Putting the Puzzle Pieces Together: A Systems Thinking Approach to Circular Economy Transitions

Abstract

The circular economy (CE) is increasingly recognized as a scientifically grounded framework for reconfiguring production and consumption systems to enhance environmental sustainability and resource efficiency. However, its implementation in corporate practice remains constrained by structural, institutional, and cultural barriers, requiring coordinated action across industry, government, academia, and civil society. Overcoming these challenges demands integrated strategies that align incentives, build capacity, and foster innovation across the entire value chain. This study adopts a systems thinking perspective to better understand how CE transitions unfold in practice and which dynamics support or hinder their diffusion. The analysis draws on 14 semi-structured expert interviews with representatives from companies, academia, and intermediary organizations in Germany. Using qualitative content analysis, the empirical insights are translated into a causal loop diagram (CLD) that illustrates key interdependencies, feedback loops, and nonlinear relationships among the CE parameters shaping corporate CE transformation processes. The results reveal two main reinforcing dynamics related to strategic commitment, market development, regulatory incentives, customer demand, and supply chain collaboration. At the same time, two main balancing dynamics—such as the economic disadvantages of secondary materials, regulatory uncertainty, insufficient infrastructure, and global competitive pressure—continue to limit broader adoption. By addressing the limitations of previous CLDs, namely aligning the micro, meso, and macro levels in CE transitions, this study contributes to business economics research by offering a holistic explanation of CE transitions and providing a conceptual basis for managerial decision-making and future system-oriented research.