Circular Economy Index: A New Methodology for Evaluating Circularity in Municipalities

Abstract

The circular economy is recognized as a critical strategy for advancing sustainable development and achieving the United Nations’ Sustainable Development Goals. This research addresses the limited application of CE assessments at the municipal level and identifies challenges and opportunities for an improved methodology. In 2024, the first scientifically led survey was conducted across all Latvian municipalities to evaluate the level of circularity or readiness for transitioning from a linear to a circular economy. Through self-assessment, all municipalities provided their perspectives on key dimensions of the new economic paradigm. These insights were integrated with feedback from citizens, collected via a separate nationwide survey, to derive a composite index value. This article aims to review other methods and assessments of circular economy conducted at the municipal level worldwide and to assess their applicability to municipalities. While most of the frameworks, either developed institutionally or by research groups, utilize statistical metrics to assess CE at the municipal level, the objectivity of such an approach is overshadowed by the data availability and complexity of the CE concept. Further research is required to develop state-of-the-art methodologies that combine the aspects of quantity and quality in a good balance. In-depth assessments of specific areas might provide more value than a broad measure for a meaningful transition to a CE.

1. Introduction

The circular economy (CE) aims to reduce and alternatively reuse, recycle, and recover materials in production or distribution and consumption processes “to accomplish sustainable development, which implies creating environmental quality, economic prosperity, and social equity to the benefit of current and future generations” [1]. In Latvia, the “right of everyone to live in a benevolent environment by providing information about environmental conditions and by promoting the preservation and improvement of the environment” has been enshrined by The Constitution of the Republic of Latvia since 1922 [2]. This constitutional commitment to sustainability, although it dates back a century, aligns with the current principles of the CE. Municipalities are key actors in implementing CE strategies [3] to enhance national and global goals, but measuring the level of CE implementation at the municipal level is still a challenge [4,5,6].

When starting the first assessment of circularity in Latvian municipalities, scientists intended to combine opinion-based survey results of municipal administrations and local societies with objective statistical data. However, when researching the official statistical data basis for reliable, consistent, and continuous data, it was concluded that there are not enough data to measure circularity at the municipal level—a data gap that is also common across other regions [7,8].

This research aims to fulfill the following points:

• Refine the methodology for assessing the CE at the municipal level, improving upon the initial opinion-based approach by developing more accurate and reliable measurement tools.
• Address data gaps by advocating for the development of a more comprehensive statistical framework that captures relevant CE metrics at the regional level.

Hence, the subsequent research questions have been formulated:

•  
  • RQ1: What trends and tendencies do a bibliographical analysis of CE assessment methodologies at the municipal level reveal?
  • RQ2: What are the global institutional practices for assessing the CE at various levels?
  • RQ3: What are the data gaps and challenges to measuring the CE at the municipal level?

As a result of this research, the authors provide a set of recommendations for further research and methodology developments.

The significance of this research lies in its potential to achieve the following:

• Advanced data collection—by addressing the current data gaps, this research will help improve CE assessments and support better decision-making at the municipal level.
• Empower municipalities—a clear and comparable framework for local CE assessments enables municipalities to track their progress and identify opportunities for improvement.
• Influence policy—sophisticated methodologies can contribute to more effective local and national policies for promoting and implementing CE practices.

2. Methodological Approach and Design

The present research uses a structured multi-stage methodology to develop and validate a CE index for municipalities. This methodology integrates both quantitative and qualitative assessments. By integrating bibliographical analysis, survey data from municipal administrations and residents, and statistical evaluation, this research paper designs a thorough and replicable framework for measuring circularity at the local level. A graphical representation of the research stages is displayed in Figure 1.

