Drivers and barriers towards circular economy in agri-food supply chains: A review

Simpson Centre New Growth

Reviews of Current Ag Policy Research and Articles

Source: Business Strategy and Development

Summary: This paper utilizes a systematic literature review approach to examine the use of Circular Economy (CE) principles in Agri-Food Supply Chains (AFSC) and highlight the key barriers (i.e., institutional, financial, and technological risks) and drivers (i.e., environmental, policy and economy, and financial benefits) that impact CE uptake and implementation. The implication for the Agri-Food sector is that greater operational efficiencies, profitability, and environmental sustainability can be achieved through the active promotion of CE practices and policies, as recently observed in major markets such as China, Japan and the EU.

Article:

According to the authors of this paper, a Circular Economy (CE) refers to a closed-loop system that achieves social, economic, and environmental sustainability through a focus on reducing, reusing, repurposing, renewing, and refurbishing materials to eliminate waste. The integration of CE principles and approaches can assist in shifting from extensive methods of production or growth to intensive ones, a shift being encouraged by international bodies such as the United Nations (UN) and the Organization for Economic Co-operation and Development (OECD) to facilitate low carbon and climate-friendly practices.

Agri-Food Supply Chains (AFSC) encompass all stages of the food journey from seed to plate to bin, and include production, processing, distribution, consumption, and waste (not to be confused with the Alberta Financial Services Corporation). AFSC are notoriously complex as they include all of the challenges facing non-food supply chains combined with the risks and vulnerabilities inherent to agri-food activities. Consideration for food security, environmental health, socio-economic status, and the quality of the products being produced, in addition to the broader societal impacts associated with AFSC activities further complicate the picture.

Applying CE principles to AFSC can help to address some of the persistent challenges observed within food systems. The authors mention a reduction in food waste, an increase in available inputs, gains in efficiency and support for the long-term health of the land as examples of some of the possible benefits from integrating CE principles into AFSC on a variety of scales, from micro (personal) to macro (state).

The authors employed a systematic literature review to establish a thorough understanding of the topic and associated research. Through the application of selection criteria (i.e., keyword and database validation, inclusion and exclusion considerations, cross-referencing) a total of 58 articles were chosen for investigation. An inductive qualitative content analysis process provided themes and insights associated with the drivers and barriers to CE implementation.

The authors observed that almost half of the articles included were published by experts based out of China (22%) and the UK (22%), followed by Italy (10%), Sweden (9%) and India (7%), with the remaining work distributed around the world. Notably, China was the first country to pursue publishing related to CE, followed closely by the UK and other European countries. Most of the published research related to CE and AFSC has come out over the last decade, with a surge of interest noted from 2015 onwards. China, Japan, and parts of the EU have implemented CE principles to move past linear economics and meet ecological and efficiency goals related to agriculture. The authors argue that the opportunity for small and medium-sized agri-businesses to improve profitability and reduce waste goes hand-in-hand with development of AFSC integrating CE principles.

Based on the percentage of reviewed articles that address a specific issue, the main drivers to integrate CE principles and actions into AFSC include six themes: Environmental Protection (67%), Policy and Economy (47%), and Financial Benefits (43%), followed by Social (34%), Product Development: Innovative Solution (28%), and Health (9%).

Environmental drivers often emphasize the dual role of agriculture in feeding the world while reducing non-renewable resource consumption, and highlight the strategic advantage of transitioning toward a CE as a way to constructively address both challenges. Policy and economic based drivers centered on the laws, regulations, and initiatives concerned with production, consumption, and resource management to ensure safety and health; findings suggest effective policies provide a roadmap to businesses or groups that want to transition to a CE. Financial drivers consider the potential profit stemming from increased efficiencies and reduced material costs while highlighting the associated growth in industries related to a CE (i.e., remanufacturing, energy recovery). The remaining drivers, while less significant, integrate concerns around social and health outcomes related to food with a recognition that innovation will play a large role in transitioning to CE in AFSC.

The barriers identified, again using the percentage of reviewed articles addressing a given issue, focus on concerns around potential risks associated with implementing or transitioning to a CE model; the highest ranked barriers were observed in the following six themes: Public Policy and Institutional risk (64%), Financial and Economic risk (48%), and Technological risk (40%), followed closely by Logistical and Infrastructural risks (38%), Knowledge and Skill risks (29%), and Operational risk (9%).

In general, the regulatory and policy landscape is not yet equipped to support CE; an absence of related incentives, regulations, and taxation supports work against targets to integrate CE practices in AFSC. There are costs in shifting to a CE approach, costs which accumulate alongside the risks already associated with AFSC, e.g., seasonality of product, weather, and market conditions. The current low cost of virgin materials relative to most recycled or recovered materials also creates incentive to maintain the status quo. While AFSC must contend with climate change, resource depletion, and environmental challenges, the technologies required to adequately address these issues within AFSC do not exist. Additional barriers include a lack of knowledge on the part of AFSC stakeholders regarding what role CE can play in agriculture, the added logistical challenges involved in recovering and repurposing materials, and a frequent lack of operational capacity.

AFSC in Canada struggle with many of these same challenges. Addressing the issues discussed in this article, while simultaneously safeguarding AFSC capacity, will require novel approaches that consider problems from a holistic perspective. Given that CE is one such approach that has found fertile soil in practice and in research around the world, it is imperative to examine the possibilities of CE for Canadian AFSC in meeting economic, environmental, and social sustainability goals.

Reference:

Amina Mehmood, Shehzad Ahmed, Evi Viza, Anna Bogush, and Rana Muhammad Ayyub. “Drivers and Barriers Towards Circular Economy in Agri-Food Supply Chain: A Review.” Business Strategy and Development, (1) 2021, pp. 1-17. https://doi.org/10.1002/bsd2.171

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