Perceptions of Firms Participating in a Circular Economy

Abstract

Circular Economy (CE) is today a major concept within the sustainability debate (Geissdoerfer, Savageta, Bocken & Hultinkb, 2017). Its theoretical arguments are widely accepted-especially at a crosscountry institutional level-but businesses still seem reluctant to acknowledge it as a revenue-making paradigm. This ongoing study aims to reveal where, along the value chain, firms are more unaware of CE best practice and/or reluctant to invest. After a comprehensive review of sustainable business models, the authors suggest a framework for circularity in business strategy as a beginning foothold on their research agenda. Next, the authors rely on expert informants to identify the most suitable areas in the value chain for the implementation of CE actions. Finally, an online free-access survey-like tool is launched to invite firms self-assessing (1) how relevant those identified areas are for their respective industries and (2) how CE-mature they feel regarding those areas. The initial results attest low consciousness of the CE potential across industries and even lower levels of maturity, especially by SMEs. Despite the growing evidence of Sustained Competitive Advantage (SCA) achieved by pioneering companies moving away from linear forms of production, through the development of new core competencies (Prahalad & Hamel 1990), most firms still perceive CE as something not applicable to them or too costly and risky to implement.

Full text

European Journal of Sustainable Development (2018), 7, 4, 105-118 ISSN: 2239-5938
Doi: 10.14207/ejsd.2018.v7n4p105
|¹Associate at Department of Sustainability Research and Development, WorlDynamics Pty. Ltd., Brisbane
QLD 4012 Australia.
|2Director at Department of Sustainability Research and Development, WorlDynamics Pty. Ltd., Brisbane
QLD 4012 Australia.
Perceptions of Firms Participating in a Circular
Economy
Nicolò Cristoni1, Marcello Tonelli2
ABSTRACT
Circular Economy (CE) is today a major concept within the sustainability debate (Geissdoerfer,
Savageta, Bocken & Hultinkb, 2017). Its theoretical arguments are widely accepted – especially at a
cross-country institutional level – but businesses still seem reluctant to acknowledge it as a revenue-
making paradigm. This ongoing study aims to reveal where, along the value chain, firms are more
unaware of CE best practice and/or reluctant to invest. After a comprehensive review of sustainable
business models, the authors suggest a framework for circularity in business strategy as a beginning
foothold on their research agenda. Next, the authors rely on expert informants to identify the most
suitable areas in the value chain for the implementation of CE actions. Finally, an online free-access
survey-like tool is launched to invite firms self-assessing (1) how relevant those identified areas are
for their respective industries and (2) how CE-mature they feel regarding those areas. The initial
results attest low consciousness of the CE potential across industries and even lower levels of
maturity, especially by SMEs. Despite the growing evidence of Sustained Competitive Advantage
(SCA) achieved by pioneering companies moving away from linear forms of production, through the
development of new core competencies (Prahalad & Hamel 1990), most firms still perceive CE as
something not applicable to them or too costly and risky to implement.
Keywords: Circular economy (CE); core competencies; grounded theory; SMEs; sustainable business models;
Sustained Competitive Advantage (SCA); value chain
1. Introduction
Environmental Sustainability is the ultimate challenge of the XXI century. The
damage caused by private and public companies is undeniable and so is the role they
need to start playing if we are to revert the current downward spiral of self-destruction
(Benn, Dunphy & Griffiths 2003; McDonough & Braungart 2002). The fundamental
problem is the industrial model standing at the roots of our economic system that is
based on a take-make-waste paradigm (The Ellen McArthur Foundation 2012). In this
linear form of production (1) natural resources are extracted from the Earth and (2)
processed in manufacturing plants to become usable objects, which are then (3) sold to
consumers, who eventually (4) discard them as waste in landfills or get incinerated. Each
of these four steps causes a great deal of damage to environmental systems, primarily in
terms of natural elements getting heavily polluted (air and water), being deprived of key
components (soil) or irreversibly modified (forests). And the problem has progressively
worsened as more and more countries worldwide have adopted this economic model.
Today, we extract and consume roughly 95% more materials than we did in 1880 and the
numbers keep rising. The world aggregate material extraction rate of 35 billion tonnes