The main steps, methods, and resources utilized within the present research were the following:

• Literature review. A substantive bibliographical analysis was performed to review the theoretical background and practices applied to assess the CE at national, regional, and municipal levels. Also, an analysis of applicable EU and national legislation, including policy documents, formed a crucial part of the research to create relatable content and facilitate participation in the survey.
• Research design. More than 20 scholars and other experts were involved in developing the research design, comprising the following stages and components:
  • Defining CE criteria in municipalities;
  • Developing a composite index formula for a single CE metric;
  • Creating two comparable questionnaires—one for the representatives of municipal governments and the other for citizens;
  • Gathering statistics for CE-related metrics;
  • Establishing a materiality matrix to leverage survey results;
  • Carrying out the survey and compiling data for further analysis;
  • Calculating results and creating additional sub-categories to explore specific areas.
• The CE index was calculated using the composite indicator with a weighted average formula, which is considered one of the most reasonable methods as it allows for the consideration of the level of importance of each selected criterion. This mathematical method has been utilized by other researchers in the calculation of the CE index [9,10,11,12].
  The calculation of the CE index involves the use of two values. The level of importance for each CE criterion is determined by the value B, while the evaluation from municipalities or citizens is represented by the value V. The level of importance ranges from 1 to 5, while the evaluation ranges from 0 to 5, with both values required to be integers.
  Initially, a list of CE criteria was compiled and categorized into sub-categories. Each criterion must be in at least one sub-category, allowing for the possibility of a criterion being present in multiple sub-categories. Evaluations for each CE criterion were obtained from surveyed parties.
  The level of importance is determined by scholars and experts, with the possibility of varying levels of importance for a single CE criterion depending on the category in which it is placed.
  The index for each sub-category is calculated according to the following formula:

  $$I=200\ast {\displaystyle \frac{\sum _{i=1}^n{V}_i{B}_i}{\sum _{i=1}^n{B}_i}}$$

  (1)

  where i is the number of criteria in a specific sub-category.
  After calculation, the index was rounded to the nearest integer. The minimum value of the CE index was 0, and the maximum value was 1000.
• Survey. During the period from June to July 2024, a nationwide online survey was carried out to address all 43 local municipalities and a sample of 3223 responses from individuals representing a population of 1.527 million.
  Residents were surveyed in July 2024 in cooperation with «Norstat Latvija». The survey was conducted online (CAWI) using a closed, representative respondent panel. In total, 3223 questionnaires were completed covering all Latvian municipalities. The survey asked residents about the activities of the municipality and their own activities in the field of CE.
  After completing the survey, data were compiled to analyze the results and calculate the index values. In addition to the initial idea to calculate a single composite index value, based on the survey results, additional sub-categories were created to explore specific areas. The final results were solely based on the survey results, without statistical avenues.
  The subjectivity of this research was reduced by combining the results from both stakeholders—municipalities that provide public services and individuals. For example, when questioning residents’ awareness of the CE within their municipality and the municipality’s contribution to informing the public, these differences are clearly noticeable (Figure 2).
  The average and excellent awareness ratings between the two respondent groups aligned, but there was a discrepancy of more than two times in the ratings for very good versus poor awareness, with the municipalities’ view being significantly more optimistic than that of the residents. The indexing algorithm helps to level out these differences, allowing for a more objective assessment.
• Index presentation. Once completed, the survey results were presented to diverse target audiences and platforms to inform the main participants—administrations of the local municipalities—as well as raise awareness of the research and its subject.

Detailed results of the research stages are described in the next section.

3. Results

3.1. Theoretical Background

To explore the landscape of academic publications on CE’s intersection with municipalities or regional context and assessment approaches, a search in the Scopus database on a large collection of academic publications was performed, using the combination of keywords “circular economy”, “municipalities”, and “regional”. Only published articles were selected, and no other additional filters were applied. The search results of 289 documents published in 2008–2024 were exported in CSV format and analyzed by VOSviewer (v. 1.6.20) [13] using indexed keywords for comprehensive and cross-disciplinary analysis to create a visual representation (Figure 3) of research trends and potential gaps or areas for future study.

Networks created by VOSviewer are widely used for constructing and visualizing bibliometric networks, encompassing entities such as academic journals, researchers, publications, and keywords. These networks illustrate relationships, such as the co-occurrence of terms, citation linkages, or co-authorship patterns that help to reveal trends and correlations [14].

