The Role of Institutions in Creating Circular Economy Pathways for Regional Development

• Published date: 01 June 2021
• Author: Cali Nuur,Maryna Henrysson
• Date: 01 June 2021
• DOI: 10.1177/1070496521991876
• Subject Matter: Articles

Article

The Journal of Environment &

Development

2021, Vol. 30(2) 149–171

© Author(s) 2021

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DOI: 10.1177/1070496521991876

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The Role of Institutions

in Creating Circular

Economy Pathways for

Regional Development

Maryna Henrysson

1

and Cali Nuur

2

Abstract

In the past decade, the circular economy has gained attention as a mechanism of

transition toward a regenerative, low carbon, and resource-eff‌icient society. As the

history of previous radical transformations shows, successful transition toward the

circular economy cannot take place without understanding the institutional features of

industrial transformations. This article highlights the signif‌icance of institutions by

placing the circular economy model in the context of the natural resource–based

sector and discusses the importance of institutions in regional path development. The

article identif‌ies three institutional determinants of both endogenous and directed

transformation toward the circular economy model in the regional context: (i)

proximity of physical f‌lows and assets, (ii) maturation and diversity of market networks,

and (iii) inherent values and patterns of cooperation. This article offers a starting point

for future studies of circular economy transitions and the role of institutions as en-

abling, as well as at times obstructing transition environments.

Keywords

circular economy transition, institutions, natural resource–based sector, regional path

development

Introduction

The urgency of addressing the climate change crisis and rapid environmental deg-

radation is putting transformative pressures on all industries, regions, and nations.

1

Energy Systems Division, Department of Energy Technology, Royal Institute of Technology, KTH, Sweden

2

Department of Industrial Economics and Management, Royal Institute of Technology, KTH, Sweden

Corresponding Author:

Maryna Henrysson, Energy Systems Division, Department of Energy Technology, Royal Institute of

Technology, KTH, Brinellv¨

agen 68, Stockholm 100 44, Sweden.

Email: maryna.henrysson@energy.kth.se

There is a consensus that the current production and consumption patterns of society

need to be radically transformed in order to be compatible with a carbon- and resource-

constrained future. There is no lack of perspectives, models, and approaches to the

sustainable transformation of societies and economies from green growth (UNEP,

2011) to degrowth (Kallis et al., 2018;Schr¨

oder et al., 2019). The circular economy

(CE) model has recently surfaced in the discussions on the societal and industrial

sustainable transformation agenda as a promising strategy for sustainable development

(Schroeder et al., 2019).

The CE model aims to create and sustain “a carbon-neutral, resource-eff‌icient, and

competitive economy”(An EU Action Plan for the Circular Economy, 2015, p. 2).

Unlike traditional economic cycles, the CE model emphasizes the deliberate long-term

maintenance of economic value and the functionality of material cycles along with

energy cascading and the use of renewable energy. The CE model prioritizes resource

and energy eff‌iciency delivered by radical and incremental innovations with solutions

that primarily aim to minimize wastage while maximizing prof‌its. The key to this is

local regenerative systems aimed at decoupling economic activity from virgin resource

consumption. The critical factors for circular economy implementation include en-

vironmental, economic, social, institutional, technological and informational, supply

chain, and organizational factors (Tura et al., 2019), and these are well documented

(e. g., Kirchherr et al., 2018;Preston & Lehne, 2017) for a range of industries (Jaeger &

Upadhyay, 2020;Salmenper¨

a et al., 2021). However, the dominant scholarly and policy

debates on the CE-based transition thus far have largely focused on the technological

and industrial aspects, such as business model innovation and process engineering

(Khitous et al., 2020;Murray et al., 2017). Nonetheless, the success of the CE model

largely depends on the relational dynamics that underlie industrial, regional, and

national development. For instance, despite the acknowledged importance of in-

stitutions in shaping the pace and nature of transformations, a relatively small pro-

portion of CE literature applies institutional analysis (Giezen, 2018;Ranta et al., 2018).

In addition, there are only a small number of studies that address adoption of the CE

model in a regional context (Scarpellini et al., 2019). The current CE strategies

predominately focus on manufacturing systems in urban areas and industrial resource

management (e.g., Ghisellini et al., 2016;Kirchherr & van Santen, 2019). Along with

the lack of knowledge of institutional determinants as both enabling and hindering

factors of regional transformation, the CE in the context of, for example, natural

resource–based regions remains understudied.

The overall objective of this article is to address these gaps and advance un-

derstanding of how the interaction of institutional structural and agency factors def‌ines

regional, place, and industry-specif‌ic transformation toward the CE model. This article

focuses on the determinants of CE model diffusion and has two distinct aims. First, it

aims to examine and illustrate the determinants of both endogenous and directed

transformation relevant to the CE model in the regional context. To do so, we focus on

natural resource–rich regions in old industrialized nations, where economic activities

are mostly dominated by the natural resource–based industries (NRBIs). Second, the

article aims to suggest an analytical perspective that can be adapted by scholars in the

150 The Journal of Environment & Development 30(2)