A Literature review of Circular economy, its drivers
& barriers, and Changes over time in Automobile
industry
M.Aadil, MS-21
1. Abstract
Circular economy (CE) concept is a framework that aims to
balance human consumption with production. It focuses on
closing the loop in industrial networks and the Earth's capacity
to provide resources through business models that incentivize
sustainability improvement at the firm level. The modern
advancements innovate the processes, but CE provides the basis
for innovation to remove the waste produced. This paper
provides the basis of proof that Linear economy is outdated as
it only favors the developed economies while CE focuses on
everyone. CE barriers and drivers are also evaluated based on
automobile industry of Pakistan. CE is also integrated with
industry 4.0 and Small, medium enterprises paradigms.
2. Introduction to the topic.
A circular economy, also known as circularity or CE, is a
production and consumption model that prioritizes sharing,
renting, reusing, repairing, and recycling already existing goods
and materials for as long as possible. By putting a focus on the
design-based implementation of the model's three guiding
principles, CE seeks to address issues like climate change,
biodiversity loss, waste, and pollution. Eliminating waste and
pollution, reusing goods and materials, and regenerating nature
are the three tenets necessary for the transition to a circular
economy. Under a circular economy, used materials are
reintroduced into the economy through a variety of means
rather than discarded. This vision challenges manufacturers to
rethink how they design, produce, and ship products, moving
away from the linear economy (take, make, waste) and toward
a more regenerative method. Consumers desire products
produced using more environmentally friendly methods. In
response, industries are finding ways to use resources more
effectively and efficiently. This includes products made from
recycled materials, less packaging, and design and production
practices optimized to reduce energy consumption and waste.
3. Literature review
Circular economy is one of the most well researched topics of
today. Different methodologies are defined in different eras to
describe the drivers, barriers, impact, and challenges to CE. The
literature summarized here will start from defining the
importance of circular economy, comparative to linear
economy, followed by the description of drivers and barriers of
CE. The other papers will introduce the review of CE in
Pakistan’s automobile industry, followed by integration of CE
with industry 4.0.
3.1. Linear Economy versus Circular Economy
3.1.1. Abstract
Upon the in-depth analysis of the existing literature about linear
vs. circular economy, this paper [1] concludes that, the
blueprint of the current economy is hardly sustainable by using
the comparative benchmarking method that drained from
literature. Circular Economy is based on the elimination of
waste by design, respect for the social, economic, and natural
environment, and resource-aware company activity. Built on
the foundation of these ideas, the circular economy has proved
its potential to meet the economic, environmental, and social
concerns of the present.
3.1.2. Literature review
According to the Ellen MacArthur Foundation [2], the existing
economic structure stems from the historically unequal
geographical distribution of income. The more an industrial
organization recycles and reuses its trash, the closer it gets to
the concept of circular economy and the more profitable it
becomes [3], and less harmful to the environment. CE primarily
supports minimization of virgin material use and use of clean
technology [4]. It is designed to demonstrate that circular
economy might be advantageous to society in an industrial
setting. Not only will benefits accrue from utilizing the
environment as a repository for leftover wastes, but also from
controlling or minimizing the use of polluting materials in
production activities.
3.1.3. Discussion
Upon in-depth analysis, it is concluded that this article
described the underlying difficulties posed by the existing
economic structure: the linear economy. It was determined that
the take-make-dispose model is inadequate to meet the current
and predicted future demands of humanity. On the other hand,
it provided a basis of considerate conclusion that circular
economy is a feasible, sustainable, and necessary option that
can meet the difficulties. The combination of ideas comprising
the circular economy facilitates waste reduction by embracing
the reuse of product components. The circular economy is
compatible with firms' intrinsic interests since it relates to
competitive and strategic frameworks and has the capacity to
enrich the contract between customers and producers.
3.2. Drivers and barriers to circular economy
implementation: An explorative study in
Pakistan’s automobile industry [5]
3.2.1. Abstract
Circular economy has garnered considerable attention from the
researchers, owing to its potential benefits in social and
environmental studies. However, there is no reliable paradigms
present, defining the drivers and barriers of circular economy.
