2. Background
2.1 A brief history of economy-wide Material Flow Accounting
Building in part on the seminal work by Ayres and Kneese (1969), in the 1990s the scientific community set the first steps towards what later would become known as economy-wide Material Flow Accounting (ewMFA; e.g., Japan Environment Agency, 1992; Steurer, 1992; Bringezu, 1993; Bringezu et al., 1998; Matthews et al., 2000). These efforts built on statistics that had initially been developed for monetary flows such as the national accounts. Based on the national accounts, Statistics Netherlands developed a system for environmental indicators (Keuning, 1993) and set up several flow accounts, for example, for iron, steel and energy (Konijn et al., 1995).
Following on this scientific work, Eurostat, the statistical office of the EU, developed a methodological guide and preliminary material indicators for the EU15 in 2001 (Eurostat 2001a and 2001b). Another international organization, the OECD, contributed to the further harmonization of MFA methods (e.g., OECD, 2008). In 2011, the EU passed a regulation that enabled Eurostat to compile annual material flow statistics (European Union, 2011). While in principle ewMFA can be executed at various levels of aggregation, initially it mainly focused on national economies as a whole. This is illustrated by the use of indicators such as domestic material consumption (DMC, which equals domestic (resource) extraction plus mass of imports minus mass of exports) and gross domestic product (GDP) to analyze progress in decoupling material use from economic growth (Fischer-Kowalski et al., 2011).
An indicator like DMC does not adequately reflect the primary resource extraction required for imported and exported products. In an increasingly globalized economy, where traded goods have become a significant fraction of global GDP, this means the picture is incomplete (e.g., Wiedmann et al., 2014). In addition, more detailed insight into material flows at economic sector level is required to understand where the biggest inefficiencies occur and how material use drives emissions, land use, biodiversity loss and other impacts. This led to attempts to develop physical supply-use and input-output tables at national and global level (e.g., Pedersen, 1999; Moll and Acosta, 2006; Weisz and Duchin, 2006; Hoekstra and van den Bergh, 2006; Baud et al., 2011; Pedersen and Deveci, 2014; Kovanda, 2018; Merciai and Schmidt, 2018). Such developments serve to strengthen the CE agenda that has been developing since around 2010, as circular economy improvements tend to be quite product specific.
2.2 Materials and the UN System of Environmental Economic Accounts (SEEA)
Developing a material flow database that covers the entire economy requires an agreed set of definitions and principles. In the 1990s and first years of the new century, extensive research on the supply and use of materials was conducted in parallel in several countries, for example by Statistics Netherlands (e.g., De Haan, 2001; Hoekstra, 2003), Statistics Denmark (Pedersen, 2004; Pedersen and Deveci, 2014; Statistics Denmark, undated) and Statistics Finland (Mäenpää, 2005). The goal was to assess sustainable development by understanding the interactions between the economy and the environment. These efforts ultimately led to the development of the System of Environmental Economic Accounting (SEEA) by an international working group of statisticians (UN, 2014).
SEEA is an internationally agreed framework for integrating environmental-economic statistics, it provides definitions, classifications and a set of statistical principles to produce comparable statistics and accounts. The SEEA framework follows accounting rules similar to those of the System of National Accounts (SNA) making it very suitable for environmental-economic analyses and policy needs. SEEA covers three main areas: physical flows, stocks and environmental assets, and economic activities related to the environment. The area on physical flows includes physical supply and use table modules, such as the energy accounts, air emission accounts, water accounts, and the material flow accounts (for more information see: https://seea.un.org).
Statistics Netherlands links several of these SEEA modules to compile the Material Flow Monitor database. The modules are linked using SEEA definitions and principles; for example, inputs and outputs are balanced, the same units and classifications are applied, as well as a consistent scope of the economy (e.g., only residents are considered), and a definition of the scopes of different aspects of the socioeconomic metabolism (e.g., what is part of the economy and what is part of the environment?).
