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A Review and Typology of Circular Economy Business Model Patterns

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Abstract and Figures

The circular economy requires companies to rethink their supply chains and business models. Several frameworks found in the academic and practitioner literature propose circular economy business models (CEBMs) to redefine how companies create value while adhering to circular economy principles. A review of these frameworks shows that some models are frequently discussed, some are framework-specific, and some use a different wording to refer to similar CEBMs, pointing to the need to consolidate the current state of the art. We conduct a morphological analysis of 26 current CEBMs from the literature, which includes defining their major business model dimensions and identifying the specific characteristics of these dimensions. Based on this analysis, we identify a broad range of business model design options and propose six major CEBM patterns with the potential to support the closing of resource flows: repair and maintenance, reuse and redistribution, refurbishment and remanufacturing, recycling, cascading and repurposing, and organic feedstock business model patterns. We also discuss different design strategies to support the development of these CEBMs.
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A Review and Typology of Circular
Economy Business Model Patterns
Florian L¨
udeke-Freund ,1Stefan Gold,2and Nancy M. P. Bocken 3,4
1Chair for Corporate Sustainability, ESCP Europe Business School, Berlin, Germany
2Faculty of Economics and Management, University of Kassel, Kassel, Germany
3Lund University, IIIEEE, Lund, Sweden
4TU Delft, Industrial Design Engineering, Delft, The Netherlands
The circular economy (CE) requires companies to rethink their supply chains and business
models. Several frameworks found in the academic and practitioner literature propose
circular economy business models (CEBMs) to redefine how companies create value while
adhering to CE principles. A review of these frameworks shows that some models are
frequently discussed, some are framework specific, and some use a different wording to
refer to similar CEBMs, pointing to the need to consolidate the current state of the art. We
conduct a morphological analysis of 26 current CEBMs from the literature, which includes
defining their major business model dimensions and identifying the specific characteristics
of these dimensions. Based on this analysis, we identify a broad range of business model
design options and propose six major CEBM patterns with the potential to support the
closing of resource flows: repair and maintenance; reuse and redistribution; refurbishment
and remanufacturing; recycling; cascading and repurposing; and organic feedstock business
model patterns. We also discuss different design strategies to support the development of
these CEBMs.
business model
circular economy
supply chain
value creation
Supporting information is linked
to this article on the JIE website
The negative effects of the currently dominant production
models based on taking, making, and disposing of resources and
goods threaten natural ecosystems and affect human health and
well-being (Braungart et al. 2007; Stahel 2016). Human activ-
ity has even been connected to a global “sixth mass extinction”
of animal species and “massive anthropogenic erosion of biodi-
versity and of the ecosystem services essential to civilization”
(Ceballos et al. 2017, p. E6089). Fundamentally, our global re-
sources are finite, and we are exceeding our planetary resource
capacity (Steffen et al. 2015). In its search for alternatives to
Conflict of interest statement: The authors declare no conflict of interest.
Address correspondence to: Florian L ¨
udeke-Freund, ESCP Europe Business School, Chair for Corporate Sustainability, Heubnerweg 8-10, D-14059 Berlin, Germany. Email:, Web:,
© 2018 by Yale University
DOI: 10.1111/jiec.12763 Editor managing review: Reid Lifset
Volume 23, Number 1
unsustainable resource use, the field of industrial ecology (IE)
provided the foundations for the idea of a circular economy (CE)
(e.g., Bocken et al. 2017; Ghisellini et al. 2016; McDowall
et al. 2017). Building on original IE thinking (e.g., Ayres and
Ayres 1996; Ehrenfeld 2004; Lifset and Graedel 2002), the CE
has recently been (re-)popularized as both a public policy and
business concept (EMF 2012; European Commission 2014). On
the national level, China (Tong et al. 2018; Yuan et al. 2006)
and Europe (Andersen 2007) in particular are trying to adopt
CE principles as guidelines for the envisioned redesign of their
economies (McDowall et al. 2017), which requires changes on
36 Journal of Industrial Ecology
... However, there is a gap between the potential shown in theory (Bressanelli et al., 2018) and practical implementation (Ingemarsdotter, Jamsin, & Balkenende, 2020). Digitalization can address several prerequisites of the CE, such as cooperation of different companies (Holzer et al., 2021), bringing transparency to supply chains and products (Agrawal et al., 2022), enabling new business models that decouple economic growth from resource consumption (Lüdeke-Freund, Gold, & Bocken, 2019), and improving production (Chauhan et al., 2022). ...
