Supply Chain Management and the Circular Economy:
towards the Circular Supply Chain
Roberta De Angelis
University of Exeter Business School
Streatham Court, Rennes Drive, Exeter, UK, EX4 4PU
*Corresponding author: Department of Management, University of Exeter Business School,
Streatham Court, Rennes Drive, Exeter, UK. EX4 4PU
+44 (0)1392 722153
527, Finchley Road, London, UK
Paper accepted for publication by Production Planning & Control, 1
(Special Issue: Supply Chain Operations in a Circular Economy)
Please reference this paper as follows:
De Angelis, R., Howard, M., and Miemczyk, J. (2017). Supply Chain Management and the Circular
Economy: Towards the Circular Supply Chain. Production Planning & Control. Forthcoming.
Supply Chain Management and the Circular Economy:
towards the Circular Supply Chain
Circular modes of production, known as the circular economy, are welcomed in political and
business circles to overcome the shortcomings of traditional linear operating models.
Academic literature on the circular economy is nascent however and little attention is given
to supply chain management implications, regardless of the relevance of supply chain
innovation towards a more resource efficient and circular economy. Based on a review of the
literature, this article presents preliminary propositions concerning implications for the
development of what we term ‘circular supply chains’, defined here as the embodiment of
circular economy principles within supply chain management. Our propositions are based on
the following arguments: a) a shift from product ownership to leasing and access in supply
chain relationships; b) the relevance of structural flexibility and start-ups in regional/local
loops; c) open and closed material loops in technical and biological cycles; d) closer
collaboration within and beyond immediate industry boundaries; and e) public and private
procurement in the service industry as a lever for the scaling up of circular business models.
We discuss what these circular economy principles mean in terms of supply chain challenges
and conclude with limitations and future research agenda.
Keywords: Circular economy, closed-loop, strategy, structure, relationships.
This paper explores the implications for supply chain management (SCM) in circular supply
chains (CSC) given the considerable rise in interest in the circular economy (CE) by both
practitioners and theorists (EMF and McKinsey & Company, 2012, 2013; EMF et al., 2015;
Yuan et al., 2006; Tukker, 2015; Webster, 2015; WEF et al., 2014), and the relevance of
supply chain innovation in the transition towards a CE (Aminoff and Kettunen, 2016).
Previous scholars have argued for the need for CE and SCM research to be combined (Sauvé
et al., 2016; Schulte, 2013; Seuring, 2004), hence we adopt this view as our starting point
with which to develop a framework of propositions. Our aim is to first examine links between
traditional SCM, sustainable SCM and the CE. We then highlight the sources of value
creation in a CE and discuss the implications for SCM in terms of opportunities and
challenges in the transition towards CSCs. In short, we ask: what are the implications for
supply chain management in circular supply chains?
We adopt a systematic literature review as our methodology, used to initially identify 84
papers which were reduced through a filtering process to papers using a selection of keywords
that specifically cover both the circular economy in general (n = 34) and supply chain
implications specifically (n = 21) (e.g. Tranfield et al., 2003; Denyer and Tranfield, 2009).
order to conduct our review consistently across traditional SCM, sustainable SCM and CE,
we used as our principle search terms: ‘circular supply chains’, ‘circular economy’, ‘closed
loop’, ‘sustainable supply chains’, ‘reverse logistics’ and other combinations comprising
similar terminology. The theoretical perspective of each paper was identified and recorded in
a database along with methodology, unit of analysis and reported findings. From this review
we identify themes that link CE to SCM, which are then used to develop a set of propositions
building on both these review papers and the practitioner literature. As an overall trend, the
following chart shows that from around 2012 published research on CE and the implications
for SCM have risen rapidly to 2016 (figure 1), with relevant articles continuing to emerge in
2017 (e.g. Geissdoerfer et al., 2017; Genovese et al., 2017)
Figure 1: Trends in number of publications linking CE and SCM by year
One of the challenges to linking the CE with SCM is that CE research is conducted
across a diverse set of disciplines ranging from environmental economics to management
science. The chart in table 1 shows the journals which were included in our review.
Table 1: Journals used in the review
The review in section 2 is conducted systematically, starting with circular economy, and
then supply chain management and the links with sustainability. The reporting in section 3
adopts an analysis or synthesis approach to the literature, using propositions to frame circular
supply chains and the implications for supply chain management. Section 4 concludes with
contribution, managerial implications, limitations and recommendations for further research.
2. Bridging CE and sustainable supply chain literature
2.1 The Circular Economy
There are many definitions of the CE proposed in both political circles (e.g. EC, 2015; UNEP,
2010) and practitioner literature (e.g. Accenture, 2014; EMF and McKinsey & Co, 2012;
2013; EMF et al., 2015; WEF et al., 2014). One of the most recent is from the European
Commission, who posits:
‘In a circular economy the value of products and materials is maintained for as long as
possible; waste and resource use are minimized, and resources are kept within the
economy when a product has reached the end of its life, to be used again and again to
create further value’ (EC, 2015, 1).
Because of assumptions around living systems as a viable model for the sustainable and
sustained development of socio-economic systems (EMF and McKinsey & Co, 2012; 2013;
Sauvé et al., 2016), the CE seeks to eliminate the concept of waste. Waste is seen as ‘food’
insofar as valuable materials are managed within technical and biological cycles (EMF and
McKinsey & Co, 2012). ‘Technical nutrients’ (e.g. metals) are designed to be suitable for
reusing, refurbishing, remanufacturing and recycling for a consecutive number of cycles of
production and use at the highest quality. ‘Biological nutrients’ (e.g. biodegradable materials)
serve a restorative purpose: they are designed to return to nature to build natural capital either
directly, or at their end of use across different supply chains (ibid).
As presented by the Ellen MacArthur Foundation and partners, CE thinking is not new.
