Managing Circular Economy Risks with an Integrated Strategic Approach

In recent years, the circular economy (CE) has attracted increasing interest as an alternative way to do business. Creating a CE model means replacing the concept of the “end of life of a product”, typical of the linear model, with the concept of regeneration, focusing on the use of renewable energy sources and the reduction of waste through interventions on the design of materials, products, and systems. Therefore, the CE is not only a response to a purely environmental issue, but it is also an opportunity for increasing competitiveness, reducing the dependence from the import of raw materials, and generating benefits on trade balances as well as for businesses. A strategic shift to the CE should rely on three strategic pillars: first, corporate governance, considered as the board’s commitment to sustainability, innovation and resiliency; second, the ability to create and nurture relations with stakeholders; third, the search of alternative solutions to linear production thanks to innovation. However, these pillars are subject to risks, which include misalignment of circular strategies, inability to adopt a broad concept of corporate performance involving long-term economic, social and environmental impacts, and inability to assess the investments required to innovate. To help companies overcome the difficulties implicit in the CE transition and avoid strategic mistakes, this paper suggests a conceptual framework for strategic risk management in organizations inclined to sustainability and circularity. The researchers tested the proposed framework on IKEA, which has already adopted a valuable approach for managing the CE, in which risk management plays a central role for the Group’s success. To this purpose, the researchers applied the case study method, which they developed through the qualitative content analysis technique. The case study demonstrated the completeness and adequacy of the conceptual framework. This permitted to conclude that the framework formulated in this paper is an effective instrument for companies engaged in the CE transition.