System of Circular Economy from a Service Perspective: the Circularity of Consumption-side Activities and Value Creation

Abstract

This paper presents a system understanding of the circular economy from the service research perspective by considering circularity related to consumption-side activities, production-side activities, and data utilization. Traditional approaches to consumer behavior include understanding behavioral change embedded in the causal loop as part of systems thinking, analyzing backfire effects caused by changes in use and ownership, and simulating the acceptability of circular businesses. Regarding the circularity in consumption-side activities focused on by this paper, we introduce two concepts, "excite the loop" and "loyalty loop," to decipher what lies behind consumer behaviors. Both of these concepts contribute to enhancing the customer experience and loyalty and to realizing a new quality loop as value creation. Symmetry with behavioral change in consumption-side, the circularity in production-side activities implies the need for research incorporating innovations of business models and products based on the circular economy, not the linear economy. This paper also explained recent movements in Japan for circularity relevant to data utilization and the EU's development of technical and legal systems by linking digital policy with circular economy policy. These three circularities and their interrelationships will contribute to analyzing to future changes in consumption behaviors in the circular economy.