Trend watch: Circularity metrics, LCA & reporting in 2026 — signals, winners, and red flags

Life cycle assessment software spending surged 62% in 2025, reaching $4.2 billion globally, according to Verdantix research on the environmental intelligence market. The acceleration reflects a structural shift: circularity metrics and LCA reporting are moving from voluntary differentiators to regulatory requirements across the EU, North America, and increasingly in emerging markets. This trend watch identifies the signals reshaping circularity measurement in 2026, the platforms and approaches winning market share, and the red flags that could undermine the entire measurement ecosystem.

Why It Matters

Circularity metrics quantify how effectively materials, components, and products remain in use rather than flowing to disposal. Life cycle assessment provides the analytical framework for evaluating environmental impacts across a product's full value chain, from raw material extraction through manufacturing, use, and end-of-life. Reporting translates these measurements into disclosures that regulators, investors, and customers can act on.

Three forces are converging to make circularity metrics and LCA reporting critical infrastructure for businesses in 2026. First, the EU's Corporate Sustainability Reporting Directive (CSRD) requires companies to disclose circular economy metrics under European Sustainability Reporting Standard E5, including resource inflows, outflows, and waste generation. Over 50,000 companies will eventually fall under CSRD's scope, and the first wave of reports covering fiscal year 2024 is now being audited. Second, the EU's Ecodesign for Sustainable Products Regulation (ESPR) mandates Digital Product Passports that embed LCA data at the product level, requiring companies to calculate and disclose embodied carbon, recycled content, and recyclability scores. Third, investors managing over $35 trillion in assets now request circular economy data through CDP and TCFD-aligned frameworks, using material circularity indicators to assess resource risk exposure in their portfolios.

The stakes are especially high in emerging markets, where manufacturing supply chains for textiles, electronics, and packaging face increasing pressure from downstream buyers in the EU and North America to provide product-level environmental data. Companies without credible LCA capabilities risk losing access to regulated markets entirely.

Key Concepts

Material Circularity Indicator (MCI) measures how restorative a product's material flows are, scoring from 0 (fully linear) to 1 (fully circular). Developed by the Ellen MacArthur Foundation and Granta Design, the MCI accounts for recycled and reused inputs, product lifespan extension, and end-of-life recovery rates. It has become the dominant metric for benchmarking circularity at the product and company level.

Life cycle assessment (LCA) evaluates the environmental impacts of a product or service across its entire life cycle, following ISO 14040 and 14044 standards. A full LCA covers climate change, water use, resource depletion, ecotoxicity, and other impact categories. Streamlined LCA approaches focus on specific impact categories, typically carbon, to reduce data requirements while maintaining analytical rigor.

Product Environmental Footprint (PEF) is the EU's standardized methodology for measuring and communicating product-level environmental performance. PEF Category Rules define calculation methods for specific product groups, enabling comparable claims across manufacturers. PEF is the methodological backbone for Digital Product Passports under ESPR.

Circularity gap reporting measures the difference between current material flows and a theoretical fully circular state. At the national level, the Circularity Gap Report published by Circle Economy found the global economy was only 7.2% circular in 2025, down from 9.1% in 2018, highlighting the growing urgency for measurement-driven intervention.

What's Working

SAP's Sustainability Control Tower has emerged as the enterprise platform of choice for integrating LCA data into business decision-making. By connecting directly to ERP transaction data, SAP calculates product-level carbon footprints using actual procurement records, energy consumption, and logistics data rather than industry averages. Over 1,200 companies now use the platform, with manufacturers in automotive, chemicals, and consumer goods reporting that automated LCA calculations reduced assessment time from months to days. Volkswagen Group uses the system to track embodied carbon across 40,000+ component variants, enabling real-time supplier comparison on environmental performance.

Sphera's Product Sustainability Software powers some of the most rigorous LCA programs in industry. The platform combines the GaBi LCA database, one of the largest commercially available life cycle inventory datasets, with workflow tools that enable non-specialist engineers to run assessments. BASF uses Sphera to calculate product carbon footprints across its entire portfolio of 45,000+ products, publishing results through its Eco-Efficiency Analysis program. The scale demonstrates that comprehensive LCA is feasible even for highly complex chemical manufacturers.

The Ellen MacArthur Foundation's Circulytics assessment tool has been adopted by over 2,000 companies to benchmark circularity performance. Unlike product-level LCA, Circulytics evaluates company-wide circular economy enablers: strategy, innovation pipelines, procurement policies, and material flows. Companies scoring in the top quintile have demonstrated 15-20% lower material cost volatility compared to peers, according to a 2025 analysis by the Foundation. In emerging markets, Circulytics adoption grew 85% in 2025, driven by Indian and Southeast Asian manufacturers seeking to demonstrate circularity credentials to European buyers.

