Improving climate emissions accounting to accelerate the circular economy transition

Climate action: why the circular economy is key to reaching net zero

As we strive towards reaching net zero and tackling the climate crisis, we face a pivotal challenge: how to significantly reduce global greenhouse gas emissions. The shift to renewable energy and energy efficiency will go a long way, but on its own it will not be enough. It can help us address 55% of global emissions. To complete the picture and tackle the remaining 45%, we need to rethink the way we produce and consume — the way we make and use products, materials, and food.?

This is where the circular economy comes in.

The circular economy is based on three principles, driven by design: eliminate waste and pollution, circulate products and materials, and regenerate nature. In this way, by decoupling economic activity from the consumption of finite resources, the circular economy tackles climate change and other global challenges, including biodiversity loss, waste, and pollution.

However, to fully unlock its potential, it’s vital that companies, as well as investors and governments, are able to measure and report on the impact of their circular economy activities. And in relation to delivering on net zero goals, that means ensuring the mechanisms for measuring and reporting emissions from circular economy solutions are fair and accurate.?

Circular economy climate impacts need to be recognised

Currently, climate emissions accounting methodologies — such as the Greenhouse Gas (GHG) Protocol — do not reflect the positive impact of circular economy activities in a fair or accurate way. In fact, some of these methodologies inadvertently discourage circular practices. Take the extension of product lifetimes, for example — companies that design products for durability or reuse are penalised under current emissions accounting frameworks because they report an increase in the lifetime emissions of those products.?

It means that businesses that are already implementing and scaling circular economy solutions aren’t able to fairly or accurately evaluate the emissions impact of these solutions. If companies don’t have this data, they may be less likely to invest in circular economy solutions, slowing down the transition from a linear take, make, waste economy to a circular one, and the progress to net zero.

GHG Protocol revisions: an opportunity for businesses, investors, and policymakers

As a trusted thought leader, the Foundation is actively contributing to the development of leading reporting frameworks, including the forthcoming revisions to the GHG Protocol. These revisions offer an opportunity to improve how emissions are measured and attributed. Our new insights paper —?Improving climate emissions accounting to accelerate the circular economy transition — proposes revisions to the GHG Protocol’s methodology so it better reflects circular economy activities, and encourages all users of emissions data to support these revisions. This will enable businesses, and their investors, to make more informed decisions about how to drive emissions reductions through circular economy strategies.

The data and insights from reporting frameworks are also valuable for policymakers. They can inform national emissions accounting considerations to better reflect circular economy activities in Nationally Determined Contributions (NDCs), and in climate risk assessments and government-led initiatives — such as carbon pricing or cap-and-trade systems. If current methodologies, whether at company, sector, or national level, continue to overlook circular practices, governments risk creating policy frameworks that focus disproportionately on the energy transition, ignoring opportunities to reduce emissions across industries through circular strategies.