Origins can be found in economics (Boulding, 1966; Pearce and Turner, 1990), industrial
ecology (Frosch and Gallopoulos, 1989; Lifset and Boons, 2012) management and corporate
sustainability literature (e.g. Benyus, 2002; Braungart and McDonough, 2002; Guide and Van
Wassenhove, 2009; Lovins et al., 1999; Pauli, 2010; Stahel, 2006), whose concepts have
started to impact the business community. Business models aligned with the performance
economy (Stahel, 2006) based on offering access rather than selling goods to satisfy
customers’ needs have emerged across some sectors (e.g. mobility, construction tools,
lighting, aerospace), with the potential to spread further because of advances in information &
communication technologies and increasing environmental awareness from consumers (Lacy
and Rutqvist, 2015). Industrial symbiosis - a field of industrial ecology literature - proposes
the exchange of by-products, materials and energy between companies in the same
geographical vicinity such as eco-industrial parks (Chertow, 2000) is gaining traction in
China (Murray et al., 2015), although widespread diffusion is still missing (Holgado et al.,
2016), with the exception of the eco-industrial park at Kalundborg in Denmark (Gregson et
al., 2015). While the application of green and sustainable supply chain practices have been
increasing for several decades (Genovese et al., 2017), it is within supply chains for consumer
goods where most environmental impact may reside (McKinsey & Co, 2016).
Although CE thinking is not new, it is only recently that it has gained attention from
the business community. This may be explained not just in light of the worsening ecological
trends, but also because of changing socio-economic and regulatory landscapes. Resource
price volatility caused by growing modern economies, a burgeoning of middle-class
consumers entering the market, increases in the sharing/renting economy, rising regulatory
pressures impacting on climate change and waste: all pose questions for the feasibility of
traditional, linear operating business models following the ‘take-make-dispose’ approach
(Accenture, 2014; WEF et al., 2014). Current macro-economic, regulatory and ecological
trends are raising the attractiveness of more resource efficient business practices to stay
competitive. Yet there are differences between CE thinking and its predecessors. Indeed, CE
thinking emphasizes economic and business opportunities (Aminoff and Kettunen, 2016;
Velis, 2015), which is perhaps not surprising as it seeks to engage the business community, a
significant lever in any transition (Franklin-Johnson et al., 2016). The practitioner literature
views the CE as ‘an economy that provides multiple value creation mechanisms which are
decoupled from the consumption of finite resources’ (EMF et al., 2015: 23). The EMF
estimates that in the transition to a CE, consumption of primary materials in the European
Union (EU) could fall significantly in the food, construction and mobility industries ‘as much
as 32% by 2030 and 53% by 2050’ (EMF et al., 2015: 15). This would have a positive effect
on the competitiveness of EU manufacturing firms given that materials and components
account for 40-60% of their total costs, and that Europe depends hugely on imports of
resources such as fossil fuels and metals in the measure of about 60% (ibid). In addition to the
economic and business opportunities, it is argued that the CE can build prosperity without
further depleting natural capital (CISL, 2015; Gregson et al., 2015; Murray et al., 2015;
Schulte, 2013) and in doing so, it is also consistent with principles of inter and intra-
generational equity as raised in the 1987 Brundtland Commission Report (Ghisellini et al.,
2016). Therefore, an initial impression of the CE is that it does appear to address the three
pillars of economic, environmental and social sustainability, as discussed further.
Despite the CE gaining momentum in political and business circles, its discussion
within academic circles is more embryonic (e.g. Murray et al., 2015; Antikainen and
Valkokari, 2016; Geissdoerfer et al., 2017). Literature on the topic is fragmented and spread
across a number of more established fields, giving limited attention to implementation and the
implications for business models and supply chains (Aminoff and Kettunen, 2016;
Lewandowski, 2016; Lieder and Rashid, 2016). This is despite the significance of SCM in
terms of innovation and transitionary capability towards the CE (Aminoff and Kettunen,
2016; Hopkinson et al., 2016), and the substantial implications of CE principles for current
SCM practice (Nasir et al., 2016; Genovese et al., 2017). Acknowledging these somewhat
limited discussions in the literature from a business perspective of CE, this paper seeks to
conceptualize the implications for SCM (Table 2).
Table 2: CE themes with implications for SCM
Section 2.2 now considers sustainable SCM, including a brief review of lean thinking
and closed-loop supply chains (Linton et al., 2007; Wells and Seitz, 2005) for their links with
CE and the design and management of circular supply chains (Aminoff and Kettunen, 2016;
Genovese et al., 2017).
2.2 Supply chain management and sustainability
The concept of supply chains and consequently SCM arose in the early 1980s due to the
increase in global sourcing, and was used to describe the complexity of business-to-business
and business-to-customer networks. What we term ‘traditional’ SCM was first developed as a
purchasing and logistics concept (Cooper and Ellram, 1993), although has become closely
associated with operations, especially the performance-based control of material and
information flow between collaborating organizations (Defee and Stank, 2005; Cooper et al.,
1997; Hines et al., 2000; Hult et al., 2007). A central paradigm of emerging supply chain
literature at the time was to foster a better understanding of the elements ‘characterizing
strategic decisions that lead to supply chain structural development and performance’ (Defee
and Stank, 2005: 28). One of the most popular definitions of SCM is Christopher’s (1998: 5)
‘the management of upstream and downstream relationships with suppliers and customers to
deliver superior customer value at less cost to the supply chain as a whole’. The emphasis on
cost and throughput illustrates the traditional language of supply chains, where the system is
geared towards linear thinking around inputs and outputs. SCM focuses on multiple customer-
supplier dyads, starting with raw material extraction through production to final end
customers or consumers (Harland, 1996). Supply chains tend to be depicted as a focal firm
with upstream and downstream relationships (Christopher, 1998), although whether supply
chains are simple linear structures, or more like networks with interconnected supply chains is
the subject of some debate (Lamming et al., 2000). A typical example of traditional, linear
supply chains therefore is the fast-moving consumer goods (FMCG) sector, which focuses on
high levels of efficiency, volume throughput and customer responsiveness (e.g. Van Hoek,
Handfield and Bechtel, 2002; Holweg, 2005).
