The relationship between the circular economy and business performance: a systematic literature review
Abstract
The circular economy represents an effective way to address limited resources and mitigate the impact of human activity on the planet. To summarize the possible effect of circular economy implementation on business performance and its possible measurement, a systematic literature review on a final sample of 28 papers was conducted. The main findings reveal that the circular economy can help to improve business performance and that numerous indicators could be used to measure it, especially the balanced scorecard approach, which seems suitable for such classification (however, more research on this topic is needed). Additionally, it was revealed that the circular economy concept itself has no clear and generally used definition, which complicates the summarizing of the revealed indicators. To simplify future research, we proposed a research framework based on this systematic literature review and emphasized the research gaps.
Keyword : business performance, balanced scorecard, circular economy, indicators, sustainable, systematic literature review
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
Ahmad, N., Naveed, A., Ahmad, S., & Butt, I. (2020). Banking sector performance, profitability, and efficiency: A citation-based systematic literature review. Journal of Economic Surveys, 34(1), 185–218. https://doi.org/10.1111/joes.12346
Alkaraan, F., Elmarzouky, M., Hussainey, K., & Venkatesh, V. G. (2023). Sustainable strategic investment decision-making practices in UK companies: The influence of governance mechanisms on synergy between industry 4.0 and circular economy. Technological Forecasting and Social Change, 187, Article 122187. https://doi.org/10.1016/j.techfore.2022.122187
Antonioli, D., Ghisetti, C., Mazzanti, M., & Nicolli, F. (2022). Sustainable production: The economic returns of circular economy practices. Business Strategy and the Environment, 31(5), 2603–2617. https://doi.org/10.1002/bse.3046
Atif, S., Ahmed, S., Wasim, M., Zeb, B., Pervez, Z., & Quinn, L. (2021). Towards a conceptual development of industry 4.0, servitisation, and circular economy: A systematic literature review. Sustainability, 13(11), Article 6501. https://doi.org/10.3390/su13116501
Atstāja, D., & Spāde, E. (2020). Economic justification for the implementation of a circular economy. Economics Ecology Socium, 4(4), 16–27. https://doi.org/10.31520/2616-7107/2020.4.4-3
Baltazar, J. R., Fernandes, C. I., Ramadani, V., & Hughes, M. (2023). Family business succession and innovation: A systematic literature review. Review of Managerial Science, 17, 2897–2920. https://doi.org/10.1007/s11846-022-00607-8
Bartolacci, F., Paolini, A., Quaranta, A. G., & Soverchia, M. (2018). The relationship between good environmental practices and financial performance: Evidence from Italian waste management companies. Sustainable Production and Consumption, 14, 129–135. https://doi.org/10.1016/j.spc.2018.02.002
Bianchini, A., Guarnieri, P., & Rossi, J. (2022). A framework to assess social indicators in a circular economy perspective. Sustainability, 14(13), Article 7970. https://doi.org/10.3390/su14137970
Bogdan, V., Sabău-Popa, C. D., Boloș, M. I., Popa, D.-N., & Beleneși, M. (2022). Tracking waste management information disclosure behavior connected to financial performance through moderating variables. International Journal of Environmental Research and Public Health, 19(20), Article 13068. https://doi.org/10.3390/ijerph192013068
Bolland, E. J. (2017). Comprehensive strategic management: A guide for students, insight for managers. Emerald Publishing. https://doi.org/10.1108/9781787142244
Boulding, K. E. (1966). The economics of the coming spaceship earth. In H. Jarrett (Ed.), Environmental quality in a growing economy (pp. 3–14). Resources for the Future/Johns Hopkins University Press.
Cook, D. J., Greengold, N. L., Ellrodt, A. G., & Weingarten, S. R. (1997). The relation between systematic reviews and practice guidelines. Annals of Internal Medicine, 127(3), 210–216. https://doi.org/10.7326/0003-4819-127-3-199708010-00006
Cokins, G. (2009). Performance management: Integrating strategy execution, methodologies, risk, and analytics. Wiley.
