Revisiting circular economy indicators: A circular supply chain perspective

Abstract

The accurate understanding and measurement of circularity in purchasing and supply management is crucial for organisations aiming to enhance sustainability, reduce costs, and comply with regulations. However, existing circular economy indicators do not account for all circularity dimensions (i.e., C₁-monetary, C₂-energy and environment, C₃-material, C₄-temporal and C₅-efficiency) and neglect key actors (i.e., collectors, recyclers, manufacturers, users) in the circular supply chain. Consequently, this results in biased decision-making when selecting supply chain partners, hindering the circular economy's progress. This study investigates the effectiveness of circular economy indicators and their constituent circular economy items at the circular supply chain level to better evaluate circular economy accomplishments. Out of the 63 circular economy indicators and 23 circular economy items identified, only three evaluate all five circularity dimensions, while nearly 40 percent fail to consider critical actors within the circular supply chain. Drawing on stakeholder theory, this study proposes a framework for developing an effective circular economy indicator. The proposed framework is validated through a hybrid approach, beginning with the fuzzy analytical hierarchy process to ascertain the weights of circular economy items, followed by the fuzzy technique of order preference similarity to the ideal solution to rank recycling alternatives using the determined weights, and culminating with the linear programming to optimise the circularity based on the established rankings. This research emphasises the importance of covering all circularity dimensions and targeting all circular supply chain actors in aligning the goals of different entities with the broader objectives of the circular economy. It is the first study to provide guidance on developing circular economy indicators and evaluating circular economy performance from a circular supply chain perspective, serving as a solid foundation to achieve circular economy agendas. It affords purchasing and supply practitioners the opportunity to augment decision-making processes, optimise sustainability efforts, and bolster supply chain regulatory adherence and governance.