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This is the published version of a paper published in Business Strategy and the

Environment.

Citation for the original published paper (version of record):

Barreiro-Gen, M., Lozano, R. (2020)

How circular is the circular economy? Analysing the implementation of circular

economy in organisations

Business Strategy and the Environment, : 2590

https://doi.org/10.1002/bse.2590

Access to the published version may require subscription.

N.B. When citing this work, cite the original published paper.

Permanent link to this version:

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R E S E A R C H A R T I C L E

How circular is the circular economy? Analysing the

implementation of circular economy in organisations

Maria Barreiro-Gen

1

|

Rodrigo Lozano

1,2

1

Center for Logistics and Innovative Production, Department of Industrial Management, Industrial Design, and Mechanical Engineering, University of Gävle, Gävle, Sweden

2

Organisational Sustainability Ltd, Cardiff, UK Correspondence

Maria Barreiro-Gen, Centre for Logistics and Innovative Production, Department of Industrial Management, Industrial Design, and Mechanical Engineering, University of Gävle, Kungsbäcksvägen 47, Gävle 80176, Sweden. Email: maria.barreiro@hig.se

Abstract

Circular economy (CE) has become one of the most recent ways to address

environ-mental sustainability. CE activities focus exclusively on one of three levels (macro

level, meso level and micro level). The majority of CE research has focused on the

macro and meso levels, whereas research on the micro level has been limited. This

paper focuses on the latter by analysing how organisations have implemented the

four Rs (reduction, repairing, remanufacturing and recycling). A survey was sent to a

database of 5,299 contacts from different organisations, from whom 256 complete

responses were obtained. The results show that organisations focus on reducing and

recycling more than repairing and remanufacturing and in particular on internal CE

efforts. Some organisations that engage with the 4Rs do not do it under the CE

umbrella, whereas some that claim to apply CE have low levels of engagement with

the 4Rs. The results indicate that organisations are using the 4Rs to contribute to CE,

but not all of them are aware that they are applying CE principles. The paper

highlights that organisations need to improve their 4Rs efforts to contribute more to

CE by better linking its theory with practice. CE also has to be implemented outside

the organisations, in a more holistic way, for example, through better collaboration

with stakeholders on CE efforts and activities. This research stresses that the gap

between CE theory and practice needs to be closed to make CE circular.

K E Y W O R D S

circular economy, organisations, recycle, reduce, remanufacture, repair

1 | I N T R O D U C T I O N

Since the first industrial revolution, economies have followed a linear model, where resources are considered to be abundant, available, easy to source and cheap to dispose of (European Commission, 2014b). In 2005, circa 60% of all raw materials processed by the global economy were throughput, and the rest were added to stock, whereas only about 6.5% of the materials processed were from recycled waste or scrap (Pauliuk, 2018).

Circular economy (CE) is one of the most recent ways of addressing environmental sustainability (European Commission, 2018; Murray, Skene, & Haynes, 2015). CE was first broached by Leontief (1928, 1991) in 1928; however, its first application at international level occurred in 1996 when the German Parliament passed a law on CE (Kreislaufwirtschaft; Bilitewski, 2012). CE has been promoted in China and other Asian countries since the end of the 1990s in an effort to address environmental problems (Andersen, 2006; Yong, 2007).

This is an open access article under the terms of the Creative Commons Attribution-NonCommercial License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited and is not used for commercial purposes.

© 2020 The Authors. Business Strategy and The Environment published by ERP Environment and John Wiley & Sons Ltd

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According to the European Commission (2015), a CE ‘… is an economy where the value of products, materials and resources is maintained in the economy for as long as possible, and the generation of waste minimised’. CE is based on the principles of industrial ecology (Andersen, 2006; Preston, 2012b). The benefits of CE contribute to the attainment of environmental goals while considering the econom-ics behind such actions (Kyllönen, 2017).

