Leveraging the circular economy with a closed-loop supply chain and a reverse omnichannel using blockchain technology and incentives

Abstract

PurposeThis paper aims to analyze the benefits of the blockchain to the circular economy (CE), which is composed of both closed-loop supply chain (CLSC) systems and reverse omnichannel solutions. By ensuring transparency, traceability, visibility and security, the blockchain allows firms to acquire operational capabilities through a CLSC and service capabilities through a reverse omnichannel, which can boost business performance considerably. The related network of relationships can be reinforced by establishing incentives, which entail both smart contracts in the blockchain and active return approaches in CE.Design/methodology/approachAfter identifying the boundaries of the theoretical framework, several research hypotheses are developed according to the literature review and emerging gaps. These gaps link to the impact of the blockchain on CE systems (CLSC and reverse omnichannel), as well as the influence on business performance. The hypotheses are then tested using structural equation modeling and adopting a partial least squares-path modeling technique on a dataset composed of 157 firms. Finally, multigroup analysis is used to test the impact of incentives on the research hypotheses.FindingsThe blockchain facilitates a more efficient CE system, although reverse omnichannel solutions seldom bring any benefits to performance. The shift from a passive to an active return approach must be carefully evaluated. The CLSC network can benefit from an active return approach by developing appealing incentives for collectors and enhancing the positive effects of the blockchain. In contrast, consumer incentives can have detrimental effects on the blockchain. Various combinations of incentives can only bring a few business performance increases, while collector incentives are vital to reinforce the CE system's operational and service capabilities.Originality/valueThis paper takes a new approach toward the study of CE, which considers a dual circular system composed of a CLSC and a reverse omnichannel. The research explores whether the adoption of blockchain technology enables better return processes by improving the operations in CLSC and services in reverse omnichannel. Finally, this is the first empirical work to evaluate the benefits emerging from incentives, which can activate smart contracts in the blockchain and enable active return approaches in CE.

Theorising circular economy and sustainable operations and supply chain management: a sustainability-dominant logic

“…The circular economy posits central importance on the reverse flow of materials, as they implement the circularity capability expected from sustainability-oriented supply chains, which enable and maintain value from returns (i.e., secondary raw materials), while minimising the consumption of primary raw materials (De Giovanni, 2022). Noticeably, a growing number of OM scholars are using the term 'circular supply chains' to refer to sustainability-oriented supply chains in the circular economy context.…”

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

“…Previous research highlights blockchain's potential to advance CE by enabling tracking of item usage and material composition during the life cycle (Bekrar et al, 2021; Kouhizadeh et al, 2020). Blockchain's frequent data recording ensures traceability in the CE system (De Giovanni, 2022). Blockchain technology contributes to CE across various domains, including sustainable water management (Zhao et al, 2019), logistics and transportation (Koh et al, 2020), carbon gas emissions control (Biswas et al, 2022), and waste management (Mastos et al, 2021).…”

“…These platforms record all information pertaining to collected goods, as well as operational activities conducted to ensure their proper treatment and second-life utilization. The integration of blockchain, the CE, and incentives represents a revolution in the creation and management of circular systems, potentially bolstering the availability of raw materials(De Giovanni, 2022) Chaudhari et al (2022). contribute to the understanding that organizations can derive benefits from blockchain technology in support of sustainable resource management, reducing waste, and promoting the recycling and reuse of products.…”

“…2021),Khan, Zia-ul-haq, et al (2021), andDe Giovanni (2022) underscores the progress made in integrating blockchain technology applications. These advancements are expected to enhance circular procurement processes, bolster environmental management, and drive greater economic benefits.…”

Framework to evaluate sustainable supply chain intensity index in MSMEs using analytic network process and fuzzy logic

“…Furthermore, it is believed that for successful implementation of SSCPs, the top management must pledge to develop an awareness of sustainability strategies and communicate them to all SC stakeholders including those who are responsible for the last-mile delivery. Research suggests that for the successful implementation of SSCM, it is imperative to develop appealing incentives for last-mile workers who are an integral part of the SC (De Giovanni, 2022). While it is obvious that the enterprises shall be benefited from the sustainability initiatives, researchers have tried to assess the design of incentive structures for sustainability initiatives.…”