Circular economy in the building industry : Innovation as an incentive and its link to company growth

University essay from Blekinge Tekniska Högskola/Institutionen för industriell ekonomi

Abstract: Background: The building industry is slowly but progressively shifting from the ‘take-make-dispose’principle of the linear economy towards a circular economy (CE), where waste is minimized and reintroduced to the loop of production. In this way, the loop of materials, energy and waste flows is closed; all for the hopes of saving the environment. Nonetheless, studies show that this is not the main incentivefor which architects and engineers implement CE principles into their projects and businesses but rather because they are interested in the innovative aspect of CE (Alhawari, et al., 2021). Previous research has also shown that there is a positive correlation between this innovation incentive and the growth thata company has experienced over the years (Horbach & Rammer, 2020). Innovation as such allows companies to attain competitiveness and make their presence stronger in the market (Raghuvanshi & Agrawal, 2020). Objectives: The objective is to extend previous studies about innovation being the main incentivedriving the implementation of CE principles in the building industry. Furthermore, the relationship between company growth and the strength of the innovation incentive is studied, as well as the relationship between company growth and the number of CE projects a company has worked on over the last years.  Methodology: The study is based on a quantitative approach for data collection and data analysis. The data comes from 70 architectural and engineering companies operating in various countries of the European Union and is analyzed with the help of descriptive statistics and Mann-Whitney U tests through STATA software.  Results: Innovation is proved to be the main incentive, driving the transition towards CE in the building industry; it is also clearly proven that there is a positive correlation between the innovation incentiveand the company growth. Diving deeper into the subject, no correlation was found between the numberof CE projects and the company growth. However, categorizing the companies based on their size and discipline, a positive correlation was found between the number of CE projects and the growth of big architecture companies. All the observations of positive correlation are in line with previous literature. Conclusions: Saving the planet, which is the reason that initiated the CE concept, is not the main incentive. Architects and engineers are innovative by their nature and always aim to follow trends thatallow them to think outside the box to help their business grow and have their name heard. The effect of innovation on the success of a company should be taken into consideration when developing newbusiness models and setting goals, as well as when recruiting new employees. Recommendations for future research: Future research could broaden the geographical area and try to find if there are different outcomes for other parts of the world. Additionally, an understanding of why only big architectural companies showed a correlation between their growth and their number of CE projects could be achieved by studying a larger sample and defining growth by using other factors. 

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