Identification of risks in circular economy practices: A systematic review of academic studies

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Abstract

The circular economy (CE) is gaining significant attention as a sustainable alternative to the traditional linear model of production and consumption. This study explores the complexities of implementing CE practices across diverse industries, focusing on the political, economic, social, technological, and environmental (PESTE) risks involved (Tsytsyna, 2019). By analyzing literature and case studies from companies such as Lucozade, McDonald’s, Volkswagen (Vollero, 2022), and H&M, the research identifies key barriers such as inconsistent regulatory frameworks, high initial costs, greenwashing practices, and technological challenges. These issues often hinder the seamless integration of CE principles into business operations. The paper argues that a comprehensive risk management framework is essential for overcoming these obstacles, promoting transparency, and enhancing stakeholder collaboration. Moreover, the study provides insights into how businesses can align their strategies with CE principles, thus contributing to a more sustainable and resilient economic model. Practical recommendations are offered to policymakers and industry leaders to foster innovation, encourage compliance, and facilitate the widespread adoption of CE practices, ultimately aiming for a balanced and sustainable development that benefits both the economy and the environment.

Keywords: Circular Economy, Risks, Political Risk, Economic Risk, Technological Risk, Social Risk, Environmental Risk, Greenwashing

Authors’ individual contribution: Conceptualization — K.P.; Methodology — K.P. and A.M.; Formal Analysis — K.P. and A.M.; Investigation — K.P. and A.M.; Resources — K.P. and A.M.; Writing — Original Draft — K.P. and A.M.; Writing — Review & Editing — A.M.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: M14, Q01, Q56

Received: 16.05.2024
Accepted: 06.02.2025
Published online: 10.02.2025

How to cite this paper: Prendi, K., & Murrja, A. (2025). Identification of risks in circular economy practices: A systematic review of academic studies. Risk Governance and Control: Financial Markets & Institutions, 15(1), 130–139. https://doi.org/10.22495/rgcv15i1p13