How to Get Started with the Circular Economy in Finance
Anders Liu-Lindberg
Leading advisor to senior Finance and FP&A leaders on creating impact through business partnering | Interim | VP Finance | Business Finance
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Sustainability is no longer a choice; it’s a mandate. For businesses worldwide, the transition toward more sustainable practices is not just a response to regulatory pressures or stakeholder expectations—it’s an opportunity to innovate and thrive. Among the most impactful shifts is adopting the circular economy, a model designed to reduce waste, extend product lifecycles, and regenerate natural systems.
This paradigm requires a new set of tools, metrics, and approaches for finance teams. Moving from linear to circular business models involves more than operational changes; it fundamentally transforms how we account for resources, measure performance, and report success.
We see circular economy accounting as one of the top trends in finance and accounting in 2025. In this blog, we’ll explore the principles of the circular economy, its implications for finance, and actionable steps to help finance professionals lead their organizations into this new era of sustainable business.
What is the Circular Economy?
At its core, the circular economy challenges the traditional "take-make-dispose" model. Instead of extracting resources, producing goods, and discarding them, a circular economy emphasizes:
1. Designing out waste and pollution
2. Keeping products and materials in use
3. Regenerating natural systems
For businesses, this translates to practices like recycling, refurbishing, reusing materials, and designing products with longer lifespans. The result? Reduced environmental impact and new avenues for economic growth.
Why Finance Teams Play a Critical Role in Circular Economy Initiatives
The shift to a circular economy is not just an operational change—it’s a financial transformation. Finance teams are uniquely positioned to enable this transition by:
For most finance teams, it starts by simply understanding how to record these transactions, so we must first understand what to measure and record.
Key Financial Metrics for Circular Economy Models
Finance teams must rethink their metrics and reporting frameworks to integrate circular economy principles successfully. Here are some of the most critical metrics to consider:
1. Carbon Credits
With the rise of carbon trading schemes, tracking carbon credits has become essential. Finance teams must measure emissions, calculate offsets, and account for carbon credits as assets and liabilities.
2. Cost Savings from Recycling
Circular models often reduce costs by reusing materials or minimizing waste. Finance teams should track savings generated through recycling initiatives and evaluate their contribution to profitability.
3. Sustainability KPIs
Metrics like water usage, energy consumption, and waste reduction should be integrated into financial KPIs. These measures help quantify the environmental impact of business operations.
4. Product Lifecycle Costs
Understanding a product's full lifecycle cost—including maintenance, refurbishment, and end-of-life recycling—is critical for assessing the financial viability of circular initiatives.
5. Revenue from Secondary Markets
Many circular models generate additional revenue streams, such as selling refurbished goods or recycled materials. Finance teams should track these earnings and evaluate their impact on financial performance.
The direct financial benefits of these new business models are clear. However, it’s also essential to consider profitability and link the costs related to the business model. Otherwise, the circular economy will not be financially sustainable. With that said, let’s get practical and see how Finance can get started with the circular economy.
How to Get Started with Circular Economy in Finance
Transitioning to a circular economy can feel overwhelming, but breaking it down into manageable steps helps finance teams take action. Here’s a roadmap to get started:
Step 1: Understand the Circular Economy Model
Finance professionals must grasp the basics of the circular economy and its relevance to their industry. To build foundational knowledge, they should attend workshops, read case studies, and consult with sustainability experts.
Example: A fashion company’s finance team learns about closed-loop systems, where fabric waste is recycled into new garments, reducing dependency on virgin materials.
Step 2: Collaborate Across Departments
Circular economy initiatives require cross-functional collaboration. Finance teams must work closely with supply chain, operations, and sustainability teams to align goals and resources.
Example: In a manufacturing firm, the finance team partners with operations to evaluate the ROI of switching to recycled raw materials, incorporating these costs into the budget.
Step 3: Develop New Financial Models
Traditional financial models often overlook the long-term benefits of circular practices. Finance teams should adopt models that account for tangible and intangible benefits, such as enhanced brand reputation or regulatory compliance.
