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Efficiency is a fundamental element of the transition towards a sustainable use of natural resources among which water has a prominent role. Spain is among the European countries facing considerable water shortage problems, particularly within its southern regions. The current paper introduces an efficiency evaluation model based on Data Envelopment Analysis (DEA). The model incorporates a subset of outputs as undesirable inputs to account for the circularity of the production process by means of treated and reused water. The main differences existing between the circular approach proposed, a standard two-stage DEA model and a dynamic Slacks-Based Measure process will be carefully illustrated. In particular, the drawbacks faced by these latter techniques to consistently incorporate circularity into their optimization structures will be demonstrated both formally and numerically. The malleability of the current approach and its capacity to generate consistent identifiable categories among the regions evaluated within a circular production setting will be studied in detail. The analysis performed demonstrates significant structural differences in production capacity and efficiency across regions, with the inefficient ones displaying a considerable subpar use of resources through their production processes. The prevalence of inefficiency in several northern regions is partially compensated through their treatment and reutilization of water. However, this is not the case for the southern ones, which face stricter constraints and more inefficient production processes. The subsequent implications for efficiency are examined and policies aimed at enhancing the structural quality of the corresponding production systems suggested. [Display omitted] • We define a circular Data Envelopment Analysis (DEA) efficiency evaluation model. • Undesirable inputs implement the production circularity generated by treated water. • Two-stage and dynamic Slacks-Based Measure DEA are inapplicable to our setting. • Significant differences in production efficiency are found across Spanish regions. • Southern regions remain inefficient even with water treatment and reutilization. [ABSTRACT FROM AUTHOR]