The EU agreed a strategy for‘a resource-efficient Europe’ under its ‘Europe 2020 strategy’ by introducing CE as an initiative for addressing raw material security (Preston, 2012a). The use of CE, as a term, has been increasing during the last 5 years (Araujo Galv~ao, De Nadae, Clemente, Chinen, & De Carvalho, 2018; Ruiz-Real, Uribe-Toril, Valenciano, & Gázquez-Abad, 2018; see Figure 1; Google Trends, 2019). Figure 1 shows that interest went above 50% at the beginning of 2018, and during 2019, it has been above 50% with an average of over 70%, reaching a maximum of 100% in February 2019. The figure shows peaks and troughs; the former during the beginning of any year and the latter in the summer (June to August) and in December, that is, during holiday periods.

CE is normally represented by the mean of four loops of recovery (Urbinati, Chiaroni, & Chiesa, 2017), that is, the four Rs (reduction, repairing, remanufacturing and recycling; Fernández & Kekäle, 2005; King, Burgess, Ijomah, & McMahon, 2006). In CE, waste is used as a resource by closing material loops through different types and the levels of recovery (European Commission, 2014b; Preston, 2012b; Yong, 2007; Yuan, Bi, & Moriguichi, 2008).

CE activities focus exclusively on one of three levels (Yong, 2007; Yuan et al., 2008): the macro level, focusing on regions, cities, munici-palities or provinces; the meso level, focusing on eco-industrial net-works, where the waste (material or energy) from one company

becomes the raw material of another; and the micro level, focusing on improving the environmental performance of a particular organisation, for example, through the reduction of resource consumption, waste discharges or designing more environmentally friendly products.

The successful uptake of CE depends on broad support from all types of organisations in society (European Commission, 2014a). Organisations can be categorised as civil society, corporate or public sector (Holliday, Schmidheiny, & Watts, 2002). All of which have been instrumental in contributing to sustainability and CE for a number of years now (Lozano, 2018).

Although the European Commission (2014b) highlighted that business and consumers remain the key actors in the transition to a more CE, the majority of CE efforts have been at the macro and meso levels, whereas the organisations that have implemented CE policies often use different terminology (Preston, 2012a), implementation practices (Howard & Webster, 2019) and concept interpretation.

Adopting CE may enable organisations to transition from a linear model of production towards a closed-loop model (Howard & Webster, 2019); however, the limited micro level efforts have focused mainly on companies in areas such as food waste, hazardous waste, plastic waste, recycling of critical raw materials, illegal waste ship-ments and recycling of phosphorus, including at seaports (Bassi & Dias, 2019; Carpenter, Lozano, Sammalisto, & Astner, 2018; European Commission, 2014b; Oncioiu et al., 2018; Ormazabal, Prieto-Sandoval, Puga-Leal, & Jaca, 2018). Some examples of such transformation include the first CE standard, BS 8001:2017, which provides a practi-cal framework and guidance for organisations implementing the prin-ciples of CE; the processing of around 80,000 tons of metal from electronic scrap in 2015 to produce gold, silver, copper, palladium and other valuable metals at Mitsubishi Materials' Naoshima Smelter and

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Refinery; and the internal recycling of waste by ArcelorMittal Tubarao, which can sell, or reuse internally, around 90% of material previously categorised as waste (about 540 kg of by-products per ton of steel, given that every ton of steel generates 600 kg of other mate-rials, including carbon, slag, dust, sludge, heat and gases; Corder & Golev, 2019). There have been limited CE outcomes in civil society and public sector organisations. Some examples are the analysis of the employees' perception of the definition of CE in the Swedish public sector (Persson, 2015) and a study on how higher education institu-tions can implement CE thinking in practice (Mendoza, Gallego-Schmid, & Azapagic, 2019).

Because there is no universal approach on how to implement CE within organisations (Ritzén & Sandström, 2017), as much depends, for example, on the products and services they produce and deliver (Charter, 2016). The‘product–service systems’ (PSS) concept can help to explain the shift to CE (Murray et al., 2015). PSS aims to reduce the total environmental consumption burden (Mont, 2002) and can lead to a more efficient use of resources (Witjes & Lozano, 2016). PSS can be divided into (Mont, 2002) (a) products/services com-binations/substitutions; (b) services at the point of sale; (c) different concepts of product use (subdivided into use oriented and result ori-ented); (d) maintenance services; and (e) revalorisation services. PSS models require close collaboration between producers and consumers (Lozano, Carpenter, & Satric, 2013). According to Corder and Golev (2019), it is more common to find CE practices in product-oriented organisations.