One of the most significant developments in supply chain strategy has been the
adoption of lean supply chains (Womack and Jones, 2003; 2005; Hines et al., 2004). Different
to the approach of the CE where waste is considered as ‘food’, lean thinking is presented as a
practical, step-by-step approach to eliminate waste in all its forms (e.g. inventory, waiting,
unnecessary movement etc) and can be applied to almost any organization, enterprise or
supply chain context (Womack and Jones, 1994; 1996; 2003). More recently, the connection
has been made between Lean and sustainability (i.e. ‘Lean and Green’) by scholars linking the
efficiency paradigm of ‘doing more with less’ with minimising the use of resources and
output of industrial emissions in order to protect the natural environment (King and Lenox,
2001; Simpson and Power 2005; Mollenkopf et al., 2010). While there is ample evidence to
demonstrate the benefits of this as an incremental approach (e.g. Womack and Jones, 1994;
1996; 2003), industry has yet to adopt Lean and eliminate waste with sufficient resolve to
meet the complex operational challenges presented by sustainability, such as the
implementation of a low carbon strategy (Correia et al., 2013). A further issue is that
efficiency-focused supply chains are at risk of disruption in industries facing turbulent and
volatile markets, particularly those with fluctuating commodity and raw material prices. As
world markets are increasingly disrupted by abnormal weather, terrorism, sole commodity
ownership (e.g. China), and price volatility (e.g. grain, oil, gas), the traditional practice of
supply chains designed exclusively around single strategies such as Lean or Agile is coming
to an end (Christopher and Holweg, 2011). Supply chain designers can no longer assume a
stable operating environment (Womack and Jones, 1994; Christopher, 2000), and are shifting
towards more flexible methods which counter the effects of constant disturbance. Christopher
and Holweg (2011) argue that the SCM principle of controlling an end-to-end process to
create a seamless flow of goods must be questioned, where assumptions over long-term
stability no longer hold true. Managing supply chains in an age of constant turbulence may
mean ‘embracing volatility as an opportunity rather than viewing it as a risk’ by
understanding its nature and impact, and shifting the exposure to risk by considering methods
such as dual sourcing, asset sharing, postponement, flexible labour, rapid manufacturing and
outsourcing (Christopher and Holweg, 2011: 63).
Supply chain management’s associations with sustainability owe much to the early
interest in closed-loop reverse logistics, product recovery and remanufacturing literature
(Thierry et al., 1995; Fleischmann et al., 1997; Jayaraman et al., 1999; Guide and Van
Wassenhove, 2009; Loomba and Nakashima, 2012). Sustainable supply chain management
(SSCM) is now recognised as a term in its own right (Seuring and Müller, 2008;
Rogers, 2008) and includes a range of associated topics including environmental and social
goals (Govindan et al., 2015), the need to understand value creation as opposed to damage
limitation (Krikke et al., 2013) and the importance of strategic supplier partnerships in
creating this value (Sarkis et al., 2011; Bell et al., 2013; Insanic and Gadde, 2014).
Carter and Roger’s seminal SSCM framework (2008) was arguably the first to
demonstrate the relationship among environmental, social and economic performance within
a SCM context. Building on Elkington’s concept of the triple bottom line (1998, 2004), they
suggest that at the intersection of all three factors ‘there are activities that organizations can
engage in which not only positively affect the natural environment and society, but which
result in long-term benefits and competitive advantage for the firm’ (Carter and Roger, 2008:
364). Calling for greater vertical integration between buyers and suppliers as means of
reducing uncertainty and resource dependency towards achieving long-term economic
sustainability in a period of dwindling resources, the authors draw on multiple theories (e.g.
Resource-based view, Transaction Cost Economics) and examples of closed loop industrial
The decision to adopt a closed loop supply chain approach shows that the organization
has begun to consider the issues of environmental management and product lifecycle, and can
distinguish traditional supply chains from more sustainable closed loop supply chains (Guide
and Van Wassenhove, 2003). Yet introducing a closed loop or ‘reverse logistics’ supply chain
into the business is not simple, particularly as product recycling is rarely considered as a value
creating system (Guide et al., 2003). Closed loop supply chains started with the application of
new industry standards and focusing on green or eco-efficiency issues. This meant working
with suppliers to reduce the impacts of products and processes. Closed loop supply chains
require considerable investment in resources, initially in understanding the configurations of
information flows and parts distribution that serve the product whilst in use, and then
developing a collection system which takes back or ‘harvests’ the product at its end-of-life,
(e.g. Loomba and Nakashima, 2012) while securing the cooperation of customers, suppliers
and not-for-profit organizations (Kumar and Malegeant, 2006). The process of product
disassembly and remanufacturing can be particularly difficult as the condition of used
products may vary greatly, can be distributed across the world and, even if retrievable, they
may have to be discarded if damaged beyond repair. A combination of increasingly stringent
legislation (e.g. European law on vehicle scrapping & disassembly) and manufacturer led
initiatives means most industry sectors have active recycling schemes in operation, such as
photocopiers, computers and electrical products, although some end-of-life products can be
transported large distances for treatment at low cost but has transport-related environmental
impacts and sometimes social exploitation issues (Spengler and Schröter, 2003).
Closed loop supply chains are not only challenging in their design and operation, but
have important implications for the supply chain (Savaskan et al., 2004). They must combine
both traditional supply chain activity centred on efficient distribution, as well as reverse
supply chain activity such as the returns process, product repair / refurbishment, testing and
sorting, and remarketing (Guide et al., 2003). Yet despite reverse logistics systems being
practised since the 1920s (e.g. automotive), the strategic intent required to integrate the
concept of the closed loop supply chain into mainstream business activity is still lacking.
