Circular KPIs: From Reuse Rate to Retention Value
Master audit-grade Circular KPIs—from reuse rate to retention value—to transform sustainability reporting into measurable profit. A complete guide for ESG leaders.
WASTE-TO-RESOURCE & CIRCULAR ECONOMY SOLUTIONS
1. The Circular KPI Imperative: Context for Sustainability Leaders
The global shift toward a circular economy is accelerating. As businesses, policymakers, and consumers demand more sustainable products and business models, the ability to keep materials circulating within the value chain becomes a crucial competitive differentiator. For sustainability leaders—including operations managers, CFOs, ESG reporting teams, and circular program architects—the pressure to translate circularity goals into measurable business outcomes grows by the quarter.
Circular KPIs—key performance indicators aligned with circular economy principles—function as hard proof of progress. They move circularity from lofty ambition to executed reality. Companies face expectations from investors seeking strong ESG credentials, customers demanding circular products, regulators tightening reporting standards, and internal stakeholders aiming to unlock new cost savings.
The importance of these metrics lies in their broader impact on business value. Where legacy “linear” KPIs focus primarily on waste volume, throughput speed, and cost reductions, circular KPIs focus on how materials and products can—and should—be kept in circulation. This extends product lifecycles, decrease resource extraction risks, and improves the predictability of input costs. Sectors handling high-value or scarce materials—such as electronics, metals, heavy machinery, and automotive—stand to capture outsized benefits.
Adopting these metrics isn’t merely optional. For example, the European Union’s Corporate Sustainability Reporting Directive (CSRD) will soon require evidence of circularity as part of sustainability disclosures. Meanwhile, research from the Ellen MacArthur Foundation indicates that enhanced material reuse can drive cost savings of up to $700 billion annually in the consumer goods sector alone. In the US, rising stakeholder activism has pushed Fortune 500 giants like Apple, Caterpillar, and HP to launch high-visibility circular initiatives—each underpinned by granular metrics.
Key insight: Circular KPIs serve as the “instrument panel” for waste-to-resource strategies—revealing process gaps, prioritizing efficiency upgrades, and surfacing new growth opportunities in circular business models.
2. Defining Circular KPIs: Concepts and Strategic Stakes
Key Definitions
A shared vocabulary is essential in constructing and implementing an effective circular KPI strategy. Let’s break down critical terms:
Circular economy: An economic system prioritizing design for durability, reuse, and resource productivity. It emphasizes closed-loop systems, where products, components, and materials are continually reused or remanufactured, minimizing waste and ecological impact.
Reuse rate: The key metric capturing the proportion of returned products or extracted materials that are directly reused without reprocessing, as a percentage of total recovery flows.
Retention value: The monetary and functional worth preserved in products or materials following a restorative process—whether through repair, remanufacturing, or advanced refurbishment. This contrasts with traditional recycling, where much of the product’s original value is lost.
Remanufacturing: Not simple repair, but a rigorous industrial process restoring used products to original or better condition. For example, Caterpillar remanufactures engines to original specs, providing warranties similar to new products.
Reverse logistics: The operational backbone of the circular economy—referring to all processes that return used, end-of-life, or off-spec items from users back to the manufacturer or a third-party facility to capture further value.
Material productivity: Measures the value created (output) per unit of material input, which becomes a crucial metric as resource constraints tighten.
Lifetime extension: Tracks increases in the number of times a product/component is reused, refurbished, or otherwise cycled before reaching end-of-life.
Strategic Stakes
The shift to circular KPIs is not purely operational—it’s highly strategic:
Financial Impact: By quantifying value recovered through circular interventions (e.g., remanufacturing or component reuse), companies can reduce dependency on volatile raw material markets. For example, Philips, by leveraging remanufacturing in medical equipment, unlocks hidden asset value and bolsters margins.
Operational Execution: Circular models introduce complexity—such as managing reverse logistics flows, quality control in refurbishment, and identifying redeployment channels. KPIs help pinpoint and resolve bottlenecks, improving process certainty and yield.
Regulatory Compliance: Across the EU and in regions adopting standards like GRI 306 or CSRD, companies need to disclose circular practices and outcomes—creating not just compliance risk but also new business opportunities for those who lead.
Brand and Reputation: Demonstrable progress attracts customers, investors, and partners. For instance, when HP reports 100+ million ink cartridges remanufactured annually, it enhances ESG credibility.
Innovation Catalyst: Accurately measured circular flows often reveal underutilized resource pools—fueling new product development, downstream partnerships, and service-based business models (e.g., leasing, pay-per-use).
Statistical note: According to Accenture, companies that achieve a high degree of material circularity outperform peers on multiple financial metrics, including EBITDA margin and capital efficiency.
3. Key Metrics: From Reuse Rate to Retention Value
To unlock the value of the circular economy, leading organizations establish a suite of interlinked KPIs—each offering unique insights:
Core Circular KPIs
Reuse Rate (%): Actively tracked by leaders in electronics, automotive, and packaging. For example, Xerox monitors the share of copiers re-entering service after refurbishment, achieving over 90% reuse in some product lines.