106 European Journal of Sustainable Development (2018), 7, 4, 105-118
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recorded in 1980 nearly doubled in three decades to the current 65+ billion tonnes
(Giljum, Dittrich, Lieber & Lutter 2014). What is even more alarming, today most assets
end up being thrown away within just a few months from the time of purchase, resulting
in waste generation levels exceeding 1.3 billion tonnes per year, and projected to surpass
2 billion tonnes by 2025 (The World Bank 2012). Despite all the damage caused to the
natural environment and life wellbeing, the linear economic model does not contemplate
any actions for the regeneration of the polluted natural ecosystems. As a result,
particularly after 1950, “The Great Acceleration” in global economic activities has
deepened the environmental footprint of the human enterprise, affecting the Earth
system structure and functioning on multiple levels (Rockström, et al. 2009; Steffen, et al.
2015): higher-than-ever atmospheric concentration of greenhouse gases (particularly
nitrous oxide, methane and carbon dioxide), widespread exploitation of fisheries, tropical
rainforest and woodland loss, ever-growing demand for domesticated land and
staggering rates of species extinct (Steffen, et al. 2004).
In the face of the many threats, challenges and opportunities posed by the linear way of
production (The Ellen MacArthur Foundation 2015), a new economic model has
emerged with strong impetus as the panacea for an economically successful and
environmentally sustainable future (Ghisellini, Cialani & Ulgiati, 2016). The Circular
Economy (CE) is essentially an alternative industrial model (Bocken, Olivetti, Cullen,
Potting & Lifset 2017; Franconi, Bridgeland & Webster, 2016; Lovins & Braungart,
2014) where, by taking a systems approach (Webster 2013), industrial processes are not
seen as the inevitable cause of natural resource exploitation, environmental pollution and
waste generation. While the focus is still on making business operations profitable (The
Ellen MacArthur Foundation 2013; Lacy & Rutqvist, 2015), in a CE model this is
achieved by embracing a number of innovative value-retaining strategies (Bocken,
Bakker & de Pauw, 2016) like design for prolonged use, modularity, utilization rate
maximization through practices of sharing and reuse, refurbishment, remanufacturing,
and recycling.
It is generally simple for firms to acknowledge the boundaries of our planet as well as the
unsustainable future of many industrial practices; firms also recognize the growing
attention of regulators and customers towards greener solutions, but very few of them
perceive a monetary return attached to investments in CE. This is perhaps due to the
great deal of innovation required to implement CE strategies within a business, together
with the existing regulatory, financial and cultural barriers still preventing both supply
and demand from fully grasping the benefits of a transition to CE products and
processes (CEPS 2015). Just a few pioneering companies (Bakker, Wang, Huisman &
den Hollander, 2014; Niero, Hauschild, Hoffmeyer & Olsen, 2017; Stål & Jansson, 2017)
– mostly large MNCs and start-ups – have shown success with their commitment to CE
practices. The investment required is considerable, but so are the rewards and mounting
evidence indicates applications in many key industrial sectors are possible (The Ellen
MacArthur Foundation 2013; The Ellen MacArthur Foundation 2015). The process of
stepping away from linear forms of production leads to the development of new core
competencies along the value chain (De los Rios & Charnley, 2016) and ultimately
superior performance that cut costs, improve efficiency, meet advanced government
regulations and the expectations of sophisticated customers, and represent a Sustained

