The years between 2020 and 2030 are poised to be a transformative decade for businesses worldwide.
In this era of unprecedented change and uncertainty, organizations are faced with the imperative to redefine their role in driving both economic prosperity and societal well-being.
The rapid influx of external factors that challenge our global context has unveiled a series of dependencies on non-traditional sources of environmental, social, and governance influences, which companies must effectively measure and manage.
As we venture further into this decade, it becomes evident that the landscape for sustainability data and innovation through analytics continue to evolve. These changes are redefining the benchmarks against which responsible business and financial management standards are measured.
While analytics innovation and sustainability data have surged ahead with advances in artificial intelligence, an aspect known as system innovation, which includes processes that influence the effectiveness of evolving business models in achieving large-scale sustainability goals, has lagged behind.
The critical question is: How can businesses navigate the complex, multidimensional landscape of the next decade?
The answer lies in their ability to harness open data and technological innovation for its aggregation across domains. By doing so, they can create thriving business ecosystems and enable sustainable transitions, where multilateral cooperation efforts provide pathways for the co-creation of socio-economic value and mutually beneficial change.
One of the most promising pathways towards sustainable business practices is the adoption of circular economy models. These models introduce regenerative consumption-production systems, enabling dynamic assessments of both business vulnerabilities and value-capture opportunities along pathways of sustainable transition. Circular economies break free from the traditional linear model of resource consumption and disposal, ushering in a new era of sustainable development.
Technical Note: Circularity Models for Sustainability Transitions
Circularity models, often used to describe the set of processes and product innovations addressing the reuse cycle of natural resources, operate in three key ways:
- Extending Usable Life: They extend the usable life of materials and products.
- Minimizing Environmental Degradation: They minimize environmental degradation through optimized material usage and product consumption.
- Regenerating Natural Systems: They help regenerate the natural systems that produce natural resources.
A circular economy or an economic system that relies on the widespread adoption of circular processes and product innovations, breaking the vicious cycle of finite resource consumption for economic growth.
According to the annual Global Circularity Gap Report, approximately seven percent of global economic growth as of 2023 relied on circularity principles. Despite this gap, emerging examples of circular models adopted by businesses at the micro-level offer a unique combination of data, process, and system innovations.
These innovations can directly boost a robust sustainability transition by addressing the consumption of primary resources while supporting the development of regenerative solutions in production and manufacturing activities.
The Circulytics barometer of progress
One notable and freely accessible data-driven tool for measuring a company's circularity performance is Circulytics, launched by the Ellen MacArthur Foundation in 2020. In less than three years, it has provided over 2,000 companies the opportunity to measure their circularity performance through indicators such as the Material Circularity Indicators (MCI) and represent in scorecard template areas for improvement.
However, the Circulytics method (* refer to note), though data-intensive for businesses, has relied on the assumption that company-level MCIs can be derived as a proxy for the aggregate of individual product circularity statistics and the flow of materials involved in the manufacturing of each product and its offering in the marketplace.
What this aggregation may have missed are the ever-changing real-world conditions that businesses must adapt to and how well synchronized the evolving business model is with the stakeholder community it serves.
One way to address these gaps is by adding a set of complementary risk and impact indicators to the aggregation of individual assessments.
A circularity framework, built around the MCI model and compliant with the upcoming ESRS reporting guidance, helps identify the material circularity effects on the business and its stakeholders. Thus, businesses can define priorities for crafting a sustainability transition roadmap with measurable outcomes stemming from system innovations while also aligning their internal processes with the disclosure requirements set forth by the ESRS.
In conclusion, the next decade is a remarkable opportunity for businesses to embrace innovation and create a lasting impact on both economic and societal fronts. By exploring the circular economy and adopting a suitable strategy for sustainability transition of their sectorial and geographic context, companies can not only thrive commercially but also contribute to a more sustainable, regenerative future for all. As we embark on this learning journey, the road to innovation and impact beckons, offering a brighter and more sustainable tomorrow.
(*) Note: As of August 2023, in a spirit of harmonisation and alignment of reporting, the Ellen MacArthur Foundation announced it would be stepping away from data collection and individual performance assessments based on Circulytics as a result of the a result of the adoption of circular economy indicators in mandatory reporting frameworks such as the forthcoming European Sustainability Reporting Standards.