A Qualitative-Based Study on Barriers to Change from Linear Business Model to Circular Economy Model in Built Environment—Evidence from Bangladesh

Financing-Related Drivers and Barriers for Circular Economy Business: Developing a Conceptual Model from a Field Study

“…The CE and CE business studies provide more indirect evidence of some finance-related factors. Studies of operational drivers and barriers for CE business have generally argued that financing often serves as a barrier for CE actors and companies that needs to be overcome if they are to operate by, or transition to, circular principles [2,3,[30][31][32][33]. These studies have suggested that, for example, a lack of capital for capital-intensive circular business models [20,31], the need for funding and upfront costs for CE transformation [34,35], and insufficient profitability [31,36] complicate CE businesses.…”

“…Company size SMEs find it more difficult to obtain financing for CE [4,19,[29][30][31][32][33][34][35] SMEs are more sensitive to extra costs [19,30] For SMEs, it is more difficult for them to obtain collateral for bank financing [19,33,34] SMEs often have no time and/or knowhow to apply for financing [29] High upfront investment costs High upfront investments (e.g., for technology, process implementations, innovation activities) are uncertain and sizable [2-4, 17, 24, 30, 36-42] Lock-in for linear processes requires drastic changes and therefore sizable investments [2,36] Circular business models' capital funding CEBMs are seen as capital-intensive, with long payback times and unfamiliar risks [2,17,19,29,43] PaaS, as an example, demands large amounts of working capital [43] The role of public financial support Public financial incentives are crucial in the CE transition [2, 3, 11, 17, 30, 33-35, 38, 41, 44-46] Investments which are otherwise not profitable can be made feasible with public support [2,42,46] Taxation requires changes to accommodate transition to CE [10,18,47] Current valuation and profitability of circular business models Traditional financiers, in particular, do not trust the value of CE business and require a precedent of profitability and risks [3,5,15,…”

“…Societies and businesses are transitioning toward sustainability and the circular economy (CE) [1], and this development is shaped by diverse technical, economic, and cultural barriers and drivers [2,3]. Because of this, the finance industry is playing a crucial role in this transition [4,5].…”

“…Because of this, the finance industry is playing a crucial role in this transition [4,5]. Even though the finance industry has shown increasing interest in sustainable development and related values [6,7], and scholars' interest in the connection between finance and sustainability is likewise increasing [8,9], and many factors, such as taxation [10], public financial incentives [4,11], and high upfront investments [2,3], have been found to drive or inhibit transition to the CE, focused view on financial drivers and barriers for CE business is still missing.…”

“…Although finance has a crucial role in how businesses and society can move toward the CE [1], surprisingly, little research has focused on CE financing, particularly in terms of how the shift toward more circular business is financed and how financing can shape the transformation of the current linear economic model into a circular one toward a CE. Some CE studies have provided initial yet unfocused insights on diverse finance-related factors and aspects (e.g., the high upfront investment costs and low profitability of CEBM as barriers [see, e.g., 2,3,17). Only a handful of studies have so far focused on CE financing.…”