What's Not Working

Data quality gaps in life cycle inventory databases remain the fundamental constraint. The majority of LCA calculations rely on generic industry-average data rather than supplier-specific primary data. A 2025 study published in the Journal of Industrial Ecology found that carbon footprint estimates for the same product could vary by 40-200% depending on which background database was used (ecoinvent, GaBi, or ELCD). Until primary data from actual supply chains replaces modeled averages, LCA results will carry significant uncertainty that undermines their use in procurement decisions and regulatory compliance.

Inconsistent circularity metric definitions across jurisdictions create reporting complexity without proportional insight. The EU's ESRS E5 uses different circularity indicators than ISO 59020 (the forthcoming circular economy measurement standard), which differs again from the metrics requested by CDP's circular economy questionnaire. Companies operating globally face three or more overlapping but non-identical measurement frameworks, each requiring different data collection and calculation approaches. Harmonization efforts are underway but remain years from resolution.

LCA expertise shortage in emerging markets limits adoption precisely where manufacturing growth is fastest. A 2025 survey by the UNEP Life Cycle Initiative found fewer than 500 qualified LCA practitioners across all of Sub-Saharan Africa, compared to over 15,000 in Europe. This scarcity means that factories producing goods for export to regulated markets often cannot perform the assessments their customers require. Remote assessment services and simplified tools are emerging but cannot fully substitute for local expertise familiar with regional energy grids, waste infrastructure, and material sourcing patterns.

Greenwashing through selective scope and functional unit choices undermines trust in published LCA results. Companies can dramatically alter their environmental footprint by narrowing system boundaries, choosing favorable functional units, or excluding end-of-life scenarios. Without mandatory third-party critical review, which is required under ISO 14044 for comparative assertions but not for internal reporting, published LCA results can be technically compliant yet deeply misleading. The EU's Green Claims Directive, expected to take effect in 2027, will impose stricter substantiation requirements, but enforcement mechanisms remain undefined.

Key Players

Established Leaders

• SAP: Integrates LCA and circularity metrics directly into enterprise ERP systems through its Sustainability Control Tower, connecting financial and environmental data at the transaction level.
• Sphera (BlackRock portfolio): Operates the GaBi LCA database and product sustainability software suite used by over 10,000 organizations for environmental impact assessment.
• Dassault Systemes: Provides LCA capabilities through its 3DEXPERIENCE platform, enabling product designers to evaluate environmental impacts during the design phase rather than post-production.
• Bureau Veritas: Offers third-party LCA verification and circularity certification services, positioning as an independent assurance provider for CSRD and ESPR compliance.

Emerging Startups

• Makersite: AI-powered product lifecycle intelligence platform that automates multi-tier supply chain LCA, reducing data collection time by up to 90% through machine learning on procurement and supplier data.
• Circular IQ: Provides circularity measurement and Digital Product Passport preparation tools designed for mid-market manufacturers, with particular traction in textiles and packaging.
• Carbmee: Enterprise carbon management platform using AI to calculate product carbon footprints from ERP data, targeting the gap between manual LCA and automated emissions accounting.
• One Click LCA: Construction-focused LCA platform used in over 170 countries, enabling architects and engineers to assess embodied carbon and circularity during building design.

Key Investors and Funders

• European Commission: Funds LCA methodology development and Digital Product Passport pilots through Horizon Europe, with over EUR 200 million allocated to circular economy measurement research in 2024-2026.
• Ellen MacArthur Foundation: Drives circularity metrics standardization and adoption through Circulytics, the Material Circularity Indicator, and partnerships with governments and industry.
• UNEP Life Cycle Initiative: Coordinates global LCA capacity building, database development, and methodology harmonization, with targeted programs for emerging market practitioners.

Signals to Watch in 2026

Signal	Current State	Direction	Why It Matters
CSRD circularity disclosures (ESRS E5)	First reports being audited	Expanding to wave 2 companies	Sets de facto standard for circular economy reporting in Europe
Digital Product Passport pilots	Active in batteries, textiles, electronics	Mandatory rollout 2027-2028	Embeds LCA data at product level, requiring granular measurement
Primary data in LCA databases	15-20% of entries use primary data	Increasing through supplier digitization	Determines whether LCA results reflect reality or industry averages
AI-automated LCA adoption	Early commercial deployment	Rapid growth, 100%+ YoY	Reduces cost and time barriers that limit LCA to large enterprises
ISO 59020 circular economy measurement	Draft standard under review	Expected publication 2026-2027	Could harmonize fragmented circularity metric definitions globally
Emerging market LCA capacity	Fewer than 2,000 practitioners in APAC emerging economies	Growing through training programs	Determines whether global supply chains can meet EU data requirements

Red Flags

Declining LCA critical review rates as volume scales. The surge in LCA demand is outpacing the supply of qualified reviewers. If companies publish environmental claims based on uncritically reviewed assessments, the credibility of LCA as a decision-making tool erodes. Regulators have not yet defined minimum reviewer qualifications for CSRD or ESPR compliance, creating a quality gap.