Dong, H., Wang, B., Li, J., Li, Z., Li, F., & Wang, C. (2022). Circular economy implementation and business performance: The mediating role of environmental performance in the Chinese energy production enterprises. Frontiers in Environmental Science, 10. https://doi.org/10.3389/fenvs.2022.982994
Ellen MacArthur Foundation. (2013). Towards the circular economy. Vol. 1: Economic and business rationale for an accelerated transition. https://ellenmacarthurfoundation.org/towards-the-circular-economy-vol-1-an-economic-and-business-rationale-for-an
Ellen MacArthur Foundation. (n.d.). Circular economy introduction. What is circular economy? https://ellenmacarthurfoundation.org/topics/circular-economy-introduction/overview
European Commission. (2015). Communication from the commission to the European Parliament, the Council, the European economic and social Committee and the Committee of the regions. Closing the loop – An EU action plan for the circular economy. 2015, December 2, No. 52015DC0614. https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52015DC0614
European Parliament. (2023, May 23). Circular economy: definition, importance and benefits. https://www.europarl.europa.eu/news/en/headlines/economy/20151201STO05603/circular-economy-definition-importance-and-benefits
Farooque, M., Zhang, A., Liu, Y., & Hartley, J. L. (2022). Circular supply chain management: Performance outcomes and the role of eco-industrial parks in China. Transportation Research Part E: Logistics and Transportation Review, 157, Article 102596. https://doi.org/10.1016/j.tre.2021.102596
Gamidullaeva, L., Shmeleva, N., Tolstykh, T., & Shmatko, A. (2022). An assessment approach to circular business models within an industrial ecosystem for sustainable territorial development. Sustainability, 14(2), Article 704. https://doi.org/10.3390/su14020704
García-Quevedo, J., Jové-Llopis, E., & Martínez-Ros, E. (2020). Barriers to the circular economy in European small and medium-sized firms. Business Strategy and the Environment, 29(6), 2450–2464. https://doi.org/10.1002/bse.2513
Genovese, A., Acquaye, A. A., Figueroa, A., & Koh, S. C. L. (2017). Sustainable supply chain management and the transition towards a circular economy: Evidence and some applications. Omega, 66, 344–357. https://doi.org/10.1016/j.omega.2015.05.015
Gonçalves, B. de S. M., de Carvalho, F. L., & Fiorini, P. de C. (2022). Circular economy and financial aspects: A systematic review of the literature. Sustainability, 14(5), Article 3023. https://doi.org/10.3390/su14053023
Gupta, H., Kumar, A., & Wasan, P. (2021). Industry 4.0, cleaner production and circular economy: An integrative framework for evaluating ethical and sustainable business performance of manufacturing organizations. Journal of Cleaner Production, 295, Article 126253. https://doi.org/10.1016/j.jclepro.2021.126253
Hategan, C. D., Pitorac, R. I., & Milu, N. D. (2021). Assessment of the mandatory non-financial reporting of Romanian companies in the circular economy context. International Journal of Environmental Research and Public Health, 18(24), Article 12899. https://doi.org/10.3390/ijerph182412899
Ioannidis, A., Chalvatzis, K. J., Leonidou, L. C., & Feng, Z. (2021). Applying the reduce, reuse, and recycle principle in the hospitality sector: Its antecedents and performance implications. Business Strategy and the Environment, 30(7), 3394–3410. https://doi.org/10.1002/bse.2809
Ionaşcu, I., & Ionaşcu, M. (2018). Business models for circular economy and sustainable development: The case of lease transactions. Amfiteatru Economic, 20(48), 356–372. https://doi.org/10.24818/EA/2018/48/356
Jain, S., Jain, N. K., & Metri, B. (2018). Strategic framework towards measuring a circular supply chain management. Benchmarking, 25(8), 3238–3252. https://doi.org/10.1108/BIJ-11-2017-0304