... CE is a very effective way of increasing the sustainability of a company. If a company decides to increase the environmental friendliness of its products in its strategic product decisions, the actions that implement CE, such as the 10 R-strategies (refuse, rethink, reduce etc.), can contribute to achieve that goal (Lüdeke-Freund et al., 2019). When environmental friendliness plays a role in purchasing decisions, used or recycled materials could be preferred, or their products could be remanufactured, which again increases the degree of CE. ...
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Small and medium-sized enterprises (SMEs) are a decisive part of the efforts against climate change. However, they are late in terms of sustainability and circular economy (CE). Little is known about the factors that facilitate the implementation of CE practices in SMEs. Due to CE leading to cost savings, new business models or reputation gains, companies can achieve a competitive advantage. To realize this competitive advantage the strategic orientation of a firm is pointed out. Various theoretical papers have shown how CE can be enabled and how it can be inhibited. However, empirical studies that support the existing literature are lacking. The goal of this paper is to investigate the influence of two mechanisms, namely commitment to sustainability (CtS) and digitalization as strategic orientations on CE implementation. Therefore, we conduct a study with a self-developed sample of 754 German SMEs. Using multiple linear regression analyses, the results show that digitalization and CtS positively influence CE implementation in SMEs. Interestingly, the complementary effect of pursuing a dual strategy toward digitalization and sustainability is not significant for CE implementation. Our study contributes to the CE literature by giving a nuanced understanding of various antecedents of CE implementation. This study provides several approaches for managers of SMEs to improve their CE practices. First, digitalization is indeed an effective tool for implementing CE practices. Therefore, practitioners should strengthen their digitalization efforts when considering increased CE implementation. Second, a general focus on sustainability increases the implementation of CE practices. Therefore, practitioners should raise awareness of sustainability throughout the organization. Third, the combined focus on CtS and digitalization needs to be carefully considered. To implement CE, digitalization should be embedded in the sustainability strategy. Due to the liability of smallness, SMEs should seek their resources for digitalization and sustainability commitment not only within but also outside the company boundaries.
... This phenomenon has led to widespread industrialization and resource exploitation (Laurance et al., 2014;Nasrollahi et al., 2020;Van Buren et al., 2016). Most industries still adhere to a linear economy, where business practices are based on conventional business models that rely heavily on resource consumption to create value and generate waste (Lüdeke-Freund et al., 2019;Pieroni et al., 2021). Studies by the United Nations and numerous international organizations indicate that the dominance of the brown economy has been a significant factor in economic development over the past four decades. ...
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This study aims to provide a more holistic understanding of how environmental and fiscal policies can complement each other to promote a circular economy in East Java. The method used in this study is panel data regression analysis using secondary data covering the period 2001-2020. Data were collected from government agencies such as the Ministry of Finance, the East Java Central Bureau of Statistics, the Ministry of Environment and Forestry, and the Supreme Audit Agency. The results show that environmental and fiscal policies significantly impact the circular economy in East Java. Environmental regulations, which include central and local government policies, promote the growth of the circular economy. The Regional Original Revenue (PAD) also plays an essential role in influencing the circular economy in the region. The proposed policy recommendations include the design of incentives to encourage the adoption of circular economy principles, the optimal allocation of special environmental and circular economy funds, the adaptation of education and training to the needs of the circular economy, the promotion of research and innovation in the circular economy, and the joint implementation of environmental regulations.
... A company's value proposition encompasses the unique offerings and products/services it offers to its customers (Lüdeke-Freund et al., 2019;Osterwalder et al., 2005). In the WEEE industry, companies provide services approaching CE practices including the 6R strategies. ...
