Scoping and Trade Dynamics

Applying the Circularity Metric to the global economy is relatively simple, largely because there are no exchanges of materials in and outside of planet earth. For countries, however, the dynamics of trade introduce complexities to which we must adapt our metric, resulting in certain methodological choices. [27]

In assessing a country or region, we first decide to either take a production or consumption perspective. In a production perspective, we consider all the materials involved in any sort of processing of production activity, regardless of whether they are exported or consumed domestically. In a consumption perspective, we consider only the materials that are consumed domestically. Whether we apply the Metric from a consumption or production perspective will yield different results. Our Circularity Gap Reports take a consumption perspective in a bid to generate actionable insights for the economy and consumption on the ground, and to enable comparison between countries. However, there are some limitations to our approach: Sweden’s ‘open’ trade profile—marked by plentiful imports and exports—means it is more susceptible to the limitations of both the material flow analysis and input-output analysis, the latter in particular. Some of these limitations include difficulties in calculating the import content of exports.

Secondly, most production is ultimately driven by the demand of consumers for a certain product or service. In an increasingly globalised world, the chain that connects production to consumption becomes more entangled across regions. Demand-based indicators—applied in this analysis—allow for a re-allocation of environmental stressors from producers to final consumers. This ensures transparency for countries with high import levels and also supports policies aimed at reducing or shifting consumer demand, at helping consumers understand the material implications of their choices, or at ensuring that costs of, and responsibilities for, resource depletion and material scarcity are allocated to entities and regions based on their roles in driving production processes through consumption.

So, why is it imperative to reduce consumption? Well, impact prevention through reduction in demand is an important first step before exploring other mitigation options. This is reflected also by environmental management hierarchies (for example, the circular economy waste management hierarchy) wherein reduction of production and consumption is always the preferred and most effective strategy.

Thirdly, when considering what Swedish citizens consume to satisfy their needs, we must apply a nuanced lens to the direct imports; meaning we work out the full material footprints of the products. To account for the material footprint of raw materials is straightforward, but this is not the case with semi-finished and finished goods. A motor vehicle, for example, may weigh 1 tonne when imported, but all the materials used to produce and transport it across global value chains can be as much as 3.4 tonnes. To represent actual material footprints in imports and exports, we apply so-called raw material equivalents (RMEs) coefficients in this study. As an open economy with high purchasing power and a large consumption footprint, doing so in the case of Sweden is more complex than for a smaller economy.

Finally, the Circularity Metric considers all secondary materials as adding to a country’s level of circularity. These secondary materials can be part of those cycled within the country, as well those that are imported or exported, either as waste destined for recycling or as secondary materials embedded in traded products. However, estimating the shares of traded secondary materials is a difficult undertaking, so we introduce an important assumption: in order to estimate the volume of secondary materials imported, we apply the average Global Circularity Index (GCI)—calculated per resource group—to the net direct imports of the country (aggregated by resource group). Because the GCI includes waste for recycling and partially also secondary materials, we assume that this is a good proxy for the estimation of the total amount of secondary materials in the system. The underlying assumption is that—although varying in terms of volume—imports of every country have the same average share of secondary materials per resource group. To determine which share of secondary materials are consumed domestically, rather than exported, we make a second assumption. This is that the share of secondary materials in the total consumption of raw materials is equal to the share of imported and domestically cycled secondary materials in the total input of raw materials. [28]