Jobs in the Circular Economy 

Method behind the Circular Jobs Monitor

1. Understanding the Circular Economy

The circular economy offers an alternative way to the linear ‘take-make-waste’ economy that is harming people and the environment. It seeks to extract the maximum value from resources in use and keeps materials in circulation for as long as possible. To this end, resources are not consumed and discarded, destroying their value. Rather, their value is retained by reusing, repairing, remanufacturing or recycling, as shown in the figure below:

The value hill model proposes a categorisation based on lifecycle phases of a product in pre-, in- and post-use, and clarifies the systemic differences between the current linear economy and the circular economy that we are striving for.^[1]

The circular economy is no end-point, it is rather a process of transformation. By following circular strategies, organisations and businesses can render their processes increasingly circular and attain the highest level of economic and societal value.

A piece of work by Circle Economy, Making Sense of the Circular Economy: The 7 Key Elements^[2] conducted a literature review and mapped the various terms and definitions used by over 20 organisations - NGOs, government agencies, academia, consultancies, etc. - working on the circular economy. From this work emerged a framework for the circular economy - the DISRUPT Framework, and from this framework the description of a circular job were formulated.

The DISRUPT model presented below describes the full breadth of relevant strategies that give direction to this transformative process. There are three core circular strategies (in light blue), which directly intervene in material cycles, and four enabling strategies (in dark blue), which serve to mainstream, accelerate and scale up the core circular strategies.

2. Definition of a Circular Job

Employment in the circular economy reflects the broad nature of the system, and can equally be defined according to the DISRUPT framework. The circular labour market, much like its linear counterpart, is comprised of all kinds of jobs in different sectors, ranging from manufacturing and creative industries to waste and resource management. Jobs in the circular economy, shortly ‘circular jobs’, are all jobs that contribute to one of the strategies of the DISRUPT framework.

There are three types of circular jobs:

• Core circular jobs - These jobs ensure that raw material cycles are closed and thus form the core of the circular economy. They include jobs in renewable energy, repair and waste and resource management sectors. Examples of core circular jobs are displayed in light blue in the framework below.

• Enabling circular jobs - These jobs enable the acceleration and upscaling of core circular activities and thus form the supporting shell of the circular economy. They include jobs in leasing, engineering and digital technology - albeit only those that actually contribute to circularity. Examples of enabling circular jobs are displayed in dark blue in the framework below.

• Indirectly circular jobs - These jobs provide services to the primary circular activities above and thus form the activities that indirectly uphold the circular economy. They include, for example, jobs in education, logistics and the public sector. Examples of indirectly circular jobs are displayed in grey in the framework below.

Using this definition, the sectors of economic activity as defined by NACE (level 5) are classified as core circular, enabling circular, or indirectly circular, based on how well the sectors are connected to the DISRUPT Framework. An indication is provided in the table below, followed by a full extract of NACE Level 5 sectors mapped to the DISRUPT Framework.  

Table 1: An indication of how sectors are mapped to the DISRUPT Framework

Table 2: NACE Codes mapped to the DISRUPT Framework

4. Quantifying Circularity

For the core circular sectors, it is assumed that 100% of the jobs are circular. For the enabling circular and indirectly circular sectors; however, not all jobs are circular and it was necessary to analyse what percentage of the jobs within these sectors that can be considered circular. This analysis is done through the use of Input-Output Tables (IOTs).

IOTs describe the economy as an integrated system of monetary transactions among industries, consumers and capital, with rows representing the ‘source’ of activity (industry output or supply) and columns representing the ‘destination’ (industry input or demand). The sectors in the rows and columns are classified using the NACE mapping indicated above. For an exhaustive theoretical background on IOTs and Input-Output Analysis (IOA), please refer to Miller and Blair (2009)^[4]. Generally, IOTs are produced by National Statistical Institutes (NSI) and are therefore at the national level. Whenever the scope of the analysis is at a lower geographical level, i.e. regional or urban, the Spatial Microsimulation Urban Metabolism (SMUM) model by UNEP is used to downscale the intermediate demand matrix based on sector-specific employment data^[5].

Sector classifications can vary greatly between different IOTs. Most tables are specified at NACE level 2 or similar, as opposed to NACE level 5 as per the classification table. Because sectors at NACE level 2 are still quite broad and incorporate many sub-sectors, they can often be intended as a combination of core, enabling and indirect industries. In order to distinguish between sub-sectors, corresponding proportions must be applied to every row and every column to disaggregate the broad sectors, thereby exposing fully core, enabling and indirectly circular sectors. We calculate these proportions using granular employment figures at NACE level 5 and applying it to each NACE Level 2 sector. This transformation is displayed in the image below where Table 3 is transformed into Table 4.

Once the original table has been disaggregated to NACE level 5, we can determine the share of circular activity within a particular enabling or indirectly circular sector. The estimation of such circular employment shares is based on the inter-industry relationships between sectors and on the assumption that monetary transactions in the form of supply and demand of products/services are a proxy for employment generation. The estimation of circular employment shares follows two slightly different logics for enabling and indirectly.