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Competitive Advantage (SCA) against competitors. Of course, there is no single and
structured way of making a business practice sustainable, but over the years a rather
defined number of business models has surfaced as the most effective in concurrently
delivering environmental as well as economic gains. Circular business models are
sustainable business models, where the focus is on applying economically viable
strategies to continually exploit products over many lifecycles and to use bio-based
materials and renewable resources where possible (Bocken, Short, Rana & Evans, 2014).
The aim of this paper is to identify the business areas most suitable for the
implementation of CE actions and to establish firms‟ perceptions of CE relevance of
such actions for their industry as well as their own alleged CE maturity. The literature is
divided into two macro areas: Section 2 reviews corporate competitiveness in terms of
SCA and the development of core competencies; Section 3 focuses on sustainable
business models and concludes by merging existing knowledge into a high-level
framework for circularity in business strategy, a beginning foothold on the research.
Section 4 presents the methods used; Section 5 discusses the results and Section 6
explains why they are deemed provisional.
2. Literature on Corporate Competitiveness
The core literature on business competitive advantage can be traced back to the
early 80s when management authors began referring to it as the ability of a company,
gained through its resources and capabilities, to reach a higher than normal level of
performance (Gluck, Kaufman & Walleck, 1980; Porter 1980). After debating for an
often-greater importance of internal resources versus external considerations (i.e.
industry structure), the conversation rapidly shifted towards how competitive advantage
could be achieved and sustained, hence becoming a fertile research domain for the
strategic management literature to proliferate (Collis & Montgomery, 1995; Dierickx &
Cool, 1989; McGrath et al., 1996).
The fundamental argument presented was that a firm obtained a competitive advantage
after properly combining resources and capabilities to develop a distinctive competence.
Resources and capabilities can be physical assets like machinery, patents and even human
resources (Barney & Wright, 1998), but also intangibles and non-easily transferable assets
like knowledge, experience, stakeholder relationships, and culture (Fiol 1991).
Unfortunately, not all resources and capabilities are good enough to create a „distinctive
competence‟ and so it becomes essential to properly assess them prior to invest in them.
The most established management tool used to evaluate resources and capabilities is the
VRIO framework, introduced in 1991 by Barney, who is widely acknowledged as the
main proponent of the Resource-Based View (RBV). Although capabilities were also
considered in the model, they felt under and overly inclusive definition of “resources”
(Kraaijenbrink Spender & Groen, 2010) – as the name RBV attests – which to create
SCA, had to be valuable, rare, imperfectly imitable and not substitutable (Collis &
Montgomery, 1995). The best place to look for the right resource candidates is the
company‟s value chain (Barney 1991).
Since the RBV model was first presented, concepts in management theory central to
corporate competitiveness matured and gained increasing attention, often leading to

108 European Journal of Sustainable Development (2018), 7, 4, 105-118
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questioning the solidity of the RBV framework (Peteraf & Barney, 2003). However, its
central proposition of requiring valuable, rare, inimitable and non-substitutable resources
and capabilities to achieve SCA remained valid and got shared by related concepts like
core competencies (Prahalad & Hamel, 1990) and dynamic capabilities (Teece, Pisano &
Shuen, 1997). The formers are defined as “the collective learning in the organization, especially
how to coordinate diverse production skills and integrate multiple streams of technologies” (Prahalad &
Hamel, 1990, p. 84). This definition clearly highlights the enrichment from the original
RBV explanation: it is not so much the value of individual resources that matters, but
rather the synergistic combination of such resources and capabilities (Laurie, Doz &
Sheer, 2006). In the short term, strategy is constrained by the resources and capabilities
available, so it is shaped by what the firm has. But over the long run, strategy is about
renewing and adding resources and capabilities to develop distinctive competences that
adapt quickly to changing environments (Alexander & Martin, 2013; Zook, 2007).
Because of the intense pressure of competing over costs and quality in the short term,
most companies do not spend sufficient time developing a corporate view of the future
and this leaves them without the core competencies necessary to tap into future
opportunities.
The strategic importance of being able to responsively and purposefully adapt an
organization‟s resource base to changing environments led to define such capacity as
„dynamic capabilities‟ (Teece, Pisano & Shuen, 1997), thus differentiating them from the
current operational capabilities of the company (Helfat et al., 2007). They are “the firm’s
processes that use resources – specifically the processes to integrate, reconfigure, gain and release resources
– to match and even create market change” (Kraaijenbrink, Spender & Groen, 2010, p. 357).
The advent of dynamic capabilities was instrumental to step aside from the all-inclusive
resources of the RBV and acknowledge the distinction between those resources that are
inputs to the firm and the capabilities that enable the firm to select, deploy, and organize
such inputs (Makadok 2001). Resources remain important for the life of the company,
not per se, but because of the configuration conferred by dynamic capabilities
(Ambrosini, Bowman & Collier, 2009; Morgan, Vorhies & Mason, 2009). Alongside the
company‟s own internal resources, another source of input, especially concerning key
technological capabilities, are external linkages (Coombs 1996). By using collaborative
arrangements oriented toward technology access, companies can multiply internal
resources and display a broader array of core competencies (Teece, Pisano & Shuen,
1997) more rapidly and cost effectively.
When talking strategy, decisions must be made, and it is difficult to be all things for all
people. A company must choose! For example, IKEA low cost and simple assembly
appeals to a specific target of consumers, and so does BMW engineering excellence.
However, when considering environmental sustainability, the potential market gets
broader as it surpasses traditional segmentations. It touches young and old, male and
female, rich and poor, sophisticated and simple buyer. A similar consideration can be
made about combining multiple distinctive competencies (e.g. quality and effectiveness),
an effort traditionally not pursued by many companies in a linear economy given the
time and investment required to obtain them, but that circular thinking could facilitate.
In a rapidly changing society like the one we are in, talking about competitive survival
might perhaps sound more appropriate than SCA. Regardless of the term used, the