This paper focuses on analysing how organisations of all types have been closing the CE loops. The paper is structured in the follow-ing way: Section 2 presents the methods; Section 3 provides the results; and Section 4 offers the discussion and conclusions.

2 | M E T H O D S

A survey was developed to investigate the importance of how sus-tainability has been embedded in organisations, including CE efforts. Most of the replies to the questions were on a 5-point scale (extremely

important to not at all important or completely agree to completely disagree) and their rankings. They were complemented with

open-ended questions to deepen the knowledge.

The survey was applied using the online survey tool Qualtrics (2018). The data collection took place from May to November 2018. The survey consisted of five sections:

1. Organisation characteristics, including country of origin, size and product–service focus

2. Role of sustainability for the organisation and role of the respondent in the company

3. Sustainability questions, including CE efforts

4. Organisational change towards sustainability and incorporation of sustainability

5. Stakeholders role in the organisation's sustainability engagement

6. Role of the supply chain

This paper is focused on Sections 1 and 3, whereas other sections have been analysed in papers already published (see Lozano, 2020; Lozano & Garcia, 2020) or are under preparation. The survey was sent to a database of 5,299 contacts from different organisations obtained from the Global Reporting Initiative (GRI) list of organisations world-wide and personal contacts. In addition, 107 anonymous links were sent out. Three reminders were sent out: one in July 2018, one in September 2018 and one in October 2018. From the total list of emails, 616 emails bounced back. From the total number of organisa-tions canvassed, 256 full responses were obtained for analysis in this paper, that is, a response rate of 5.47%.

The CE questions included whether the respondents had obtained any results from using CE as a tool/initiative, with five possi-ble answers (not used/do not know; negative results; no perceived results; some results; and good results); and, in regard to material and energy resources, whether their organisation reduces, repairs, remanufactures/refurbishes and recycles internally (within the organi-sation) and externally (outside the organisation, i.e., in collaboration with other organisations), using a 5-point Likert scale (strongly agree to

strongly disagree).

The data were analysed using descriptive analysis, the Friedman test for relative ranking between items, Spearman correlations and Kruskal–Wallis tests to test for differences between the four ‘Rs’ internally and externally for each organisational sector, product/service combinations and number of years that the organisa-tions have been working on sustainability. The analyses were done using SPSS 24 (IBM, 2016).

2.1 | Limitations of the methods

The internal validity of this research might have been limited by the wide scope of the survey, which tried to cover many topics of sustain-ability in organisations. The Likert scale may suffer from acquiescence problems and desirability. The generalisability of results to all organi-sations may be limited to the application of a non-random sampling procedure and the focus on companies listed in the GRI Disclosure Database with additional input from personal contacts and ‘snowballing’ methods. Generalisability could be improved by a study based on a randomly selected sample drawn from the total number of corporations active in sustainability. A non-response bias may be cau-sed by companies from sectors that were contacted but refucau-sed to complete the survey. Most of the respondents were from Europe, which may not represent the reality in other regions.

3 | R E S U L T S

3.1 | Descriptive statistics

Of the 256 responses, 167 were companies, 39 public sector organi-sations, 46 civil society organisations and 4 preferred not to say. Two organisations had been actively engaged with sustainability for less

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than 1 year, 15 for between 1 and 3 years, 27 between 3 and 5 years, 68 between 5 and 10 years, 61 between 10 and 15 years, 83 more than 15 years and 4 did not answer.

From all the respondents, 254 indicated their product–service focus; 27 of these offered only products, 53 mainly products with some services, 26 equal number of products and services, 51 mainly services with some products and 97 services only.

As Figure 2 shows, the respondents were from more than 40 coun-tries, most of them from Europe, where the countries with most of the responses were Germany, Sweden, Spain, the Netherlands and Italy.

From the responses, 82 organisations had more than 5,000 employees, 71 between 1,000 and 4,999 employees, 15 between 500 and 999 employees, 17 between 250 and 499 employees, 22 between 50 and 249 employees and 47 between 1 and 49 employees.

