Regional measurement of the circular economy is important but challenging
The article was originally published on the website of the ‘Uusimaa Circular Valley’ (Uudenmaan kiertotalouslaakso) pre-study project. The article is based on a broader background report. The pre-study project has been partially financed with the ‘Supporting sustainable growth and vitality in the regions’ (Alueiden kestävän kasvun ja elinvoiman tukeminen) allocation of funds granted by the Helsinki-Uusimaa Regional Council (UKKE funding). The project was coordinated by Green Net Finland and, in addition to HSY, implemented by CLIC Innovation Ltd and VTT.
The main objective of the ‘Uusimaa Circular Valley’ (Uudenmaan kiertotalouslaakso, website in Finnish) pre-study project (hereinafter referred to as the Valley project) was to create a concept for the regional circular economy ecosystem. As part of the project, we examined indicators that could possibly be used to monitor the progress of the circular economy on a regional level and, in particular, as a result of the Valley concept. To this end, we surveyed the current state of measuring the circular economy both in Finland and internationally by reviewing scientific articles, reports and interviewing key experts in the field. Link to the study, in Finnish.
No consensus on the definition of circular economy
The circular economy describes a broader phenomenon than simply improving material efficiency or waste management. It is often used to refer to systemic change and a new kind of economic system, the promotion of which requires action from all actors in society: the public sector, businesses, and residents. The circular economy has only established itself as a political objective in recent years, and there is still no full consensus on its definition and delimitation. Nonetheless, the circular economy is seen as a tool for solving the sustainability crisis, with strong links to climate change mitigation and protecting biodiversity. According to reports prepared by the Finnish Environment Institute, however, assessing the environmental impacts of circular economy measures is challenging due to long impact chains and unclear causal relationships, among other things.
Prior to this study, we already had a preliminary picture of the challenges of measuring the circular economy, especially at the city and urban area level. In 2018, we prepared an internal report at HSY on what kinds of indicators, especially those related to material efficiency, have been used when scoring cities in various global sustainability rankings (European Green Capital Award, European Green City Index, Arcadis Sustainable City Index, and Smart City Index). The main finding of our report was that waste volumes and their recovery rates had generally been used as indicators for the consumption of natural resources and material efficiency, employing very varied and incompletely reported methods. This finding was not surprising, as HSY has long-standing experience in monitoring regional waste information and the related challenges of data availability and fragmentation.
Objectives and indicators go hand in hand
The worn-out phrase “if you can’t measure it, you can’t manage it” is also true of the circular economy. Where measurable GHG emission targets are set for climate action, the targets set for circular economy measures appear more diverse. The circular economy of course aims to reduce the consumption of natural resources and to minimise material losses, but also to maximise the economic value tied to natural resources. However, the financial benefits are rarely quick gains, so monitoring must also be long-term. The switch to a circular economy is seen as a method to replace the current economic system, which wastes natural resources, in a way that is also socially sustainable. Consequently, the promotion and measurement of the circular economy must be broken down into sub-objectives, without succumbing to sub-optimisation. The framework of indicators must be versatile enough to cover the entire spectrum of the circular economy. At the same time, it must be sufficiently short and easy to interpret to facilitate its use to support decision-making. It is a challenging task.
According to our study, positive developments have taken place in measuring the circular economy in recent years. Waste-related indicators are still strongly present, but the approach has widened. Finland’s strategic programme to promote a circular economy places change in actions, behaviour and attitudes at the centre of measurement. However, measurement is still focused on the national level, where official national statistics can be relied upon. Indicators such as those related to the consumption of natural resources require background data on, for example, cross-border movements of materials (cf. imports and exports), for which no official statistics are available at regional or city level. Still, many roadmaps, decisions and measures for the introduction of circular economy solutions are implemented at regional or municipal level, so monitoring of the circular economy at this level is needed.
Challenges include lack of regional information and laborious data collection process
In its 2021 inventory, the OECD found more than 400 circular economy indicators suitable for cities and regions. It can be said that this list of indicators is a mixed collection of potential indicator options at different levels that measure the circular economy from different perspectives. The challenge is therefore not the lack of possible indicators, but the lack of the data they require. Based on our expertise, many of the indicators collected by the OECD require either a lot of manual data collection, informed guesswork, or downscaling of national data. Although a top-down approach of scaling national data to the regional level can provide an indicative picture of the level of the circular economy regionally as well, such indicators are not functional in terms of monitoring, as they do not respond to regional decisions or measures.