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significance of core competencies linked to environmental sustainability and the
subsequent ability of a company to outperform competitors by doing things differently
could be decisive in the years ahead.
3. Literature on Sustainable Business Models
A complete discussion of sustainable business models should arguably
commence with the emergence back in the „80s of stakeholder theory (Freeman, 1984),
as an alternative to pure profit maximization. The theory asserted that anyone, who
affects or is affected by a firm‟s operations (e.g. employee, local communities,
customers), has the right to be included in decision making, even if this means reducing
profits for shareholders. Later attempts to broaden the spectrum of the constituencies
that ought to be considered in shaping the direction of firms, focused on what was called
the silent stakeholder i.e. the environment (Shrivastava, 1995; Solomon, 1997). In 1999, the
authors of Natural Capitalism (Hawken, Lovins & Lovins, 1999) put forward a four-step
agenda to align ecological considerations with business operations, thus a sustainable
business model that would favour both profitability and the environment.
This early work on conceptualizing Corporate Social Responsibility (or CSR), and
attempting to place ecological considerations at the centre of business practices, has
gradually evolved into more pragmatic approaches that see sustainability as a means to
increase the competitive advantage of a firm, while concurrently benefitting its many
stakeholders and thus contributing to sustainable development (Lüdeke-Freund, 2010).
As the focus shifted from responsibility towards value creation, greater attention has
been given to integrating social and environmental considerations at the very heart of a
company business model (Porter & Kramer, 2011).
With the notion of CE going mainstream, today the concept of „sustainable business
model‟ is being reshaped once again to accommodate the increasing concerns
surrounding resource scarcity, a thriving middle-class, and fears of ecological thresholds
being surpassed (Rockström et al., 2009; Steffen et al., 2015). At least four different
typologies of circular business models appear in the corporate world: a switch towards
environmentally friendly products and processes (net-zero innovation); selling services
instead of goods, through servitization or product-service systems (Tukker 2015; Stål &
Jansson, 2017; Adrodegari, Saccani, Kowalkowski & Vilo, 2017); implementing reverse
cycle operations to extend the lifecycle of products; and recovering the residual value of
materials through recycling or energy generation. While these novel approaches to
business have been recognized as potentially helpful in driving a firm‟s competitiveness
as well as contributing to environmental sustainability (Tukker & Tischner, 2006), their
successful implementation depends on being carefully tailored to the specific set of
capabilities of each company, and be leveraged so that they connect modern
technological advancements with the needs of the market in which the firm operates.
Depending on the scenario, a company will favour one area of intervention or another.
For example, a focus on innovative product design will imply placing ground-breaking design
principles at the roots of the CE corporate strategy (den Hollander, Bakker & Hultink,
2017). At least three broad approaches to circular design are rapidly emerging as clear
alternatives to outdated linear solutions: green design, plan for durability and envisage

