The circular economy (CE) is a sustainability framework focused on minimizing waste and keeping products, materials, and resources in use for as long as possible, in contrast to the traditional linear economy of “take, make, dispose.” Achieving this transformation requires significant changes across societal, technological, and institutional structures, underpinned by the concepts of system innovation and ecosystem innovation. System innovation focuses on reconfiguring entire socio-technical systems, while ecosystem innovation emphasizes collaboration between diverse actors—businesses, governments, academia, and civil society—to co-create and scale sustainable solutions. This analysis explores how these two concepts drive the circular economy in Europe, highlighting real-world examples and incorporating insights from scientific literature.
- System Innovation: Transforming Socio-Technical Systems
System innovation refers to large-scale transformations in socio-technical systems, encompassing shifts in technology, governance, and societal practices. Unlike incremental improvements, system innovation is about reconfiguring existing systems to enable sustainability transitions (Elzen et al., 2004). These transformations are particularly relevant in sectors such as waste management, energy, and mobility, where the circular economy principles are most urgently needed (Bocken et al., 2014, p. 45).
In Europe, system innovation is central to efforts to implement the circular economy. For example, the Netherlands’ Circular Economy Strategy (2050) is designed to transform production, consumption, and waste management systems by fostering innovation in recycling, product design, and resource efficiency (Rijkswaterstaat, 2016). The strategy emphasizes a comprehensive system-wide transformation to make the Dutch economy circular by 2050. Research shows that circular economy strategies, particularly in sectors like construction and manufacturing, require technological advancements and institutional changes to enable long-term sustainability (Bocken et al., 2017, p. 73).
Similarly, Denmark’s Circular Economy Strategy (2018) highlights the importance of system innovation in transforming sectors such as construction and food production, with the government incentivizing businesses to reduce waste and adopt circular practices (Ministry of Environment and Food of Denmark, 2018, p. 4). Denmark’s strategy illustrates how technological innovation, coupled with institutional reforms, is necessary to drive the circular economy at a national scale.
At the European level, the Circular Economy Action Plan (2020) calls for system innovation to decouple economic growth from resource use, a key pillar of the EU’s sustainable growth agenda. The plan advocates for system-wide changes in product design, waste management, and recycling to create a more sustainable, circular economy (European Commission, 2020). The European Green Deal reinforces this by emphasizing the need for system-wide transformations in production and consumption patterns to achieve carbon neutrality by 2050 (European Commission, 2019).
- Ecosystem Innovation: Collaborative Networks for Circular Solutions
While system innovation targets the transformation of individual sectors or industries, ecosystem innovation focuses on collaboration and interconnectedness among various stakeholders. Ecosystem innovation refers to the development of networks in which businesses, governments, research institutions, and civil society co-create solutions to complex problems (Granstrand & Holgersson, 2020, p. 4). In the context of the circular economy, ecosystem innovation plays a critical role in scaling up circular practices and embedding them within mainstream economic activities.
Finland’s Circular Economy Roadmap (2016) provides a strong example of ecosystem innovation in practice. The roadmap promotes collaboration between public and private sectors to foster innovation in industries such as forestry and manufacturing, aiming to develop sustainable business models and circular technologies that can be scaled globally (Sitra, 2016). Finland’s strategy is built on creating innovation ecosystems that connect businesses with academic institutions and governmental agencies to foster large-scale circular transitions (Korhonen et al., 2018, p. 549).
In Sweden, the National Strategy for Circular Economy (2020) focuses on partnerships between businesses, academia, and government agencies to drive circular innovation in key sectors like textiles, plastics, and food systems (Swedish Ministry of the Environment, 2020). Ecosystem innovation is central to Sweden’s approach, fostering synergies across sectors to spread circular solutions through collaborative networks. This strategy reflects research showing that cross-sectoral partnerships and coordinated efforts are essential for addressing the complexities of transitioning to a circular economy (Geissdoerfer et al., 2017, p. 764).
At the European Union level, Horizon 2020 and Horizon Europe research and innovation programs play a key role in fostering ecosystem innovation. These programs fund projects that bring together diverse stakeholders from different countries and sectors to address sustainability challenges, including circular economy transitions (European Commission, 2017). The Circular Cities and Regions Initiative (CCRI) also supports local innovation ecosystems by connecting municipalities, businesses, and academia to implement circular solutions in urban environments (European Commission, 2020).
- System and Ecosystem Innovation in Practice: European Case Studies
Several European countries and cities have successfully implemented system innovation and ecosystem innovation to drive circular economy transitions. These initiatives demonstrate how the concepts are applied in practice, starting with innovations in specific sectors and expanding through collaboration to create broader systemic changes.
In Amsterdam, the Circular 2020-2025 Strategy showcases ecosystem innovation at the city level. The strategy includes partnerships between local government, businesses, and research institutions to implement circular economy innovations in construction, urban planning, and waste management (City of Amsterdam, 2020). By building a supportive innovation ecosystem, Amsterdam can scale niche innovations—such as sustainable building materials—into systemic changes that benefit both the environment and the local economy (Frantzeskaki & Loorbach, 2017, p. 608).
In Germany, the Circular Economy Law (2012) represents a major step in system innovation, reshaping the country’s waste management system by promoting recycling and resource efficiency (Bundesministerium für Umwelt, Naturschutz und nukleare Sicherheit, 2012). Building on this, Germany’s Resource Efficiency Program (ProgRess II) facilitates collaboration between government, industry, and academia to develop circular technologies and business models that drive the circular economy forward (UBA, 2016). This systemic approach aligns with research showing that system innovation requires both technological advances and institutional support (Markard et al., 2012, p. 958).
France’s Anti-Waste and Circular Economy Law (2020) integrates both system innovation and ecosystem innovation by implementing regulatory measures to reduce waste and promote product durability, while encouraging collaboration between businesses, non-profits, and consumers (Ministère de la Transition écologique, 2020). The law includes an Extended Producer Responsibility (EPR) system, which mandates that manufacturers are responsible for managing the entire lifecycle of their products, from design to disposal. The success of France’s EPR system depends on strong collaboration between producers, waste management companies, and government agencies, illustrating how ecosystem innovation can help scale system-wide changes (ADEME, 2017).
Conclusion
System innovation and ecosystem innovation are essential concepts for understanding and implementing the circular economy in Europe. System innovation drives the structural changes needed to transition industries and sectors toward circularity by reconfiguring production, consumption, and waste management systems. Meanwhile, ecosystem innovation fosters collaboration among diverse stakeholders, enabling circular solutions to be co-created and scaled across sectors.
European countries such as the Netherlands, Denmark, Finland, Sweden, Germany, and France have demonstrated how these two forms of innovation can work together to advance circular economy goals. By building networks of collaboration and creating supportive policy environments, these countries are leading the global transition to a circular economy. Achieving circularity requires not only technological and regulatory innovations but also the development of collaborative ecosystems that can sustain long-term, systemic change.
By Dr. Aina Ndrianjara Andriamanantena
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