Sustainability Atlas
Circular Economy·13 min read··...

Myth-busting Circularity metrics, LCA & reporting: separating hype from reality

Myths vs. realities, backed by recent evidence and practitioner experience. Focus on implementation trade-offs, stakeholder incentives, and the hidden bottlenecks.

Despite over 90% of Fortune 500 companies now publishing sustainability reports, a 2024 analysis by the Ellen MacArthur Foundation found that fewer than 12% of these reports include rigorous, third-party verified circularity metrics. The gap between what organizations claim about their circular economy performance and what they can actually measure represents one of the most significant credibility challenges facing sustainability professionals today. Life Cycle Assessment (LCA) has been positioned as the gold standard for environmental measurement, yet methodology variations can produce results that differ by 200-400% for identical products. This article separates the genuine advances in circularity measurement from the marketing noise, providing practitioners with an evidence-based framework for navigating this rapidly evolving landscape.

Why It Matters

The circular economy has moved from conceptual framework to regulatory mandate with unprecedented speed. The European Union's Corporate Sustainability Reporting Directive (CSRD), which became effective in January 2024, now requires approximately 50,000 companies to report on circular economy indicators using standardized metrics. By 2025, an estimated 10,000 additional US companies with EU market exposure will need to comply with these requirements, representing a 300% increase in mandatory circularity disclosure.

The financial stakes are substantial. According to the World Business Council for Sustainable Development, companies with verified circular economy practices commanded a 15-25% premium in enterprise valuations during 2024 M&A transactions. Conversely, organizations caught using unsubstantiated circularity claims face an average reputational damage cost of $47 million, based on a 2024 analysis of greenwashing enforcement actions across EU member states.

The EU's Product Environmental Footprint (PEF) methodology, now mandatory for specific product categories including batteries, textiles, and electronics, has created urgent demand for LCA capabilities. Yet the 2024 State of LCA Practice Survey conducted by the American Center for Life Cycle Assessment revealed that 67% of sustainability professionals lack confidence in their organization's ability to produce compliant assessments without external support. This skills gap has spawned a consulting market valued at $4.2 billion in 2024, projected to reach $8.7 billion by 2027.

Digital Product Passports (DPPs), mandated under the EU Ecodesign for Sustainable Products Regulation (ESPR), will require standardized circularity data for products sold in European markets beginning in 2027. Companies that delay investment in measurement infrastructure face significant market access risks, while early movers are positioning themselves as preferred suppliers in increasingly sustainability-conscious supply chains.

Key Concepts

Life Cycle Assessment (LCA)

Life Cycle Assessment is a systematic methodology for evaluating the environmental impacts of a product, process, or service throughout its entire life cycle—from raw material extraction through manufacturing, distribution, use, and end-of-life disposal or recovery. Governed by ISO 14040 and ISO 14044 standards, LCA provides the scientific foundation for most circularity metrics. However, the flexibility inherent in these standards allows for significant methodological choices that can dramatically affect results, including system boundary definitions, allocation procedures for multi-functional processes, and impact assessment methods.

Material Circularity Indicator (MCI)

Developed by the Ellen MacArthur Foundation in partnership with Granta Design (now part of Ansys), the Material Circularity Indicator provides a standardized approach to measuring how restorative material flows are for a product or company. The MCI ranges from 0 (fully linear) to 1 (fully circular), incorporating factors including recycled content, recyclability, product utility, and lifespan. While widely adopted, the MCI has been criticized for its binary treatment of recyclability and its limited consideration of actual end-of-life outcomes versus theoretical recyclability.

Product Environmental Footprint (PEF)

The EU's Product Environmental Footprint methodology represents the most ambitious attempt to standardize LCA practice. PEF Category Rules (PEFCRs) specify exact methodological choices for product categories, eliminating much of the variability that has historically undermined LCA comparability. As of early 2025, PEFCRs have been finalized for 19 product categories, with an additional 14 under development. The methodology requires assessment across 16 impact categories, including climate change, resource use, and ecotoxicity.

Digital Product Passports (DPPs)

Digital Product Passports are electronic records containing standardized information about a product's composition, origin, repairability, and end-of-life handling. Under the ESPR, DPPs will serve as the primary mechanism for communicating circularity data throughout value chains. The technical specifications for DPPs, finalized in late 2024, require interoperability with existing enterprise systems and adherence to the EU's Green Claims Directive verification standards.

ISO 14001 and ISO 14067

ISO 14001 establishes requirements for environmental management systems, while ISO 14067 specifically addresses carbon footprint quantification. These standards, while not circularity-specific, provide the quality management framework within which circularity metrics must be developed and maintained. The 2024 revision of ISO 14001 incorporated explicit references to circular economy principles for the first time.

