Barriers in the transition to Circular Economy in SMEs

Submitted by Siegfried Keplinger, BIZ-UP

There are a large number of barriers that show how complex and challenging a transition to circular economy would be for SMEs.
The barriers identified are often technological (quality of recycled material) and financial barriers (lack of business cases illustrating possible revenues) as well as barriers connected to the supply chain (responsibilities and dependencies). These barriers relate to what circular economy is – barriers for closing material loops, delivering new offers to customers, making requirements and expectations of suppliers and on customers, and developing the whole supply chain. Also, how their current businesses are conducted is strongly connected to these barriers.
Beside barriers related to the actual transition towards circular economy, companies tend to suffer through issues concerning the integration of different perspectives and of different domains. These barriers are in several ways similar to barriers to integration of environmental aspects, though is likely challenges of larger altitudes as they encompass every function and every level in the organization and take sustainability issues to a strategic level. These integrational barriers also have consequences for achieving the explorative working way, that is needed for performing the required disruptive changes and radical innovations. Furthermore, the lack of integration throughout the supply chain can be identified as a barrier. Possible solutions for closing material loops are requiring a closer connection between suppliers and producers and between producer and customer.

Photo by Michał Parzuchowski on Unsplash
In addition to integration barriers, the barrier connected to knowledge and an explorative way of working needs to be addressed. A shallow understanding of circular economy may give a positive attitude to circular economy and, therefore, not be an initial barrier. However, it seems likely that it will produce a resistance to change in an organization, as “knowing about” is fundamental for managing change. More serious is maybe the lack of being aware of opportunities with circular economy and another attitudinal barrier: risk-aversion. Knowledge is not only of concern for its content, with lack of knowledge as a barrier, but also for how companies regard knowledge creation and how this is managed within innovation. The ability to perform radical innovations is strongly connected to an explorative way of working, deeply connected to how knowledge is gained.
Circular economy is attractive to SMEs as it embraces the critical integration of sustainability issues and business development, a criticality coming from the fact that we have extended our resource consumption above our limits with a number of negative footprints. However, circular economy is only rarely and fragmentally applied in practice. As circular economy will require disruptive changes and radical innovation, the transitions towards circular economy requires to be seen in relation to the abilities of managing disruptiveness and radical innovation in industry.

For more information please see:
Sofia Ritzéna*, Gunilla Ölundh Sandströma: Barriers to the Circular Economy – integration of perspectives and domains
© 2017 Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license