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Due to the rapid economic growth, growing demand for high-tech products, and decreasing service life of products, global waste generation from the electrical and electronic equipment sector is increasing. From the environmental and economic perspective, the circular economy (CE) emphasizes e-waste prevention as it is one of the fastest-growing waste streams having both valuable and rare materials as well as toxic substances. It is common to manage electrical products at their end-of-life through circular practices however, knowledge and implementation of CE in the waste electrical and electronic equipment (WEEE) sector still need to be improved. End-of-life practices center on recycling, and the percentage of valuable resources recovered is low. There is a missing insight into the business opportunities for alternative end-of-life options such as reusing, repairing, and re-manufacturing that hold stakeholders from implementing circular strategies. To fill the gaps identified, we developed a research question for investigating and analyzing the services offered and the electrical products adaptable to CE business models (CEBMs) of young companies operating in the WEEE. This study aims to explore the business models (BMs) of circular practice-based business options such as buyers and sellers of used and refurbished electronic devices, information technology asset dispositions (ITADs) companies, and e-waste recyclers to enhance other researchers with a better understanding of business options toward end-of-life e-waste handling and emerging issues in this industry. We conduct a literature review on CEBMs in the WEEE and conduct a multiple-case analysis of 412 emerging circular companies in the WEEE selected from the Crunchbase database to explore their BMs. Key findings show that most young WEEE companies focus on IT and telecom equipment and consumer electronics. Emerging WEEE companies mostly involve asset management and e-waste Recycling service, followed by ITAD services, trade-in/buyback, and reselling of preowned and refurbished electrical devices service, and e-waste collection, recycling, and disposal service. These companies provide unique offerings such as information security, compliance, trustworthiness, convenience, quality, social responsibility, and charitable purpose. Studies in the future may explore other dimensions of these BMs to gain a comprehensive picture and support the design of CEBMs.
... In Australia, policies and guidelines need to better encourage synergies and collaboration among businesses across the whole range of resource and management strategies [21]. Encouraging new circular business models is also critical to success for Circular Economy advocates and many barriers must be overcome, including changes to consumer habits and routines [29][30][31][32][33][34]. There is a clear need for the development of consistent, sectoral, industry-, and location-specific policies by the federal and state governments to stimulate Australian SME CE adoption [35]. ...
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Australia has recently declared its commitment to a Circular Economy. Policy and initiatives to date have focused on recycling and waste management and research to date has highlighted the need for more ambitious policy, clearer definitions, collaboration, and consensus on goals. There are also calls from some government and non-business sectors for more inclusive, circular models, including Doughnut Economics. In the context of a competing mainstream Circular Economy and inclusive circular society discourses, circular intermediary organizations and their representatives are key to achieving change. Compared to the green growth business narrative of policy and industry media, intermediary representatives are aware of the diversity of challenges and solutions for Australia. Based on semi-structured interviews with twenty representatives of circular intermediaries in Australia and thematic discourse analysis, this study finds Circular Economy, circular society, and de-growth discourses informing themes about government, business, growth, consumers, society, and policy present and future. Arguing for a more nuanced view of the discursive and practice-based complexities of the circular transition, the study concludes with recommendations for a more holistic policy and practice beyond the current circularity for circularity’s sake.
... com) offers repair and altering services to clients for their specialized clothing. These repair services according to Lüdeke-Freund et al. [35] reduce the use of virgin materials and extends the clothing life span for customers, a situation that further promotes new revenue streams for retailers [36]. ...
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The fashion industry has contributed to greenhouse gas emissions, hence global environmental pollution. Recent happenings in the fashion industry especially activities of fast fashion have promoted rapid production of apparel and accessories to meet the taste and preferences of consumers. These products have resulted in clothing waste ending up in landfills, or burnt in the open, which poses severe environmental risks. Considering this, a mini review was conducted to investigate sustainable technological innovations within circular fashion and bio-based materials which have been advanced in the fashion industry. These recent advances have influenced the possibility of ensuring a cost-effective solution for consumers, limiting waste, and reducing carbon emissions in the environment. Furthermore, we present a selection of case studies by brands and designers on new approaches and materials developed within the circular fashion concept and for bio-based materials. Findings show varying approaches and technologies developed within the circular fashion concept to reduce clothing waste products in the environment. Circular fashion has introduced approaches such as resale, repair, and rent models, the concept of recycling for textile waste, and the concept of disassembly in design which ensures the possibility of easily deconstructing the various parts of a product without any difficulty. Additionally, the development of bio-fabricated materials, bio-dyes, and do-it-yourself (DIY) materials from natural sources has promoted bio-materials with less environmental impact. Consumer perception remained an important element for effective sustainable fashion. Findings revealed that price plays a critical role in influencing consumers to purchase bio-based materials and recycled clothing, with others willing to buy these products due to the environmental impact. It is recommended for effective collaborative efforts between consumers, industry, and the government, for a positive mindset and shift towards a sustained fashion industry.