Retention Value ($ or %): A financial lens on the effectiveness of circular strategies. In the automotive sector, remanufactured parts typically retain 60–80% of original value, per McKinsey estimates.
Material Recirculation Index: Developed by the Ellen MacArthur Foundation, this metric gauges the percent of input material that re-enters productive use—inside or outside the originating company.
Reverse Logistics Efficiency (%): Timely and effective returns are critical. Amazon and Best Buy both leverage automated systems to triage returns for repair, reuse, or recycling, raising their returns processing efficiency.
Cycle Count (average): A leading indicator in asset-intensive fields; every additional reuse or remanufacturing cycle multiplies emission and resource savings.
Recovery Lead Time (days): Directly correlated to operational agility and working capital efficiency.
Emerging Metrics
Circular Revenue Share (%): Quantifies business model transformation—for example, Schneider Electric’s “Circular Certified” offer now generates over 10% of regional revenues.
End-of-First-Life Recovery Rate (%): Crucial for companies with leased or service-based models, such as industrial printers or medical devices.
Emissions Avoided (tCO₂e): Circularity doesn't just save resources—it cuts carbon. Rolls-Royce’s reuse of titanium in aero-engines reduces CO₂ emissions by thousands of tons annually.
Industry Snapshot: According to a 2023 Circularity Gap Report, only 7.2% of the global economy is “circular,” underscoring vast upside for organizations willing to leverage circular KPIs for transformation.
4. Blueprint: Circular KPI Framework and Stepwise Method
A well-structured framework helps organizations implement, scale, and optimize circular KPIs effectively. Here’s what a best-practice approach encompasses:
Circular KPI Framework
Prioritize Material Flows: Use Pareto analysis to identify the materials, products, or components that drive the bulk of cost and risk—in sectors like electronics, metals, or automotive.
Define Outcome KPIs: Focus on metrics linked to financial impact and strategic priorities (maximizing retention value, raising reuse rates).
Set Process KPIs: Include operational levers such as reverse logistics efficiency and recovery lead time.
Build Data Infrastructure: Adopt digital passporting, IoT-enabled tracking, and integration with ERP systems to gain granular visibility.
Feedback and Adjust: Regularly review KPI data, root-cause gaps in process, and refine data capture.
Future Trends: With the advent of blockchain for provenance and AI-powered predictive analytics, future circular KPI tracking will become even more granular and real-time—allowing for better forecasting and reduced material loss.
Step-by-Step Process
Baseline Audit: Analyze current flows and recovery rates—where is material value lost? For example, a global appliance manufacturer revealed $25M annually in recoverable part losses during baseline mapping.
Segmentation: Group flows based on risk, value, and potential recovery. This enables targeted interventions.
KPI Selection: Pick the six to ten metrics that best map to business priorities and complexity.
Assign Owners: Clear accountability drives results; leading companies assign each metric to cross-functional owners.
Tooling: ERP modules, Power BI dashboards, or bespoke IoT solutions can automate data capture—Siemens uses digital twins to monitor asset recirculation.
Set Baselines and Targets: Benchmark against peer performance, or industry guides (e.g., metals remanufacturing might aim for a 60% reuse rate within 3 years).
Monitoring Cadence: Weekly reviews for fast-moving metrics; monthly or quarterly deep-dives for strategic KPIs.
Course Correction Protocols: Deviations >10% from target prompt immediate process reviews and corrective actions.
Disclose Results: Integrate insights into ESG, operational, and investor communications.
Continuous Improvement: Conduct annual reviews using lessons learned and evolving regulatory standards.
Worked Example: Industrial Metals Manufacturer
Scenario:
A global manufacturer focused on aluminum components launches a closed-loop program to recapture and remanufacture fixtures.
Step 1: Baseline reveals 40% return rate post-contract, with $10M of aluminum annually leaving the system.
Step 2: Chosen KPIs include reuse rate (goal: 50%), retention value ($ gain), and recovery lead time.
Step 3: Implementation of RFID tagging and cloud-based tracking increases visibility.
Step 4: After one year, the reuse rate reaches 55% (exceeding baseline), lead time drops 20%, and retention value rises by $1.2M.
Lessons Learned:
Digitalization and KPI accountability drove rapid improvement, while incentivizing returns from distributors unlocked additional value flows.
5. Implementation Playbook: Deploying Circular KPIs
A proven playbook can speed KPI adoption and optimize outcomes:
Map Material/Product Flows: Visualize every path from post-use collection through to final redeployment or disposal.
Prioritize Top Value/Volume Flows: Use the 80/20 rule—target the highest-potential streams to maximize ROI.
Cross-Functional Co-Authoring: Involve finance, operations, and sustainability teams early to define each metric and its calculation method—reducing disputes down the road.
KPI Selection: Select a balanced set of outcome plus process metrics (at least one per material/product family).
Define Success (Quantitative & Narrative): For instance, “Achieve a 40% reuse rate within 12 months and generate $3M in retention value from remanufactured gearboxes.”