Based on this analysis and underlying data connections, regional development, regional planning, regional economy, municipal waste, and waste management have so far been the most frequent topics when researching CE within municipal or regional contexts. On the other hand, such keywords as “assessment”, “measurement”, “indicators”, “metrics”, or “evaluation” do not prominently appear in connection with CE and municipalities. While terms like “life cycle analysis”, “life cycle assessment”, and “material flow analysis” are present, they are more broadly associated with environmental impact assessments and resource use rather than being directly tied to municipal-level evaluations of CE. A more customized search for “circular economy”, “assessment”, “circularity assessment”, and “municipalities” produced only two matching publications: the “Assessment of the urban circular economy in Sweden” [15], published in 2021, and “A methodological proposal for developing a Municipality Indicator of Circular Economy (MICE)” [16], published in 2024. These results confirm the gap and novelty of this research.

The CE is a transformative approach to decouple economic growth from the consumption of finite resources and reduce waste and environmental impact [17]. It envisions a systemic shift from the traditional “take–make–dispose” model of production and consumption to one that is centered on sustainability, resource efficiency, and value retention. According to Reike et al. [18], the historical development of the CE concept can be outlined in three phases:

• CE 1.0 (1970–the 1990s)—the focus is on the “output side”, i.e., waste management and the introduction of preventive and life-cycle-thinking-focused concepts like cleaner production and industrial ecology.
• CE 2.0 (1990–2010s)—the integration of input and output strategies for eco-efficiency and the framing of environmental problems as economic opportunities.
• CE 3.0 (2010s–)—the focus is on maximizing value retention in response to resource depletion and decoupling growth from resource use.

To fully understand this concept, it is helpful to examine how key organizations and scholars have defined and framed the CE, each offering a unique perspective that complemented their overarching principles:

• The European Commission [19] defines the CE as dealing with waste minimization and recovery, the implementation of low-carbon processes, resource-efficient usage, ecological and energy transition, and sustainable pathways to economic competitiveness. In the new CE Action Plan, approved in March 2020 [20], there is no concise definition of the CE. Instead, it focuses on sustainability, resource management, social inclusivity, and global collaboration, elaborating on the evolving scope of the CE.
• Kirchherr et al., in their revisited edition of the conceptualization of CE, provide the following meta-definition: “The circular economy is a regenerative economic system which necessitates a paradigm shift to replace the “end of life” concept with reducing, alternatively reusing, recycling, and recovering materials throughout the supply chain, with the aim to promote value maintenance and sustainable development, creating environmental quality, economic development, and social equity, to the benefit of current and future generations. It is enabled by an alliance of stakeholders (industry, consumers, policymakers, academia) and their technological innovations and capabilities” [21]. This aims to promote value maintenance and sustainable development, creating environmental quality, economic development, and social equity to benefit current and future generations.
• The most recent definition from the renowned Ellen MacArthur Foundation describes the CE as “a systems solution framework that tackles global challenges like climate change, biodiversity loss, waste, and pollution. It is based on three principles, driven by design: eliminate waste and pollution, circulate products and materials (at their highest value), and regenerate nature” [22].
• Geng and Doberstein, focusing on the Chinese implementation of the concept, describe the CE as the “realization of [a] closed-loop material flow in the whole economic system” [23]. This definition emphasizes the closed-loop system where materials are continuously cycled within the economy.
• Yuan et al. state that “the core of [the CE] is the circular (closed) flow of materials and the use of raw materials and energy through multiple phases” [23]. This definition underscores the multiple life cycles of materials and energy in the CE.
• Bocken et al. characterize the CE by defining it as “design and business model strategies [that are] slowing, closing, and narrowing resource loops” [24]. This definition emphasizes the role of design and business models in achieving circularity.
• Geissdoerfer et al. defined the CE as “a regenerative system in which resource input and waste, emission, and energy leakage are minimized by slowing, closing, and narrowing material and energy loops. This can be achieved through long-lasting design, maintenance, repair, reuse, remanufacturing, refurbishing, and recycling” [8].
• In May 2024, the International Organization of Standardisation (ISO) released a new standard, ISO 59004:2024, “Circular economy—Vocabulary, principles, and guidance for implementation”, where the CE is defined as an “economic system that uses a systemic approach to maintain a circular flow of resources, by recovering, retaining or adding to their value, while contributing to sustainable development” [25]. It is doubtful that with this attempt, the persistent lack of a unified CE definition will be resolved. This definition contains a multi-level cascade of terms with separate definitions, making it rather arduous to puzzle out all the components into one comprehensive and meaningful statement.
• Most recently, acknowledging a great variety of CE definitions, the Organisation for Economic Co-operation and Development (OECD), in their report “Monitoring Progress towards a Resource-Efficient and Circular Economy”, proposed a common language headline definition of the CE as being “an economy where the value of materials in the economy is maximized and maintained for as long as possible; the input of materials and their consumption is minimized; the generation of waste is prevented and negative environmental impacts reduced throughout the life-cycle of materials” [26]. This definition highlights the three interrelated features of the CE and is designed for international use.

