Measuring resource efficiency and circular economy: A market value approach

Francesco Di Maio, Peter Carlo Rem, Kees Baldé, Michael Polder

Research output: Contribution to journalArticleScientificpeer-review

56 Citations (Scopus)

Abstract

This paper proposes a new value-based indicator to assess the performance of actors in the supply chain in terms of resource efficiency and circular economy. Most of the methodologies developed so far measure resource efficiency on the basis of the environmental burden of the resource relative to the value of output. However, the key point of circular economy is keeping resources within the economy when products no longer serve their functions so that materials can be used again and therefore generate more value. The unit in which resource efficiency and circular economy are measured greatly affects both the ease of acceptance by policymakers and the direction in which green policy will change our society. Whereas the most common approaches to assessing resource efficiency and circular economy use mass, in this paper we advocate measuring both resource efficiency and circular economy in terms of the market value of ‘stressed’ resources, since this value incorporates the elements of scarcity versus competition as well as taxes representing urgent social and environmental externalities. The market value of resources is well-documented and responds automatically to the locality and time at which resources are used. Applying this unit, circularity is defined as the percentage of the value of stressed resources incorporated in a service or product that is returned after its end-of-life. Resource efficiency is the ratio of added product value divided by the value of stressed resources used in production or a process thereof. It is argued that precisely the concept of a free market, in which materials, parts and components are exchanged purely on the basis of their functionality and cost, allows the resource efficiency of a process (KPI for industry and governance) to be distinguished from the resource efficiency of a product (KPI for consumers and governance). Using standard industry data from Statistics Netherlands, the resource efficiency of several Dutch industries were evaluated using the new methodology and compared with a traditional mass-based approach.

Original languageEnglish
Pages (from-to)163-171
Number of pages9
JournalResources, Conservation and Recycling
Volume122
DOIs
Publication statusPublished - 1 Jul 2017

Keywords

  • Agriculture
  • Energy
  • Manufacturing
  • Mining
  • Services

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