Closed loop or reverse systems are typically treated as a silo, isolated from the core business,
where common activities are yet to be established and not fully understood in different
contexts because of variations in product complexity and perceptions in managerial
importance (Johnsen et al., 2014). Haake and Seuring (2009: 9) argue that although many
companies have adopted sustainable procurement and supply strategies and are demanding
minimum performance from their suppliers, current approaches using SSCM frameworks
reveal ‘some shortcomings in their ability to be comprehensive’. They argue that the chief
cause of the failings of SSCM is the inadequate approach when overall impacts along an
entire supply chain are considered. Table 3 presents some of the key issues faced by SCM in
terms of sustainability and closed loop supply chains.
Table 3: Key issues for SCM
3. Circular Supply Chains: implications for Supply Chain Management
While the previous section reviewed developments in SCM and CE, here we analyse the
implications for the development of CSCs defined as the embodiment of CE principles within
supply chains. First we compare traditional, sustainable and circular supply chains. Then, we
present our framework consisting of five propositions in support of CSCs and discuss future
supply chain challenges.
Until comparatively recently it was rethinking value at the product’s traditional end-
of-life phase that created new opportunities in terms of recycled component materials, with
facilities installed in the supply chain to enable remanufacturing and repair (Guide and
Daniel, 2000). Yet the practitioner literature on the CE introduces more comprehensive
notions of value creation deriving from a more efficient and productive materials usage and
defined as the power of the ‘inner circle’, ‘circling longer’, ‘cascaded use’ and ‘pure inputs’
(EMF and McKinsey & Co, 2012, 30-31; EMF and McKinsey & Co, 2013: 33-34).
According to the power of the inner circle some end-of-life strategies create more economic
and environmental value than others because they retain much more of a product’s embedded
materials, energy and labour (EMF and McKinsey & Co, 2012; Gorissen et al., 2016; Nasr
and Thurston, 2006). End-of-life strategies should be pursued as follows: 1) maintenance to
prolong durability; 2) reuse for the same purpose with either little or no change; 3)
refurbishment/remanufacturing involving replacements of some relevant components and
recovery of components to be used within a new manufacturing process respectively and 4)
recycling, i.e. the recovery of materials for the same or different purposes (EMF and
McKinsey & Co, 2012). Recycling is the least valuable options since it generally takes the
form of down-cycling rather than of up-cycling (ibid), with materials losing quality and thus
suitability for use within subsequent production processes (Braungart et al., 2007).
The hierarchy of strategies explains the power of the inner circle mechanism: ‘tighter
loops, those closest to the original product serve best value…while outer loops…provide less
value’ (Webster, 2013: 552). Clearly, understanding of how customers use and dispose
products, i.e. expanding supply chains reach, is crucial to reap the benefits of the power of the
inner circle (Timmermans, 2016). Digital technologies which collect and analyse data across
the supply network enable companies to better understand customers’ preferences and thereby
capture value (ibid).
Figure 2: Traditional, sustainable and circular supply chains
Based on the previous literature review, figure 2 compares CSCs with traditional and
sustainable supply chains, highlighting the importance of key elements and how they may
change according to prevailing conditions or SC approach. We choose as our foundation
common elements such as strategy, structure, focus and flow, identified from our literature
review as constructs commonly adopted in emergent supply chain research (e.g. Cooper and
Ellram, 1993; Defee and Stank, 2005). Scale and scope were also added as a result of our
investigation of CE literature, particularly the ‘short and cascaded use’ aspect of material and
resources (EMF and McKinsey & Co. 2012).
3.1 CSC propositions and framework
In this section we develop propositions based on the potential impact of CE on supply chains,
with the supply chain challenges presented after each proposition.
An important element in the transition from traditional or sustainable supply chain
management towards CSCs is ‘the power of circling longer’ which involves extending the
period of time during which materials are kept in use (EMF and McKinsey & Co, 2012). This
can be achieved by prolonging products durability or increasing the number of consecutive
cycles of remanufacturing, repair, refurbishing and recycling (ibid). The powers of the inner
loop and of circling longer are relevant when considering the durable components of a
product, and less so when considering consumable ones. In a CE ‘consumables’ are made of
biological, non-toxic and restorative nutrients that can be returned to nature with no risk of
harm (EMF and McKinsey & Co, 2012). Consumables have a very short life span (e.g. food),
though for other products (e.g. packaging materials and textiles) it is possible to extend usage
and thus increase resource efficiency (EMF and McKinsey & Co, 2013). Textiles could
benefit from design for reparability and durability (ibid). The company Patagonia, for
example, designs sport clothing that lasts longer and it is suitable for repair and recycling at
the end of its useful life (Bocken and Short, 2016). On the other hand, durables are made of
technical nutrients (e.g. metals) that are not suited to the natural environment but to
consecutive cycles of production and use (EMF and McKinsey & Co, 2012). Durables are not
exchanged through a traditional sale transaction but rather are leased, rented or shared (ibid).
Some companies have already adopted servitized elements of circular business in their supply
chains where selling a service means customers pay only for what they receive, with the firm
retaining ownership of the lighting system e.g. Philips, ‘Pay per Lux’ (Ledvance, 2015), or
aero engine e.g. Rolls Royce, ‘Power by the hour’ (The Economist, 2009), and meeting the
associated long-term maintenance and repair costs. As information technology develops,
customers can upgrade their systems thereby raising efficiency, bringing further benefits as
well as controlling the flow of material returns using digitally enabled systems. Advances in
digital technologies are now sufficiently developed to facilitate CE implementation on a large
scale (Lieder and Rashid, 2016), offering opportunities for monitoring product performance
over the lifecycle, tracking and improving resource usage across the supply chain (Lacy and
Rutqvist, 2015; Preston, 2012), and enabling closer customer relationships to facilitate
product-service continuation or renewal (Lacy and Rutqvist, 2015). Hence, our first
Supply chain relationships will change in CSCs, shifting from product ownership towards
greater emphasis on leasing and service based strategies enabled by digital systems.
