Systemic change: The complexity of business in a circular economy

Abstract

The transition to a circular economy is often associated with appropriate business models, which should, among other things, help replace the conventional `end-of-life´ concept regarding commodities with restoration and environmental design. This systemic change appears to be closely linked to the waste hierarchy: prevention of waste, reuse of old commodities, and recycling of waste. The paper shows that there are various problems for businesses to maintain the waste hierarchy in the context of a circular economy. The intrinsic nature of environmental commodities and, in particular, societal path dependencies present some challenges. These societal path dependencies are related to the benefits of decentralized decision-making in a market economy. In the short term, appropriate environmental policies can help alleviate some of these problems, but in the long term, these societal path dependencies need to be reoriented. The paper contains practical examples of all issues raised. © 2020, National Research University, Higher School of Econoimics. All rights reserved.