In summary, the CE is a system that minimizes resource input and waste, emissions, and energy leakage by slowing, closing, and narrowing material and energy loops. This is achieved through long-lasting design, maintenance, repair, reuse, remanufacturing, refurbishment, and recycling. The concept of the CE is primarily based on the 3Rs framework, i.e., “reduce–reuse–recycle”, initially outlined in the 2008 CE Promotion Law of the People’s Republic of China [27], and further developed to 4Rs by introducing “recover” as the fourth R [28]. According to more recent research, this core of the CE can be scaled down to encompass as many as 60R CE principles [29]. The literature review of multiple R-imperatives used in academic publications creates inconsistencies and a lack of consensus among scholars when defining the CE concept [18]. Meanwhile, various stakeholders might opt for the most suitable definition that fits their industry, environment, objectives, and priorities, leading to a diverse interpretation and application of CE principles.

3.2. Global Practices of Assessing CE

3.2.1. Eurostat Monitoring Framework

Eurostat, as the organization responsible for providing access to relevant data to help monitor progress towards the CE [30] on behalf of the European Commission, has developed and published the CE monitoring framework. In total, 11 indicators covering five thematic areas are included (see

Table 1. EU CE monitoring framework, developed by Eurostat [32].

Thematic Area	Indicator	Sub-Indicators (Measurement)
Production and consumption	Material consumption	Material footprint (tonnes per capita)
		Resource productivity (index 2000 = 100)
	Green public procurement	The share of public procurement procedures above the EU thresholds (in number and value), which include environmental elements
	Waste generation	Total waste generation per capita(kg per capita)
		The generation of waste, excluding major mineral waste per GDP unit (kg per thousand EUR; chain-linked volumes (2010))
		Generation of municipal waste per capita (kg per capita)
		Food waste (kg per capita)
		Generation of packaging waste per capita (kg per capita)
		Generation of plastic packaging waste per capita (kg per capita)
Waste management	Overall recycling rates	The recycling rate of municipal waste (percentage)
		The recycling rate of all waste excluding major mineral waste (percentage)
	Recycling rate for specific waste streams	The recycling rate of overall packaging (percentage)
		The recycling rate of plastic packaging (percentage)
		The recycling rate of WEEE when separately collected (percentage)
Secondary raw materials	Contribution of recycled materials to raw materials demand	Circular material use rate (percentage)
		End-of-live recycling input rates (EOL-RIRs) for aluminum (percentage)
	Trade in recyclable raw materials	Imports from non-EU countries (thousand tonnes)
		Exports to non-EU countries (thousand tonnes)
		Intra-EU trade (thousand tonnes)
Competitiveness and innovation	Private investment, jobs, and gross value added related to circular economy sectors	Private investments (the percentage of gross domestic product (GDP) at current prices)
		Persons employed (percentage of total employment)
		The gross value added (percentage of gross domestic product (GDP) at current prices)
	Innovation	Patents related to waste management and recycling (number)
Global sustainability and resilience	Global sustainability from circular economy	Consumption footprint (index 2010 = 100)
		GHG emissions from production activities (kg per capita)
	Resilience from circular economy	Material import dependency (percentage)
		EU self-sufficiency for raw materials, aluminum (percentage)

) [31].

Eurostat’s structured approach assesses CE progress across the five thematic areas. Key indicators and subsequent sub-indicators capture material consumption, waste management efficiency, recycling contributions, trade in recyclable materials, and the economic and innovation aspects of circular activities. By covering both environmental and economic dimensions, this framework helps policymakers and stakeholders to track progress toward the CE and identify areas for improvement.

Data are compiled and provided at the EU level, as well as by each member state. Out of the 27 sub-indicators, only 21 can be compared between the EU and a member state because for 6 sub-indicators, data are not available yet, or their progress is measured cumulatively across all member states. A comparison between the EU and Latvia’s measurements is summarized in Figure 4.