Assign Clear Ownership & Reporting Cadence: Use dashboards with live data—ex. monthly email summaries plus quarterly deep-dive workshops.
Tool Integration: Incorporate KPI tracking in supply chain management platforms and ERP systems for seamless workflow.
Reverse Logistics Standardization: Document protocols for return, inspection, triage, and grading to ensure data quality.
Personnel Training: Empower frontline teams—warehouse workers with mobile apps can ensure accurate tracking at intake.
Pilot Focus: Launch on a single product line for 2–3 months, refining definitions and data flows before moving to full-scale rollout.
Midpoint Check-In: Early reviews allow fast adjustment; for example, fixing a data capture issue if initial cycle counts lag targets.
Data Gap Solutions: Where IT can't automate, create manual workarounds and schedule digitization for long-term scalability.
Phased Scale-Up: Only expand company-wide after hitting at least 80% of pilot targets—building momentum and credibility.
Integration with Reporting: Sync with annual ESG and sustainability disclosures to maximize transparency.
Cause-and-Effect Reviews: Use root-cause analysis tools to understand why KPIs move (or don’t), linking to specific process changes.
Internal/External Wins: Publicize successes to build internal buy-in and enhance market positioning.
Annual Recalibration: Use learning loops to iterate and improve KPI frameworks as business needs and product lines evolve.
Mini Decision Tree
Recovery Lead Time Lagging? Increase logistics cadence or add distributed collection hubs.
Reuse Rate Plateau? Examine intake inspection criteria or improve take-back incentives.
Retention Value Falls? Audit refurbishment process for yield losses—consider technical upgrades or staff retraining.
Common Failure Modes (and How to Avoid):
Soft Definitions: Ensure every KPI has a precise, documented measurement method, avoiding interpretation drift.
Siloed Accountability: Assign a single point of contact for each metric, while promoting coordination across teams.
Clashing Data Streams: Reconcile financial and operational data sets with cross-platform integrations and periodic audits.
Stale KPIs: Plan quarterly reviews to adjust for shifting product mixes, new regulatory demands, or competitive benchmarks.
KPI definitions that survive scrutiny, the difference between a dashboard and proof
Circular KPIs fail most often for one simple reason. Teams measure activity, then call it progress. They count what is easy to count, not what is defensible. Circularity reporting is moving into a world where your numbers will face investor questions, customer audits, and regulatory assurance. That shift changes how you define every metric.
Start with the reality check that should shape your KPI discipline. Global circularity, measured as the share of secondary materials consumed by the global economy, fell from 9.1% in 2018 to 7.2% in 2023. That is a 21% drop in five years. In other words, more circular talk has not produced more circular outcomes. If your KPIs do not force operational change, they become corporate decoration.
The core rule for KPI design is boundary clarity. Every KPI needs four boundary decisions written into the definition, not implied in the team’s memory.
First, define the unit of measure. Many circular KPIs get distorted because teams mix weight, units, and value in a single storyline. Reuse rate in units answers a different question than reuse rate by weight. A refurbished laptop counts as one unit, but its weight tells you almost nothing about its retained function and resale value. Metals are the opposite. Weight is often the most useful truth because the output is melted and reformed.
Second, define the system boundary. Are you measuring product circularity inside your company only, or across your value chain. If you measure “recirculated” outputs that leave your network without traceable evidence of productive use, you will overstate circularity. This is where many claims break in external assurance.
Third, define the lifecycle stage. “Reuse rate” can mean at least three different things.
Direct reuse with no restorative work beyond inspection and cleaning.
Refurbishment or repair reuse, meaning functional restoration without full remanufacture.
Remanufacture reuse, meaning the product or component is restored to a defined standard with testing.
If you do not separate these, your reuse rate rises for the wrong reasons. You can increase “reuse” by reclassifying borderline material. That creates future warranty cost, brand damage, and customer churn.
Fourth, define the evidence standard. A KPI is only as strong as the proof attached to it. If an auditor asked “show me,” what would you show.
Serial number trace for product returns.
Batch trace for material flows.
Test results for remanufactured components.
Proof of redeployment, resale, or contractual transfer for second-life outputs.
This is why measurement standards are tightening. ISO has now published circular economy standards that move measurement from opinion to method, including ISO 59020 on measuring and assessing circularity performance. The direction is clear. KPI definitions must become consistent, comparable, and verifiable.
Now take the two KPIs in your title, reuse rate and retention value, and make them audit-grade.
Reuse rate, practical definition that avoids double counting
A strong reuse rate definition specifies numerator, denominator, exclusions, and timing.
Numerator example, product context:
Count of returned products placed back into service within a defined period, split by pathway (direct reuse, repair/refurb, remanufacture).
Denominator example:
Total products returned and accepted into the reverse system in that period, excluding units rejected at intake for safety, legal, or contamination reasons that are documented and coded.
Two common traps you should call out in the definition.
Do not count “collected” as “returned.” Collection is upstream. Return is intake into a controlled system with evidence.