Strategic purchasing in the services sector represents a major shift in focus for a
profession still dominated by products, components and raw materials. If a transition towards
CSCs is to be achieved, procurement policy must shift the current emphasis on ‘best cost’
sourcing and pricing towards a more services friendly, relationship-based approach which
recognises the value of techniques such as lifecycle analysis, leasing and through-life
management. Some high value products, such as photocopiers, lend themselves easily to new
procurement techniques (e.g. pay-per-print), but there is also opportunity to analyse the full
range of assets used in the service sector. In order to maximise value and extend life of
products, different types of customer and supplier relationship strategies are needed which
deploy new incentives around percentage utilisation of assets.
Whereas the powers of the inner circle and of circling longer create opportunities for
value creation via circulating materials within the same supply chain, the power of cascaded
use suggests that value can be created and captured by flowing materials across different
supply chains (EMF and McKinsey & Co, 2012). This principle could be applied to
consumables. Food for example is contributing significantly to the generation of waste
whereas it could be returned to the natural environment once energy and other nutrients are
recovered. Indeed, agricultural waste in a CE is: a) reused where possible (e.g. reuse of
wood); b) treated for bio-chemical feedstock extraction (e.g. orange peels treated to obtain
sugars and bio-ethanol) (Balu et al., 2012), and c) sent to anaerobic digestion (EMF and
McKinsey & Co, 2012). Anaerobic digestion is a natural process involving micro-organisms
such as bacteria, which in the absence of oxygen converts the organic waste into two different
products (DECC and DEFRA, 2011). One of these is called digestate which is a fertiliser; the
other is biogas - a mixture of carbon dioxide and methane - which can be used in combined
heat and power engines to produce heat and electricity. Anaerobic digestion is more
environmentally sound as it avoids generation of further greenhouse gases (GHGs) emissions
through landfill, with additional benefits deriving from the production of renewable forms of
energies and biological fertilisers (ibid). The latter could be used to restore soil degradation,
one of the most serious environmental externalities deriving from food production, which also
prevents soil from retaining carbon (EMF et al., 2015). For example, British Sugar has
increased its revenue streams and reduced costs via converting waste streams and even CO
emissions from its core business of sugar production into inputs for other product lines such
as tomatoes, bio-ethanol and animal feed (Short et al., 2014). However, preventing food waste
in the first place is one of the aims of a restorative and regenerative CE, with positive
economic, environmental and social implications (e.g. reduced costs in the food supply chain,
reduced GHGs emissions and better food security) (WRAP, 2015). All of the above
mechanisms for value creation are enabled by the power of pure inputs (EMF and McKinsey
& Co, 2012). For materials to circulate properly within technical and biological cycles, their
purity and quality are essential features. These can be maintained if aspects such as design for
disassembly, ease of identification of components and exclusion of any toxic materials is
observed, with after-use collection improved so that contamination is avoided.
The sources of value creation have major implications for SCM. Most supply chains
are still linear in structure, with increased globalisation of business operations meaning that
products components are sourced worldwide (Preston, 2012; Velis, 2015; WEF et al., 2014).
This could represent a barrier to the recovery of materials, since the points of manufacture and
use are located in different and often very distant regions. While closing the loop across
global supply chains is still in its early stages and when implemented will involve high value
products, it seems that it is within regional and local loops that the majority of opportunities
for the development of CSCs lies because of the reduced geographic barriers (WEF et al.,
2014). This is not surprising considering that the CE takes its inspiration from the functioning
of living systems. Here, cyclical patterns are not only closed and thus waste is turned into
food, but they are also local and decentralised (Nielsen and Müller, 2009). For example: ‘the
blossoms of a cherry tree bring forth a new generation of cherry trees while also providing
food for micro-organisms, which in turn nourish the soil and support the growth of future
plant-life’ (Braungart et al., 2007: 1342). On the other hand, within socio-economic systems,
cycles of materials have become increasingly global and open with significant levels of
leakage (Nielsen and Müller, 2009). Such ‘linear lock-in’ and geographic barriers raise
important questions for the development of CSCs. For instance, could small-medium
enterprises (SMEs) break linear lock-in because their size provides an in-built structural
flexibility? And, are CSCs more likely to be developed from start-ups rather than from large
incumbent firms attempting to transition their existing supply chains, where regional or local
businesses may offer a better chance for CE adoption? Recent research shows that it is start-
ups that may offer the greatest potential for sustainable business model innovations (Bocken
et al., 2016a). In addition, regional/local CSCs would be in line with the developing concept
of redistributed manufacturing, which consists of reshoring large-scale manufacturing sites to
more local, smaller ones (Prendeville et al., 2016). Redistributed manufacturing is crucial to a
more sustainable manufacturing industry and clearly intertwined with the CE, with one city
based project analysing the impact of localised and small-scale manufacturing plants on UK
city resilience (Freeman et al., 2016). Hence, the second proposition:
: CSCs requires structural flexibility and reduced geographic barriers with SMEs and
innovators within regional/local loops playing an important role in their implementation.
The introduction of new actors and subcontractors as shorter product cycle loops are
introduced means new risks for conventional supply chains. As the CE model advocates more
cascaded use, horizontal collaboration across traditionally competing supply chains will
emerge, introducing challenges around ‘coopetition’ and difficult decisions over whether to
share knowledge of material reprocessing, design and/or technology. Greater flexibility may
be required in the future as buyers and suppliers choose to collaborate via inter-connected
knowledge networks, rather than in-house R&D or stand-alone supply chain partnerships. On
the other hand, the downside of flexibility i.e. asset underutilization, may be minimized if
assets can be shared and reused for other purposes, as is the case for wooden pallets for
example, but this may require greater level of product standardization to minimize process
redesign for adaptation towards asset re-use.