Januska, M., & Chodur, M. (2009, May 13–17). Virtual enterprise network. In Proceedings of the 2009 32nd International Spring Seminar on Electronics Technology. Brno, Czech Republic. IEEE. https://doi.org/10.1109/ISSE.2009.5206949
Johl, S. K., & Toha, M. A. (2021). The nexus between proactive eco‐innovation and firm financial performance: A circular economy perspective. Sustainability, 13(11), Article 6253. https://doi.org/10.3390/su13116253
Kanzari, A., Rasmussen, J., Nehler, H., & Ingelsson, F. (2022). How financial performance is addressed in light of the transition to circular business models – A systematic literature review. Journal of Cleaner Production, 376, Article 134134. https://doi.org/10.1016/j.jclepro.2022.134134
Kaplan, R. S., & Norton, D. P. (1996). The balanced scorecard: Translating strategy into action. Harvard Business Press. https://doi.org/10.2307/41165876
Kazancoglu, Y., Kazancoglu, I., & Sagnak, M. (2018). A new holistic conceptual framework for green supply chain management performance assessment based on circular economy. Journal of Cleaner Production, 195, 1282–1299. https://doi.org/10.1016/j.jclepro.2018.06.015
Kennedy, R., Jamison, E., Simpson, J., Kumar, P., Kemp, A., Awate, K., & Manning, K. (2020). Strategic management. Virginia Tech Publishing. https://doi.org/10.21061/strategicmanagement
Khan, S. A. R., Razzaq, A., Yu, Z., & Miller, S. (2021). Industry 4.0 and circular economy practices: A new era business strategies for environmental sustainability. Business Strategy and the Environment, 30(8), 4001–4014. https://doi.org/10.1002/bse.2853
Kirchherr, J., Reike, D., & Hekkert, M. (2017). Conceptualizing the circular economy: An analysis of 114 definitions. Resources, Conservation and Recycling, 127, 221–232. https://doi.org/10.1016/j.resconrec.2017.09.005
Kwarteng , A., Simpson, S. N. Y., & Agyenim-Boateng, C. (2022). The effects of circular economy initiative implementation on business performance: The moderating role of organizational culture. Social Responsibility Journal, 18(7), 1311–1341. https://doi.org/10.1108/SRJ-01-2021-0045
Lacy, P., Long, J., & Spindler, W. (2020). The circular economy handbook: Realizing the circular advantage. Palgrave Macmillan. https://doi.org/10.1057/978-1-349-95968-6
Li, Y., Hu, Y., Li, L., Zheng, J., Yin, Y., & Fu, S. (2022). Drivers and outcomes of circular economy implementation: Evidence from China. Industrial Management and Data Systems, 123(4), 1178–1197. https://doi.org/10.1108/IMDS-05-2022-0267
Mazzucchelli, A., Chierici, R., Del Giudice, M., & Bua, I. (2022). Do circular economy practices affect corporate performance? Evidence from Italian large-sized manufacturing firms. Corporate Social Responsibility and Environmental Management, 29(6), 2016–2029. https://doi.org/10.1002/csr.2298
Moher, D., Liberati, A., Tetzlaff, J., & Altman, D. G. (2009). Preferred reporting items for systematic reviews and meta-analyses: The PRISMA statement. BMJ, 339, Article b2535. https://doi.org/10.1136/bmj.b2535
Moric, I., Jovanović, J. Š., Đoković, R., Peković, S., & Perović, Đ. (2020). The effect of phases of the adoption of the circular economy on firm performance: Evidence from 28 EU countries. Sustainability, 12(6), Article 2557. https://doi.org/10.3390/su12062557
Murray, A., Skene, K., & Haynes, K. (2017). The circular economy: An interdisciplinary exploration of the concept and application in a global context. Journal of Business Ethics, 140(3), 369–380. https://doi.org/10.1007/s10551-015-2693-2
Pearce, D. W., & Turner, R. K. (1989). Economics of natural resources and the environment. Johns Hopkins University Press. https://doi.org/10.56021/9780801839863
