Circular Economy and the evolution of industrial districts: a supply chain perspective

Circular Economy promises to achieve sustainability by decoupling economic growth from resource extraction and environmental losses. However, it requires a systemic change in the design of products, business models and supply chains. In this study the evolution of the supply chain structure and relationships is addressed in the specific context of industrial districts – i.e., agglomerations of small and medium-sized firms territorially concentrated and specialised in one or more phases of a production process – undergoing a transition to Circular Economy. Through the study of the textile industrial district in Prato (Italy), this study addresses two topics that have been limitedly investigated in the literature. First, the potential role of Circular Economy in revitalising an industrial district in a decline phase. Second, how supply chain structure and relationships should evolve in an industrial district transitioning to Circular Economy. This study outlines the causes triggering industrial districts decline and discusses the factors that can induce a Circular Economy based re-organisation of industrial districts. Consequently, we provide insight to managers on how to successfully couple Circular Economy and technological or business model innovations with supply chain management practices. We also provide indications to policymakers on how local and regional actors can support a Circular Economy driven reorganisation of industrial districts. Finally, this study links contributions concerned with the Circular Economy transition, supply chain structure and relationships and evolution trajectories of industrial districts, thus paving the way for a deeper understanding of the interplay among these phenomena.