New Metrics
Entropic Overhead:
Measuring the Circular Economy

Errors using inadequate data are much less than those using no data at all.

— Charles Babbage

Do you break the timer when your boiled egg is cooked?

Our economy does; it is like a broken hourglass. We collect together valuable materials, apply energy and labour, put them into products that have yet more added design and brand value and spew them out into the world before starting again (mostly), from scratch.

This of course would all be fine if scarcity was not a problem: If the materials, energy and inputs we rely upon for industrial production were either eternally abundant or safe to distribute and use. However in our current industrial models this is simply not the case.

To pursue the disposable hourglass metaphor, instead of merely turning it over when the sand has run through (a cradle-to-cradle, or circular industrial model), we smash it, buy another hourglass (a cradle-to-grave industrial model) — and maybe pop the old one in the recycling if we’re feeling virtuous.

This is all fine until the raw materials energy and skills to make more hourglasses start to get scarce or expensive. Then we would have to start to pick over the remains of the broken one to collect these now-valuable raw materials for remanufacture and reuse.

How much easier is it to retain the investment that has gone into making an hourglass than to smash it and start again every time we want to boil an egg?

Measuring the performance of different models

The performance difference between a broken and unbroken hourglass economy is easy to sum up simply — “a lot.” However, in practice more marginal differences can be crucial. A metric would allow us to measure the difference between potential courses of action and help determine the processes and activities most effective in achieving a circular, sustainable economy. But given the complexity of modern industrial processes and the fact that a well-functioning circular economy would add further convolutions, how do we develop a suitable measure?

The common denominator for all industrial activities is energy, therefore a metric which refers to the energetic characteristics of systems and processes is required. We believe this is entropy.

Entropy applies, without exception, to all activities and processes. Given that universality, it might be used to measure the overall efficiency of our economy and the transition to a circular economy.

Entropy applies primarily to energy and not to matter — something we are fundamentally concerned with in the circular economy. However, matter is of little use until we organise, process, manufacture and distribute it in products and services — all of these activities require energy.

We therefore propose the metric of Entropic Overhead.

What is Entropic Overhead?

Entropic Overhead is a relative lifecycle measure of the energetic efficiency of maintaining the utility of a product or service, or reusing its constituent materials.

It can be used to assess the energetic efficiency differences between alternative pathways: for example, the energy required to either make a new product or retrieve its resources to original utility, versus the energy that would be spent on retaining the original products’ use. It can also be used to assess the efficiency of alternative uses of constituent resources, beyond the original utility, in different products and processes within a circular economy.

In terms of the hourglass metaphor, it is the performance difference between:

• obtaining a new timer with virgin materials;
• obtaining a new timer and making some further use of the constituent materials for other purposes;
• remaking the broken timer by retrieving and reprocessing all the constituent materials (and supplementing with new materials where needed), and;
• avoiding breakage and simply turning the hourglass over.

Entropic Overhead is therefore a measure of the differential energy costs we would bear because we failed to make full use of the initial investment we have made in creating a functioning object with long-term utility.

Why we need a metric for the circular economy

Humans seek simplicity, and we value simple measures to tell us whether we are moving in the “right” direction and to help assess marginal choices.

However, this desire does cause us problems, such as an over-reliance upon metrics that are so abstracted as to be meaningless or even dangerous. GNP was famously condemned by Senator Robert Kennedy as a metric that “measures everything in short except that which is worthwhile.”

The dictum “If you can’t measure it, you can’t manage it” might be trite and one-dimensional (and often wrong), but in this case it is useful. How do we measure progress towards a circular economy and, is there one measure, rather than a million, that we can use?

“All models are wrong, but some are useful”

— George E. P. Box

Finding a metric that applies everywhere is difficult. In order to do so, we must look to universal principles that apply to all, without exception. The laws of thermodynamics are a good candidate as they represent a fundamental framework for physical existence.

What about zero-impact energy and materials?

Entropic Overhead is an ideal measure to indicate the difference between varying production approaches because, in our current, unsustainable economy, energy is a useful proxy for environmental efficiency.

However, it would be possible to have an economy that used only zero-impact energy sources and materials. In this utopian situation, Entropic Overhead would be less suited to indicate the sustainability (or otherwise) of processes.

Therefore the metric is a transitionary one — useful until we achieve a circular economy that uses zero-impact energy. Before this occurs, we can rate the Entropic Overhead of different processes using carbon intensity factors to allow for different means of production.

What scale can Entropic Overhead be applied to?

Any scale we like: from a product level, comparing the performance of a leased product to a “disposable” one; to the level of a value chain; for comparing business models, or comparing national & international economies.

Who else has explored this?

“It is not once nor twice but times without number that the same ideas make their appearance in the world.”

—Aristotle

Various people have explored the concept of entropy in different fields from economics to social dynamics, including Frederick Soddy in the 1930s and more recently Nicholas Georgescu-Roegen. Many have caught the imagination and many have foundered, possibly because the concept of entropy has been misunderstood or misappropriated — often stretched to apply to social organisation or economics.

However, this doesn’t mean the concept is without value, particularly if we don’t overextend our interpretation of the underlying science. Entropic Overhead is seeking to avoid the pitfalls that misappropriation of the concept can create by focussing upon the fundamental energetics of different industrial and economic processes and not overextending the application of the second law.

Measures that matter

We need truly useful measures if we are to assess and drive towards a sustainable world. At the physical level, sustainability requires us to find ways to exist and thrive in a system that is closed to matter — though open to energy.

This existential context should define our ways of measuring and managing performance yet we have effectively ignored the reality of life on this planet for too long.

As we start to recognise and push against the hard limits of existence we need measures that tell us, meaningfully, how we are performing and the value of doing so. Entropic Overhead allows us to measure our progress to a sustainable future.