Therefore, this paper [5] will introduce the suitable paradigm
for the implementation of CE in Pakistan’s automobile
manufacturing industry. The methodology adopted is an
explorative approach, including both qualitative and
quantitative methods of data collection and analysis, to derive
the suitable CE paradigm of drivers and barriers. It concludes
that Business principle, cost reduction and profitability are the
main drivers, while Unawareness, cost constraints and lack of
expertise are the barriers to the implementation of CE in
Pakistan’s automobile industry.
3.2.2. Literature review
CE idea and its implementation are growing vital for firms and
countries to minimize and manage waste effectively and
efficiently. Emerging economies can obtain many benefits from
CE with good regulation and its execution. CE is a systematic
approach and requires efficient execution. More recently, many
researchers and practitioners have discovered many challenges
(see I-e [6], [7] ) while others worked on identifying the drivers
for implementation of CE (see I-e [8], [9] ). Nonetheless, in
numerous emerging economies, such as Pakistan, CE
exploration is prevalent notion, and its possible benefits is
uncommon. The goal of this study is to recognize the drivers
and constraints of CE with a focus on Pakistan's auto industry.
Pakistan's developing economy offers a unique opportunity for
this research because unlike the other countries, the developing
economy offers socioeconomic context of literature that is
currently unavailable.
3.2.3. Discussion
An in-depth analysis of the defined drivers and barriers
concludes that at the micro-level, internal variables rather than
external ones comprise most CE's motivators and obstacles.
Enterprises must consider internal reasons that restrict their
ability to transition to CE to overcome the barriers to CE
initiative. Integrating CE activities into the organization's
strategy, mission, vision, goals, and key performance
indicators, which may require employee training, is a crucial
means of achieving this. This study is limited to only large-scale
enterprises while stressing on the need to be analyzed and
updated through SME’s.
3.3. Industry 4.0 to Accelerate the Circular
Economy: A Case Study of Electric Scooter
Sharing [10]
3.3.1. Abstract
To achieve sustainability, the circular economy (CE) concept is
challenging traditional linear enterprise models due to the need
to manage geographically distributed product life cycle and
value chains. Concurrently, Industry 4.0 is being used to bring
productivity to higher levels by reducing waste and improving
the efficiency of production processes via more precise real-
time planning. There is significant potential to combine these
two frameworks to enhance the sustainability of manufacturing
sectors. This paper [10] discusses the fundamental concepts of
Industry 4.0 and explores the influential factors of Industry 4.0
that accelerate the sharing economy in the CE context via a case
of electric scooters in Pakistan. The result shows Industry 4.0
can provide an enabling framework for the sharing economy in
CE implementation.
3.3.2. Literature review
CE denotes a paradigm shift that seeks to maximize the
likelihood of preserving resources for future generations by
decreasing short- to medium-term rewards. These resources
include economic and business resources, but they're not the
only ones. Others also includes environmental protection, and
additional social advantages[11]. The fourth industrial
revolution—also named Industry 4.0—is one of the most
trending topics in both professional and academic fields [11].
Industry 4.0 starts with customer requirements and integrates
the different systems, such as connected technologies. The main
goal of Industry 4.0 is to create value by connecting resources,
services, and humans in real time. It is concluded that the
benefits of Industry 4.0 are vertical integration, virtualization,
automation, traceability, flexibility, and energy
management[12], [13]. Utilizing Industry 4.0 tools to support
CE is still in its infancy. In the first step of this study, the
framework for CE supported by Industry 4.0 is developed.
Second, interpretive structural modelling (ISM) is utilized to
illustrate the factors by which Industry 4.0 can accelerate the
sharing economy within the circular economy.
3.3.3. Discussion
This paper has explored the possibilities of Industry 4.0 for
applying the CE to boost the sustainability of firms. This
technique mixes human workers with autonomous machines to
approach a scenario of very efficient operations. To find the
detailed influential aspects of Industry 4.0 that could accelerate
the sharing economy in the circular economy, interpretative
structural modelling (ISM) is used. Although this paper
provides the much-needed basis of integration for industry 4.0
with CE, it is still in very early stages and very difficult to bear
any fruits in developing countries like Pakistan.