CSCs expand the range of environmental and economic value that is created beyond
those attainable within so-called closed-loop supply chains. As noted earlier, the power of
cascaded use suggests that value creation stems from flowing materials across different
supply chains (EMF and McKinsey & Co, 2012). For instance, textiles can be designed
without the use of chemical substances and when reuse is no longer possible, natural fibres
can be used as secondary raw material serving insulation and filling purposes eventually
returning to nature at the end of their useful life (ibid). Cascading materials across different
supply chains creates additional revenue streams via selling secondary raw materials that can
be used for the manufacturing of a different product and thus expanding further downstream a
company’s supply chain. In addition, due to increased environmental regulation, resource
price volatility and supply risks, the providers of high quality secondary raw materials may
gain competitive advantage (Lacy and Rutqvist, 2015). Hence, the third proposition:
: CSCs must consider both closed and open material loops in technical and biological
SCM professionals should view value not only in terms of a reduced waste approach
(i.e. Lean), but in how shorter loops can maximise the value of materials use and productivity.
More co-operative customer and supplier relationships during downstream collection and
return will help extend product life as their use is cascaded across further cycles of repair,
reuse, refurbish etc. This means different incentives will be needed to encourage customers
and suppliers to engage in material return, invest in remanufacturing, and generally improve
the overall quality of material input.
The opportunities for value creation identified in the powers of the inner loop, of
circling longer and of cascaded use can be captured if the principles relating to the power of
pure inputs are implemented first (EMF and McKinsey & Co, 2012). In a CE, the design of
products acknowledges technical and biological cycles. Therefore, CSCs could be
implemented only if products are designed in accordance with the requirements of these
cycles. A significant change in design practices is therefore crucial to implement CSCs (De
los Rios and Charnley, 2016). Design for a CE should be incorporated in the early stages of
the design process since product specifications cannot be modified easily once they are
defined (Bocken et al., 2016b). The resulting supply chains would be in contrast with
traditional closed-loop supply chains where returning products are not intentionally designed
and thus manufactured to enable closing the loop (Lieder and Rashid, 2016; Rashid et al.,
2013). Hatcher et al., (2011) argue that despite increasing attention devoted to design for
remanufacture, there is neither uptake in this type of design or of remanufacturing activities.
Nasr (2016) laments the lack of significant scale in global remanufacturing, with Souza
(2013) confirming that the relationship between new product design and recovery at end-of-
life is an area that merits further exploration. After the RSA’s launch of the Great Recovery
Project, it was concluded that ‘the design of our products is far from being circular ready’
(RSA, 2016: 5) where only a few products are designed for full end-of-life recovery (e.g.
upcycling). Further, when better designs do appear, the lack of a sound business case may
prevent the necessary investment from taking place (ibid). The RSA identifies four design
typologies that would enhance the circularity of products, namely: design for longevity,
design for service, design for re-use in manufacture, and design for material recovery (RSA,
2016: 14). If these design strategies are combined both resource reutilization within
production processes and higher durability are achieved (Lacy and Rutqvist, 2015). Similarly,
Bocken et al., (2016b) and Lieder and Rashid (2016) have argued that business model
innovation and product design strategies are needed to support the transition towards a CE
with Bocken and colleagues identifying several design strategies for ‘slowing resource loops’,
enabling the slowdown in the rate of resource utilization, and design strategies for ‘closing
resource loops’, enabling increased circularity in resource utilization. The first set of
strategies includes: design for reliability and durability, design for ease of maintenance and
repair, and design for upgradability and adaptability (Bocken et al., 2016b: 310). The second
set includes: design for a technological and biological cycle, as well as design for dis- and
reassembly (p. 311), which underlines the role of supplier involvement in CSCs.
Other issues affecting the application of the power of pure inputs are product
composition and after use collection. Ever more complex and novel materials which can be
difficult to identify and separate at the end-of-life stage are now used in the manufacturing
processes of products, with after-use collection methods often compromising the purity and
quality of materials (WEF et al., 2014). Both aspects; composition and after-use collection,
are negatively affecting the plastics industry. The lack of coordination within plastics supply
chains has hindered plastics circularity so far, with the consequence that 95% of plastic
packaging value is lost after its first use and creating significant negative environmental
externalities, for instance ‘there may be more plastic than fish in the ocean…by 2050’ (WEF
et al., 2016: 29).
Materials proliferation is developing faster than after-use sorting and
separation systems. The recent European Commission CE white paper confirms that there are
structural barriers to the uptake of secondary raw materials usage across Europe, such as the
uncertainty surrounding material composition, which the EC is committed to overcome
through the development of quality standards especially for plastics (EC, 2015). At the World
Economic Forum (January 2017), a ‘global plastic protocol’ was launched to start laying the
foundations of global standards for plastic packaging and after-use treatments (WEF et al.,
2017). Such challenges which relate to product design, composition and after-use collection
require the implementation of what Winkler (2011: 244) defines as ‘sustainable supply chain
networks’. These represent an extension of the traditional view of SCM, since multiple actors
(i.e. suppliers, customers, collection and sorting facility agents) are engaged in strategies
seeking to achieve not just cost efficiencies and customer satisfaction, but designing out the
concept of waste from the outset in the transition towards a CE (ibid). New suppliers and
customers bringing innovative ideas from outside the industry sector may be needed to fill
demand for returned products, such as in the carpet tile and composite textile sector
(Miemczyk et al., 2016). In the light of the discussion on pure inputs, designers should also
be incorporated in these networks, and regulators should facilitate the uptake of these
practices within the industry by devising standards for material composition and after use
Clearly the CE requires a high degree of cooperation (Antikainen and Valkokari,
2016; Green Alliance, 2013), which is perhaps not surprising given the level of functioning
the CE is modeled on, similar to that of an ecosystem where both elements of competition and
cooperation is required to enable it to thrive (Sauvé et al., 2016). The Green Alliance, a
British think tank, has warned that the move to cooperate over the scaling up of circular
industrial systems is threatened by competition law, which may create unease in some
corporations over the decision to co-operate together (Green Alliance, 2013). This is not
because competition law prohibits collaboration, but because the law lends itself to various
interpretations over exactly what constitutes a monopoly, and where lawbreakers may incur
high penalties. Regulatory intervention at the government level and from the European
Commission is thus welcomed to provide clarity on the law so that it does not impede CE
collaboration (ibid). Hence the fourth proposition:
: CSCs are enabled by close supply chain collaboration with partners within and beyond
their immediate industrial boundaries, including suppliers, product designers and regulators.
