Better environmental performance achieved in business by adopting a circular economy

New research shows that Small and Medium Sized Enterprises (SMEs) are likely to achieve higher environmental performance by encouraging the circular economy – where products and services are designed to be reused, to use less resources and made easier to repair.

In contrast to the 'take-make-waste' linear model, a circular economy systemic approach to economic development is regenerative by design and aims to gradually decouple growth from the consumption of finite resources and benefits businesses, society, and the environment. These are the findings from a study led by Aston University with Essex Business School, Toulouse Business School, Birmingham City University and Agricultural University of Athens.

Data was gathered from around 100 SMEs from four selected countries – Greece, France, Spain, and the UK - using a survey to study the current state of circular economy adoption, and subsequently, focus groups were organised which involved SMEs owners and managers, policymakers, SMEs' customers and suppliers, in each country to derive means for improving sustainability performance.

The study reveals that SMEs in all the participating countries are likely to achieve higher environmental performance through adopting a circular economy model. SMEs in France were likely to achieve higher overall sustainability performance than other participating countries.

It also found products, processes and facilities design are likely to help SMEs most in all the participating countries to adopt the circular economy approach, while all needed to improve their waste management.

Dr Debashree De from Essex Business School said: “Prior research had shown SMEs achieving superior environmental performance by adopting the circular economy approach, but economic and social performances are not assured. This motivated us to undertake empirical research to reveal how companies can achieve higher sustainability performance (economic, environmental, and social) by adopting a circular economy adoption.

“The findings of this research enable us to continue to promote the adoption of circular economies not only in other European countries but also in India.

“SMEs in the EU countries are likely to have sustainable design practices aligned with the philosophy of circular economy. However, SMEs in the participating countries are also likely to have less good recover function – that is the ability to come back from a major cybersecurity incident to normal operations.

“This implies that customer demand is central to SMEs adopting circular economy principles as design function (the definition of the physical form of a product, for example) in most of the SMEs' businesses is governed by SMEs' customers. Whereas effective recover function depends on SMEs' self-motivation and policymakers’ pressure.

“Circular economy adoption needs a structured approach to analysing organisational value functions with sustainability performance, identifying issues and challenges, and suggesting means for improvement across value functions.”

You can read the full report here.