Over-reliance on carbon as a proxy for circularity. Many organizations measure only greenhouse gas emissions and equate carbon reduction with circular economy progress. Circularity encompasses material flows, water use, biodiversity impacts, and toxicity, all of which may not correlate with carbon performance. A product with a low carbon footprint can still be highly linear in its material design. Single-metric optimization risks missing systemic resource challenges.

Database vendor lock-in distorting market competition. The LCA software market is consolidating around a small number of proprietary databases. If interoperability between platforms remains limited, companies face switching costs that reduce competitive pressure on data quality and pricing. The EU's Open Data Directive may eventually require public access to government-funded LCA data, but implementation timelines remain uncertain.

Measurement burden falling disproportionately on SME suppliers. Large brands pass LCA and circularity reporting requirements downstream to suppliers without providing tools, training, or financial support. Small manufacturers in emerging markets face compliance costs that can exceed 2-3% of revenue, creating trade barriers disguised as sustainability requirements. Without capacity building and cost sharing, circularity metrics become a tool for market exclusion rather than environmental improvement.

Action Checklist

• Audit current circularity metrics and LCA capabilities against CSRD ESRS E5 disclosure requirements and identify gaps
• Evaluate LCA software platforms for compatibility with Digital Product Passport requirements under ESPR
• Prioritize primary data collection from top 20 suppliers by spend to reduce reliance on generic database averages
• Implement Material Circularity Indicator or equivalent product-level circularity scoring for flagship product lines
• Train procurement and design teams on LCA interpretation to embed circularity into sourcing and R&D decisions
• Engage with ISO 59020 development to ensure alignment between internal metrics and emerging international standards
• Establish supplier capacity building programs for LCA data provision, particularly for emerging market partners

FAQ

What is the difference between LCA and circularity metrics? Life cycle assessment evaluates the total environmental impact of a product across its full value chain, covering multiple impact categories like climate change, water use, and resource depletion. Circularity metrics specifically measure how effectively materials are kept in use through recycling, reuse, remanufacturing, and lifespan extension. LCA provides the analytical framework, while circularity metrics focus on material flow efficiency. The two are complementary: a product can have a low environmental footprint per LCA but still follow a linear take-make-dispose model.

How much does a product-level LCA cost? Costs vary widely depending on complexity. A streamlined carbon-only LCA for a simple consumer product might cost $5,000-15,000 using automated tools. A full multi-impact LCA for a complex manufactured product, such as an electronic device or vehicle component, typically ranges from $25,000 to $100,000 when conducted by specialized consultancies. AI-powered platforms like Makersite and Carbmee are reducing costs by 50-80% through automation, making product-level LCA accessible to mid-market companies for the first time.

Will Digital Product Passports require full LCA data? The EU's ESPR mandates that Digital Product Passports include environmental performance information, but the specific data requirements vary by product category. Battery passports, the first category to be regulated, require carbon footprint declarations based on defined calculation rules. Textile and electronics passports are expected to include recycled content percentages, durability scores, and recyclability assessments. Full multi-impact LCA is not universally required, but the Product Environmental Footprint methodology provides the calculation framework for most required data points.

How are emerging market manufacturers preparing for circularity reporting requirements? Preparation varies significantly by region and sector. In India, the Bureau of Indian Standards is developing national LCA guidelines aligned with ISO 14040, and industry associations in textiles and automotive are running pilot programs. In Southeast Asia, UNIDO and the Asian Development Bank fund LCA training and software access for export-oriented manufacturers. However, capacity remains far below demand. The most proactive approach combines investment in local expertise, adoption of simplified assessment tools, and partnerships with international buyers who provide technical assistance alongside compliance requirements.

Sources

1. Verdantix. "Global Environmental Intelligence Market Forecast 2025-2030." Verdantix, 2025.
2. Circle Economy. "The Circularity Gap Report 2025." Circle Economy Foundation, 2025.
3. European Financial Reporting Advisory Group. "ESRS E5: Resource Use and Circular Economy." EFRAG, 2024.
4. Ellen MacArthur Foundation. "Circulytics: Measuring Company Circularity." Ellen MacArthur Foundation, 2025.
5. UNEP Life Cycle Initiative. "Global LCA Capacity Assessment 2025." UNEP, 2025.
6. Journal of Industrial Ecology. "Variability in Product Carbon Footprints Across Life Cycle Inventory Databases." Wiley, 2025.
7. European Commission. "Ecodesign for Sustainable Products Regulation: Implementation Roadmap." EC, 2025.
8. CDP. "Circular Economy Disclosure: Corporate Readiness Assessment 2025." CDP Worldwide, 2025.