Development and application of a composite circularity index

Abstract

Resource depletion and environmental pollution are increasingly a matter of concern for their adverse effects on ecosystems, human health, and the economy. Circular Economy (CE) practices can help us address these challenges. This paper proposes a composite circularity index (CI) to assess the level of implementation of CE practices. The main advantage of the proposed index is its ability to combine multiple indicators of circularity for different units operating in a given sector (given as inputs), using a 'Benefit of the Doubt' model. This new model is innovative in the manner it deals with ordinal scales and also by considering both relative and absolute performance indices. These indices are computed using mathematical programming tools, building on ideas from Data Envelopment Analysis models. Although the model can be applied to any sector, this work addresses the hotel industry in particular. The selection of indicators for this CI was based on seven blocks of the Circular Economy Action Plan and a literature review of circular practices. An application of the proposed index is performed by using data from Portuguese and Spanish hotels. The proposed CI allows the identification of the organizations with the best and worst performance in implementing the CE practices and clarifying the benchmarks they could follow to improve their level of circularity. Moreover, the index analysis also provides specific targets for improvement, indicating which circular practices should be improved for the lower performers to reach the implementation levels of the best performers.