In terms of innovation in the move towards CE, CSCs require a conceptual shift from
products and ownership, to access to services. CSCs are not only closed loop, but also open
with regard to the opportunity for materials to flow across different supply chains, and within
technical and biological cycles. New product development processes therefore will involve
suppliers as part of early supplier involvement, looking at new ways to extend product life
through additional of services and finding different uses for products as they reach the end of
the cascade (e.g. old car tyres converted to floor chippings). Ultimately, the way products and
supply chains are designed will reduce the demand for recycling, although a prolonged period
of transition involving the accommodation of ‘traditional, waste-based thinking’ is expected
before the full benefits of circular systems can take effect.
While manufacturing companies can develop their own CSCs and assist others
manufacturers in improving the circularity of their products by supplying recoverable
components, the contribution that the tertiary sector can bring towards the scaling up of more
CSCs cannot be overlooked. EMF and McKinsey & Co (2012) have argued that service
providing companies, as buyers of products, are important levers for the development of
circular business practices. Using their procurement policies, they not only could improve
efficiency in their own asset utilisation and thereby reducing the risks and the costs associated
with capital investments (e.g. leasing assets), but also promote the uptake of circular business
practices upstream of their own supply chains. For instance, suppliers could be asked to
reduce or use returnable packaging in their deliveries. The tertiary sector (i.e. services)
contribution to the development of more circular business practices could be very significant
considering that services account for over 70% of the EU’s gross domestic product and
employment (EC, 2016) and 78% of GDP in the USA (World Bank, 2017). Large service
organizations (e.g. health, finance) are particularly suited as their bargaining power and thus
ability to influence supplier behaviour is higher. Both private and public sectors could act as
levers for change, particularly the public sector with its large purchasing power (Walker and
Brammer, 2012) by stimulating demand for more sustainable products and services (Uyarra et
al., 2014). Public procurement across the EU accounts for 18% of the EU’s total GDP (EC,
2015) and thus the public sector as a whole could be a significant lever through its choice of
purchased goods (Correia et al., 2013). The European Commission’s recent CE paper seeks to
take action on green public procurement by revising or setting new standards that accord with
CE principles (EC, 2015). However, there is little research on whether service sector
procurement policies include circularity-based clauses. One example of buying guides for
European financial services shows that while there are requirements for recycling/takeback
for IT, this does not go much beyond current legal requirements (Johnsen et al., 2014).
Hence, the fifth and final proposition:
: Procurement policies both in the private and public sectors of service organizations are
an important lever for the transition to CSCs if they go beyond minimum legal requirements
to include the CE principles.
The issue of economies of scale will require more horizontal collaboration across
supply chains and between industrial sectors to maximise the opportunities for high volume
production. This aspect may require cross-industry standards via legislation, although is more
likely to emerge as voluntary cooperation between corporations.
Given the significant
contribution of services to GDP in western countries, involving the tertiary sector as well as
manufacturing is crucial in the transition towards the CE and CSCs. We raise the question
whether it is within more regional rather than global loops that CSCs are likely to be
developed, and where start-up companies and SMEs are likely to have the capability to drive
innovation towards CSCs and bypass the ‘linear lock-in’ of larger corporations. The issues
affecting the introduction of new product designs and after-use collection methods means that
traditional structures around supplier-manufacturer-customer must be extended to include
other actors such as designers, regulators and collection facilities for CSCs to succeed. The
‘global versus local’ debate is perhaps one of the biggest challenges facing the CE and
transition to CSCs, because of the difficulties over reaching a global-wide agreement whose
processes can be implemented at a local or regional level.
Table 4 Framework of CSC propositions
This section has presented CE thinking and discussed the implications for SCM
through our formulation of propositions, concluding each section by considering the
implications in terms of future challenges. Our framework of CSC propositions in table 4
builds on the elements of supply chain strategy, structure, flow, focus, scale and scope,
derived as themes from the literature review, reflecting the changes anticipated in SCM and
the shifts needed to achieve implementation. Such proposed changes to current models of
business practice will not occur overnight however, with some structural elements taking
longer across some sectors and requiring considerable effort and resources. In our conclusion,
we now summarize our contribution in terms of outcomes and propose a future research
agenda of opportunities to explore CSCs.
In this paper we have traced the origins of CE thinking and its more recent developments,
exploring traditional and sustainable SCM before considering the implications for what we
term CSCs. Our contribution is as follows: first, from the literature we distinguish and define
traditional, sustainable and circular supply chains. Second, given the limited attention that
supply chains have received in the context of the CE (Aminoff and Kettunen, 2016; Lieder
and Rashid, 2016), we propose five preliminary propositions as a framework which supports
CSCs and yield insights into the CE and SCM. Sustainable business models and SCM are
closely connected in the sense that the configuration of supply chains can affect the
development of a sustainable business model, and vice versa (Lüdeke-Freund et al., 2016).
Yet these two literature streams have a tendency to remain separated rather than inform each
other. By contrast, we start to lay the foundations for a more integrated discussion and to
consider what the implications are for SCM in a CE. Third, based on CE principles, we
discuss the key supply chain challenges facing managers, namely: extending the shifting
perceptions of value, mitigating risk through structural flexibility, introducing early supplier
innovation, more strategic services, and the issue of global vs. local distribution of
In terms of a future research agenda, one major finding from our investigation was not
only the lack of literature bridging CE and SCM, but also very little information on the
practical side of how to introduce CSCs in a real-world context. Although cases on sector-
specific recycling and reverse logistics currently exist, there are no large-scale industrial
examples of CE principle adoption, hence the motivation for our study. We argue that the
concept of CSCs supported by propositions now provides a theoretical basis for a more
practical phase of investigation into the practicalities of widespread implementation. This is
increasingly relevant given the recent launch of the European Union’s ‘Circular Economy
Package’ and the 2017 release of British Standard 8001 ‘Framework for implementing
Circular Economy principles in organizations’.