Do not count “processed” as “reused.” Processing can end in shredding and low-grade recycling, which may be necessary but is not reuse.
Retention value, the KPI most likely to get attacked
Retention value sounds simple, but it collapses without a consistent method. A defensible retention value approach separates three components.
Realized recovered value
Revenue from resale, redeployment, or remanufactured output sales, net of discounts and returns.Avoided value loss
Avoided procurement cost of a new part or avoided virgin material purchase, but only when you can show substitution. If you remanufacture 10,000 gearboxes but procurement still buys the same number of new gearboxes, your avoided value claim is weak.Incremental circular cost
Reverse logistics cost, inspection cost, disassembly cost, testing cost, rework cost, yield loss, and warranty provision.
A practical retention value expression most CFOs can accept is:
Retention value equals recovered value plus verified avoided cost minus incremental circular cost.
Your KPI definition should also specify the price basis.
Use a consistent reference, such as average new replacement cost, or average market resale value, defined by region and quarter.
Lock the time window. Retention value changes with commodity price and secondary market demand. If you allow ad hoc valuation, you will end up “explaining” numbers instead of improving them.
Then you add a metric that prevents retention value from becoming a sales vanity number: yield-to-value.
Yield-to-value measures how much of the intake value actually becomes sellable output, after scrap, rework, and downgrade losses. This is where circular programs either become profitable or become a cost center.
The data backbone, from messy returns to trustworthy circular numbers
Circular KPIs are not blocked by ambition. They are blocked by data that cannot travel with the product. The reverse chain is noisy. Labels fall off. Parts get mixed. Returns arrive without paperwork. Third parties touch the item before you see it. If you want circular KPIs that leaders can rely on, you need a measurement stack designed for chaos.
A modern measurement stack has five layers.
Layer one: Identity
Products need persistent identity. At minimum, this means serialized identifiers that survive use, repair, and resale. QR, barcode, RFID, and data matrix all work, but only if the identifier is physically durable and tied to a record that cannot be casually overwritten.
Regulation is pushing hard in this direction. The EU’s Ecodesign for Sustainable Products Regulation introduces the Digital Product Passport concept, a digital identity card for products, components, and materials intended to support circularity and compliance. Once identity becomes a compliance requirement, circular KPI programs that still run on spreadsheets and manual intake notes will become fragile.
Layer two: Condition capture at intake
Circularity lives or dies at triage. You need condition grading that is fast, repeatable, and linked to disposition. “Repair,” “refurb,” “reman,” “harvest,” “recycle,” and “scrap” cannot be judgement calls that vary by shift.
Leading programs build condition scoring with clear gates.
Safety gate. If it fails, it exits the reuse pathways.
Function gate. If it passes, it goes to direct reuse or light refurbishment.
Core gate. If it passes, it qualifies for remanufacture.
Material gate. If it fails all above, it goes to material recovery.
This is where data quality begins. If grading is inconsistent, your reuse rate becomes a story, not a measurement.
Layer three: Chain-of-custody events
Every meaningful event needs a timestamp and owner.
Collected
Received
Inspected
Disassembled
Tested
Repaired
Remanufactured
Packaged
Redeployed or sold
Warranty claim, if it returns again
If you cannot replay the lifecycle as a timeline, you cannot explain KPI movement, and you cannot fix it.
Layer four: Material and component genealogy
For complex products, you need to know what went into the second-life unit. This matters for safety, warranty, and compliance. Battery passports show where this is heading. Volvo announced a battery passport that traces materials and includes long-term battery health data, and they reported a per-vehicle cost in the low double digits to produce it. That is a signal to every industrial category. Provenance data is becoming cheaper than non-compliance and reputational risk.
Layer five: KPI calculation rules
This is the part most teams skip. You need written calculation rules that specify:
How you handle partial returns and cannibalization.
How you handle multi-component products where one component gets reused and the rest gets recycled.
How you handle time lag, because returns today may become reused output next quarter.
How you avoid counting the same unit twice across cycles.
This is also where ISO 59020 becomes useful, because it pushes teams to define boundaries and indicators in a consistent way.
Turning circular KPIs into financial performance, how CFOs decide if this is real
Circular programs win long-term only when they show financial control. Sustainability teams often lead with emissions and waste, but finance teams fund what they can forecast and govern. Circular KPIs give you that bridge, but only if you connect them to three financial levers: margin, working capital, and risk.
Margin, where retention value becomes a profit engine
Retention value should map directly to gross margin improvement in at least one of these ways.
Lower cost of goods sold through verified substitution, where reman output replaces new procurement.
Higher resale margin through better grading and channel strategy, where you stop sending high-value returns into low-value liquidation.
Higher parts margin through harvested components, especially in asset-heavy sectors where parts margins commonly exceed services margins.
Remanufacturing economics often work because you begin with a “core.” McKinsey describes remanufacturing as starting with a large share of the final product and then restoring it, and they note typical cost reductions versus new in the 40% to 60% range. That margin headroom is real, but only when yield, quality, and warranty are controlled.
