Executive summary

A new perspective on the potential of circularity

The Value Gap provides a pragmatic, economy-wide measure of how much avoidable economic value, expressed monetarily, is lost due to linear material use. For global comparability, value is primarily defined in economic terms and expressed in prices, using GDP as a proxy for total value creation. Within this framing, the methodology distinguishes between functional value—the utility embedded in materials, components and products—and created value, referring to the broader environmental and social impacts of economic activity that largely remain external to market prices.

The Value Gap represents the total avoidable value lost through inefficient material use (including energy and food), premature obsolescence and asset deterioration, and partially unpriced externalities. It is an absolute figure that can also be expressed relative to GDP (that is, as euros of avoidable value lost for every euro of value created), indicating how much value is lost for each unit of economic output generated. Accounting for the Value Gap alongside GDP would provide a more realistic measure of net value creation by revealing how much economic value is structurally lost to linearity and highlighting the scale of opportunity for circular strategies to retain and recover that value.

Main pathways of value loss

Value losses are grouped into five interlinked pathways that capture both short-term inefficiencies and longer-term asset erosion: processing losses, energy losses, food losses and waste, end-of-life waste, and the consumption of fixed capital (the deterioration of buildings, infrastructure, and machinery). Together, these pathways reveal how the current economic system not only creates value but also erodes it, highlighting the scale of opportunity for circular strategies to retain value.

The five value loss pathways capture the primary mechanisms through which economic value is lost in linear systems. The results are presented as a range to reflect methodological uncertainty, data limitations, and variability in underlying assumptions.

Mechanisms driving value loss

Value loss can occur through four intertwined mechanisms that explain how and why materials, products, and assets fail to reach their full potential: