Clearing the fog: How circular economy transition can be measured at the company level

Abstract

How far has the transition process to a circular economy progressed? How can this transition process be promoted? So far, the indicators used to analyse such questions have mostly been based on aggregate recycling rates or waste volumes. However, circular economy is much more than that. This paper develops a concept for empirically measuring the transition process along a company's value chain. The concept distinguishes 27 business activities that are relevant for the circular economy and thus enables detailed statements about the transition to the circular economy along the entire value chain and the three dimensions of the circular economy, i.e. efficiency, closing the resource loop and extending product life. Based on this concept, a representative survey of 8,000 Swiss companies was conducted. The data allow - for the first time and for a representative sample - the analysis of the determinants of the transition process to a circular economy using econometric estimations. The results suggest that the transition process has just started; most companies involved in circular economy activities focus on efficiency enhancing measures rather than on extending the life of products/services or closing the loop. In addition, the results show that circular economy pioneers are characterized by a willingness to invest a significant amount of available capital in the breadth of circular activities, have greater financial flexibility, and in some cases face greater non-price competition. Ultimately, the results suggest that the transition to a circular economy can only be successful if the necessary framework conditions are set in such a way that it is profitable for the company to significantly increase the degree of circularity.

Keywords: Circular economy; Company level data; Empirical concept; Quantitative analysis; Sustainability transition.