Working capital, the hidden killer of circular programs
Reverse flows can trap cash when lead times stretch. This is why recovery lead time is more than an ops metric. It is a cash metric.
A simple way to make this visible is to track:
Days in reverse pipeline, from receipt to redeployment.
Inventory aging for returned units and harvested components.
“Stalled value,” the book value of items waiting on inspection, parts, or disposition.
When stalled value rises, it often means one of three things.
Intake bottleneck, not enough inspection capacity.
Parts bottleneck, missing parts delay repair.
Channel bottleneck, you do not have a buyer pathway for the grade you are producing.
This is also why the reverse logistics market is growing fast. One major research estimate put the global reverse logistics market in the hundreds of billions of dollars in 2024, with rapid growth projections into the next decade. Even if any single forecast is debated, the direction is not. Returns, take-back rules, and circular models are forcing a larger reverse infrastructure.
Risk, where circular KPIs become an insurance policy
Circular KPI maturity reduces several risks that are hard to price until they hit.
Commodity volatility risk, reduced when reused materials or reman parts displace virgin purchases.
Supply chain disruption risk, reduced when core returns provide local supply.
Regulatory risk, reduced when you can show traceable circular performance.
CSRD is a major driver here. The European Commission states that the first companies under CSRD apply the new rules for the 2024 financial year, with reports published in 2025. At the same time, policy is in motion. In 2025, the EU advanced proposals and votes to delay or narrow parts of sustainability reporting requirements, which creates uncertainty on scope and timing for some firms. This uncertainty is exactly why internal KPI discipline matters. If you build your circular measurement system so it stands on its own operational value, you do not depend on the regulatory mood to justify the work.
Expert case scenarios, how real circular KPI systems behave under pressure
Scenario A: Heavy equipment remanufacturing, when reuse rate is easy but retention value is hard
A heavy equipment OEM launches a reman expansion program across engines, hydraulics, and drivetrain components. The early KPI dashboard looks strong. Reuse rate climbs quickly because cores are available and customers accept reman units when lead times beat new supply.
Then the program hits the real constraint, variation in core quality. The same part number arrives in widely different conditions, depending on duty cycle, operator behavior, maintenance history, and environment. If the program measures reuse rate only, it will celebrate too early.
A stronger KPI suite adds:
Core acceptance rate, by source and channel.
First-pass yield, the share that meets spec without rework.
Cost-to-restore distribution, not just average cost.
Warranty return rate for reman units versus new.
This is where industrial facts matter. Caterpillar’s reman program publishes sustainability benefit ranges that show why reman is powerful when controlled, including large reductions in greenhouse gas emissions, energy use, and new materials versus new parts. Those benefits do not appear automatically. They come from process discipline, test standards, and quality gates.
Expert synthesis takeaway
If your retention value drops while reuse rate rises, do not assume market pricing is the issue. Assume grading drift, yield loss, and rework inflation until proven otherwise. Fix triage and test repeatability first.
Scenario B: Office equipment and consumables, where circular KPIs win through standardization and volume
A global print and document company runs a mature returns system for toner cartridges. Their advantage is not a single technology. It is standard work, high volume learning, and clear design rules that support take-back.
Public reporting shows what “good” can look like. Xerox reported remanufacturing over 1.7 million toner cartridges, with reuse by weight around 90%, and landfill diversion of returned equipment, parts, and supplies measured in the hundreds of thousands of metric tons since 2009.
Now map this to KPIs that explain performance.
Intake-to-output lead time, because high volume creates congestion.
Reuse yield by weight, because weight-based accounting is defensible for consumables.
Reject rate by failure mode, because it feeds design changes.
Customer participation rate, because collection drives the whole engine.
Expert synthesis takeaway
High-volume circular programs succeed when they treat reverse flow as manufacturing, not as customer service. They run it with takt time thinking, defect coding, and feedback loops into product design.
Scenario C: Metals and industrial components, where circularity is real but claims are fragile
A metals manufacturer sets a closed-loop target for aluminum or steel offcuts and end-of-life components. They sign take-back terms with fabricators and large customers, aiming to recapture material before it contaminates and downgrades.
The main KPI risk is accounting inflation. Metals are easy to double count because scrap can move through multiple hands. To keep credibility, the company sets “traceable recirculation” rules.
They count only material that returns with batch documentation and confirmed processing destination.
They split flows into internal loop and external loop, because internal loop can be verified through melt records and production orders.
Future trend pressure will increase here. EU product passport direction explicitly includes intermediate materials, and policy and market pressure are moving toward more traceable material information across supply chains. That means metals companies will increasingly need chain-of-custody evidence to support circular KPI claims.
Expert synthesis takeaway
In metals, the KPI that separates leaders from marketers is “traceable yield,” not “collected volume.” You win by reducing downgrades, contamination, and time-to-melt, not by counting more inbound scrap.
Scenario D: Medical equipment refurbishment, where growth is strong but compliance and documentation decide winners
Hospitals and clinics face capital constraints, and refurbishment demand is rising. Market estimates project the refurbished medical equipment market growing from the mid-teens billions in 2024 to the mid-twenties billions by 2029, depending on the source.