The comparability between the monetary figures of the national accounts and the physical figures in SEEA is very important for the compilation of productivity indicators. However, in some cases SEEA deviates from the national accounts in order to maintain focus on relevant material flows. An example of this is the harvest of crops: while the national accounts consider crops to be part of the economy, the Material Flow Accounts of SEEA regard harvested crops as a flow from the environment to the economy. Another difference between the national accounts and SEEA is the accounting of goods sent for processing: if the Netherlands sends crude oil to Britain for refining while ownership of the crude oil remains with the Netherlands, the national accounts record this as the import of a refining service by the Netherlands. In contrast, SEEA aims to record the actual flows crossing the border. By doing this, important indicators like emission coefficients, such as CO2 emission per unit of production, remain comparable in time and across countries.
2.3 Indicators for the circular economy and the bio-based economy
To accelerate the EU’s transition to a circular economy, the European Commission adopted the new Circular Economy Action Plan in March 2020 (European Commission, 2021). It is one of the main blocks of the European Green Deal, Europe’s new agenda for sustainable growth. The action plan states that monitoring must rely on European statistics as much as possible.
To monitor the progress of the transition towards a circular economy, indicators have been developed by academics (e.g., Moraga et al., 2019; Saidani et al., 2019), policy makers (e.g., Eurostat, 2022a; Hanemaaijer et al., 2021), and consultants (e.g., Circle Economy, 2021). Progress towards the circular economy can be measured using indicators at micro, meso and macro level (Kristensen and Mosgaard, 2020; Mayer et al., 2019; Saidani et al., 2019). Many available circular economy indicators relate to the preservation and use of materials and production of waste. Saidani et al. (2019) provide a comprehensive review of circular economy indicators and classify these by the level and circular economy strategy they measure. Recently, macro-economic indicators were developed to monitor the circular bio-economy (Kardung et al., 2021).
While the present study focuses on macro-economic material flows based on national statistics, we wish to highlight that it is crucial to combine these indicators with indicators that monitor environmental effects (e.g., environmental and CO2 footprints) to ensure that the circular economy transition does in fact contribute to sustainable development (Haupt and Hellweg, 2019; Helander et al., 2019). Previous studies, like that by Mayer et al. (2019), have taken an economy-wide perspective at the national or higher scale and not at the level of individual products or industries. Their approach is especially interesting in the context of this study, as they developed an ewMFA for the EU28 and derived circular economy indicators from it.
While many circular economy indicators are being developed, these are often difficult to compare and connect due to differences in coverage of and definitions in the underlying datasets. For example, De Jongh et al. (2022) outline and discuss the differences and objectives of different waste-statistics produced in the Netherlands. The large number of different indicators produced using different datasets and methods by academics, consultants and policy makers can result in disconnected and seemingly inconsistent indicators that make it difficult to coherently monitor the circular economy.
2.4 Research gap and contribution
In order to monitor the circular economy, a database is needed. A macro-economic MFM built from national statistics could be the solution but needs to be regularly and consistently updated to provide reliable circular economy indicators. To achieve consistency in time and across countries, this study proposes using existing national statistical data and integrating these using the existing SEEA statistical framework. This method developed by Statistics Netherlands (see Van Berkel and Delahaye, 2019) is an expansion of the one Mayer et al. (2019) presented and allows for disaggregation of material flows to the level of products and sectors. This is necessary for circular economy monitoring as policy targets are increasingly industry specific.
With this study we contribute an accessible step by step description of the method used to compile an MFM for the Netherlands from national statistical data and illustrate the possibilities and limitations of using this state-of-the-art national Material Flow database at different aggregation levels through a case study. Other EU countries and Eurostat have similar data, and the method developed by the Dutch CBS hence could be an example for CE monitoring in other countries. The MFM could thus contribute to more consistent monitoring of the circular economy transition in Europe. The MFM is a useful source of information for policy makers as it is consistent with economic figures of the national accounts, links several environmental modules on resources, waste and emissions, results in consistent time series, and provides opportunities for economic-environmental analyses.