Circular Economy and the Barriers to Bussinesses in Transitioning to It

CIRCULAR ECONOMY
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Circular Economy
The current economic system takes raw materials from the Earth and turns them into products, eventually returning them to the Earth as waste. This economic model is linear. On the contrary, a closed-loop economic system, or circular economy, is based on eliminating waste and enhancing the continuous usage of resources (D'amato et al., 2019). This paper aims to discuss the concept of the "circular economy" and the barriers that businesses that want to transition into this economic model face. Additionally, it provides insights into real-world business examples that have adopted a closed-loop economic model and how they have achieved it.
The need for sustainability has gained importance in the past few years due to the increased depletion of raw materials. Due to the rapid depletion of raw materials, studies have demonstrated that a sustainable economy is the only feasible way to ensure future generations have resources (D'amato et al., 2019). In a circular economy, there is no wastage of resources since organizations use the residues to produce other new products. This system enables businesses to reduce the amount of waste they generate and release into the environment.
Stahel and Reday are considered the fathers of the circular economy after providing its concepts back in 1976. They related their concepts to product life extensions and their development processes in their work. Later in 1981, Stahel submitted a paper titled "The Product Life Factor," in which he explained the principles of the circular economy (Rathinamoorthy, 2019). In this paper, Stahel's primarily based the definition of the "circular economy" on the product life cycle extension. Stahel, in 1981 emphasized that extending the life cycle of a product is the first step towards a sustainable economy, but the progress should be consistent with the availability of resources (Rathinamoorthy, 2019). The second step has a strategy that is consistent with the role of businesses in society. The product life cycle determines their replacement period, the consumption of resources required to produce them, and the volume of waste they create.
When product life cycles are short, demand for replacement goods increases if affordable. On the other hand, extending the product life cycle optimizes its total life span, reducing resource depletion and waste. This action helps in building and increasing wealth. Stahel concluded the definition by stating that the more prolonged use of products contributes to the transition toward a closed-loop economy.
According to Stahel, product reuse and recycling are major resource conservation and waste reduction strategies for industrial production. Therefore, Stahel provided two primary concepts of the circular economy: product-specific and material-specific. Under product specificity, there is an emphasis on product reuse and life extension, whereas material specificity emphasizes loops during post-use waste and resources. In the second concept, Stahel detailed four loops: reuse loop, repair loop, reconditioning loop, and recycling loop (Rathinamoorthy, 2019). By "reconditioning," Stahel meant using the used product as a raw material to make a new product. Therefore, entities extend product life cycles through reconditioning with available resources without using extra from the Earth. The loops should be kept as small as possible under certain conditions. There is no need to recondition something that requires repair, and what entities can recondition economically does not need recycling (Rathinamoorthy, 2019). Organizations can also apply these conditions to products, systems, and processes.
McDonough and Braungart also explained the concepts of a circular economy in 2013 through their design for sustainability principle, which encourages manufacturers to use sustainable materials to improve the end life of products. According to their analysis, once a product reaches its end life, it should become either a "biological" or "technical" nutrient (Rathinamoorthy, 2019). In the biological pathway, the consumption of products and materials is at a higher rate. Their design is that they get back into the system in different ways, such as composting and anaerobic digestion. These processes play a significant role in regenerating living systems such as soil, which are responsible for renewable resources in the economy. In the technical cycle, restoring and recovering products, materials, and components is possible through various strategies such as reuse, repair, remanufacture, or recycling.
Based on the above discussion, the concept of a "circular economy" looks like that of a simple waste management process but is much broader than that. The circular economy requires a more comprehensive focus on designing alternative options throughout the life cycle of the involved processes and their interactions with the environment and economy. This action ensures that the regeneration process is not just about recovering materials or energy but is an improvement of the entire system. The concept was essential to address challenges in economic development by considering the environment, people, and businesses.
Economic activities should be about more than just consuming finite raw materials. When firms design products using the concepts of the circular economy, the items become durable, of high quality, and can be recycled many times. Under the circular economy, the cycle does not end when the product ceases to be valid; the materials can be added somewhere in the cycle to create new products. Based on the above analysis of the circular economy concept, it is clear that it is not new, but one can trace it back to the 1970s when Stahel and Reday discussed the product life factor.
Despite the documented importance and need to shift from linear economies to circular ones, businesses from both the public and private sectors need help implementing and adopting the concept of a circular economy. With the current energy crisis in the world, existing processes are dependent on fossil fuels and mass production frameworks, which makes them challenging to transform. Based on the available data, the following are the main barriers that businesses that want to transition to a circular economy face:
Scholars who have attempted to explore barriers to adopting circular economy practices have cited financial barriers as the primary barrier. Businesses are concerned with the initial costs of an investment and the projected payback period (Rizos et al., 2015). Transitioning to the circular economy adds new financial costs. According to studies, some businesses need more financial resources to establish a circular economy. Moreover, there is an indication that the collection and recycling of waste could be more economically viable for businesses that produce low volumes of waste. Besides the direct financial costs associated with transitioning to a circular economy, there are indirect costs such as human resources and time that businesses should set aside to improve their organization. These hidden costs constitute a significant barrier for businesses in adopting and implementing circular economy practices due to a shortage of human capital and time.
Various scholars have recognized the need for more government support in the form of effective taxation policies, training, and funding opportunities as a significant barrier to adopting and implementing circular economy practices by businesses. Moreover, the lack of strict legislative policies plays a significant role in consideration of the necessity to adopt and implement circular economy practices in the operations of businesses (Rizos et al., 2015). This idea demonstrates that authorities and regulators influence businesses to improve their environmental contributions. Organizations' commitment to sustainability drives the adoption and implementation of mechanisms for a circular economy where strict legislative mechanisms do not exist. This action demonstrates that a lack of regulatory frameworks impedes the implementation of a circular economy model. However, despite supportive regulatory frameworks for circular economy practices, a lack of policy coherence will not influence the adoption of the circular economy.
According to various studies, limited knowledge and technical know-how on shifting from a linear economy to a circular economy is an additional barrier preventing businesses from adopting circular economy practices. Most businesses need more technical capabilities to identify, assess, and implement practices that will allow them to transition to circular economy practices (Melati et al., 2021). As a result, businesses tend to prioritize technologies with which they are familiar and rely on their suppliers for new solutions. They need a certain level of knowledge and technical know-how to assess new solutions. Moreover,...