Circularity Development Program, Blog 6: How to align an organization for circular transition?

How to align an organization for circular transition?

Unlocking the transformative power of circularity within organizations demands not only a shift in product design, business models and value chain composition, but also cross-organizational internal realignment. In the Circularity Development Program’s last Sprint, we delved into the complexities of building internal cohesion for circular transition. 


Internal Barriers for Circular Transition

The transition to circularity is a large cultural shift that requires the build-up of entirely new capabilities, change management and clear leadership. As we have dived deeper into what circularity development truly means in an organization, it seems internal barriers may present a larger challenge for adopting circularity than external, ecosystem-related challenges. 

These internal challenges include 

  • the difficulties in integrating circular economy practices into existing business models

  • risk-averseness, hesitance for change, and hesitance to experiment with new business models that may even cannibalize their own business

  • prioritizing short-term financial goals over long-term sustainability, hindering the adoption of circular practices that may have longer payback periods

  • absence of standardized metrics and reporting methods for circular economy makes it difficult for companies to engage employees and measure and communicate the circular progress effectively

  • rethinking and restructuring supply chains is difficult – the complexity of existing supply chains and established sourcing routines may make it challenging to adopt circular sourcing practices

Overcoming these barriers often requires a strategic and holistic approach that involves cultural change, building new capabilities, collaboration across functions and value chain, and of course a long-term vision for circularity.


Top-down and Bottom-up Circular Strategies

Companies develop circularity with top-down and bottom-up strategies.

Top-down led circular strategies often falter due to their generic nature, making it challenging to translate them into tangible initiatives in businesses. Top-down strategies may lack the necessary implementation platform, governance structures, and aligned incentives. Moreover, in many instances, the unit or function dealing with the cost and execution challenges of circular initiatives does not directly capture the resulting business value. Successful circularity initiatives and the development of new business models require precise cross-functional coordination.

On the other hand, bottom-up approaches typically concentrate on specific operational aspects linked to circular opportunities within an existing value chain. These efforts might stay modest, incremental, and limited to isolated trials that struggle to demonstrate clear value. In addition they might lack the scalability to encompass the entire business.

To tackle these challenges, collaboration and change management across the organization are essential. Companies must make sure that they align both top-down and bottom-up approaches to fully build circularity internally. (1)


Building cross-organisational teams and capabilities to speed up the circular transformation

According to the Nordic Circular Economy Playbook (2), there are nine critical capabilities for adopting circularity along a product’s lifecycle:

1. Design for Circularity

2. Circular Sourcing and Procurement

3. Circular Manufacturing and Remanufacturing

4. Selling Outcomes and Lifecycle Services in Sales and Use Stages

5. Take Back Products at End-of-Life

6. Reuse and Recycle Products

7. Deploy Technologies and Data for Delivering Outcomes

8. Orchestrate Ecosystem of Partners

9. Transform Culture and Steering

In developing these capabilities, a cross-organizational approach is crucial. Such an approach could mean that each capability is spearheaded by a specific business function, with support from other relevant functions. For instance, designing products for circularity should be led by the Design and R&D function, supported by remanufacturing, sales, and aftersales. (2)


A Call for Holistic Transformation

Achieving circularity on a company level demands a fundamental shift in organizational culture, processes, and capabilities. In addition, the journey from a linear to a circular company requires synchronized efforts from the whole value chain, which means actively fostering multi-stakeholder collaboration. Building a comprehensive approach enables organizations to successfully unlock the full business value of a circular economy. 


(1) Bain, The Circularity Challenge: Expect Disruption and Get Out in Front of It (2022)
(2) Nordic Innovation, Sitra & Accenture:  Nordic Circular Economy Playbook

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