The Circular Economy by the Numbers

You know that old managerial maxim of “what gets measured, gets managed?” Well, it sure applies to the world of sustainability, too.

You simply can't evaluate any eco-friendly initiative's efficacy without a set of clear and strong measurements. These metrics need to tell a genuine and compelling story of progress, one devoid of “green-washing” or other half-hearted efforts.

The Material Circularity Indicator and the Linear Flow Index

What first drew my attention to the Circular Economy were the two measurements on which it relied: (1) the Material Circularity Indicator (MCI), and (2) the Linear Flow Index (LFI).

I found these measurements to be sturdy and sound. To be persuasive. And to be a potential catalyst for motivating change in the retail industry.

Before I share what I’ve learned about the MCI and LFI, a brief public service announcement:

There’s a healthy debate in circular economy circles (see what I did there?) about the proper framework for measuring circularity. But in this update—and subsequent ones on measurement—I’ll continue to reference the Ellen MacArthur Foundation as the thought leader in this space.

The Origins of the Material Circularity Indicator (MCI)

The Ellen MacArthur Foundation first developed the MCI in partnership with the engineering software company Granta Design. It is based on these four principles:

1. Using feedstock from reused or recycled sources

2. Reusing components or recycling materials after the product has been used

3. Keeping products in use longer (for example, by reuse or redistribution)

4. Making more intensive use of products (for example, via service or performance models)

Its goal was to help organizations understand how effectively they were transitioning from a traditional linear model to a circular one.

Perhaps a visual will help here.

Here is a snapshot of a “linear flow”—that is, the standard take/make/use/dispose model, where virgin raw materials are used to create a product, which is then discarded at the end of its life.

Source: Ellen McArthur Foundation

The linear flow for this model approaches 1, which you can think of as 100% waste. But the closer that number gets to 0, the more restorative (and circular) the flow has become.

In fact, as an organization moves to a more circular flow, it now has options for diverting waste, such as recycling and reuse:

Source: Ellen McArthur Foundation

The more waste diverted from the garbage truck, the lower the Linear Flow Index (LFI), and the higher the Material Circularity Indicator (MCI).

But how do the MCI and the LFI relate to each other? Well, I must warn you that this math is not for the faint of heart. Below is an image of circular flow, this time including variables in the calculations:

Source: Ellen McArthur Foundation

See . . . I warned you, right? But for the math fans out there, this diagram comes from the 98-page Material Circularity Indicator paper authored by the Ellen MacArthur Foundation and Granta, where you’ll find full breakdowns for each of the variables.

But in the meantime, the TLDR version for the linear flow index is: LFI = (V + W) / 2M

Where the linear flow is the measurement of virgin materials (V) + waste materials (W) divided by two times the mass of the original item. Easy, right?

For those of you still with me—and not reliving the total delight of taking pre-calculus in high school—you can start to see one important truth: the fewer virgin and waste materials used, the lower the overall linear flow, and the higher the restorative (or circular) flow.

The Importance of Utility

I have one more factor to introduce here: utility.

Utility refers to two things: (1) how long the product lasts (as compared to the industry), and (2) how much it is used. For example, my car now sits in the garage for all but 30 minutes a day. That means it currently has very low use and, therefore, low utility. But that car also lasts longer than similar vehicles out there, which raises its utility.

My example shows that each of the forces at play here—durability and use—can move the overall utility “score” in opposite directions. But when all’s said and done, the higher the utility, the higher the material circularity.

Bringing It All Together

Here’s what we know so far: the lower the linear flow index (LFI), the higher the material circularity indicator (MCI). We also know three ways to decrease that LFI and raise the MCI:

1. First, you increase circularity by using more recycled or reused materials at the start of the flow.

2. Second, you increase restorative flow (and thus, circularity) by recycling and restoring products at the end of their life.

3. And third, when you increase the utility of a product, you also increase the MCI because fewer replacement products are needed.

The simplified math looks like this (you can find the full details here): MCI = 1 – (LFI x 1/Utility)

What Does it Look Like in Practice?

So far, the flows we’ve talked about have helped to illustrate our two key measures, the Linear Flow Index (LFI) and the Material Circular Indicator (MCI).

But creating a true circular economy is, well, a bit more complicated. You need to do more than simply decrease the use of new materials at the start of the value chain and remove the waste at the end.

You must also eliminate waste throughout the process of creating and using products.

In the real world, circularity can be created in several places along the retail value chain. Below is the classic “butterfly diagram,” developed by the Ellen MacArthur Foundation in partnership with the authors of Cradle to Cradle.  It shows the most common areas for creating circularity.

Source: Ellen McArthur Foundation

There are two ways to create “circles.” On the left are biological cycles, where biological elements are returned to the biosphere (think composting). On the right are technical cycles, where products, components, and materials are returned to the market for future use.

In our discussions for retail and brands, we'll focus predominately on the technical cycles, but the biological cycles are critical for industries like agriculture.

Bringing Circular Models to Retail

The Ellen MacArthur Foundation uses four fundamental approaches to create circularity in an organization:

1. Leveraging product design and using recovered materials at the start

2. Creating innovative business models that provide incentives for collecting end-of-life products

3. Developing reverse logistics processes that make it easy to recover end-of-life products from consumers and return them to production partners

4. Instituting a system of conditions to support businesses as they make these transitions, as well as to lower or eliminate any existing barriers to change

These areas of focus clearly apply to retail, too. We’ve already seen how companies such as H&M and Zara, which encourage textile recycling, are beginning to address challenges with reverse logistics—and design with recovered materials in mind.

We've also just discovered how to use the Material Circularity Indicator (MCI) to measure these programs' efficacy.

But while we can all agree that the math is available, it’s not exactly what you’d call “easily accessible” or “comprehensive.” And figuring out how to apply the MCI across your organization could be a perplexing challenge.

So, to better support circular efforts in an all-encompassing way, the Ellen MacArthur Foundation has launched a program called Circulytics. Its commitment is to measure the entire company’s circularity, not merely its products and material flows.