It may also be appropriate to consider policy implications for the scaling-up of CSCs,
specifically from an energy perspective. Stahel and Reday-Mulvey (1981) observed that two-
thirds of energy consumption in the construction industry takes place during the extraction of
raw materials (e.g. steel). Consequently, the substitution of virgin raw materials with
secondary raw materials could lead to significant energy savings. Though the CE reduces
virgin materials consumption, is less wasteful and thus less energy intensive than a linear
economy (EMF and McKinsey & Company, 2012; ZWS, 2015), some recycling processes are
either energy intensive (e.g. recycling of chemicals) (Bjørn and Hauschild, 2013; Rammelt
and Crisp, 2014) or in other cases (e.g. glass recycling) demand almost the same amount of
energy as that needed for the production from virgin materials (Allwood, 2014). Despite the
CE relying only on renewable energy (EMF and McKinsey & Co, 2012), recycling and
reprocessing facilities need reliable energy sources to run consistently (Remsol, 2014). One of
the problems of renewable energy is intermittent supply due to variation in weather conditions
(Parente and Feola, 2015), though energy storage may offer a solution (Miser, 2015).
Questions remain however over the appropriate energy mix that can satisfy CE requirements.
The tertiary or services sector is another relevant opportunity to advance research at
the intersection between SCM and the CE. Service providers can be an important lever in the
development of CE-oriented practice in the business context as buyers of products (EMF and
McKinsey & Co, 2012). The service sector has received little attention compared to
manufacturing companies in corporate sustainability studies (Etzion, 2007; Maas et al., 2014).
The scaling-up of more circular business models and thereby of CSCs is also dependent upon
funding to enable investment in infrastructures, new technologies and research in alternative
and renewable materials. Yet the financing of circular business models is not without
challenges because of the different forms of capital needed, types of business model
implemented and cash flow changes in companies, as in the case of usage or performance
based contracts (ING, 2015). Access to financial resources therefore is one of the key
obstacles encountered in the setting up of circular business models (Roos, 2014).
Crowdfunding is one emerging approach which may suit the more collaborative approach to
business growth as envisaged by the CE, hence future studies could explore developments in
the financial sector that lift barriers which prevent circular business models from gaining
access to capital investment.
While we acknowledge the limitations of this paper in terms of its almost exclusive
basis on the literature (both scholarly and practitioner based), we encourage other scholars to
continue and extend our work into the realms of practical CE implementation, using empirical
research and case study investigations to demonstrate the role of supply chain innovation in
the transition towards the CE. This paper adopts a western perspective, yet for China and
India the CE represents a significant opportunity. Some argue that it is in China where
implementation of the CE is most advanced (Murray et al., 2015), and recent research shows
that India could benefit from CE implementation by 624 billion dollars per year in 2050
(EMF, 2016). Our ultimate aim is to encourage other investigators to test these concepts and
propositions, offering further insights into the potential of the CE and advance our
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Figure 1: Trends in number of publications linking CE and SCM by year
Figure 2: Traditional, sustainable and circular supply chains
Table 1: Journals used in the review
Journal Title No.
Business Strategy & the Environment 2
Chinese Management Studies 2
Comparative Economic Research 1
Ecological Economics 1
Economic Horizons 1
Economy & Society 1
Environmental Science & Technology 1
Greener Management International 1
Habitat International 1
International Journal of Environmental Technology & Management 1
International Journal of Production Economics 4
Journal of Agricultural & Environmental Ethics. 1
Journal of Business & Industrial Marketing 1
Journal of Cleaner Production 21
Journal of Industrial Ecology 9
Journal of Transport Geography 1
Logistics Management 1
Supply Chain Management Review 1
Systems Research & Behavioral Science 1
Thunderbird International Business Review 1
Table 2 CE themes with implications for SCM
Theme Issue Key references
Business strategies Ownership models
Hawken et al., 2000
Aminoff and Kettunen, 2016
Lieder and Rashid, 2016
EMF and McKinsey & Co, 2012
Structures Closed loops
Cascaded Loops Braungart et al., 2007
EMF et al., 2015
EMF and McKinsey & Co, 2012; 2013
Flows Technical (long cycles)
Biological (short cycles) Lovins et al., 1999
Braungart et al., 2007
EMF and McKinsey & Co, 2012; 2013
Priorities Value capture, broad view of
value (natural capital) Murray et al., 2015; Schulte, 2013; EMF
et al., 2015
Scale and scope Cope with lower volumes
Local & decentralised WEF et al., 2014
Nielsen and Müller, 2009
Table 3 Key issues for SCM
Theme SSCM issue Key references
SC strategy Beyond a ‘cost & price’ focus
towards triple bottom line
Lean and green
Cost of ownership and lifecycle
Seuring and Müller, 2008; Carter &
King and Lenox, 2001; Simpson and
Power 2005; Mollenkopf et al., 2010
Christopher and Holweg, 2011
SC structure Beyond connected dyads
Networks including non-economic
Flows Reverse logistics, Closed loop, global
flows of supply and waste products
(e.g. steel, e-waste)
Guide et al., 2003
Govindan et al., 2015
Spengler and Schröter, 2003
and Focus Efficiency vs Effectiveness
Value (social, externalities)
Sarkis et al., 2011; Bell et al., 2013
Table 4 Framework of CSC propositions
Supply chain relationships will change in CSCs, shifting from product ownership towards
greater emphasis on leasing and service based strategies enabled by digital systems.
CSCs require structural flexibility and reduced geographic barriers with SMEs and
innovators within regional/local loops playing an important role in their implementation.
CSCs must consider both closed and open material loops in technical and biological
CSCs are enabled by close supply chain collaboration with partners within and beyond
their immediate industrial boundaries, including suppliers, product designers & regulators.
Procurement policies both in the private and public sectors of service organizations are an
important lever for the transition to CSCs if they go beyond minimum legal requirements
to include CE principles.