... A growing body of literature has examined CE related to business innovation (see excellent reviews by Pieroni, et al. 2019;Dey et al. 2020;Bassi and Dias, 2020;Lüdeke-Freund et al. 2019) and sustainable supply chain management (Allen et al., 2021), and specifically in regard to SMEs (Brendzel-Skowera, K., 2021;Cantú et al., 2021, Salvioni et al., 2021Rizos et al., 2016). Pieroni et al. (2019) found that while extensive work has sought to understand and conceptualise circular business innovations, fewer than 20% of studies focused on the actual application and implementation of CE at the business level. ...
... As the findings indicated, the development of a circular solution is generated by dynamic and interconnected business relationships characterizing the supply network that involves the integration of complementary components and mainly complementary competences. The configuration of the supply network overcomes the linearity of the supply chain (Lüdeke-Freund et al., 2019). Such reconfiguration involves the key actors (Lacoste, 2016) that can be selected, as shown by results, by a new actor: the mobilizer. ...
Purpose The research question is how can a company implement a circular innovation in a supply network context? Leveraging the main conceptual and interpretative models of the industrial marketing and purchasing thinking, this study aims to investigate the interplay between the process of circular innovation development and the changes in the structure and dynamics of the supply network in which innovation takes place. Design/methodology/approach This research applies a case study design focusing on participant interaction dynamics. The case relates to an industrial company producing an innovative coating solution for compostable packaging. The data used to develop the case study came from multiple sources but primarily from semistructured interviews that cover the implementation of the circular innovation and the configuration of the circular network. Findings The dynamics of interconnected relationships can configure a circular network that interconnects business and non business actors through vertical, horizontal and heterogeneous relationships. The network configuration is supported by the new mobilizer actor that facilitates the sharing of circular knowledge within the circular network, together with the sharing of a market orientation and entrepreneurial orientation within the supply network, through the educational learning path. Originality/value This paper aims to contribute to a new understanding of how circular innovation can be developed, adopted and diffused. In a network, when circular innovation takes place, the focal issue is not the new product or technology in itself but how such innovation is developed and implemented by and through the reconfiguration of the business and non-business relationships into circular network.
Cette étude de cas permet d’analyser la manière dont les écolieux pourraient inspirer la transition vers une société plus écologique et plus respectueuse des liens humains. Le cas met à disposition des étudiants le compte rendu d’une étude terrain à l’écolieu du Bois du Barde en Bretagne, intégrant de nombreux verbatims des parties prenantes interviewées et des photos prises sur place lors de l’été 2021. Il propose un cheminement pour objectiver la contribution sociétale de ce type d’organisation. Les dimensions analysées sont la raison d’être, les missions et interactions du Bois du Barde avec ses parties prenantes, les activités et les pratiques mises en œuvre, l’éthique sous-jacente, les effets positifs et négatifs des activités sur la société et l’environnement et enfin l’évaluation de la contribution sociale de l’écolieu. Le cas peut être utilisé dans un cours d’éthique, de RSE ou dans un cours de stratégie intégrant les dimensions environnementales et humaines du management. Il permet de mettre en perspective des questions stratégiques (raison d’être, mission, modèle économique…) et opérationnelles (activités, organisation du travail) d’une organisation et les outils permettant de mesurer la contribution de ce type de lieu à la société, autrement dit son utilité sociale.