First impressions of this analysis suggest that Latvia leads over the EU in the progress of transitioning to a CE. A comparison in the category of secondary raw materials cannot be performed due to most of the sub-indicators being measured cumulatively at the EU level. However, Latvia strongly outperforms the EU in production, consumption, and waste management and underperforms in competitiveness and innovation. Yet, at the beginning of 2025, this conclusion has a caveat regarding the most recent data sources for different sub-indicators ranging from 2023 back to 2020. Secondly, there are no target values established by the European Commission that should be achieved at some definite point in time. Thirdly, this data set does not provide one total index or value of the level or CE or circularity.

3.2.2. OECD and UNECE Practice Guidelines

In 2020, the OECD published the synthesis report “The Circular Economy in Cities and Regions” [33], which examines the role of cities and regions toward a CE, emphasizing the importance of effective governance and measurement. The OECD inventory of the CE indicators offers a comprehensive collection of over 400 indicators, compiled between 2018 and 2020 across various categories, such as economy and business, environment, governance, infrastructure and technology, jobs, and sectors of economic activities [34]. They can be divided into five main categories—environment, governance, economics and business, infrastructure, and social (see Figure 5).

These five main categories have been further broken down into 33 sub-categories and 11 sectors, facilitating a more nuanced evaluation and understanding of the various facets of the CE. Yet, with the abundance of numerous indicators comes several challenges identified by the OECD:

• The lack of an agreed definition of the CE does not allow a robust and comprehensive indicator framework to be built, and different definitions of the CE may result in different ways and indicators to measure it.
• Limited harmonization and standardization among existing indicators make it challenging to provide reliable and comparable information; for example, different calculations of recycling rates limit the comparability of data across various subjects [35,36].
• Incomplete information—data gaps and inconsistent statistical reporting derived from some dimensions of the CE are not being reflected in statistical databases [37] A strong focus on waste but little on closing loops—indicators like waste collection and recycling rates may give a misleading indication of progress towards a CE, as they do not necessarily show how the primary consumption of materials is reduced or optimized. It has also been identified that statistics on waste and material flow are not enough to assess such CE-related aspects, including material losses and the quality of recycling [38,39,40].
• Available indicators are mostly data-driven rather than objective-driven, resulting in an over-representation of sectors with a greater availability of data (e.g., waste or energy-related indicators).
• The lack of a systemic approach to CE indicators—indicators should measure and control several factors (e.g., from urban planning to material consumption) instead of limiting them to very specific sectors such as waste management [36].

These and other challenges prevent countries and global organizations from building a unified and widely applicable quantitative approach/framework to ensure sufficient and comprehensive measurements of relevant, reliable, and comparable CE indicators. Granularity and the availability of the necessary statistical data—or lack thereof—at the national and municipal level contradicts the notion that the transition to a CE must not create an additional administrative burden.

The OECD scoreboard does not measure the level of CE achieved in a particular municipality. It is a limited-scope self-assessment tool for measuring the maturity of the CE’s governance only and does not explicitly address other quantitative and substantive aspects of CE implementation, for example, the actions and behaviors of other economic actors, resource flows, etc. The quality of this checklist also entails the subjectivity factor of such an evaluation.

Part A, “Guidelines for Measuring Circular Economy”, jointly prepared by the United Nations Economic Commission for Europe (UNECE) and OECD, published in February 2024 [41], clarifies a headline definition of a CE, provides a conceptual framework, and sets harmonized indicators to monitor the progress of the CE. Part B of the guidelines, which provide practical guidance for statistics on core indicators, has not been released yet. Like the latest OECD monitoring report, these guidelines are designed for a national or governmental level of monitoring for the CE. They provide a more detailed explanation of the CE concept and expand on the statistical framework.

3.2.3. Case Studies of Sweden and Italy

Based on bibliographical analysis (see Section 3.1), two case studies were selected for further analysis on how the CE is evaluated or measured at the municipal level. Heshmati and Rashidghalam [15], in their research, created a multi-dimensional index to assess the urban CE across 273 Swedish municipalities observed during 2012–2018. To rank the municipalities, the index comprised 40 indicators grouped into eight components:

(1)

Waste recycling and utilization;

(2)

Collected waste;

(3)

The emission of air pollutants;

(4)

Infrastructure, mechanisms, and culture;

(5)

Waste tax;

(6)

The investment and waste management costs;

(7)

Clean transport;

(8)

Renewable energy.