Example: A consumer electronics company develops a financial model to evaluate the profitability of refurbishing returned products and reselling them at a lower price point.
Step 4: Track and Report Sustainability Metrics
Integrate sustainability metrics into your financial reports and dashboards. This transparency aligns with regulatory requirements and builds trust with stakeholders.
Example: A food company includes metrics like water savings from sustainable farming practices and reductions in packaging waste in its annual financial report.
Step 5: Invest in Technology
Technology plays a crucial role in managing circular initiatives. From AI-powered analytics to blockchain for tracking supply chains, finance teams must invest in tools supporting data-driven decision-making.
Example: A logistics firm uses blockchain to verify the origin and sustainability of materials, ensuring compliance with circular economy principles.
Step 6: Engage Stakeholders
Communicate the value of circular economy initiatives to internal and external stakeholders. This includes educating employees, engaging investors, and aligning with customers’ growing demand for sustainability.
Example: A retailer hosts an investor briefing to showcase how circular economy practices drive cost savings and customer loyalty.
Most companies have worked with tracking sustainability metrics by now, but it’s primarily been a manual effort. Hence, companies must find better ways to manage this than spreadsheets, and we see 2025 as a year of sustainability reporting transformation. Reporting is not the only challenge, so let’s dig into a few more.
Challenges and How to Overcome Them
Like any transformation, the journey to a circular economy comes with challenges. Here’s how finance teams can address them:
1. Lack of Standardized Metrics
The absence of universally accepted sustainability metrics makes benchmarking difficult. Finance teams should adopt widely recognized frameworks like the Global Reporting Initiative (GRI), Corporate Sustainability Reporting Directive (CSRD), or Sustainability Accounting Standards Board (SASB).
2. Upfront Costs
Many circular initiatives require significant upfront investment. Finance teams must focus on the long-term ROI and communicate this to stakeholders.
3. Resistance to Change
Transitioning to circular models often involves cultural shifts. Finance teams can act as champions of change by highlighting the financial benefits of sustainability.
Luckily, we can learn from many front-runners in this field. Let’s look at some early success stories in circular economy accounting.
Success Stories: Circular Economy in Action
1. IKEA’s Circular Furniture Program
IKEA has embraced the circular economy by refurbishing and reselling used furniture. The finance team plays a key role in tracking the program’s cost savings, revenue, and sustainability impact.
2. Patagonia’s Worn Wear Initiative
Patagonia encourages customers to repair and reuse their outdoor gear. By monetizing the resale of refurbished items, the company has created a profitable secondary market while reducing waste.
3. Philips Circular Lighting
Philips offers “light as a service,” allowing customers to pay for lighting usage rather than owning it. This model requires finance teams to track recurring payments' asset lifecycle costs and revenue.
These early successes should encourage finance teams to drive similar successes in their own company. Start by understanding the ongoing initiatives and see how you can help.
Why the Circular Economy Matters for Finance Professionals
The circular economy isn’t just an environmental initiative—it’s a business strategy with profound financial implications. By embracing this model, companies can unlock new revenue streams, reduce costs, and build resilience against future disruptions.
The circular economy allows finance teams to take charge of sustainable growth. Finance professionals can play a pivotal role in shaping a more sustainable future by adopting new metrics, collaborating across departments, and championing innovative models.
As sustainability becomes a non-negotiable business imperative, the circular economy represents the next frontier for finance teams. By integrating circular principles into financial models and metrics, companies can align profitability with purpose.
The question is no longer why adopt the circular economy—it’s how. And for finance professionals, the time to act is now. Are you ready to lead the charge? Share your thoughts in the comments below!
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Anders Liu-Lindberg is the co-founder and a partner at Business Partnering Institute and the owner of the largest group dedicated to Finance Business Partnering on LinkedIn, which has more than 12,000 members. I have ten years of experience as a business partner at the global transport and logistics company Maersk. I am the co-author of the book “Create Value as a Finance Business Partner,” a long-time Finance Blogger, a LinkedIn Learning instructor, and a Top Voice on LinkedIn with 375,000+ followers.
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