IS4CE2020_Assessing and evaluating CBMs through challenging LCC approaches_Miguel et al (2020)_final.pdf (342.73 kB)

Assessing and evaluating CBMs through challenging LCC approaches

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posted on 04.02.2021, 09:05 by Mecia Miguel, Sonal Choudhary, Graeme Heron
The transition to Circular Economy involves rethinking of products, services, changes throughout the value
chain, and implementation of circular business models. Potential economic gains and cost savings from
circular business models have been mentioned as drivers to implement circular thinking within
organisations. However, companies still struggle in understanding the economic benefits and implications
associated with such a transition. To overcome this, metrics that provide economic information associated
with circular products and business models are needed. Life cycle costing (LCC) has been identified as a
potential economic quantitative assessment method. Through a systematic literature review, this paper
presents the strengths and limitations associated to LCC in assessing the economic implications of circular
business models.
The review recognised that LCC can provide a life cycle and multiple stakeholder perspectives, which are
relevant to overcome some challenges associated with the implementation and design of circular business
models. Furthermore, environmental and social LCC can include externality costs, which is an important
factor for Circular Economy. Nonetheless, there is a lack of empirical studies implementing multiple
stakeholder perspective and accounting for externalities. Several challenges were also identified: lack of
understanding of the cost implications of products/materials with multiple life cycles; difficulties in
allocating costs among multiple stakeholders; lack of data availability and low quality. These are relevant
issues for costing associated to circular business models and should be addressed in future research.

Funding

Realising the Transition to the Circular Economy: Models, Methods and Applications

European Commission

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Management School

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