Inside the Circle is a monthly column on circular economy trends transforming source reduction and recycling.
California is considering legislation that would sharply restrict the use of something called “mass balance accounting.” Most people have never heard of mass balance accounting. That is understandable. Almost nobody notices accounting systems when they work well.
But if California gets this wrong, we could make recycling more expensive, make sustainable products harder to produce, increase pollution overseas, worsen the affordability crisis, and slow progress toward a circular economy.
The hidden accounting that makes sustainability work
Imagine you sign up for wind power. Will the exact electrons generated by a wind turbine travel all the way from that turbine to your home? Of course not. Electricity from many sources mixes together on the power grid. An accounting system tracks how much renewable electricity was generated and how much was purchased. Without that accounting system, renewable energy markets would be rare, and almost impossible to operate.
Now imagine buying recycled paper. Should the paper mill have to guarantee that every fiber in your notebook came from a particular newspaper collected hundreds of miles away? Should sustainably harvested wood from a certified forest in Oregon be shipped all over the country so that every customer receives only the exact wood fibers from that forest?
Should coffee beans from a certified sustainable farm be physically separated from all other beans throughout every step of processing, storage, transportation and roasting? Should recycled aluminum from a particular collection program be physically tracked through every smelter and factory until it reaches a specific soda can?
The additional transportation alone would increase emissions and environmental impacts. The environmental benefit would often disappear. The cost would be enormous. Billionaires could afford to be eco-friendly. The rest of us could not.
The same principle applies to renewable energy, sustainable timber, recycled paper, recycled metals, recycled plastics, biofuels, textiles, chemicals, coffee, chocolate, cotton, and many other products. The physical materials frequently mix together. A mass balance accounting system tracks the environmental value.
That is how modern sustainability markets work.
What happens if we ban practical accounting?
Supporters of California’s AB 2253 want products labeled “recycled” to contain physically traceable recycled material. At first glance, that sounds reasonable. But manufacturing systems do not work that way.
Consider recycling technologies that convert used plastics into raw materials used to manufacture new products. The recycled material often enters large industrial systems where many inputs and outputs are combined. Mass balance accounting allows manufacturers to track how much recycled material enters the system and assign that value to products leaving the system. That enables all of us to shift step-by-step from linear extractive practices to circular ones.
Without that accounting method, much of the recycled content becomes difficult or impossible to verify in a practical and affordable way. The result is predictable. Recycling becomes more expensive. Affordability is reduced. Investment becomes riskier. Less recycled material is used. The value of collected materials declines. Markets weaken. And more waste ends up on land, in the ocean, or exported to nations where labor and environmental standards are lax, at best.
That is the opposite of what we want.
Transparency, not prohibition
Certainly, some environmental marketing claims deserve scrutiny. A package made from difficult-to-recycle film may be covered with green symbols and environmental messaging. Consumers have every right to be skeptical when they see packaging that appears difficult or impossible to recycle being promoted as environmentally friendly.
Some claims are confusing. Some are exaggerated. Some are misleading. Those problems should be addressed. But the answer is not to prohibit one of the most important accounting tools used throughout the sustainability marketplace.
The better answer is transparency, auditing, and disclosure. Consumers should know what claims mean. Companies should substantiate those claims. Third-party auditors should verify them. All of us should crack down on deceptive marketing.
But we should be very careful before dismantling systems that have helped drive decades of environmental progress.
Think in systems, not slogans
For more than three generations, environmental leaders have worked to move our economy away from a purely extractive model. We increased recycling. We invented more sustainable forestry. We launched and expanded renewable energy. We created markets for more sustainable products. None of this happened by accident. It required practical systems that connect environmental goals with economic reality. Mass balance accounting is one of those systems.
A linear economy often fails because it focuses on one impact and ignores the rest. It solves one problem while creating several new ones. We should not make the same mistake in public policy. The authors of AB 2253 are trying to solve a legitimate problem. Some environmental claims are confusing. Some may be misleading. Those concerns deserve attention.
But policymakers should also consider the unintended consequences. Will this legislation reduce recycling? Will it discourage investment? Will it increase exports of recyclable materials? Will it make sustainable products more expensive? Will it weaken domestic manufacturing? Will it slow innovation? These questions deserve careful consideration.
Let’s get this right
Instead of rushing forward, let’s sit down together. Let’s bring environmental groups, consumer advocates, recyclers, manufacturers, scientists and policymakers to the same table. Let’s improve transparency, disclosure, auditing and verification. Let’s stop misleading claims, and increase public trust. But let’s do so without undermining the accounting systems that make sustainability possible.
Our goals should be simple: Reduce waste. Keep plastics out of the oceans. Keep pollution out of communities. Increase recycling. Encourage innovation. Create stronger markets for sustainable materials. And do all of this in ways that work in the real world.