This category forces an important KPI lesson. High-stakes products need measurement beyond volume.
Compliance pass rate, by device category.
Test coverage, measured as required tests completed per unit.
Field failure rate and mean time to failure, compared to new.
Documentation completeness, because missing records can block resale and trigger liability.
Expert synthesis takeaway
In regulated categories, circular KPIs must be designed like quality KPIs. If you cannot prove condition, you cannot sell, and your retention value collapses no matter how good your reuse rate looks on paper.
What changes next, 2026 to 2030 trends that will reshape circular KPIs
The next five years will change circular KPIs in three ways. More rules. More traceability. More expectation that circularity shows up in cash, not slogans.
Trend one: Repair and lifetime extension become policy, not preference
The EU adopted the Directive on common rules promoting the repair of goods in June 2024, with application from July 31, 2026 after national transposition. This matters for KPI design because it shifts the baseline. Repair becomes an expected pathway, which means you will need KPIs that track repair throughput, repair lead time, parts availability, and repair success rates. Programs that cannot measure repair performance will struggle to meet customer and regulatory expectations.
Trend two: Product passports move from pilots to infrastructure
The Digital Product Passport concept is now embedded in EU direction through the Ecodesign for Sustainable Products Regulation framework. Battery passports are already appearing in the market ahead of mandates, with early movers showing that traceability costs can be low enough to scale. Once passports become common, circular KPI programs will shift from sampling and estimation toward item-level accounting.
What this means for KPIs
You will track circularity by model, batch, and supplier, not just by region and business unit.
You will need “data completeness rate” as a KPI, because missing passport fields will block resale, recycling, or compliance claims.
You will see more “verified circularity” claims, because traceable records make assurance easier.
Trend three: Circular KPI standards mature and assurance gets tougher
ISO 59004, ISO 59010, and ISO 59020 create a clearer language for circular economy practice, business model transition, and measurement. As standards mature, companies will face a choice. Either align KPI definitions to accepted measurement practices, or keep explaining why internal numbers cannot be compared to anyone else’s.
Trend four: Reporting pressure rises, even when politics change
CSRD timing has begun for early waves, with the first reports tied to the 2024 financial year and published in 2025. At the same time, 2025 policy actions and proposals aimed to narrow scope and delay requirements for some firms. This combination creates a practical reality for leaders. You cannot plan by guessing the final political outcome. You plan by building a measurement system that is useful even if reporting rules shift.
Trend five: The gap between circular talk and circular results becomes the story
The global circularity rate decline is the headline that will keep getting cited in boardrooms, because it shows the world is moving in the wrong direction. That makes circular KPIs more important, not less. Leaders will be expected to show measurable reversal inside their own value chains, even if the global system lags.
What leaders should do now, the actions that separate serious programs from surface-level ones
Freeze KPI definitions in writing, then train them. Treat this like financial control. If definitions shift by team or region, the KPI is not a KPI.
Build a minimum viable evidence chain. Pick three proof artifacts per KPI, then enforce capture at intake and at disposition.
Put a price basis on retention value, then hold it stable for a quarter. You can refine later, but you cannot manage a moving target.
Add two “anti-vanity” KPIs to every dashboard.
Yield-to-value, to stop reuse rate from hiding quality loss.
Warranty or failure rate, to stop retention value from hiding customer harm.
Prepare for passport-era measurement. Even if you are not in the EU, your customers may be. Start building identity, condition capture, and event logging now, because retrofitting later costs more and takes longer.
KPI formulas you can hand to finance, in plain language
Reuse rate
Use this when you care about product or component life extension.
Definition: the share of returned items that go back into use as products or components, within a defined time window.
Formula: reuse rate equals reused units divided by accepted returned units.
What counts as “reused” needs a rule. Split it into pathways so you do not mix very different realities: direct reuse (clean and test only), repair or refurbishment, and remanufacture (full industrial restoration with testing).
Example: you accept 10,000 returned pumps in Q1. You redeploy 1,800 after inspection and cleaning, 3,200 after repair, and 2,000 after remanufacture. Your total reuse rate is 70% (7,000 divided by 10,000). Your direct reuse rate is 18%. Your reman reuse rate is 20%. These three numbers tell you where margin and risk sit, not just volume.
Retention value
Use this when you need a financial read on circular performance.
Definition: the money and function you keep, compared with buying new, after you pay the costs required to recover that value.
A finance-ready method splits retention value into three pieces: realized recovered value, verified avoided cost, and incremental circular cost.
Formula: net retention value equals resale and redeployment revenue plus verified avoided new procurement minus reverse and restoration costs minus expected warranty and failure costs.
McKinsey reports that remanufacturing can reduce costs by about 40% to 60% versus newly manufactured parts in many contexts, which is why retention value can be large when quality and yield are controlled.