110 European Journal of Sustainable Development (2018), 7, 4, 105-118
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reverse cycles (Bakker et al., 2014). Reverse cycle is the term used to identify the process of
establishing and managing one or multiple flows of materials, components and products
from the moment they get damaged, broken or discarded to their re-valorisation –
through repair, reuse, refurbishing, remanufacturing or recycling – and further
introduction in the economic system. Thus, a company focusing on reverse cycles will be
implementing actions aimed at collecting its used products and then establish effective
post-value channels whereby items get processed according to the new function they will
serve (Singh & Ordonez, 2015). Green internal operations are circular interventions
particularly relevant when the environmental impact of a company is largely dependent
on the performance of its own sites and internal operations. In such circumstances CE
principles can be leveraged, for example through the establishment of an Environmental
Management System (EMS), to gradually reduce environmental externalities like
greenhouse gas emissions, water use or pollution (Balta & Woodside 1999; Wilson 2001).
There is increasing evidence that a business case exists for leveraging circular solutions
and establishing closed-loop processes through supplier engagement (The Ellen MacArthur
Foundation 2014; Niero, et al., 2017). For some firms broad re-structuring of both
internal operations and relationships with business partners are required, most notably if
reverse cycles for product recovery are also established (CISL 2016). To do so,
companies might need to expand the boundaries and scope of their sourcing activities
well beyond business-as-usual. Internal alignment is the area of intervention that prompts a
company to manage the widespread implications of embracing CE principles. It implies a
change in culture touching all levels of the organization and successful implementation
would result from getting managers and employees on board, getting buy-in from
executives (CISL 2016), and ensuring strong cross-company alignment especially
between design, marketing, sales and operations. As most organizations are still at the
beginning of their circular journey, collaboration with external stakeholders can often bring
multiple benefits (Niero et al., 2017; Lieder & Rashid, 2016), especially in industries
where CE implementation is particularly difficult (e.g. due to complex and dispersed
supply chains or heavy reliance on virgin materials). Moreover, the establishment of a
novel circular business model is likely to impact the organization well beyond its
traditional boundaries and current operations. Hence, for many firms, implementing a
circular strategy will inevitably mean collaborating with a complex web of stakeholders –
as opposed to managing simple transactions in a linear fashion.
The framework below is meant as a beginning foothold on the research (Glaser &
Strauss, 1967). It developed from a comprehensive review of the existing literature on
circular business models and was strengthened by the professional experience in
management consulting matured over the years by the two authors. It outlines in
sequence from left to right: the four high-level guiding CE principles, the six CE
business objectives that generally lead to major opportunities for CE adoption; and the
six areas of intervention for operationalizing the circular opportunities identified.

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Fig.1. Framework for Circularity in Business Strategy
The growing interest of society towards sustainability is confirmed by the rapid
expansion of the literature discussing sustainability-related topics, and CE is certainly
becoming a prime concept within that conversation. However, even though there is a lot
of positive and promising talk happening, many companies still perceive CE as
something not applicable to them and/or too innovative, with high risks and prohibitive
costs involved. From this consideration the following questions were derived:
1. What business areas are most suitable for the implementation of strategies based on
principles of circularity?
2. Do companies perceive CE strategies in those areas to be relevant for their respective
industries (i.e. capable of providing a competitive advantage)?
a. Are there differences in perceptions based on company size?
b. Are there differences in perceptions across industries?
c. Are there differences in perceptions across countries?
d. Are there differences in perceptions based on business category (e.g. manufacturer,
distributor, wholesaler, service provider)?
e. Are there differences in perceptions based on customer target (e.g. B2B, B2C)?
What level of maturity do companies feel they have achieved in terms of their CE abilities,
policies, and internal programmes compared to what would be possible?
4. Methodology
Given the brief history of the field and the absence of consolidated theoretical
frameworks, the research design opted for this paper was mostly based on inductive
reasoning and sought to derive broad generalizations from specific observations.
Interviews and questionnaires were used as data sources to come up with a grounded
theory (Strauss & Corbin, 1994) capable of answering the research questions. The first

