Transition to circular economy on firm level: Barrier identification and prioritization along the value chain

Abstract

This research paper is concerned with potential barriers to the transition to a circular economy business model (CEBM) on the firm-level. Using a case study in the electronics manufacturing industry, we identify and analyze barriers in terms of their impact along the value chain (VC) as well as the level of difficulty required to overcome them. This allows us to map barriers to managerial responsibilities, thus improving the organizational transition process. The key findings of this research are: (1) To scale up CEBM on the firm-level, additional changes need to be implemented next to the oft-cited and discussed changes towards a Product-Service-System (PSS) and reverse logistics. Based on literature research and our case study, we put forward an extensive list of 29 potential barriers. (2) As managerial and financial resources are limited, we also suggest a priority ranking for barriers. Specifically, we show that barriers should be prioritized along the dimensions of their organizational resistivity and their impact on the VC. Organizational resistivity refers to the estimated effort along managerial time, financial resources, and cultural resistance for change, while VC impact refers to the ability of the barrier to influence and re-direct product, parts, and material flows along the foreword and reverse supply chain. This type of barrier assessment is new to the literature. (3) We argue that the proposed method for barrier prioritization, which we term the Circular Economy Matrix, can be readily transferred to manufacturing firms in other industries. (4) Clustering the barriers along managerial responsibilities (sets of barriers) is shown to lead to a more efficient and effective transition, as gauged by incurred transaction costs.