How to manage the Circular Economy Rebound effect: A proposal for contingency-based guidelines

Abstract

The Circular Economy Rebound (CER) effect can compromise the capability of a Circular Economy (CE) to achieve its intended sustainability benefits. The CER occurrence may potentially lead firms engaged in circular strategies to overstate their environmental performance, indulge in greenwashing, and undermine their economic prosperity and sustainability. Nevertheless, the scientific literature falls short in suggesting how CER should be managed at the microeconomic level not to jeopardise the effectiveness of the circular transition. Thus, this paper aims to investigate how firms may undertake to manage CER. Through an in-depth literature review on CER and an exploratory case study developed through the Contingency Theory lenses, a theoretical characterisation of the CER phenomenon was advanced and four guidelines that firms may adopt to manage it were devised. The CER management guidelines recommend courses of action to better balance the trade-off between economic and environmental performance and achieve sustainability through circularity. Furthermore, they propose a tool – the Displacement-Profitability matrix – to guide managers in pursuing profitable and environmental-friendly CER management. The results contribute to the CE and Operations & Supply Chain Management research streams and attempt to tackle the lack of theoretical guidance that the CE field suffers from.