AbstractWhile there has been a growing interest on the concept of Circular Economy (CE), its correlation with sustainability remains controversial. In this work, the combination of Statistical Entropy Analysis (SEA) and Life Cycle Assessment (LCA) is proposed as a new methodology to evaluate recycling processes from the perspective of materials circularity and environmental impacts using a Li‐ion battery recycling process as a case study. This work addresses the need of quantitative circularity indicators, as SEA evaluates the concentration of materials at a systems level, while LCA measures the environmental impact of recycling processes in comparison with virgin raw materials production. It was found that process optimization points can be found by simultaneously accounting for materials recovery and the LCA categories of global warming potential, ozone depletion and mineral resource scarcity. Furthermore, a strong correlation was found for the first time between the recovery of critical elements and the environmental impact of raw materials production. The proposed methodology thus offers a robust analysis of a product lifecycle that aids in its design and optimization from the CE perspective.