To reduce the dimensionality of data and preserve variability, Principal Component Analysis (PCA) was used to combine these components into the final CE index, which was used to compare and rank all municipalities. After calculating the index values, they concluded that there are variations in CE implementation across municipalities attributed to factors such as regional location, population and density, the concentration of industries, and programs invested in CE infrastructure.

In the second part of the research, several factors or determinants causing variations in the CE index were identified. For example, the causal relationship between higher unemployment and commuting had a negative effect on the CE levels, whereas the cost of educational activities and variable charges for waste collection positively impacted the level of CE.

Although sophisticated and multi-dimensional, this approach also had a few limitations. Firstly, data availability caused 17 municipalities to be excluded from the assessment. Secondly, applying mathematical weighting based on data variation might not align with the policy goals and might not reflect on what is the most important from a policy perspective. Finally, this study might not account for the complexities of human behavior enough, and there is still a valid question of whether highly populated urban areas can be compared to rural areas with a lower density using the same index.

Ghinoi et al. [16] developed a Municipality Indicator of Circular Economy (MICE)—a composite indicator of 14 variables that are standardized to consider municipalities’ population. These variables were grouped into five areas of interest or dimensions of circularity (see

Table 2. Variables and areas of interest included in the MICE [16].

ID	Variable Name	Description	Area of Interest
1	Farmhouses	No. Farmhouses/municipal land	Green enterprise
2	50,001 certified firms	No. of firms awarded with 50,001 certificates/firms × 100
3	Environmentally certified firms	No. of firms awarded with environmental certificates/firms × 100
4	Cars	Cars/inhabitants × 1.000	Sustainable mobility
5	Railway stations	No. of railway stations/municipal area
6	Solar energy	Installed kW of solar plants/inhabitants	Sustainable energy
7	Non-solar renewable energy	Installed kW of non-solar renewable energy/inhabitants
8	Energy projects	Cohesion funds granted in 2007–2020 for energy projects/inhabitants
9	Organic utilized agriculture area (UAA)	Organic UAA/UAA	Biodiversity and resource saving
10	Environment projects	Cohesion funds granted in 2007–2020 for environmental projects/inhabitants
11	Protected territory	Protected land/municipal land
12	CO2eq	CO2eq/inhabitants × 1.000	Emissions and pollution
13	Municipal solid waste (MSW) generation	MSW/inhabitants
14	MSW recycling	MSW sorted/MSW

).

The MICE indicator, developed by Ghinoi et al. [16] aggregates 14 standardized variables that can be categorized into five key areas: green enterprise, sustainable mobility, sustainable energy, biodiversity and resource saving, and emissions and pollution.

Data were gathered from six different sources covering data points from 2016 to 2023. All variables were normalized with a linear scaling method and ranged between 0 and 1. For weighting, they used PCA and uniform weights and, by testing four different combination functions, weighted and normalized variables were aggregated into an MICE value.

The index was tested on 329 municipalities in the Emilia-Romagna region of Italy. Empirical application revealed differences in circularity performance in municipalities based on their regional location. A positive correlation was identified between MICE scores and industrial specialization and per capita income, while a negative correlation was identified with the digital divide.

When reviewing the limitations of this method, it was noted that data availability influenced the choice of variables, and the data used for calculations spanned from 2011 to 2023. This highlights the challenge of inconsistent data availability, a common issue in CE metrics, which can lead to a bias known as “lamp-posting” [42]. Also, the use of per capita or fractional data introduced bias by inflating values for smaller municipalities while overstating the performance of larger ones.

Both studies demonstrated the complexity of assessing the CE at the municipal level. Although sophisticated and robust, both these approaches faced significant limitations deriving from data availability, biases, and methodological certainty. Yet, the challenge of developing universally applicable metrics that fairly compare municipalities in different population sizes, infrastructure, and policy priorities remains unresolved.

