Aligning incentives across the value chain for implementing reversible bonding as a circular economy innovation

Wim Van Opstal^1,*, Anse Smeets¹, Emma Pals¹

¹Flemish Institute for Technological Research (VITO)

*[email protected]

Extended abstract

Innovative business models and technologies supporting the transition towards a circular economy are challenging since they require a close collaboration along value chains (Brown et al., 2018). Examples include the organization of reverse logistics to foster repair and high-quality recycling (Julianelli et al., 2020), or feedback loops from parties involved in recycling and refurbishment to value-chain actors that are responsible for product design and materials sourcing (Franco, 2019). This kind of collaboration, however, requires a sound alignment of incentives along the value chain behind a circular business model. Misaligned incentives across value chains may stem from market failures, including informational asymmetries, market power, externalities, path dependencies, and coordination costs (Grafström & Aasma, 2021; Lahane et al., 2020). Examples of these dynamics have been reported in studies on circular business models and circular supply chains of many goods, including solar photovoltaics (Franco & Groesser, 2021), fashion (Manshoven & Van Opstal, 2022), and steel production and recycling (Smeets et al., 2019).

Also, intra-organizational dynamics within companies involved may play an important impeding or enabling role to implement circular business models and technologies (Suchek et al., 2021). Examples include the importance of a non-bureaucratic governance framework that provides intrapreneurs the mandate to negotiate with parties upstream and downstream the value chain, or the occurrence of conflicting key performance indicators (KPI) between the sales department and engineering department to embrace circular innovations.

To be able to embrace new business models and technologies, circular innovators are therefore challenged with this combined external and internal quest to align incentives among all relevant actors (Chen et al., 2017; De Angelis et al., 2018; De Lima & Seuring, 2023). Nevertheless, an increased awareness and thorough comprehension of external and internal incentives may strengthen businesses and industries in their ability to respond to ecosystem challenges, enhancing their resilience when new technologies disrupt current linear settings (Carraresi & Bröring, 2021; Farooque et al., 2019). Insights from empirical research, however, remain limited.

In this paper we use empirical data from Flanders (Belgium) to investigate the alignment of value propositions, external and internal stakeholder support, and transition conditions for the implementation of a new circular economy innovation. As a case, we study the potential implementation of reversible bonding. While the use of adhesive bonding as a joining technique increases (e.g. in smartphones, cars, or fashion items), repair, remanufacturing, and high-quality recycling are increasingly difficult to perform (IIEE & EEB, 2021; Lu et al., 2014; Thompson et al., 2020). Reversible bonding techniques could therefore play an important enabling role for increasing the potential for establishing more circular systems, while at the same time providing the advantages that are related to the use of adhesives. The main principle of debonding is the ability separate the joint between two materials or components on demand, triggered by an external stimulus (Banea, 2019). Thereby, the functionality and quality of the materials and components can be preserved to a larger degree, enabling their separate collection, higher quality recycling, reuse, or repair. This may enable the development of new circular business models. The circular potential of reversible bonding, however, is rather unexplored, both in academics as in industry, and its technological possibilities are currently under research (see e.g. https://circularbonding.be). However, successful implementation of a new technological innovation and business model requires a well-aligned value chain and suitable business models to support it.

We consider the case of reversible bonding as relevant since it represents a new technological innovation that may address a salient challenge for the circular economy, both in terms of repairability as recyclability of products, components, and materials. It is potentially applicable to a wide array of manufacturing and construction goods, allowing us to capture insights from multiple industries (Arán-Ais et al., 2021; Schäfer et al., 2020). The geographical scope of our research is Flanders, which is relevant as a region given its industrialized open economy that combines an R&D intensive industry with a strong position in the production of intermediate goods for the global economy.

We performed semi-structured interviews (n = 30) with companies along the value chain such as adhesive manufacturers, their industrial clients from the manufacturing and construction industry, waste processing companies, and companies in (reverse) logistics. We complemented this material with interviews with experts at sector federations, consultancy firms, and policy makers. Interviews were complemented with a short online questionnaire to indicate the professional position of the respondents within their organisations and to identify the importance of barriers and transformation dependencies to implement circular supply chains (Asgari & Asgari, 2021; Ayati et al., 2022). Our results allow us to answer the following research questions:

-        RQ 1: What are value propositions of reversible bonding as a CE innovation along the value chain?

-        RQ 2: How do we align value-chain and intra-company support to implement reversible bonding as a CE innovation?

-        RQ 3: What are transition conditions to scale and replicate reversible bonding as a CE innovation?

Our analytical framework is mainly constructed from economic theory (industrial economics, institutional economics, game theory, welfare economics). Preliminary results reveal the importance of informational asymmetries within and between organisations, and the absence of complete markets as a crucial barrier for the development of circular supply chains. Mandatory regulations and non-mandatory government interventions are rather considered as enablers instead of barriers for a circular transition. Key transition conditions include the ability to create a demand pull instead of a technology push, and mechanisms to resolve the intertemporal redistribution of value that would be generated by a circular design by manufacturers while being captured many years from now by waste management companies.

Keywords 

Circular economy, value chain alignment, partnerships, intrapreneurship, reversible bonding

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