Conference Paper
Annual e-waste (waste electrical and electronic equipment) generation globally is increasing, resulting in a significant waste stream because of its large quantity, potential negative impact on health and the environment, and the valuable materials it contains. In managing e-waste, minimizing pollution, and maximizing product value, the circular economy (CE) becomes an ideal solution. However, despite the potential environmental, social, and economic benefits the circular economy approach can bring to the WEEE industry, knowledge and implementation remain limited. There is a lack of understanding of business opportunities related to alternative end-of-life options, which hinders interested parties from implementing circular strategies. To address these gaps, our study identifies and analyzes the business model (BM) of young companies operating in the WEEE industry. An exploratory research design with an inductive approach was employed, and we collected data from 412 companies selected from the Crunchbase database. Using the business model canvas, we examine these business models in four key dimensions. These are value propositions (products and services offered), value delivery (delivery processes and customer segments), value creation (creation processes and circular operation forms), and value capture (revenue streams). Through the collection and analysis of data pertaining to companies in this industry, significant insights have emerged. Our findings show that about 50% of these companies engage in IT asset disposition (ITAD). Among the target customers of these ITAD companies, an overwhelming majority of 78% focus on serving the B2B market and government agencies. These companies specialize in office equipment and networking devices. However, 27% of the analyzed businesses specialize in trade-in, buyback, and reselling pre-owned electrical devices. These companies serve both B2B and B2C markets. The findings highlight a concerning trend: despite the alarming increase in global e-waste generation caused by the rising demand for high-tech products and their decreasing service life, the practice of reusing these products, especially from individual customers, is not adequately observed among young companies operating in the WEEE sector.
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The literature on sustainable business models (SBMs) offers different classifications of the available kinds of SBM. Our careful reading of this literature reveals that the received classifications have developed ad-hoc from multiple divergent perspectives. As a consequence, the proposed classifications are only partly overlapping and difficult to reconcile, thus hampering cumulative progress. Building on this premise, we offer a synthesis and consolidation of the available knowledge about SBMs. Following the notion of patterns as problem–solution combinations, we developed, tested, and applied a new multi-method and multi-step approach centred on an expert review process that combines literature review, Delphi survey, and physical card sorting to identify and validate the currently existing SBM patterns. Ten international experts participated in this process. They classified 45 SBM patterns, assigned these patterns to 11 groups along ecological, social, and economic dimensions of sustainability and evaluated their potential to contribute to value creation. The resulting taxonomy can serve as a basis for more unified and comparable studies of SBMs and for new business model tools that can be used in various disciplines and industries to analyse and develop sustainability-oriented business models in a consistent manner.
Increasing numbers of reports reveal that planet Earth is at significant risk. There are mounting calls to address the damage caused by the unprecedented demand for land, energy and water and environmental destruction, which is attributed to escalating population growth and unparalleled, rising rates of economic growth. Society and its organisations now are expending the Earth’s resources much faster than they can be replenished. Consequently, over the past two decades, sustainability has become an important business issue; growing attention is being paid to organisations’ ecological and environmental performance; and to their impact on the climate and on local and global communities. A number of researchers broadly claim that organisations need to move from Traditional Business Models and adopt Sustainable Business Models, and to deliver a sustainable value proposition aligned with stakeholders’ economic, environmental and social expectations. To achieve this, organisations should expand their perceived stakeholders from customers and shareholders to include all other stakeholders who may be directly or indirectly affected by the organisation’s activities, such as the broader society and the environment. Organisations’ cultures have considerable influence on their attitudes to environmental and social sustainability; their commitment to sustainability; and their environmental and social performance. In order to develop and implement Sustainable Business Models, organisations need to understand their underlying cultural values and develop sustainability-related cultural characteristics. This chapter explains the role of organisational culture and its desired characteristics and discusses actions organisations can take to change their culture. It also discusses steps for embedding sustainability principles across the organisation.
