Understanding of the broader context is important for small and medium-sized enterprises transitioning to circular economy

Recent research looks at six smaller enterprises in the UK and the EU to characterise the tools, opportunities and challenges affecting successful transitions. This study presents a framework identifying the key stages in the circular economy transition process and highlights the importance of engaging with the wider environmental, social and business context.

A circular economy is a regenerative system in which raw material demands are dramatically reduced through co-ordinated innovations in product design, maintenance, lifetime extension, end-of-life collection, reuse and recycling. While the development and adoption of circular economy models is an established and growing field, it has typically focused on large, multinational companies. Small- and medium-sized enterprises (SMEs), however, face different conditions in areas such as access to investment and corporate structure.

This study considered the process of adopting circular-economy principles in six SMEs, based in the UK and the EU between 2012 and 2020. These companies were already engaged in circular activities and included a UK clothing manufacturer which combines a responsible supplier source with garment repair, reuse and recycling, and a firm which designs and manufactures reusable cups, using life cycle analysis to shorten its overseas supply chain – to use as few intermediaries as possible. The researchers began their engagement by running a workshop for 10–20 participants to establish relationships and explore underlying issues. They followed these with structured interviews and ongoing collaboration – including site visits and demonstrations of relevant management tools. All interactions were recorded in detail and analysed in the context of current models of circular-economy adoption.

Researchers report that circular practices most often created value from recapturing materials, with leasing services being another a key mechanism and repair and maintenance services also significant. They say that, for larger SMEs, value mapping was popular at early stages to orientate management and external stakeholders, while life cycle analysis and computer modelling were employed at later stages when commitment to the process was established. They note that the use of measurable indicators, such as value capture from reused materials or product life extension, were fundamental in all cases.

The researchers suggest that opportunities provided by following circular principles include preserving value, extending product life and adopting service models such as flexible rental or leasing instead of product ownership. They report that the most significant challenge was scaling up pilot projects. However, they also found significant barriers to aligning stakeholders to agreed practices and standards, with collaborative approaches to asset investment and technology licensing proving important in maintaining mutually beneficial relationships.

The researchers present a framework for conceptualising the adoption of circular-economy practices by SMEs. They identify three stages – identifying opportunities, initiating projects, and scaling implementation – and propose management and decision-making tools that could be of use in each. They also highlight four sets of external conditions that are required to enable the transition, relating to technology and design, funding and investment, markets and governance, and society and labour.

This framework is intended as a guide to potential tools and methods for adopting a circular-economy approach based on long-term case studies. The researchers suggest that the most successful efforts are those that adopt a broad environmental and societal scope beyond the concerns of the business itself. They also argue that such transitions require governmental incentives and support as well as more robust accreditation systems.

The researchers propose that future research could focus on assessing the application of tools such as value mapping and life cycle analysis within different sectors, reviewing the interface between circular-economy principles and other sustainability and social-impact business models, and considering other geographical regions beyond Europe and North America.

Source:

Howard, M., Yan, X., Mustafee, N., Charnley, F., Böhm, S. and Pascucci, S. (2022) Going beyond waste reduction: Exploring tools and methods for circular economy adoption in small-medium enterprises. Resources, Conservation and Recycling 182: 106345. Available from: https://doi.org/10.1016/j.resconrec.2022.106345

To cite this article/service:

“Science for Environment Policy”: European Commission DG Environment News Alert Service, edited by the Science Communication Unit, The University of the West of England, Bristol.

Notes on content:

The contents and views included in Science for Environment Policy are based on independent, peer reviewed research and do not necessarily reflect the position of the European Commission. Please note that this article is a summary of only one study. Other studies may come to other conclusions.