3.3. The CE Index in Latvian Municipalities

The basis of the development of any territory is its inhabitants. Therefore, the work of the municipality is aimed at creating an attractive living and working environment, which, in turn, is a prerequisite for the economic growth of the region.

At all times, the main basic needs of people have comprised high-quality and affordable housing, opportunities to work and earn, and living in a safe and clean environment. Only by observing the mutual connection and interactions of these basic conditions can the sustainable and balanced development of the territory become possible.

Given Latvia’s peculiarities in terms of administrative–territorial, regulatory, and policy planning aspects, the importance and role of local governments in the transition to the CE have been established based on different methodologies: to understand one’s current standing in the CE and understand what needs to be improved for the overall well-being and prosperity of Latvia’s inhabitants.

Municipalities have the greatest influence on outcomes by setting an example and shaping the environment. To reach our research objectives, it was essential to engage all stakeholders, including the government, local authorities, businesses, individuals, non-profit organizations, and researchers in our study. The nature of the CE index is characterized by its novelty:

• International research methods were evaluated, and a synthesis of these methods was applied to develop the CE index.
• Latvia’s unique characteristics and the role of local governments in the CE and their importance were established and implemented in the CE index.
• A sustainable and flexible method for tracking results was developed and applied.
• A performance improvement tool was developed along with the CE index.

For comparison, the review of the CE index in cities and the available case studies for Italy [16] and Sweden [15] are mentioned to illustrate the need for a situational assessment.

When developing a research concept for the first CE index in Latvia, initial ideas from the authors were tested in the focus group. The first concern, as discussed above, was to limit the boundaries of what the CE is and what it entails. The conceptual framework developed by the EU (see Figure 6) was used along with the official functions of municipalities, defined by the “Local Government Law” [43].

This comprehensive model represents the key aspects of the CE that apply to all economic actors. It was used to test the suggested criteria to make sure that they were relevant to the CE at the municipal level.

The first focus group, consisting of more than 20 scholars and experts, aimed to define CE criteria based on the CE model, principles, values, and practices. These criteria were further developed into two comparable questionnaires for municipalities and individuals. In the second focus group, the materiality matrix was developed, distinguishing different levels of importance for criteria and how they should be weighted for a cohesive integration into a single index value. When calculating the circularity index, values were used and a significance level was determined for each circularity indicator.

The significance was determined by experts. Moreover, a single circularity indicator may have different significance levels depending on the category it belongs to. For example, in the category of economics/business transformation, the significance of a circularity indicator might be five, while in the category of resource management, the significance of the same indicator might be two. Most answer options were formatted according to the Likert scale. Even if the weights change, it would still be possible to compare the indices over time. For example, the significance of an indicator that is currently considered important may change if it is reassessed. The index data and results are presented in groups and categories for clarity.

In Latvia, no prior CE assessments were conducted at the municipal level. With this being the first attempt to establish baseline positions among all local governments, it was crucial to assess a broad range of areas, which is a goal that could only be achieved through a well-designed quality survey. During the research design stage, the collection of statistical data was also conducted with the preliminary objective of supporting survey results with official, objective, and sufficient data. More than 40 metrics were obtained via the Official Statistics database [45], but when cross-referencing them with the questionnaire, several questions could be supported by more than two metrics, while about a third of questions had no data points. Hence, it was concluded that incorporating statistical data into the index value would require complex calculations and produce sub-par results.

The initiator of the CE index was JSC CleanR Grupa; the index methodology was devised by a group of Latvian scientists under the supervision of Dzintra Atstāja, a Doctor of Economics and an economics and sustainable development expert. The population survey comprising 3223 completed questionnaires and data analysis was overseen by Andris Saulītis, Doctor of Social Sciences. The liaison with the local governments was facilitated by the Latvian Association of Local and Regional Governments. A total of over 20 Latvian scientists and experts were involved in the development of the Latvian CE Index.

The results (Figure 7) of the CE index divide the overall scale into five groups:

• Leaders (more than 500 points)—the highest results were obtained in circularity; residents were involved in achieving circularity goals and obtained an understanding of the importance of circularity in well-being and sustainability.
• Experts (450–499 points)—manage elements of the CE, implement them in practice, and explain their efforts to residents.
• Practitioners (400–449 points)—implement significant CE initiatives at the municipal level and widely engage residents.
• Conscientious (350–399 points)—implement CE principles and explain them to residents.
• Expectants (less than 349 points)—evaluate opportunities to integrate the CE into municipal functions.

