- Apr 2, 2019
The circular economy is often seen as a way towards a sustainable future. Basically, the waste of one business becomes the input for another. While this may sound like a simple concept, the circular economy (CE) has many challenges.
Researchers, Samuli Patala (Aalto University), Minna Halme (Aalto University), and Laura Albareda (LUT University), analyzed three circular economy case studies in Finland, Spain, and the USA and found there were three main challenges affecting circular economy systems:
- Lack of information. In many CE systems, two parties are involved: one who produces waste, and another who uses it. Unfortunately, finding a CE partner can be difficult as many organizations are focused on their own industry and are not aware of outside opportunities.
- Lack of scale. In order for CE to be successful, businesses need sufficient scale of materials. This may require intermediaries that can collect and distribute materials.
- Involvement of many actors. Successful CE requires a multi-stakeholder network with many moving parts. For instance, a system may involve supply chain partners, public sector organizations, and even NGOs. Connecting these various groups takes time and energy.
In addition to challenges, the researchers identify 3 solutions based on their findings.
- Adjust operations to consider other participants. This can take shape through more open information sharing or inter-company collaboration.
- Build formal coordination processes across organizations. CE works best when participatory decision-making bodies and joint spaces for experimentation are in place. Collaboration needs to be instilled in the process.
- Be open to novel ways of partnering. Because CE requires collaboration, businesses may need to rethink competitive advantage. Competitors become partners who share resources, infrastructure, or equipment that has been traditionally kept internal only.
The circular economy has significant potential to move society towards a sustainable future but businesses have to be open-minded and willing to stray from the status quo.