MOVECO - Barriers in the transition to Circular Economy in SMEs

13-05-2020

There is a large number of barriers that show how complex and challenging a transition to circular economy would be for Small and Medium sized Enterprises (SMEs).

The barriers identified are often of technological (quality of recycled material) and financial nature (lack of business cases illustrating possible revenues) as well as barriers connected to the supply chain (responsibilities and dependencies). These barriers relate to what circular economy is – closing material loops, delivering new offers to customers, meeting requirements and expectations of suppliers and on customers, and developing the whole supply chain. Also, the way their current businesses are conducted is strongly connected to these barriers.

Besides the barriers related to the actual transition towards circular economy, companies tend to struggle with the integration of different perspectives of various domains into their business strategies. These barriers are in several ways similar to those of integrating environmental aspects, though these are likely to be more challenging as they encompass every function and every level in the organization and take sustainability issues to a strategic level. These integration barriers also have consequences for achieving the explorative working way that is needed for performing the required disruptive changes and radical innovations. Furthermore, the lack of integration of environmental aspects throughout the supply chain can be identified as a barrier itself. Possible solutions for closing material loops are requiring a closer connection between suppliers and producers and between producer and customer.

Photo by MichaƂ Parzuchowski on Unsplash

In addition to integration barriers, the barriers connected to knowledge and an explorative way of working needs to be addressed. A shallow understanding of circular economy may give a positive attitude to circular economy and, therefore not be an initial barrier. However, it seems likely that it will produce a resistance to change in an organization, as “knowing about” is fundamental for managing change. More serious is probably the lack of awareness of opportunities within the circular economy and another barrier is a question of attitude: risk-aversion. Knowledge itself is not only a barrier, but also for how companies regard knowledge creation and how this is managed for innovation. The ability to perform radical innovations is strongly connected to an explorative way of working, deeply connected to how knowledge is gained.

Circular economy is attractive to SMEs as it embraces the critical integration of sustainability issues and business development, a criticality coming from the fact that we have extended our resource consumption above our limits with a number of negative footprints. However, circular economy is only rarely and fragmentally applied in practice.  As circular economy will require disruptive changes and radical innovation, the transitions towards circular economy requires to be seen in relation to the abilities of managing barriers in the industry.

 

For more information please see:

Sofia Ritzéna*, Gunilla Ölundh Sandströma: Barriers to the Circular Economy – integration of perspectives and domains © 2017 Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license https://www.sciencedirect.com/science/article/pii/S221282711730149X

 

Credit title image: Tim Collins on Unsplash

Programme co-funded by European Union funds (ERDF, IPA, ENI)