial incentives for circularity. California's SB 54, effective 2025, requires producers to fund a system achieving 65% recycling or composting of covered materials by 2032, with modulated fees that reward recyclable and recycled-content products.

SEC Climate Rule: The Securities and Exchange Commission's climate-related disclosure requirements mandate that public companies report material climate risks, including physical and transition risks. While not explicitly requiring circular economy metrics, the rule's emphasis on supply chain resilience, asset stranding risks, and resource dependency creates disclosure pathways for circular strategies. Practitioners note that proactive circular KPI reporting positions companies favorably for anticipated regulatory expansion.

Circular KPIs: Quantitative metrics that track progress toward circular economy objectives across product lifecycles. Unlike traditional sustainability metrics that often focus on single impact categories, robust circular KPIs capture trade-offs between material efficiency, product longevity, recyclability, and carbon intensity. Leading frameworks include the Ellen MacArthur Foundation's Material Circularity Indicator, the World Business Council for Sustainable Development's CTI tool, and industry-specific metrics developed through sector coalitions.

What's Working and What Isn't

What's Working

Modular product architecture enabling component-level refurbishment: Companies like Caterpillar and Dell have demonstrated that designing products for disassembly at the component level generates measurable circular value. Caterpillar's Reman program recovered 130 million pounds of material in 2024, generating margins comparable to new equipment sales. Dell's modular laptop designs have achieved a 92% material recovery rate in their takeback programs. The key insight from practitioners: modular design decisions must be made early in development, informed by end-of-life data from existing product lines. "We now require lifecycle cost modeling that includes five refurbishment cycles before any new product gets approved," shared one electronics manufacturer.

PaaS models with integrated reverse logistics: Philips Lighting's pay-per-lux model in commercial settings has achieved material recovery rates exceeding 95% because service contracts include end-of-life collection obligations. In the US, similar models have gained traction in healthcare equipment (Stryker's sustainable solutions program), office furniture (Steelcase's product-as-a-service offerings), and industrial equipment. Success factors include customer data integration that triggers proactive maintenance, standardized return processes that minimize reverse logistics costs, and secondary market partnerships that capture residual value from returned assets.

Industry-specific circular accounting standards: The emergence of sector-specific circularity measurement frameworks has reduced confusion and improved comparability. The Automotive Industry Action Group's 2024 Circularity Framework provides standardized definitions for recycled content, recyclability, and material traceability that align with OEM purchasing requirements. Similar efforts in packaging (How2Recycle's expanded protocols), textiles (Textile Exchange's Material Circularity Framework), and electronics (R2/E-Stewards certification updates) give practitioners common language for setting and benchmarking KPIs.

What Isn't Working

Single-metric optimization creating perverse outcomes: Multiple practitioners cited examples where optimizing for one circular metric undermined overall sustainability. A packaging company that maximized recycled content percentage found their products generating higher Scope 3 emissions due to the transportation intensity of recycled feedstock supply chains. An apparel brand pursuing 100% recyclable materials discovered that the chemically recyclable polyester required more energy to process than virgin alternatives. "We learned that circularity without carbon boundaries is just resource shuffling," one sustainability director observed. The solution emerging from leading companies is multi-criteria decision matrices that establish minimum thresholds across circularity, carbon, water, and social impact before any single metric can be maximized.

Misaligned incentives between design and end-of-life teams: Organizations frequently structure circular KPIs at the product development level without connecting them to take-back operations. Design teams optimize for recyclability scores using theoretical assessments, while operations teams face materials that actual recycling infrastructure cannot process. "Our design team specified a 'recyclable' multi-layer film that precisely zero MRFs in our distribution footprint can actually recycle," shared a consumer goods practitioner. Effective organizations are creating cross-functional circular accountability, where design teams' performance metrics include actual (not theoretical) recovery rates from products reaching end-of-life.

Project finance structures mismatched to circular market volatility: Several practitioners described challenges securing project finance for circular infrastructure due to commodity price volatility in recycled materials markets. Traditional project finance requires predictable cash flows, but recycled material prices can swing 40-60% annually based on virgin commodity prices and demand fluctuations. The 2024 recycled PET market illustrated this challenge, with prices dropping 35% year-over-year as virgin PET costs declined. Solutions emerging include long-term offtake agreements with price floors, blended finance structures combining commercial debt with concessional capital, and hedging instruments specifically designed for recycled commodity exposure.

Key Players

Established Leaders

Caterpillar: The heavy equipment manufacturer operates the world's largest remanufacturing program, recovering and rebuilding components to original specifications. Their circular business generates approximately $1.5 billion annually with margins exceeding new equipment sales.