F I G U R E 2 Country distribution of the responding organisations [Colour figure can be viewed at wileyonlinelibrary.com]

F I G U R E 3 Ranking of Rs (internally and externally) for all organisations (n = 211; Friedman test, p < 0.01). Group 1, blue; group 2, green; and group 3, purple [Colour figure can be viewed at wileyonlinelibrary.com]

T A B L E 1 The four Rs average and differences between the internal and the external results in each R

All—Reduces All—Repairs All—Remanufactures/refurbishes All—Recycles

Average 3.627 3.064 2.906 3.543

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Almost half of the responding organisations had good results (12.7%) or some results (32.9%) from using CE. The 17.3% of oganisations did not perceive results, 23.7% had not used or did not know about CE and only 0.7% had negative results using CE. In rela-tive terms (from the ones that used CE), 20% had good results, 51.7% had some results (32.9%), 27.2% did not perceive any results and 1.1% had negative results.

The 4Rs (internally and externally) were ranked in order of impor-tance, using Friedman significance tests (p < .01). They were divided into three groups according to their ranking (Figure 3).

Two Rs from the ‘internal side’, reducing and recycling, were ranked the highest (in blue). The second highest ranked group (in green) is also composed by reducing and recycling but from the external side and repairing (internally). The third group (in purple) comprises a combination of internal and external Rs (remanufactures/ refurbishes internally and externally and repairs externally).

Table 1 shows the mean of each R (all). Reducing has the highest mean (3.6270) but also the highest difference between the internal and the external side (0.3485). Remanufacturing/refurbishing has the lowest mean (2.9063) and the lowest difference between internal and external results (0.0098). The differences in all categories are positive when comparing each R for the internal and the external aspects, because the mean was higher for the internal part than for the exter-nal in all cases. Overall, organisations focused more on reducing and recycling more than on the other categories, such as repairing. Thus, their approaches are mainly concentrated on internal CE efforts.

3.2 | Correlations between the 4Rs (internally and

externally) and the use of CE

A correlation analysis was done between the 4Rs (internally and externally) and the use of CE. The results are presented in Table 2. All of the correlations were significant at p < 0.01. The results show posi-tive correlations between all the Rs (internally and externally). Some of them are higher than 0.5, such as between remanufactures/ refurbishes and repairs externally (0.784) and also internally (0.647). Correlations are also higher than 0.5 between both dimensions (inter-nally and exter(inter-nally) of each R: reduces (0.676); repairs (0.674); remanufactures/refurbishes (0.629); and recycles (0.609). However, the correlation between each R and the use of CE was low (less than 0.330). Organisations were using the 4Rs strategy (to a greater or lesser extent) to contribute to CE, but not all of them were aware of that, and this is reflected in their answers about the use of CE. It is possible that they were, for example, recycling, but they did not know that through recycling, they were contributing to CE.

3.3 | Comparing differences in means

This section presents the differences in means (using Kruskal–Wallis test) for organisational sector, product–service-focus and years engaged with sustainability. TA

BLE 2 C orrelat ions bet ween the four Rs and the use of CE Internally Reduces Internally Repairs Internally Remanufactures/refurbishes Internally Recycles Externally Reduces Externally Repairs Externally Remanufactures/refurbishes Externally Recycles Circular economy Internally — Reduces 1.000 Internally — Repairs 0.512 1.000 Internally — Remanufactures/ refurbishes 0.362 0.647 1.000 Internally — Recycles 0.462 0.483 0.429 1.000 Externally — Reduces 0.676 0.418 0.334 0.432 1.000 Externally — Repairs 0.414 0.674 0.507 0.423 0.505 1.000 Externally — Remanufactures/ refurbishes 0.378 0.490 0.629 0.372 0.489 0.784 1.000 Externally — Recycles 0.429 0.405 0.386 0.609 0.588 0.537 0.514 1.000 Circular economy 0.267 0.185 0.233 0.276 0.327 0.202 0.233 0.291 1.000 Abbreviation: CE, circular economy.

