Circular Supply Chain Management (CSCM)

Geissdoerfer et al. [60] (p. 714) define “the configuration and coordination of the organizational functions marketing, sales, R&D, production, logistics, IT, finance, and customer service within and across business units and organizations to improve operative effectiveness and efficiency of the system and generate competitive advantages.” Circular supply chain management (CSCM) offers a compelling perspective that includes the vision of a zero-waste economy and the restorative and regenerative cycles designed based on circular thinking.

For this restoration and regeneration of materials to achieve the vision of zero waste, business model and supply chain designs must be adapted with the participation of a wide range of stakeholders [27]. For them, distributors must be considered from a broader perspective, since they are no longer considered only as the company's suppliers—closed-loop—but also as others in the same sector—open-loop, same sector—and even in other sectors—open-loop, cross sector [61]. Decision making in supply chain management should be done with the estimation of different types of costs. This estimation generally depends on several factors that make up the supply chain [62], which will be analyzed from the main theoretical perspectives in strategic management literatures.

Theoretical Perspectives in Strategic Management Literature

The resource-based view (RBV) [63–65] contributes to a better understanding of how the company as a whole works, as well as the resources and competencies fundamental for the company to redesign its operations in response to a change in competitive conditions. "Companies need certain dynamic capabilities and organizational routines to deal with the increased complexity of managing innovation from a sustainable perspective" [66] (p.225). The capacities, routines, and resources included in the business model must allow, on the one hand, the detection of opportunities with the objective of obtaining valuable knowledge about the business habitat [67], and on the other hand, seizure through organizational capacities to take advantage of recognized opportunities and create value from them [68]. Both must achieve the implementation of new products, services, or processes [66]. Therefore, “RBV is considered as an adequate theoretical framework to understand whether specific resources applied to the CE by businesses are relevant for closing production loops without affecting the level of competitiveness” [69] (p. 3).

Industrial ecology (IE) can be defined as a policy with the aim of reducing the amount of waste creation by examining the flows of materials and energy in industrial systems as closing the material flow loop efficiently [70,71]. “The IE enables understanding how the industrial system works, how it is regulated, and what interactions it presents, to restructure it in order to make it similar to natural systems” [72] (p. 2). For all that, circular supply chain incorporates concepts and ideas from IE.

The agency theory will also condition how it operates, since the company (who act as principal) must ensure that the different primary stakeholders (customers or suppliers) will behave in accordance with the contractual terms established. These terms should enable the achievement of business objectives related both to the provision of sustainable services and to the sale and recovery of products at the end of their useful life [31,73]. It must therefore consider temporal aspects that would be related to the technical life of the product and the duration of the cycle of use of the same one [72]. The value chains can be mapped to visualize the linkages and interactions between the different stages and chain actors to understand the complexities of such multi-actor systems and make informed decisions regarding the coordination and balance among stakeholders of a supply chain [74,75]. For this reason, [45] consider that greater intensity is required in the relationships established in the supply chain and with customers. It implies a change of focus, focusing on the life cycle of the product and not on the quantity of the product produced.

Strategic networks are stable inter-organizational links which are of importance to the company and which express these links through various forms, such as strategic alliances or long-term buyer-supplier partnerships [76]. The network perspective is of great relevance for understanding value creation in the circular economy due to the importance of the networks that are formed between companies, their suppliers, their customers, and other relevant partners [60].

The configuration of the network in terms of density and centrality [77] and the importance of governance mechanisms such as trust. Other sources of value in strategic networks include shortened time to market [78], enhanced transaction efficiency, reduced asymmetries of information, and improved coordination between the firms involved in an alliance [76]. It seeks “to change organizational mindsets to facilitate collaborative knowledge development and sharing, the creation of shared visions, and collaborative value propositions” [79] (p. 23).

In the context of institutional theory, companies incorporate social legitimacy through adopting the norms and social traditions predominant in their environment [23]. Powerful institutions have an option of implementing policies which boost organizations and the population to adopt a practice [80]. The environment of the circular economy is governed by new rules and customs that revolutionize social, cultural, and political models.

From the main theoretical perspectives of strategic management literature, we propose four main dimensions that would allow us to classify the main factors found in the literature review (Figure 3). In the following sections we will carry out a detailed analysis of these dimensions and their variables, to finally propose a conceptual model to support the design and implementation of circular supply chains.

Conceptual model for the integration of circular economy into supply chains

Four fundamental dimensions have been identified when developing and implementing circular supply chains—greater intensity in the relationships established in the supply chain, adaptation of logistics and organizational, disruptive and smart technologies, and a functioning environment. These dimensions apply both within the organization and in its environment. 

Regarding the establishment of a new framework of relationships, successful circularization will require integrated synergistic actions by all actors and sectors involved and supported by improved flows of knowledge [107]. The development of a relational capacity is also essential. Relationships are closer, more frequent, and with new actors. Achieving a model of adoption of the full circular would imply its application both internally and externally, involving suppliers and customers in their internal activities [28].

In addition, the company needs to adapt both logistically and organizationally. Reverse logistics encourage the return of material via the producer and industrial symbiosis favors the exchange of waste between industrial partners. But the transformation goes much further. It requires the design of circular business models [108]. Consequently, achieving archetypes through business models of CE, which are recognized at both the meso and micro levels, would allow the development of a common framework [96].

The new technologies allow the development of new functionalities necessary for productive and management change [58]. The main role of information and communication technologies is the application of push and saving impacts to optimize the economic processes of production, consumption and circulation. So, technology development toward a circular economy in three fundamental aspects: (1) The production, for example recycling of waste, high-efficiency incinerators and cogeneration systems, product design, manufacturing, and remanufacturing processes; (2) the stakeholders, for example predictive analysis and the exchange of information; and (3) the information, so through the Internet of Things (IO) and the Internet of services, information is monitored, controlled, and transferred.

As a final point, through long-term agreements [15], the establishment of reward systems [58], and the achievement of financial and legal commitments [109], the company can capture value. Because of the need for collaboration between different actors, there is a need to employ a multidisciplinary system in solving problems where actors can be held responsible for others for their tasks and deliveries [83]. A holistic framework helps companies ensure they are more environmentally-conscious in circular supply chain activities and provides a roadmap in terms of environmental, economic, logistical, operational, and organizational activities [16] to adopt circular supply models effectively. The new framework is also more complex, and thus more difficult to apply than the original one.

Figure 4. Conceptual model for the integration of circular economy into supply chains

This entry is adapted from the peer-reviewed paper 10.3390/su12062459