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Between you and I: A portfolio theory of the circular economy

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  • Figge, Frank
  • Thorpe, Andrea Stevenson
  • Manzhynski, Siarhei

Abstract

By using resources more circularly, individual resources users hope to contribute to a more eco-efficient and sustainable resource use. Whether resources are used sustainably is decided at the macro-level, raising the question if, as well as how, the efficient and circular use of resources at the micro-level adds up to their efficient and circular use on the macro-level. Currently, the link between the circular use of resources at micro- and macro-levels is under-theorized. The symbiotic relationship between individual resource users enables a reduction in the resource use at the macro-level. In this conceptual paper, we argue that an analogous link exists in finance where desirable investment return is linked to undesirable investment risk, and that via the generation of efficient portfolios, individual risks are at least partially diversified away. As our main contribution, we theorize the circular economy, both in its perfect and imperfect forms, using modern portfolio theory. Our theory identifies the drivers of circular resource use and shows under which conditions individual resource use contributes to the circular use of resources.

Suggested Citation

  • Figge, Frank & Thorpe, Andrea Stevenson & Manzhynski, Siarhei, 2021. "Between you and I: A portfolio theory of the circular economy," Ecological Economics, Elsevier, vol. 190(C).
    • Handle: RePEc:eee:ecolec:v:190:y:2021:i:c:s0921800921002494
    DOI: 10.1016/j.ecolecon.2021.107190
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    Cited by:

    1. Figge, Frank & Thorpe, Andrea Stevenson, 2023. "Circular economy, operational eco-efficiency, and sufficiency. An integrated view," Ecological Economics, Elsevier, vol. 204(PB).
    2. Frank Figge & Andrea Stevenson Thorpe & Siarhei Manzhynski & Melissa Gutberlet, 2022. "The us in reUSe. Theorizing the how and why of the circular economy," Business Strategy and the Environment, Wiley Blackwell, vol. 31(6), pages 2741-2753, September.
    3. Gutberlet, Melissa & Preuss, Lutz & Thorpe, Andrea Stevenson, 2023. "Macro level matters: Advancing circular economy in different business systems within Europe," Ecological Economics, Elsevier, vol. 211(C).
    4. Lahcen, Bart & Eyckmans, Johan & Rousseau, Sandra & Dams, Yoko & Brusselaers, Jan, 2022. "Modelling the circular economy: Introducing a supply chain equilibrium approach," Ecological Economics, Elsevier, vol. 197(C).
    5. Figge, Frank & Thorpe, Andrea Stevenson & Gutberlet, Melissa, 2023. "Definitions of the circular economy: Circularity matters," Ecological Economics, Elsevier, vol. 208(C).

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