Why Circular Business Models Fail And What To Do About It

Abstract

The circular economy aims to decouple economic growth from negative environmental impacts. To achieve this goal, circular economy concepts and policies must be implemented in practice by organizations through new circular business models. However, organizations often fail to implement circular business models on the market at scale. This is a major problem in business innovation practice, while a knowledge gap about the underlying implementation challenges remains in the scientific literature. More research on the subject is needed. The objective of this study is contributing to shed light into the gap with empirical insights. Using an action research method within an EU innovation project, this article proposes a preliminary empirical framework that links the value proposition, creation, delivery, and capture dimensions of a circular business models with specific cultural, regulatory, economic, and technical barriers that might hinder implementation. Based on the framework, four lessons to support managerial action are provided. Future research might build upon this work by systematically collecting and structuring more granular empirical data about the specific reasons why new circular business models fail to be implemented by organizations, across different sectors and geographical areas.