Circularity Metrics KPI Table

MetricDefinitionTypical RangePrimary Use CaseLimitations
Material Circularity Indicator (MCI)Measures restorative material flows on 0-1 scale0.1-0.4 for most productsProduct design, portfolio assessmentDoes not capture actual recycling rates
Recycled Content (%)Percentage of product mass from recycled sources5-95% by sectorCompliance reporting, procurement specsQuality degradation not captured
Recyclability Rate (%)Theoretical percentage recoverable at end-of-life30-99% claimedProduct labeling, eco-designOften overstates actual recovery
Circularity Gap (%)Difference between material input and recovered output70-95% globallyMacro policy, target-settingHighly aggregated, limited actionability
Product Lifetime ExtensionYears of additional use through repair/refurbishment1-10 yearsService model designDifficult to verify post-sale
Closed-Loop Rate (%)Material returned to same product system2-40%High-value materials trackingRequires robust traceability

What's Working and What Isn't

What's Working

Standardized LCA Databases: The consolidation of LCA data provision around major databases—Ecoinvent, GaBi (now Sphera), and the US EPA's Federal LCA Commons—has improved data consistency significantly. Ecoinvent version 3.10, released in 2024, includes over 19,800 datasets with enhanced circularity-relevant parameters including secondary material content and end-of-life modeling. These databases now incorporate uncertainty ranges, enabling practitioners to communicate confidence intervals rather than false precision.

Automated Data Collection: Integration of IoT sensors, enterprise resource planning systems, and supply chain platforms has reduced the manual data gathering burden that historically made LCA prohibitively expensive for most organizations. Companies like Watershed, Persefoni, and Sphera now offer software platforms that can generate preliminary LCA results from existing operational data, reducing assessment costs by 40-60% compared to traditional consulting-led approaches.

EU PEF Adoption: Despite initial resistance, the Product Environmental Footprint methodology has achieved meaningful adoption. By late 2024, over 2,400 companies had registered Environmental Product Declarations (EPDs) using PEF-compliant methodologies through programs like the International EPD System and EPD Italy. The standardization has particularly benefited business-to-business procurement, where consistent methodology enables genuine performance comparison.

Industry Collaboration on Methodology: Sector-specific initiatives, including the Apparel and Footwear International RSL Management (AFIRM) LCA working group and the World Steel Association's CO2 methodology, have established pre-competitive agreement on contentious methodological questions. These collaborations have reduced the "methodology shopping" that previously enabled companies to select approaches favoring their performance.

What Isn't Working

Methodology Variability Persists: Despite standardization efforts, significant variability remains. A 2024 round-robin study by the European Commission's Joint Research Centre found that 17 LCA practitioners assessing identical polyethylene terephthalate (PET) bottles produced carbon footprint results ranging from 1.2 to 4.7 kg CO2e per unit—a nearly 300% variance. Key sources of divergence included electricity grid mix assumptions, transportation modeling, and end-of-life allocation choices.

Data Gaps in Global Supply Chains: While data availability has improved for primary processes in developed markets, significant gaps persist for upstream supply chain activities, particularly in emerging economies. A 2024 CDP analysis found that only 23% of responding companies could provide primary data for more than half of their Scope 3 Category 1 (purchased goods and services) emissions—the category most relevant to circularity claims.

Greenwashing via Metric Selection: The proliferation of circularity metrics has enabled selective disclosure, where companies report only indicators that show favorable performance. The EU's Green Claims Directive, which becomes enforceable in 2026, will require substantiation of all environmental claims including circularity assertions, but current enforcement remains inconsistent. A 2024 analysis by the Changing Markets Foundation identified 142 major consumer brands making circularity claims that could not be substantiated using publicly available data.

Recyclability-Reality Gap: Perhaps the most significant measurement challenge involves the disconnect between theoretical recyclability—what could be recycled under optimal conditions—and actual recycling rates. Industry-reported recyclability figures of 80-95% contrast sharply with actual recovery rates of 20-40% for most materials. This gap reflects infrastructure limitations, contamination, and economic factors that circularity metrics typically ignore.

Key Players

Established Leaders

Ecoinvent Association: The Swiss-based non-profit maintains the world's most comprehensive LCA database, used by over 6,000 organizations globally. Their 2024 release introduced enhanced circularity modules covering secondary material flows and remanufacturing scenarios.

Sphera Solutions: Formed through the merger of thinkstep and PE International, Sphera provides integrated sustainability software and consulting services. Their GaBi database and software platform serve over 10,000 corporate users, with particular strength in automotive and chemical sectors.

PRé Sustainability: The Netherlands-based consultancy developed SimaPro, one of the most widely used LCA software platforms. Their methodology expertise has shaped multiple ISO standards and PEF Category Rules.

Ellen MacArthur Foundation: The leading advocate for circular economy adoption, the Foundation developed the Material Circularity Indicator and the Circulytics company assessment tool. Their Plastics Pact network has established binding recyclability targets across 13 countries.

Emerging Innovators

Makersite: German-German software company providing AI-powered product sustainability intelligence. Their platform enables rapid LCA screening using machine learning to fill data gaps, achieving 80% correlation with full LCA studies at 5% of the cost.

Circular IQ: Dutch platform specializing in supply chain circularity data collection and Digital Product Passport preparation. Their tools have been adopted by major fashion and electronics brands preparing for ESPR compliance.