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3.3.1 | Means differences in sector

A Kruskal–Wallis test was carried out to test for differences in means between companies, public sector and civil society organisations for

all the R variables and in the use of CE. On the one hand, there are differences in most of the Rs, internally and externally (Table 3), and the means for companies are higher than for public sector and civil society. The biggest differences appeared in‘reduces’ and ‘recycles’, in

T A B L E 3 Comparison between types of sector

Item Sector Mean rank Kruskal–Wallis H p value

Reduces All—Reduces Companies 136.28 10.225 ***

Public sector 98.82 Civil society 114.46

Internally—Reduces Companies 137.04 12.442 ***

Public sector 99.26 Civil society 111.35

Externally—Reduces Companies 119.30 7.188 **

Public sector 93.30 Civil society 97.99

Repairs All—Repairs Companies 132.50 4.508 0.105 Public sector 105.85

Civil society 122.24

Internally—Repairs Companies 125.21 2.150 0.341 Public sector 107.34

Civil society 122.92

Externally—Repairs Companies 117.55 10.724 *** Public sector 82.29

Civil society 97.78

Remanufactures/refurbishes All—Remanufactures/refurbishes Companies 135.45 8.862 **

Public sector 99.62 Civil society 116.80

Internally—Remanufactures/refurbishes Companies 127.07 5.487 *

Public sector 98.35 Civil society 117.31

Externally—Remanufactures/refurbishes Companies 120.54 16.236 ***

Public sector 80.39 Civil society 91.06

Recycles All—Recycles Companies 138.08 13.787 ***

Public sector 95.71 Civil society 110.55

Internally—Recycles Companies 136.57 15.268 ***

Public sector 100.84 Civil society 101.02

Externally—Recycles Companies 124.50 19.778 ***

Public sector 79.15 Civil society 92.50

Use of circular economy Companies 126.17 1.672 0.434 Public sector 119.57

Civil society 111.83

* p < 0.10. **p < 0.05.

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T A B L E 4 Comparison between different product–service focus

Item Product–service focus

Mean rank

Kruskal–Wallis

H p value

Reduces All—Reduces Only products 130.00 5.370 0.251 Mainly products with some

services

136.37 Equal amount of products and

services

143.06 Mainly services with some

products

133.25 Only services 114.76

Internally—Reduces Only products 122.28 13.052 ** Mainly products with some

services

131.93 Equal amount of products and

services

168.23 Mainly services with some

products

129.78 Only services 114.41

Externally—Reduces Only products 120.33 2.776 0.596 Mainly products with some

services

116.70 Equal amount of products and

services

123.60 Mainly services with some

products

108.83 Only services 104.45

Repairs All—Repairs Only products 111.41 7.881 *

Mainly products with some services

133.42 Equal amount of products and

services

137.83 Mainly services with some

products

146.11 Only services 116.19

Internally—Repairs Only products 120.48 5.593 0.232 Mainly products with some

services

119.80 Equal amount of products and

services

129.44 Mainly services with some

products

140.67 Only services 113.29

Externally—Repairs Only products 102.10 8.835 *

Mainly products with some services

110.85 Equal amount of products and

services

136.12 Mainly services with some

products

116.98 Only services 96.46

Remanufactures/refurbishes All—Remanufactures/refurbishes Only products 122.67 12.322 **

142.55

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T A B L E 4 (Continued)

Item Product–service focus

Mean rank

Kruskal–Wallis

H p value

Mainly products with some services

Equal amount of products and services

144.69 Mainly services with some

products 141.52 Only services 108.64 Internally Remanufactures/refurbishes Only products 124.08 7.648 0.105 Mainly products with some

services

131.87 Equal amount of products and

services

139.75 Mainly services with some

products 127.40 Only services 106.81 Externally Remanufactures/refurbishes Only products 117.05 12.642 **

Mainly products with some services

114.13 Equal amount of products and

services

137.14 Mainly services with some

products

116.03 Only services 91.73

Recycles All—Recycles Only products 122.00 8.788 * Mainly products with some

services

139.29 Equal amount of products and

services

141.88 Mainly services with some

products

140.60 Only services 111.85

Internally—Recycles Only products 128.58 8.567 * Mainly products with some

services

130.34 Equal amount of products and

services

153.64 Mainly services with some

products

128.55 Only services 111.66

Externally—Recycles Only products 115.19 9.169 *

Mainly products with some services

118.27 Equal amount of products and

services

133.77 Mainly services with some

products

118.99 Only services 96.42

Use of circular economy Only products 138.06 10.922 **

Mainly products with some services

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all the dimensions. On the other hand, there are no differences when comparing the use of CE between the three sectors.

