Blockchain and the transition to the circular economy: A literature review

Abstract

Companies and industries face various challenges when it comes to embracing the circular economy (CE). These challenges not only deter companies from adopting effective strategies that promote it but also hinder industries from effectively establishing a circular system that ensures the addition of economic value to the supply chain. To address these challenges, blockchain technology has emerged as a new and revolutionary protocol for sharing and updating information. It does so by linking databases within a decentralized, peer‐to‐peer, open‐access network, guaranteeing secure, immutable, and irreversible operations. Within this context, the primary objective of this article is to investigate how blockchain technology supports the transition to the CE. Additionally, the paper aims to identify the barriers that hinder the process of transitioning to the CE. To achieve this, a systematic literature review (SLR) was conducted, considering 22 articles published in recent years across Scopus, Web of Science, and Science Direct databases. The results of this review underscore the considerable potential of blockchain in supporting companies and industries as they embrace their roles in the CE and seek to overcome the barriers they encounter. The findings reveal that blockchain supports the transition to the CE by facilitating decentralization, enabling smart contracting, enhancing information sharing and improvement, ensuring traceability and transparency, providing incentives, offering protection and security, and promoting value creation. However, in examining the barriers that blockchain may face in supporting companies and industries as they transition to the CE, certain challenges are highlighted. These include issues related to low scalability, insufficient funding, underdeveloped regulations, limited infrastructure support, a lack of standardization and generalization, high initial adoption costs, associated risks, and a deficiency in engagement and awareness. In conclusion, this study contributes to the existing literature by demonstrating that although barriers may pose challenges to blockchain's role in facilitating the CE transition, the benefits it offers are likely to outweigh these obstacles.