Which innovations for Circular Business Models? A product life-cycle categorisation

ABSTRACT

Circular Economy has emerged to face current unsustainable economic trends. Clarifying and promoting tools for embedding circularity in firms’ business models is becoming crucial. Notwithstanding Eco-Innovation has been recognised as a fundamental link to connect Circular Economy with business models restructuring, still little consensus exists on the interlinkages among the concepts of Eco-Innovation, Circular Economy and Circular Business Models. This research aims to understand which innovations can favour the transition from linear to closed-loop processes, and to identify circular business models using the lens of Eco-Innovation practices. We recognise three groups of innovations that are expected to drive firms’ business towards circularity, leading to the identification of an original Product Life-Cycle Categorisation. An exploratory empirical analysis is finally developed on the basis of Italian Small and Medium Enterprises’ data, in order to show the ability of our categorisation to distinguish across eco-innovative practices that are driven by (partly) heterogeneous determinants.

Highlights

• Designing new ways of creating value in accordance with circular economy strategies is becoming crucial

• The lack of theoretical guidance around the role of Eco-Innovation for circular economy may hinder firms’ ability to put in practice circular business models

• A categorisation of eco-innovative practices desirable for circular economy can support firms to put forward business models changes

• Heterogeneous drivers are involved in the adoption of different typologies of circular innovations

KEYWORDS:

• Circular economy
• circular eco-innovation
• Circular Business Models
• Life-Cycle
• Small and Medium Enterprises

JEL CLASSIFICATION:

• Q00
• Q55
• O32

Acknowledgements

We acknowledge the funding within the University of Ferrara project “Dipartimenti di Eccellenza 2018–2022” (coordinator M. Mazzanti) and the financial collaboration with Fondazione Eni Enrico Mattei (FEEM).

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ This refers to upcycling. Differently, downcycling refers for example to the transformation of waste into energy in which materials are transformed into low-value products and hence do not allow the continuous flow of resources.

² The survey has been organised with the financial support from the ‘Dipartimenti di Eccellenza 2018–2022’ project of the Department of Economics and Management of the University of Ferrara. Data has been gathered by the survey company Izi s.p.a. through a Computer Assisted Web Interview (CAWI). The sample has been stratified by geographical localisation (macro area, Istat), sector (technological intensity, Eurostat), dimension (10–49 employees; 50–249 employees; >250 employees).

³ Sectors with more than 150 observations include: food industry, textile industry, clothing manufacture, manufacture of leather goods, wood industry, manufacture of rubber articles, manufacture of mineral goods, manufacture of metal products, manufacture of electronic equipment, manufacture of machinery and equipment, manufacture of furniture, machine repair, maintenance and installation. All other firms are included in a ‘reference’ category.

⁴ Looking at the 2022 Ecoinnovation Index https://green-business.ec.europa.eu/eco-innovation_en, in fact, Italy belongs to the group of leaders in Europe, demonstrating a strong aptitude for the circular transition, its experience can therefore represent a useful case for understanding the mechanisms underlying the innovative choices of firms