Rizos, V., Tuokko, K., & Behrens, A.(2017). The circular economy, a review of definitions, processes and impacts (Report No. 2017/8). Centre for European Policy Studies. https://aei.pitt.edu/85892/1/RR2017%2D08_CircularEconomy_0.pdf
Rodríguez-González, R. M., Maldonado-Guzmán, G., Madrid-Guijarro, A., & Garza-Reyes, J. A. (2022). Does circular economy affect financial performance? The mediating role of sustainable supply chain management in the automotive industry. Journal of Cleaner Production, 379, Article 134670. https://doi.org/10.1016/j.jclepro.2022.134670
Rolstadås, A. (1998). Enterprise performance measurement. International Journal of Operations & Production Management, 18(9/10), 989–999. https://doi.org/10.1108/01443579810225577
Sarfraz, M., Ivascu, L., Artene, A. E., Bobitan, N., Dumitrescu, D., Bogdan, O., & Burca, V. (2022). The relationship between firms’ financial performance and performance measures of circular economy sustainability: An investigation of the G7 countries. Economic Research-Ekonomska Istrazivanja, 36(1), 2545–2572. https://doi.org/10.1080/1331677X.2022.2101019
Stahel, W., & Reday-Mulvey, G. (1981). Jobs for tomorrow: The potential for substituting manpower for energy. Vantage Press.
Stankevičienė, J., & Nikanorova, M. (2020). Eco-innovation as a pillar for sustainable development of circular economy. Business: Theory and Practice, 21(2), 531–544. https://doi.org/10.3846/btp.2020.12963
Tang, Y. M., Chau, K. Y., Fatima, A., & Waqas, M. (2022). Industry 4.0 technology and circular economy practices: Business management strategies for environmental sustainability. Environmental Science and Pollution Research, 29(33), 49752–49769. https://doi.org/10.1007/s11356-022-19081-6
Taouab, O., & Issor, Z. (2019). Firm performance: Definition and measurement models. European Scientific Journal, 15(1), 93–106. https://doi.org/10.19044/esj.2019.v15n1p93
Tomašević, I., Stojanović, D., Slović, D., Simeunović, B., & Jovanović, I. (2021). Lean in High-Mix/Low-Volume industry: A systematic literature review. Production Planning & Control, 32(12), 1004–1019. https://doi.org/10.1080/09537287.2020.1782094
Torgautov, B., Zhanabayev, A., Tleuken, A., Turkyilmaz, A., Borucki, C., & Karaca, F. (2022). Performance assessment of construction companies for the circular economy: A balanced scorecard approach. Sustainable Production and Consumption, 33, 991–1004. https://doi.org/10.1016/j.spc.2022.08.021
Tranfield, D., Denyer, D., & Smart, P. (2003). Towards a methodology for developing evidence-informed management knowledge by means of systematic review. British Journal of Management, 14(3), 207–222. https://doi.org/10.1111/1467-8551.00375
Trisyulianti, E., Prihartono, B., Andriani, M., & Suryadi, K. (2022). Sustainability performance management framework for circular economy implementation in state-owned plantation enterprises. Sustainability, 14(1), Article 482. https://doi.org/10.3390/su14010482
Williams Jr, R. I. (2018). Measuring family business performance: Research trends and suggestions. Journal of Family Business Management, 8(2), 146–168. https://doi.org/10.1108/JFBM-12-2017-0047
Yu, Y., Xu, J., Zhang, J. Z., Wu, Y., & Liao, Z. (2022a). Do circular economy practices matter for financial growth? An empirical study in China. Journal of Cleaner Production, 370, Article 133255. https://doi.org/10.1016/j.jclepro.2022.133255
Yu, Z., Khan, S. A. R., & Umar, M. (2022b). Circular economy practices and industry 4.0 technologies: A strategic move of automobile industry. Business Strategy and the Environment, 31(3), 796–809. https://doi.org/10.1002/bse.2918
Zikopoulos, C. (2022). On the effect of upgradable products design on circular economy. International Journal of Production Economics, 254, Article 108629. https://doi.org/10.1016/j.ijpe.2022.108629