The alternative would be a bottom-up approach to information generation, with actors in the field as the starting point. This is generally already the case, for example, when it comes to measuring the functioning of circular economy ecosystems. Such data collection could be suitable for the needs of an ecosystem such as the Valley concept or to focus on specific sectors at the regional level. However, the session on measurement at WCEF 2021 summarised the root of the problem: “data management is time-consuming”. Without a shared information system in use, data can only be collected by asking the actors themselves for information. The quality of the information relies both on the data collector’s success in providing instructions, phrasing the questions and clarifying the definitions, and on the actors’ ability to interpret the instructions and assess impacts. The circular economy is strongly business-driven activity, so trust is also needed between the actors and the data processor, as much of the desired information is linked to trade secrets, for example. Manual data collection is always resource-intensive, and would require sufficient motivation and investment from all the actors in the data chain.
Yet the many ongoing projects to develop sets of criteria and data systems for the circular economy are encouraging. The sets of criteria in development (such as the circular economy criteria for procurement) will hopefully harmonise our views as to what we consider a circular economy to be in the first place and allow for more consistent monitoring of measures in general. Data systems have the potential to facilitate the data collection process and to enable the integration of new data interfaces and thus perhaps the generation of new types of indicator data. In visions for the future, artificial intelligence will be able to screen out relevant information from huge data flows and evaluate the effectiveness of measures on our behalf.
Priority indicators to support the Valley concept
For the time being, we do not have sufficiently comprehensive data systems or artificial intelligence for information processing and analysis. In our study, the potential indicators we recommend for the Valley concept can be summed up around the following preconditions: what kinds of indicators are suitable for regional and/or ecosystem-level measurement, how the indicators satisfy the objectives set in the Valley project, and which indicators are worth co-developing within the Valley concept. The preliminary objectives of the Valley concept were defined as increasing jobs and business, increasing the number of companies operating within the sharing economy, making it easier for municipal residents to operate in the circular economy, and finding uniform practices between municipalities.
Based on this, we propose the following Uusimaa-level indicators as priority indicators for the further development of the Valley concept:
- development of the circular economy sector;
- share of services in the economic structure;
- accessibility and/or ease of circular economy services;
- waste volumes and recycling rates; and
- re-use.
Monitoring the development of jobs and turnover in the circular economy sector was considered to be the most important indicator, although it involves challenges related to the Standard Industrial Classification. Based on our pre-study, it is possible to refine the indicator data to better meet the needs of the Valley concept with the help of various customised company searches, but at the same time, customisation requires more resources and reduces comparability.
The share of services in the economic structure was selected as a potential indicator, as there is existing and easily generated statistical information on it that may, in the long term, respond to systemic change in the circular economy. However, it alone is not an actual circular economy indicator and can be expected to respond slowly to the change.
In our view, combining the geographic information of circular economy actors (e.g. service providers) with population grid data could capture how accessible services are to residents. This information could benefit service design and highlight location gaps in the area. Service and business data tied to geographic information could also provide interesting opportunities for integrating various data interfaces. In such information generation, however, geographic information being up-to-date plays an essential role in terms of data coverage. If necessary, consumer data could be supplemented by a survey aimed at residents in order to see changes in attitudes and practices.
Waste volumes and recycling rates are the most traditional circular economy indicators and can be considered as measuring the success of the circular economy in its downstream loops. Regional waste information is already collected and analysed extensively, at least in the Helsinki metropolitan area, so it is justified to keep this indicator in the selection. To supplement this information, in the future it will likely be possible to obtain regional data on re-use once the Finnish Environment Institute (SYKE) starts collecting re-use statistics in 2022.
In order to measure the activities of the Uusimaa Circular Valley more specifically, we have proposed a questionnaire for organisations committed to the network to supplement the regional information. We have produced an example proposal of the questions, but they should be reviewed once the organisations committed to the network are known in more detail and the final common objectives are being defined. The questionnaire could include, for example, a question on the municipalities’ shared practices whose introduction the Valley concept has promoted, or a question on the jobs that are estimated to have been created as a result of the cooperation.
Measurement can also be focused on specific sectors
In Uusimaa, specific sectors have been identified that could be focused on in terms of promoting the circular economy. A light survey of potentially suitable indicators was also carried out for these selected theme sectors (textile, food, plastic, and construction sectors). However, it is important to continue discussions on these as the Valley concept and its group of actors develop and the pilots to be launched become clearer.
The use of natural resources, zoning, public procurement, and education have been recognised as import themes in promoting a circular economy. For now, it is still challenging to propose indicators for them. Nonetheless, cooperation in order to attain the knowledge base required as the background for the indicators should be further promoted. However, it would also be important to continue other measures, such as sharing good procurement examples and regional consideration of common criteria, for example in certain procurement groups, in the Valley concept.
In the pre-study phase, the appropriate number of indicators was estimated to be about five to ten. The indicators should be produced and developed in stages, starting with smaller pilot areas and indicators first and then expanding the geographical area and framework at a later stage. It will be up to the orchestrators of the Valley concept to decide how much resources are available to pilot and develop the indicators, what to focus on in the measurement, and who is responsible for the generation and monitoring of information.
The article was written by Nea Metsänranta and Andrea Weckman, who work as circular economy experts in HSY’s climate unit.