Example: you remanufacture 5,000 gearboxes. You sell them for €1,200 each, so €6.0M revenue. You can show that 3,000 of these replaced new purchases that would have cost €1,600 each, so €4.8M avoided procurement. Your reverse and reman costs average €650 each, so €3.25M. You set €0.25M aside for warranty and failures based on historical performance. Net retention value is €6.0M + €4.8M − €3.25M − €0.25M = €7.3M for that period. If procurement does not actually drop, you do not claim avoided procurement. You treat it as a target until substitution is proven.
Value retention rate
Use this when you need a percent metric that is easy to compare across product families.
Definition: the share of “new-equivalent value” preserved through value-retention processes.
Formula: value retention rate equals net retention value divided by the new-equivalent baseline value of the same volume.
In automotive research, one peer-reviewed study reports that remanufacturing preserves roughly 85% of initial value, while recycling preserves only about 7.5%, which is why your KPI set must separate reuse and reman from material recycling.
Material recirculation rate
Use this when you care about material loops, especially metals and plastics.
Definition: the share of your material input that comes from verified secondary sources.
Formula: recirculation rate equals mass of secondary input used in production divided by total mass of material input.
This is where the global context matters. The Circularity Gap Report 2023 reports the world is only 7.2% circular, down from 9.1% in 2018, so any credible program must show traceable movement against that tide.
Circular revenue share
Use this when you need to prove business model change.
Definition: the share of revenue that comes from circular offers, such as repair, refurbishment, remanufacture, take-back, resale, product-as-a-service, and certified reused components.
Formula: circular revenue share equals circular revenue divided by total revenue.
The hard part is taxonomy, not math. You need a written rulebook that says what qualifies, what does not, and how you treat bundles.
Recovery lead time
Use this when you need cash and throughput control.
Definition: the time from return receipt to final disposition, measured separately by disposition path.
Formula: recovery lead time equals disposition date minus receipt date.
Use median and 90th percentile, not only an average. Returns have long tails, and averages hide stuck value.
Reverse logistics efficiency
Use this when you run high return volumes and want to reduce processing drag.
Two common versions work well together.
Speed version: efficiency equals returns processed within SLA divided by total returns received.
Cost version: cost per return equals total reverse logistics cost divided by total returns processed.
Returns volumes are not a niche problem. The NRF and Happy Returns report projected US retail returns of $890 billion in 2024, with retailers estimating 16.9% of annual sales returned. That scale explains why reverse flow discipline is becoming a board topic.
Emissions avoided
Use this when you need climate reporting that is tied to operational reality.
Definition: the emissions difference between “buy new” and your circular path, multiplied by units, within a defined boundary.
Formula: emissions avoided equals (baseline new emissions minus circular-path emissions) times units, using consistent LCA assumptions.
This is where verified product data is headed. ISO 59020 sets out requirements and guidance for measuring and assessing circularity performance using defined indicators, which pushes teams away from hand-wavy claims.
Evidence checklists per KPI, the minimum proof that stops arguments and survives assurance
Your KPI numbers need a chain of evidence that matches the risk of the claim. A reuse claim without trace is weak. A retention value claim without finance reconciliation will get rejected. Build evidence like you would build revenue recognition.
Reuse rate evidence checklist
You need identity, condition, disposition, and proof of redeployment.
Identity proof: RMA record, serial or asset ID at intake, date and location stamp, and a photo or scan at receipt tied to the record.
Condition proof: intake grade, test result, and triage decision code, with a locked list of failure modes.
Disposition proof: work order for repair or reman, or a direct redeploy order, with timestamps.
Redeployment proof: invoice, transfer order, lease redeploy event, or customer acceptance record.
Control tests that catch inflation: sample 30 redeployed units and trace them end-to-end; check for duplicate serials across periods; reconcile redeployed counts to shipment records; confirm that “received” is not being counted as “reused.”
Retention value evidence checklist
You need value proof, substitution proof, and cost proof.
Recovered value proof: sales invoices for second-life outputs, credits, returns, and discounts; channel-level pricing records.
Avoided cost proof: procurement reduction in the same part family, or a substitution log that proves reman displaced new buys, not just added volume.
Cost proof: reverse logistics costs (freight, handling, triage), restoration costs (labor, parts, test), scrap and downgrade losses, and warranty reserves.
Control tests that stop soft math: reconcile revenue to general ledger; reconcile unit volumes to operations; lock the valuation basis for a quarter; document how you handle cannibalization where one returned unit becomes multiple reused components.
Material recirculation rate evidence checklist
You need mass balance, supplier proof, and destination proof.
Mass balance proof: weighbridge tickets or scale readings at receipt; batch IDs; production consumption records; scrap and yield records.
Supplier proof: certificates of origin or recycled content documentation where relevant; contracts that define material grade and contamination thresholds.
Destination proof: internal melt records for internal loops, and documented downstream processing destinations for external loops.
Control tests that protect credibility: perform a monthly mass balance reconciliation (inputs, outputs, losses); audit a sample of batches for documentation completeness; flag any batch that lacks a verified destination as “unverified” until proven.
Circular revenue share evidence checklist
You need a taxonomy and a tagging method that cannot drift by region.
Taxonomy proof: written rules, examples, edge-case decisions, and sign-off by finance.