Philips: Through their Circular Economy program, Philips has committed to generating 25% of revenue from circular products, services, and solutions by 2025. Their lighting-as-a-service model serves as a benchmark for PaaS implementation.

Dell Technologies: Dell's closed-loop recycled plastics program has incorporated over 100 million pounds of recycled materials since inception, with circular design principles embedded in their product development lifecycle.

HP Inc.: HP operates one of the most extensive cartridge take-back programs globally, having recovered over 900 million cartridges since 1991, and has expanded circular principles across their hardware portfolio.

Interface: The flooring manufacturer pioneered circular manufacturing in the US, achieving carbon negative operations and implementing take-back programs that have recovered over 400 million pounds of carpet for recycling.

Emerging Startups

Rheaply: Chicago-based resource exchange platform enabling organizations to circulate assets internally and between partners, with verified circular impact metrics. Raised $20 million Series B in 2024.

Recyclops: Provides curbside recycling services in underserved markets using technology-optimized routing, expanding access to circular infrastructure in rural communities across 20 states.

Circulor: Offers blockchain-based supply chain traceability for circular materials, enabling companies to verify recycled content claims and track materials through multiple lifecycle loops.

Nth Cycle: Develops electro-extraction technology for critical mineral recovery from batteries and electronic waste, offering lower-carbon alternatives to pyrometallurgical recycling processes.

Grover: European-born PaaS platform expanding into US markets, providing subscription access to consumer electronics with integrated refurbishment and resale operations.

Key Investors & Funders

Closed Loop Partners: The New York-based investment firm focuses exclusively on circular economy ventures, managing over $500 million across private equity, venture capital, and project finance vehicles.

Breakthrough Energy Ventures: Bill Gates-founded climate venture fund includes circular economy solutions in their portfolio, particularly materials and manufacturing decarbonization plays.

Prelude Ventures: San Francisco-based climate-focused VC with significant portfolio allocation to circular economy startups, particularly in food systems and industrial materials.

US Department of Energy: Through the Bipartisan Infrastructure Law and Inflation Reduction Act, DOE has deployed billions toward circular infrastructure, including battery recycling and critical mineral recovery.

Circulate Capital: Impact-focused investment firm targeting circular economy solutions in packaging and materials, with US operations complementing their emerging markets portfolio.

Examples

Example 1: GM's Ultium Battery Circularity Program - General Motors has established closed-loop partnerships with Li-Cycle and Redwood Materials to recover battery materials from Ultium platform vehicles. By 2024, GM achieved 95% material recovery rates in pilot programs, with recovered lithium, nickel, and cobalt feeding directly back into new battery production. The program targets 50% recycled content in new batteries by 2030, with lifecycle carbon reductions exceeding 30% compared to virgin material pathways. Circular KPIs tracked include material recovery efficiency, closed-loop percentage (materials returning to GM batteries versus external applications), and avoided emissions per kilowatt-hour of battery capacity.

Example 2: Steelcase's Product-as-a-Service Workplace Solutions - Steelcase launched comprehensive PaaS offerings for commercial interiors in 2023, providing workplace furniture and technology through service contracts rather than sales. Their Grand Rapids, Michigan operations incorporate recovered materials into new production, with 2024 metrics showing 44% average recycled content across product lines and 92% end-of-life recovery rates for leased products. The financial model demonstrates 35% higher customer lifetime value compared to traditional sales, validated through 50+ enterprise deployments. Critical KPIs include asset utilization rates, refurbishment cycle economics, and customer satisfaction scores correlated with circular service features.

Example 3: Loop Industries' Infinite Recycling Partnership with PepsiCo - Loop Industries' depolymerization technology enables infinite recycling of PET plastic without quality degradation. Their 2024 partnership with PepsiCo commits to producing bottles with 100% recycled content for select US beverage lines, targeting 25,000 metric tons of circular PET annually by 2026. The project employs project finance structures with guaranteed offtake from PepsiCo, addressing the commodity volatility challenges that have stalled other chemical recycling ventures. Circular KPIs include virgin plastic displacement, processing energy intensity per ton of output, and comparison of lifecycle emissions versus mechanical recycling pathways.