Cascading use of biomass is a recognized strategy contributing to an efficient development of the bioeconomy and for mitigating climate change. This study aims at assessing the potential of cascading use of woody biomass for reducing GHG (greenhouse gas) emissions and increasing the overall wood flow efficiency in the European Union’s forest and bioeconomy sectors. A life cycle approach was followed to quantify the potential benefits of cascading use of woody biomass. Different supply chain stages of production were analyzed: forgone fossil-fuels substitution, optimization at manufacturing level and forest regrowth. We started with the current waste wood and paper recycling practices (scenario S1). Then we compared this current scenario with two divergent options: a scenario in which all post-consumer wood and paper waste is fully re-utilized for energy (S0) and a scenario with optimized future product cascading (S2).  Through maximized product recovery and zero waste strategy (optimized cascading), the wood use efficiency ratio (cascade factor) in the European wood sector would be increased by 9% (S2 vs S1). The optimal cascading leads to more GHG savings (-7 MtCO2-eq/year) in the wood production sector, less GHG emissions in the energy sector (-1 MtCO2-eq/year) and less GHG emissions in the waste sector (-6 MtCO2-eq/year), when compared with current practices.  The wood use efficiency ratio in the European wood sector strongly decreases with direct energy use of all paper and wood waste (no product cascading), total by about 25% (S0 vs S1). The full energy scenario leads to additional GHG emissions in the waste sector (7 MtCO2-eq/year), in comparison with current practices. Although the GHG reduction effect is quite substantial for using all wood waste directly for energy in SO (-43 MtCO2-eq/year), that effect is largely counteracted by additional GHG emissions (28 MtCO2-eq/year) through the need of fresh fibers (instead of waste fibers) for the production of wood and paper products in SO. Overall, the optimal cascading S2 scores considerably better (-14 MtCO2-eq/year, equivalent with 8.3% GHG emission reduction) than the full energy scenario SO (-8 MtCO2eq/year or 4.7% GHG emission reduction), in comparison with current practices in the EU. This explorative study highlights the potential of cascading use of woody biomass in the wood production chains to contribute to a reduction of environmental impacts related to wood resource and energy use, relevant especially in meeting short-term (2020-2030) renewable energy targets.
Business models—the underlying structures of how companies create, deliver and capture value—form the engine of our economy. They determine the speed at which economies grow, and the intensity at which our resources are consumed. They determine the number and type of jobs in our cities, the provenance of the products we buy, and the price of the food we eat. They contribute to the quality of our communities and our lives.
In recent years in Sweden, interest has grown concerning the possibilities of biogas production from organic waste. This interest reflects a general concern over environmental sustainability in society. However, given the lack of financial backing and the competition of other energy producers, few Swedish biogas plants have been profitable. This is particularly the situation with farm-based biogas producers. One response to this problem in the farm-based biogas industry is to engage in business model innovation that can lead to new ways of organizing business structures and activities. This qualitative study, which takes an action research approach, explores the early phases (initiation and ideation) of the business model innovation process for sustainability at a biogas-producing farm cooperative in southern Sweden. The main activities and the actors who are central to the execution of these activities are identified in six sub-phases. The paper describes two Flourishing Business Canvas workshops in which the participants were the researchers, members of the farm cooperative, external consultants, and university students. This study contributes theoretically to the literature with its detailed examination of the early phases of the business model innovation process for sustainability. It also contributes to practice with its conceptual model that demonstrates how biogas producers and farm managers can innovate and transform their current business models towards sustainability in order to improve competitiveness and long-term profitability.
The effort to build an EPR system for waste electrical and electronic equipment (WEEE) in China has created unexpected niches for innovation in business models for post-consumer recycling of e-waste as well as other recyclables in recent years. This study used action research to evaluate the performance of emerging business models for post-consumer recycling in urban China in recent years. We identified three categories of emerging models: (1) community-based programs targeting the garbage sorting behavior of consumers for all household waste, (2) reverse logistic systems with automatic vending machines attached to traditional commercial chains, and (3) pure internet solutions to bridge the transactions between the consumers and recyclers. All these business models share the common characteristic that they use internet technology, which is aggressively promoted in China as “Internet +” by both government policies and venture capital investment. The various business models serve as the link between the firm and the system level and reflect the diverse possibilities for the future evolution of the recycling system in China. We developed a qualitative evaluation framework with five elements including convenience for consumers, traceability for producers, profitability for recyclers, hybridity for collection, and reliability of the information used by the public to address the various values pursued by different actors involved in the recycling chains. The results reveal the dilemmas facing each business model in balancing among all the elements and highlight the governance challenge of integrating the EPR scheme with the municipal waste management system.