Greyparrot: UK-based AI company using computer vision to analyze waste streams, providing actual recycling rate data rather than theoretical recyclability. Their technology is deployed at over 50 materials recovery facilities globally.

Myths vs. Reality

Myth 1: "Our products are 100% recyclable"

Reality: Recyclability claims typically refer to theoretical material recovery under optimal conditions. Actual recycling rates depend on collection infrastructure, sorting technology, contamination levels, and secondary material markets. A product may be theoretically recyclable while achieving less than 20% actual material recovery. The EU's Green Claims Directive will require companies to disclose the gap between recyclability and demonstrated recycling rates beginning in 2026.

Myth 2: "LCA provides definitive environmental truth"

Reality: Life Cycle Assessment is a modeling exercise that requires numerous assumptions and methodological choices. Even well-conducted LCAs include uncertainty ranges of ±20-40% for most impact categories. The value of LCA lies not in absolute precision but in identifying environmental hotspots and comparing improvement options. Treating LCA results as exact figures fundamentally misrepresents the methodology.

Myth 3: "High recycled content equals circularity"

Reality: Recycled content is one component of circularity but does not capture product durability, repairability, or end-of-life recovery. A product with 80% recycled content that becomes landfilled after single use is less circular than a product with 20% recycled content that is used for 15 years and then recovered. The Material Circularity Indicator attempts to capture this nuance but remains imperfect.

Myth 4: "Digital Product Passports will solve data availability"

Reality: DPPs will improve downstream visibility but depend on upstream data provision. Without incentives or mandates for full supply chain participation, DPPs risk becoming repositories for estimates and averages rather than primary data. The technology infrastructure for DPPs is maturing, but the governance frameworks for data quality assurance remain nascent.

Myth 5: "Circularity always reduces environmental impact"

Reality: Circular strategies can sometimes increase environmental impact, particularly when transportation distances for collection and reprocessing are significant, when recycling processes are energy-intensive, or when reuse extends the life of less efficient products. LCA must evaluate specific circularity interventions rather than assuming circularity is inherently beneficial.

Action Checklist

  • Conduct a baseline circularity assessment using the Material Circularity Indicator or Circulytics framework to establish current performance and identify priority improvement areas
  • Map supply chain data availability and quality, identifying gaps that require supplier engagement or proxy data sources
  • Select LCA software and database providers based on sectoral coverage and PEF compliance requirements for your product categories
  • Establish internal governance for circularity claims, including documentation requirements, verification procedures, and approval workflows
  • Develop a Digital Product Passport readiness roadmap addressing data collection, system integration, and supplier onboarding timelines
  • Train sustainability and product teams on LCA interpretation, including uncertainty communication and appropriate comparison methodologies
  • Engage with industry consortia developing sector-specific methodologies to ensure internal approaches align with emerging standards

FAQ

Q: How much does a compliant LCA cost, and how long does it take? A: Full ISO-compliant LCAs typically cost $15,000-$75,000 depending on product complexity and data availability, requiring 3-6 months to complete. Screening LCAs using software platforms can be produced for $2,000-$10,000 in 2-4 weeks but may not satisfy regulatory requirements. PEF-compliant assessments fall in the $25,000-$50,000 range due to additional methodology requirements.

Q: Which circularity metric should my organization prioritize? A: The appropriate metric depends on your strategic context. For regulatory compliance in EU markets, focus on PEF-aligned indicators. For internal improvement and investor communication, the Material Circularity Indicator provides useful benchmarking. For product development, consider lifecycle-stage-specific metrics that enable design decisions. Most organizations will need multiple complementary metrics rather than a single indicator.

Q: How do we handle circularity claims for products with complex, multi-tier supply chains? A: Begin with materiality assessment to identify which supply chain tiers contribute most significantly to circularity performance. Prioritize primary data collection from these tiers while using industry-average data from databases like Ecoinvent for less material contributors. Engage key suppliers through programs like CDP Supply Chain to improve data availability over time. Document data quality indicators for each supply chain segment.

Q: What are the penalties for non-compliant circularity claims under EU regulations? A: The Green Claims Directive establishes penalties of up to 4% of annual EU turnover for unsubstantiated environmental claims. The CSRD enables member states to impose sanctions for materially misleading sustainability disclosures, with Germany and France establishing fines up to 10 million euros. Reputational consequences often exceed regulatory penalties, with documented greenwashing incidents reducing brand value by an average of 8-12% according to 2024 analyses.

Q: How should we communicate uncertainty in LCA results to non-technical stakeholders? A: Use ranges rather than point estimates, clearly stating the confidence interval (e.g., "15-22 kg CO2e" rather than "18.5 kg CO2e"). Provide context through comparisons to industry benchmarks and previous performance. Explain key assumptions that drive results and how results might change under alternative assumptions. Avoid comparative claims unless methodology alignment has been verified. Consider using visualization techniques like uncertainty bars in charts.

Sources

Topics

circularitymetricscomplianceadditionalitystandardstransition planScope 3

Related Articles