3.3.2 | Means differences in product

–service focus

Differences in means comparing organisations by their product service focus were detected, where product-oriented organisations used CE more than the other types of organisations (Table 4). This is in line with CE practice (see Corder & Golev, 2019).

3.3.3 | Means differences in years engaged with

sustainability

The tests did not show any statistically significant differences between organisations that had been actively engaged with sustainability for different number of years, from zero to more than 15 years, when the means in all Rs were compared. However, there were differences in the responses to the question about the use of CE: the more years engaged with sustainability, the more the use of CE in the organisation (Table 5). Organisations working with sustain-ability for longer implemented CE more effectively. This could be due to such organisations having a greater understanding of both con-cepts. Organisations with less sustainability experience may not be aware of the meaning of CE and what it encompasses and thus may have answered that they do not use CE, even when they are implementing some of the 4Rs.

4 | D I S C U S S I O N A N D C O N C L U S I O N S

CE has become one of the most recent and significant ways to address environmental sustainability. In CE, waste is used as a resource in other parts of the value chain by shifting the focus to closing material loops through different types and levels of recovery, represented by the 4Rs (reduction, repairing, remanufacturing and recycling). CE activities have focused mainly on the macro and meso levels (see Yong, 2007; Yuan et al., 2008). Research and practice on the micro level have been limited (see European Commission, 2014b), mainly focusing only on one type of organisation, that is, corporations (e.g., Ormazabal et al., 2018), or with a focus on a particular country (e.g., Oncioiu et al., 2018). This paper focuses on analysing how orga-nisations have closed the CE loops using the 4Rs. It provides more insights into the micro level by analysing their CE efforts internally (within the organisation) and externally (outside the organisation, that is, in collaboration with other organisations).

A survey was sent to a database of 5,299 contacts from different organisations, from whom 256 complete responses (5.47%) were obtained. The results show that organisations focus on reducing and recycling more than on repairing and remanufacturing and in particu-lar on internal CE efforts, which complements the research of Bassi and Dias (2019) and Oncioiu et al. (2018). In addition, the results highlight that some organisations while engaging with the 4Rs do not do so under the CE umbrella, whereas some that claim to apply CE have low levels of engagement with the 4Rs. The results also show that organisations favour reducing and recycling (concurring with Bassi & Dias, 2019) from an internal focus. Additionally, a discordance T A B L E 4 (Continued)

Item Product–service focus

Mean rank

Kruskal–Wallis

H p value

Equal amount of products and services

130.29

Mainly services with some products

130.32 Only services 105.87

*p < 0.10.

**p < 0.05 (Kruskal–Wallis test).

T A B L E 5 Comparison between different years engaged with sustainability

Item Years engaged with sust. Mean rank Kruskal–Wallis H p value

Use of circular economy Less than 1 year 34.00 20.246 ***

Between 1 and 3 years 77.23 Between 3 and 5 years 100.54 Between 5 and 10 years 120.14 Between 10 and 15 years 123.06 More than 15 years 144.85

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was found between CE understanding and its application in the responding organisations, where they have been using the 4Rs (to a greater or lesser extent) to contribute to CE, but not all of them are aware that they are applying CE principles.

This paper is one of the first on CE focusing on the micro level, that is, on organisations and their CE practices. The paper shows that organisations need to improve their 4Rs strategy to contribute more in depth to CE by a better linking of the theory of CE with its practice. CE also has to be implemented in a more holistic way externally, for example, through better collaboration with all involved stakeholders.

This research stresses that the gap between CE theory and prac-tice needs to be closed to make CE circular. It should be noted that organisations are not islands but have to collaborate with their stake-holders in order to achieve the goals of CE and sustainability.

Further research could be focused on the micro level, in order to analyse how organisations are understanding and implementing CE and to better link the micro, meso and macro levels.

O R C I D

Maria Barreiro-Gen https://orcid.org/0000-0001-6260-6727

Rodrigo Lozano https://orcid.org/0000-0003-1441-7555

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How to cite this article: Barreiro-Gen M, Lozano R. How

circular is the circular economy? Analysing the implementation of circular economy in organisations. Bus Strat Env. 2020; 1–11.https://doi.org/10.1002/bse.2590

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