3.4. Small and medium-sized enterprises
within the circular economy: challenges
and opportunities [14]
3.4.1. Abstract
Small and Medium Enterprises (SMEs) are playing a significant
role in most economies, and they are key to the effective
adoption of the circular economy, one where numerous
materials are re-circulated, recycled, and re-used. This study
[14] aims to grasp the concept of a circular economy and
expand awareness about the problems and potential of the
implementing circular economy for SMEs through a systematic
literature review. The study suggests that SMEs generally lack
awareness about prospects of circular economy and their main
attention is on their core business function. We need a powerful
government agenda, supported initiatives by officials that
understand difficulties faced by SMEs and urge them to
consider and act differently.
3.4.2. Literature review.
Academics, consumers, manufacturers, and small- and
medium-sized businesses are increasingly attracted to the
notion of the Circular Economy (CE) (SMEs). The notion of
circular economy was originally introduced at the close of the
20th century. The first scientific articles on the subject appeared
in the 1980s. Circular economy is concerned not just with
reducing the use of the environment as residuals sink, but also
with the construction of self-sustaining industrial processes in
which materials are recycled multiple times [12]. More SMBs
are interested in the circular economy as it closes loops and
optimizes resource utilization Material cost savings,
competitive advantage creation, and opening [15]. Small- and
medium-sized enterprises are also interested in the circular
economy for the opportunity to enter new markets.
3.4.3. Discussion
It is concluded that SMEs might be the key drivers of
macroeconomic development towards a circular economy, but
problems. With knowledge gaps, and severe uncertainty,
sometimes standing in the way of greening their operations.
Additionally, present macroeconomic factors such as deflation
and low investments may also discourage. SMEs to explore
implementing circular economy models. We need to give
appropriate resources and networking opportunities for SMEs.
So that way they can explore the benefits of circular economy
opportunities themselves and for that aim we need a forceful
government agenda, numerous programs established by
policymakers, must push SMEs to think and act different.
3.5. Industry 4.0 and circular economy
practices: A new era business strategies
for environmental sustainability [16]
3.5.1. Abstract
Industry 4.0 and blockchain technology (BCT) are altering
circular economy (CE) practices and prevalent business
structures in response to mounting environmental concerns.
This study [16] explores the significance of blockchain
technology in circular CE practices and their effect on eco-
environmental performance, which effects organizational
performance. BCT significantly enhances circular economy
practices (circular procurement, circular economy) design,
remanufacturing, and recycling). CE practices improve firms'
performance Environmental performance and financial
performance enhancement. Third, greater Organizational
performance is significantly enhanced by eco-environmental
performance. This study lays the groundwork for participating
nations/companies to simultaneously Integrating blockchain
technology into your business will help you achieve financial
and environmental objectives, circular economy practices.
3.5.2. Literature review
Industry 4.0 and the circular economy are emerging
organizational and technological advancements that boost a
firm's productivity and sustainability output. Under the
atmosphere of Industry 4.0, blockchain technology has been
related to CE, considering the crucial nature of data and
information for its comprehensive management. Blockchain
technology addresses contemporary challenges of the circular
economy, such as circular procurements, recycling and
remanufacturing, flexible production, and customization
(circular design), energy and resource conservation, carbon
footprints, compact set-up times, minimization of material and
labour costs, and higher productivity, through rich data analysis
from ICTs [17]. Industry 4.0 and blockchain technology gain
attention to boost organizational performance. There is little
firm-level empirical evidence on blockchain. CPEC is a
pioneering Belt and Road Initiative project between China and
Pakistan.
3.5.3. Discussion
This study explored the role of blockchain technology in
circular economy activities and the impact of these practices on
eco-environmental performance, which in turn influences
organizational performance. The results demonstrated that BCT
has a beneficial impact on circular economy practices through
smart contracts with suppliers and stronger and more
transparent information exchange, which considerably
increases supply chain visibility. The results demonstrate that
circular economy techniques assist businesses in enhancing
their environmental performance and bolstering their financial
performance, which ultimately leads to improved
organizational performance.

4. Conclusion
The whole discussion concludes to the fact that Circular
economy is one of the most compatible, and profitable practice
to be employed in large organizations as well as SME’s.
unfortunately, due to the barriers described above, it is still a
concept scarcely known to the industrial setup in Pakistan. A
complete paradigm is needed for Pakistan only, focusing on the
barrier’s solutions for small, medium enterprises, mainly
focusing on the barrier of cost constraint and scarce training
sessions.
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