Tagging proof: SKU or service code mapping that identifies circular offers; system controls that prevent miscoding.
Reconciliation proof: revenue by tagged codes equals revenue claimed; internal audit sample checks for misclassified deals.
Recovery lead time evidence checklist
You need event logs that cannot be edited without leaving a trace.
Event proof: receipt timestamp, inspection timestamp, work start, work complete, disposition timestamp.
Segmentation proof: lead time by disposition path, by site, and by product family.
Control tests that reveal hidden queues: track median and 90th percentile; track “days waiting for inspection” separately; flag items with no event update for 14 days, or a threshold you set based on product risk.
Emissions avoided evidence checklist
You need a consistent baseline and a consistent boundary.
Baseline proof: product LCA or category emission factors, with a documented boundary and year.
Circular-path proof: energy and material inputs for the circular process, transport distances, scrap rates.
Calculation proof: version-controlled model, documented assumptions, and a method for handling uncertainty.
Control tests that prevent green claims blowback: align boundaries across periods; do not mix cradle-to-gate and cradle-to-grave baselines; publish ranges when uncertainty is material.
This matters even more as reporting pressure rises. The European Commission states the first companies under CSRD apply the rules for the 2024 financial year, for reports published in 2025, and it also issued a “quick fix” amendment affecting ESRS reporting from financial year 2025.
Benchmarks and target ranges by sector and reverse pathway, what “good” looks like and what to aim for first
Benchmarks are tricky because product design, channel structure, and customer behavior swing results. You still need ranges, because teams cannot steer without guardrails. Use these as starting points, then replace them with your own baselines inside 90 days.
A. High-volume consumables, toner and cartridges
These systems can achieve very high material reuse because design and process are mature.
Xerox reports manufacturing over 1.7 million toner cartridges using recovered units, with an average of about 90% reuse by weight in recent reporting. Treat that as an upper-end reference for what standardized, high-volume reverse manufacturing can achieve.
Practical targets if you are early: first aim for documented collection and intake integrity, then push yield. A realistic first-year goal in a less mature category is often to stabilize grading, cut reject rates, and shorten lead time before you chase a headline reuse number.
B. Heavy equipment remanufacture, engines, hydraulics, drivetrains
This category shows the power of reman when quality gates are strict.
Caterpillar publishes sustainability benefit ranges for its reman parts, including 65% to 87% fewer greenhouse gas emissions and 80% to 90% less new materials used, compared with new, which signals what is possible when reman is industrialized.
McKinsey also highlights a typical reman reality that affects KPIs, you start with a large share of the final product, cited as roughly 70% to 90%, and then restore it. That is why core acceptance and first-pass yield often matter more than headline reuse rate.
Practical targets that usually move outcomes fastest: core acceptance rate and first-pass yield. If your acceptance rate is low, fix collection and handling. If your first-pass yield is low, fix triage, test repeatability, and parts availability.
C. Automotive and complex electromechanical components
This category forces KPI precision because electronic parts, software locks, and fast model cycles create volatile yields.
One peer-reviewed study in the automotive context reports remanufacturing preserves roughly 85% of initial value, while recycling preserves only about 7.5%, which supports aggressive value-retention targets when the product and channel allow it.
Practical targets: separate “repairable,” “reman-ready,” and “harvest-only” at intake, then track yield and warranty. If you cannot test to original spec, your reuse rate may rise while your field failure rate rises faster.
D. Retail and consumer goods returns, the upstream pressure on circular systems
If you sell consumer goods, your circular performance often depends on returns scale, speed, and fraud control.
NRF and Happy Returns projected $890 billion in returns for 2024, with retailers estimating 16.9% of annual sales returned. Online return rates are often higher than in-store, which increases the importance of triage speed and disposition discipline.
Practical targets: process returns to disposition quickly, then improve the share that re-enters saleable channels. If you treat everything as liquidation, your retention value will stay low even when return volumes are high.
E. Cross-sector trend benchmarks that matter from 2026 onward
Two policy and standards signals will change what “good” looks like, because they push traceability and repair into normal operations.
The EU repair directive must be applied from 31 July 2026 after national transposition, which increases pressure to measure repair throughput, repair success, and parts availability as core KPIs.
ISO 59020 pushes organizations toward consistent, comparable circularity measurement, which raises the bar for evidence quality and indicator definitions.
The EU Ecodesign for Sustainable Products Regulation sets a direction that includes Digital Product Passports as a central tool, which will make item-level trace and data completeness harder to avoid.
A simple way to set targets without guessing
Start with three horizons.
Horizon 1, 0 to 90 days: build baseline numbers you can trust. Focus on identity capture rate, documented disposition rate, and a clean mass balance where relevant.
Horizon 2, 3 to 12 months: increase yield and speed. Drive down lead time, raise first-pass yield, reduce reject rates, and prove substitution for any avoided cost claim.
Horizon 3, 12 to 36 months: expand scope and publish credible outcomes. Add product families, add second-life channels, and move from estimated circular performance to verified circular performance.