Action Checklist

• Conduct lifecycle cost analysis including minimum five product use cycles to establish baseline circular economics before new product development approval
• Map actual (not theoretical) recycling infrastructure within your distribution footprint to validate recyclability claims with operational reality
• Establish cross-functional circular accountability by linking design team performance metrics to actual end-of-life recovery rates
• Implement multi-criteria decision frameworks requiring minimum thresholds across circularity, carbon, water, and social impact before single-metric optimization
• Develop modular product architecture specifications that enable component-level refurbishment and material recovery
• Create project finance structures with appropriate risk allocation for circular infrastructure investments, including offtake agreements and commodity hedging
• Align circular KPI reporting with SEC Climate Rule disclosure requirements to demonstrate regulatory readiness
• Establish EPR compliance monitoring across all operating states with particular attention to modulated fee structures that reward circular design
• Build partnerships with certified recyclers and remanufacturers who can provide verified material recovery data for your product categories
• Implement digital product passports or equivalent traceability systems that enable material tracking across multiple lifecycle loops

FAQ

Q: How should we prioritize circular KPIs when they conflict with carbon reduction goals? A: Practitioners consistently recommend establishing minimum thresholds rather than absolute prioritization. A robust approach defines acceptable ranges for both circularity metrics (e.g., >30% recycled content) and carbon intensity (e.g., <10% increase versus baseline), then optimizes within those boundaries. When genuine conflicts exist, decision-making should reference materiality assessments—if your company's largest climate exposure stems from Scope 3 upstream emissions, recycled content that reduces those emissions may warrant slight circularity trade-offs elsewhere. Document the rationale transparently for stakeholder communication.

Q: What financial structures best support circular economy infrastructure investments? A: Project finance remains viable but requires adaptation for circular markets. Key elements include long-term offtake agreements (minimum 5-7 years) with price floors or indexed pricing mechanisms, blended capital stacks combining commercial debt with concessional or catalytic capital from impact investors or government programs, and revenue diversification across multiple output streams rather than dependence on single commodity markets. The DOE's Loan Programs Office and state green banks increasingly provide credit enhancement that improves project finance terms for circular infrastructure.

Q: How do we measure circular economy progress when our products have 10+ year lifespans? A: Long-lived products require leading indicators that predict end-of-life outcomes before those outcomes materialize. Effective approaches include design-for-circularity scorecards validated against recovery data from previous product generations, material passport implementation tracking component composition and disassembly requirements, modular design metrics measuring theoretical refurbishment potential, and partnership agreements with recyclers or remanufacturers that establish future recovery commitments. Additionally, second-life applications and mid-lifecycle refurbishment provide intermediate data points before final end-of-life.

Q: What role does EPR compliance play in setting circular KPIs for US companies? A: EPR frameworks increasingly function as external validation mechanisms for circular performance. States with modulated fee structures—where producers pay lower fees for recyclable, recycled-content, or reusable products—create direct financial incentives to hit circular thresholds. Forward-looking companies are setting circular KPIs aligned with the most stringent state requirements (typically California's SB 54), recognizing that compliance-ready products can be deployed nationally while competitors face state-by-state reformulation costs. EPR also provides third-party verification infrastructure through Producer Responsibility Organizations that can validate circular claims.

Q: How do we balance the capital intensity of circular infrastructure with uncertain market demand for circular products? A: Practitioners recommend phased investment approaches that de-risk circular infrastructure commitments. Start with asset-light models—partnerships with existing recyclers, third-party remanufacturers, or PaaS platforms—to validate customer demand and circular economics before verticalizing. When building owned infrastructure, secure anchor customer commitments covering 60-70% of capacity before breaking ground. Leverage government incentives (IRA credits, DOE grants, state programs) to improve project economics. Finally, design infrastructure with flexibility to serve multiple product categories or customer segments rather than single-application facilities.

Sources

• Ellen MacArthur Foundation. "Circularity Gap Report 2024." Circle Economy, January 2024.
• Accenture. "The Circular Economy Handbook: Realizing the Circular Advantage." Accenture Strategy, 2024 Update.
• US Securities and Exchange Commission. "The Enhancement and Standardization of Climate-Related Disclosures for Investors." Final Rule, March 2024.
• US Department of Energy. "National Blueprint for Lithium Batteries 2021-2030." DOE Office of Energy Efficiency and Renewable Energy, Updated 2024.
• Sustainable Packaging Coalition. "State of Sustainable Packaging in North America." GreenBlue, 2024.
• McKinsey & Company. "The Next Normal for Product-as-a-Service Business Models." McKinsey Sustainability Practice, January 2025.
• California Legislative Information. "SB 54: Solid Waste: Reporting, Packaging, and Plastic Food Service Ware." California State Legislature, Effective 2025.
• Automotive Industry Action Group. "Circularity Framework for the Automotive Sector." AIAG Sustainability Working Group, 2024.