112 European Journal of Sustainable Development (2018), 7, 4, 105-118
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step in designing the research framework was to identify a purposive sample (Glaser &
Strauss, 1967; Strauss, 1987): business practitioners with some degree of knowledge or
expertise in CE. The aim was to come up with a sample large enough to cover most of
the industrial sectors in Italy. Country selection was solely based on accessibility
advantages and the limited funding available (convenience sampling). After initial
contacts were made with personal acquaintances, the sample was then expanded to reach
30 individuals by implementing elitist snowball techniques (Verschuren & Doorewaard,
1999). The objective here was to increase the likelihood of finding divergent information
and gaining access to a greater number of confirming or weakening perspectives.
This sample of „CE-expert‟ practitioners was then employed to gather data regarding the
business areas most suitable for the implementation of strategies based on principles of
circularity. The choice of interview questions and how to frame them, as well as the
selection of certain topics for detailed analysis was based on the researchers‟ ongoing
study of existing CE instruments and insights from professional experiences (Glaser &
Strauss, 1967; Strauss & Corbin, 1990). The previously presented framework for
circularity in business strategy (Figure 1) was shared with the interviewees prior to the
meeting to introduce the context and prompt thought through responses to open-ended
unstructured questions (Douglas, 1985; Saunders, Lewis & Thornhill, 2007) build around
a typical value chain: design > sourcing > production > distribution/shipment > use >
end use.
Content analysis was performed manually (analysis of phrases) and separately by two
researchers, before being circulated for comments. Upon grouping analysed data into
concepts, 17 different business areas for CE strategies were identified. Each one was
given a definition, it was linked to specific business benefits, and exemplified with fitting
cases of best practice.
The last step of the research design was to broadly disseminate the 17 business areas for
CE strategies and begin testing practitioners‟ perceptions for (1) the relevance they had for
the industry they belonged to and (2) their own degree of maturity towards them. An
online questionnaire1 was created and released with free access, hence adopting a random
sampling technique. Any company could register by filling a simple form and then
conduct a CE self-assessment (WorlDynamics, 2017). The exercise required ranking
relevance (for industry) and maturity (at the firm-level) for each of the 17 areas for
circular action. A 5-point Likert-type scale was used.
5. Results
5.1 Business Areas for Implementing CE Strategies
The collection, study and clustering of expert opinions led to the identification
of 17 areas of circular action that could most significantly modify business-as-usual
operations. These are presented in the diagram below and grouped according to the steps
of a typical value chain.
1 Circular Readiness Assessment Tool http://www.worldynamics.com/circular_economy/web/assessment/main

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Fig. 2. The Key Areas of Circular Action
During the interview process, the most challenging step in the value chain to assess and
unpack into practical circular actions was DESIGN. That difficulty, primarily due to the
variety of perspectives offered by the interviewees, is in line with the vast attention given
by the literature when compared to other phases (Bakker et al. 2014; Mendoza,
Sharmina, Gallego-Schmid, Heyes & Azapagic, 2017) and arguably justified by a
recognition that changes in product design have clear and direct consequences on the
entire value chain (De los Rios & Charnley 2016). Item #4 “Design for recycling” was
initially included, just as “Recycling” under END-USE, primarily for consistency with
the other reverse cycle operations clustered under that heading. However, after careful
analysis, some experts suggested it would have been sounder to move recycling under
DESIGN, notably because, contrary to reuse, repair, refurbishing and remanufacturing,
usually the recycling of a product is not processed by the company producing it, but
rather by specialized external firms. According to this view, “Design for recycling” was
created to denote the design efforts put in place when developing products that are
easier to recycle. PRODUCTION was another area that required substantial analytical
work to comprehensively identify and evaluate all the possible circular activities a
company can pursue. And once again the literature confirmed how manufacturing had
traditionally been an area highly investigated under the CE perspective (Lieder & Rashid
2016).
Overall, the 17 circular actions were defined according to a broad understanding of the
CE as being an umbrella concept (Blomsma & Brennan 2017) covering not only
activities aimed at phasing out waste and pollution while keeping products and materials