With a maximum value of 1000, the highest score reached was 504, while the average circularity across Latvian municipalities was 422. With this being the first overall assessment, the CE index can be used by municipalities to plan their actions and adopt good practices, work with citizens, introduce and explain various initiatives, and plan policy documents.

In addition to the total index value, four categories were established by combining related questions to measure such areas as the following:

(1)

Resource management: (everyday resource conservation; principles of smart management; procurement and service usage in the municipality; support for specific initiatives and business models; the level of green procurement; solving waste management problems; public transport accessibility; utilizing recycled materials in tourism, flood protection systems, construction, and city maintenance; and implementing CE principles in municipal public cultural, sports, and other events);

(2)

Economics/business transformation: (principles of smart management; support for specific measures and business forms; shared and collaborative service support; support for shared and co-working services; and municipal initiatives to foster a CE);

(3)

Public engagement: (information initiatives organized by the municipality; the availability of information about municipality activities in the field of CE);

(4)

Skillful management: (an approved CE implementation strategy/action plan; the integration of CE principles into municipal activities; engagement and support in building a CE; contributions to climate solutions; achieving climate neutrality in municipal management; and priorities in road and traffic planning).

Dividing the assessment into these categories or sub-indices provides a practical tool for municipalities to address the most urgent weaknesses and facilitate more targeted improvements for a successful transition to the CE.

4. Discussion

While most research uses a set of statistical metrics to evaluate the CE either in specific areas or as a composite index, justification for the selected data points remains insufficient, leaving doubts about the objectivity and integrity of the results relative to the CE concept. While quality self-assessment surveys might produce opinion-based results, the most advanced municipal CE measurement frameworks might be compromised by the data availability at the required granularity and frequency, challenging local governments either to measure all the required indicators or limit themselves to a shorter list, thereby potentially compromising to a subpar result.

As suggested by the OECD, a self-assessment scoreboard is a good start. The authors started this by creating the first CE index for municipalities in Latvia. In the authors’ opinion, selecting specific and limited amounts of statistical data also entails a certain level of subjectivity. Latvia’s case proved that objectivity is limited by data availability, especially at the municipal level, where some data points lack the necessary granularity. The indicators that best represent CE levels and how to combine them in a single index calculation must be well-researched and substantiated.

The categories of the CE index—resource management, economic and business transformation, community engagement, and skillful management—allow each municipality to understand which areas require the most critical improvements and what should take priority, given time and budget constraints.

Municipalities can use the CE index to plan their actions and adopt good practices, work with residents, introduce and explain various initiatives, and implement the CE in policy planning documents.

5. Conclusions

This group of scientists managed to develop a methodology for local governments, allowing the following points:

• A self-assessment of processes and results in the work of the municipality;
• Following the dynamics of their performance by years or periods and comparing it with the results of other local governments;
• Receiving expert recommendations on priority processes to be improved (considering both the requirements of the European Green Deal and the interests of residents and businesses);
• Popularizing success stories and examples of good practice;
• Better understanding of the role of the CE in the performance of local government functions and cooperation with stakeholders;
• Developing recommendations on how to motivate local governments to act more responsibly, support mechanisms, and attract funding.

This is a good start for municipalities to assess their priorities and choose further directions of action, including the following:

• Understanding and gaining knowledge of the CE;
• General recommendations by index category;
• Recommendations for policymakers and institutions;
• Educational events and the exchange of good practice and experiences for popularization.

The CE index can be precisely calculated and utilized to track changes over time. The method outlined in the publication allows for the determination of the CE index using both subjective and objective data. Subjective data are gathered through surveys, while objective data can be obtained from normalized statistical data. However, comparing CE indices across different studies proves challenging due to variations in criteria and their respective levels of importance.

This scientifically based tool will help municipalities see their current situation in the field of the CE and understand what needs to be improved for overall well-being and the well-being of the inhabitants of Latvia. The assessment is planned to be repeated regularly and progress monitored, as well as recommendations to support municipalities on how to improve their performance.