Shift to circular economy is slowed by traditional thinking

The shift to a circular economy demands that decision-makers raise their sights, and take a more holistic view of value creation in the business sector. By communicating and collaborating, businesses can join forces to create greater social, economic and environmental value for society than what they do today, researchers at Linköping University have found.

A picture of a men Wisdom Kanda, one of the researchers behind the study.

Put simply, the circular economy means that materials are recycled and reused, over and over. Goods are designed and produced not to be discarded but to be used as material for new products. This is fundamental to sustainable development, and is the opposite of today’s linear economy, where materials are sourced for the production of goods which are subsequently discarded or incinerated.

The EU has approved an action plan for circular economy, and several countries have taken similar national decisions. In Sweden, for instance, there is a special delegation tasked with boosting the shift towards a biobased, resource-efficient and circular economy.

Biogas is questioned

Much has been written about the theory, but few studies have investigated how businesses contribute to circular economy in practice. New research from Linköping University can increase our knowledge of why the shift to circularity is so difficult. The explanation is that the shift to circular methods (e.g. the exchange of waste materials, energy and services, as well as repairs and reuse) is difficult for a company to implement because it often requires collaboration between multiple actors.

Thus the solution is to shift the focus from the business models of individual companies, and instead to look at how the network of actors, including businesses, academia and public organisations, can collaborate to increase the common benefit. This network of collaboration between actors is what the authors of this study call a circular business ecosystem.

- In the biogas sector, resources are used which otherwise would have become waste. This results in biomethane, used as fuel, and biofertiliser for the agricultural sector. It’s a complete circular system. However biogas is constantly questioned, because the biogas companies are still scrutinised from a traditional perspective. Does each individual company have a profitable business model? This is a narrow way of thinking that causes us to miss social, economic and environmental value that is created when companies collaborate with each other, says Wisdom Kanda, senior lecturer at Linköping University’s Department of Management and Engineering.

A joint solution

By studying nine companies in the biogas sector, and the industry organisation Avfall Sverige, it became clear that the network jointly creates social, economic and environmental values. So it is a good example of the benefit of viewing and analysing value creation across the entire network, not just in the businesses separately.

- If we can see that the biogas sector isn’t about an individual company or a single industry, the sector can be more proactive. Since biogas spans several industries, it is everything from waste to energy to agriculture. Everything is connected. It generates considerable value for the local economy, and if decision-makers can take a more holistic view of the sector, it can help generate more jobs, innovation and development, says Wisdom Kanda.

The concept circular business systems highlights the mutual dependency between various actors who join forces to solve problems and create value. These actors bring a specific component to a joint solution, which means they are not competitors, but partners.

- In the biogas sector this means that the businesses review their value chains and explore how they can help each other. Biogas is built largely on collaboration. This also means that the actors must communicate more strategically, and highlight all the benefits that the sector delivers to the local region.

Translated by Martin Mirko.

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