114 European Journal of Sustainable Development (2018), 7, 4, 105-118
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in use, but also focusing on regenerating natural systems (The Ellen MacArthur
Foundation 2014). As such, besides the “core” CE activities linked to the establishment
of reverse cycle operations and closed-loop systems, there has been unanimous
agreement among the experts involved on the inclusion of a number of CE actions
primarily concerned with minimizing environmental externalities caused by emissions
and the use of toxic substances (“Optimise input materials”, “Engage Suppliers On
Environmental Programs”, “Maximize Overall Environmental Performance Of
Operations” and “Switch To Renewable Energy To Power Operations”).
5.2 Firms Perceptions of CE Efforts
Over a period of 3 months, a total of 38 companies registered to take the CE
self-assessment test. All these all were based in Italy, with ⅔ of them operating business-
to-business, while the rest were business-to-consumer (B2C). Most of these companies
(roughly 92%) were SMEs operating as manufacturers in their respective value chains.
The table below offers an overview of the aggregate results collected thus far.
Table 1. Summary of Firms Perceptions Towards CE Efforts
Relevance was the industry-level indicator of how firms perceive the 17 circular actions
might have a positive impact on the overall environmental performance of their
industries. According to the feedback received, the areas recognized to be potentially
transformed by an industry-wide implementation of circular principles were DESIGN,
SOURCING, PRODUCTION and END USE. This was little surprise, given most
respondents being SMEs operating in manufacturing sectors (e.g. textile, consumer
products and food), with elaborated supply chains, environmentally impactful operations
and overall poor closed-loop performance.
As for Maturity – the firm-level indicator used to self-assess one‟s own operations on the

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17 circular actions – SHIPMENT, PRODUCTION, and DESIGN scored slightly higher
than the rest, but still in the low range. The average maturity for SHIPMENT was low
because generally perceived as being not so relevant, which is consistent with green
shipment activities usually being pursued only by large multinationals that can afford
investing in such projects. However, there have been instances of SMEs communicating
that they had taken some initial steps to address their unsold inventory stocks (13) by, for
example, regularly donating to local charities. Other firms have been engaged by their
clients to improve their logistic operations (12). With respect to PRODUCTION, it is
worth mentioning that some respondents scored relatively high to both items (7) and (8),
for they had either embarked on an environmental certification path (EMAS or
ISO14001, which both the setting up of an EMS), or had installed renewable energy
systems (primarily solar) to power their manufacturing operations (even though only
partially). When it came to DESIGN, it must be said that a considerable number of
respondents supplied products to clients in the business-to-business (B2B) arena, and
therefore often these firms received mandatory design instructions on how to create the
product directly from their customers. Therefore, the adoption of circular design
principles was automatically prevented to them. However, a considerable number of
respondents gave a medium rating to the optimization of input materials (2) for they
communicated that many toxic substances used in production, like glues and paints, have
been replaced over the last few years with ecological and bio-based alternatives.
SOURCING, USE, and END-USE proved to be the weakest areas, with average scores
of 1. A rational similar the one used for DESIGN also applied to the USE and END-
USE phases, for usually the companies lost track of their products after being sold to
clients. Regarding SOURCING, most respondents based their rating on the
acknowledgement that they lacked the resources and capabilities to engage suppliers on
environmental programs (5) or to partner up with them to find circular feedstock
solutions (6).
Conclusions
This paper is part of an ongoing research project aiming to identify the business
areas most suitable for the implementation of CE actions and to establish firms‟
perceptions of CE relevance for their industries as well as their own alleged CE maturity.
While the preliminary results show a picture consistent with the findings of recent
studies, they are based on a still limited dataset and need to be pondered as a first
attempt at informing on the subject. Further validation is necessary and will be built
overtime as the tool progresses through advanced phases of development and adoption.
The prospect, once the limitations of sample size have been overcome, is to allow for
statistically meaningful aggregate analyses based on firm size, industry type, location,
category (e.g. manufacturer, distributor, wholesaler, service provider), and customer
target (B2B, B2C).
In its current form, the study substantiates the view shared by academic literature and
practice: a swift and widespread prosperity of CE principles is challenging. Apparently,
the common perception is still anchored to CE efforts aiming at weakening profit-
maximization by placing excessive attention towards reaching new heights in

116 European Journal of Sustainable Development (2018), 7, 4, 105-118
Published by ECSDEV, Via dei Fiori, 34, 00172, Rome, Italy http://ecsdev.org
environmental protection. This erroneous understanding represents a serious threat to
implementation as theoretical arguments can only go so far in presenting a valid case for
CE. To help all companies (especially SMEs) appreciate the full potential of circularity
for business, it would seem highly beneficial to incorporate novel CE notions into
conventional conversations surrounding the strategic management process (definition,
evaluation and realization) and its analytical tools.
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