For Enabling sectors, we assume that the extent to which they can be considered circular is determined by the share of supply (output) of Enabling products/services to Core sectors over the total supply of Enabling products/services. This can be also be thought of as the (circular) market share of Enabling to Core sectors over the total Enabling output. For Indirectly circular sectors, we assume that the extent to which they can be considered circular is determined by the share of demand (input) of Indirectly circular sectors for Core product/services over the total demand of Indirectly circular sectors. This can also be thought of as the (circular) input coefficient of Indirectly circular sectors from Core over the total input of Indirectly circular sectors. Noticeably, we do not consider the interaction between Enabling sectors to classify as circular. Figure X presents a case-by-case graphic depiction of the logic.

ENABLING CIRCULAR SECTORS LOGIC

INDIRECTLY CIRCULAR SECTORS LOGIC

The result of these operations are three matrices, one for each category, filled with coefficients ranging between 0 and 1; the product of these matrices is a single final circular coefficient matrix () which reflect the share of each transaction (and assuming full proportionality, also jobs) that can be considered circular.

We move on by applying standard IO formulas for the calculation of the total industry output (x vector), Intermediate coefficient matrix (A matrix) and Leontief inverse or total requirement matrix (L matrix). Each element of L is also known as total requirement multiplier:

Where  is the intermediate demand matrix, is the final demand matrix,  is a summation vector,  is the diagonalised inverse of the total output and  is the identity matrix with same shape of .

We then apply the circular coefficients to the Leontief inverse by multiplying the two and create a new counterfactual matrix which only considers the circular share of each total requirement multiplier, that is the “circular” requirement multiplier:

Where is the circular coefficient matrix and  is the counterfactual Leontief inverse matrix. Finally, we apply the standard IO formula for calculating the total stressor in a system:

Where  is the row vector of employment intensities (number of FTE jobs per unit of sector output), is the counterfactual circular requirement matrix , is the final demand matrix,  is a summation vector and  is the matrix of circular employment by sector.

5. Advantages and limitations

The approach holds advantages and limitations:

• The method employs macro-economic data, which is up to date, reliable and existing data to calculate the amount of jobs in the circular economy. There is no need to collect new data, a time intensive and costly process.

• This data is structured following the NACE an internationally standardised classification system. This allows for replication and comparison of results over time and across borders.

• The method employs a proxy to calculate the circular share of jobs in enabling and indirect circular sectors. This proxy is derived from economic interaction between sectors (see method description IOA above) and can therefore lead to an under- or overestimation of circular jobs in enabling and indirect circular sectors.

• The method consists of an original application of IOA, which has to date not been validated by a larger scientific community and therefore still highly uncertain. Additionally, the method inherits all the assumptions and constructs behind the production of IOTs.^[6]

• The method scales down and aggregates employment data based on monetary information. The relationship between employment and monetary transactions rests on the following assumptions:

• Employment is a good proxy for downscaling national IOTs to lower geographical scopes.
• Employment is a good proxy for disaggregating sectors in IOT, which implies full proportionality between monetary transactions and employment.
• Volume of monetary transactions is a good proxy for estimating the number jobs (for the estimation of circular market shares and input coefficients), which again implies full proportionality between monetary transactions and employment.

• The method takes into account only domestic flows and therefore does not account for circular employment implications related to trade with other countries (import and export).

Considering both the opportunities and limitations, the method employed for this monitor forms the basis - and first iteration - of a monitoring practice for employment in the circular economy.

6. Territories on display on the monitor

The monitor displays results from the above analysis across three levels of territory. These territories correspond to the administrative boundaries of the region under study, and are selected to support insights generation or decision making for visitors to the monitor.

In Europe, we apply the Eurostat's Nomenclature of Territorial Units for Statistics (NUTS) regions and display NUTS0 - NUTS2 - NUTS3, where NUTS0 refers to the state boundaries.

Although these levels aim to describe regions at all hierarchical levels, the regions at a given level can differ significantly with respect to land area, population, economic strength and administrative importance.

We adjust the three tiers on display according to the needs of the region under study.

For example:

• Scotland, is a NUTS1 region of the United Kingdom (NUTS0). Here we display NUTS1-NUTS2-NUTS3
• Cornwall and Isles of Scilly is already a NUTS3 region. We applied the calculation at that level and do not show aggregated figures for surrounding regions, or other regions in the same NUTS0 territory i.e. across the United Kingdom.

6. Updates to the methodology

With the aim of continuous improvement in monitoring jobs in the circular economy, Circle Economy updates its methodology for quantifying circular economy jobs on a yearly basis. It therefore follows that in some cases the results shown in reports using previous versions of the methodology may differ from the ones displayed on the online Circular Jobs Monitor. In these cases, we include a method update notice on the landing page of all relevant reports.