Circular Economy Can Shield Against Known Shocks While Making Systems Brittle, Study Warns

The circular economy has become one of the most celebrated ideas in modern sustainability policy: keep materials in use, design out waste, and close the loop. Governments from Brussels to Beijing have staked industrial strategies on the promise that recycling, repair, remanufacturing, and reuse will simultaneously cut environmental damage and free economies from dependence on volatile global supply chains. Yet a new conceptual study published in the Journal of Industrial Ecology argues that this confidence rests on a dangerous oversimplification. According to Felix Carl Schultz of Martin-Luther-University Halle-Wittenberg and his co-authors Vladislav Valentinov and Ingo Pies, the very strategies that make circular systems more secure against known disruptions can quietly make them more fragile against the shocks nobody has anticipated.

The paper, published open access on 14 August 2026, tackles a puzzle that has been accumulating in the research literature for years. Some studies find that circularity strengthens resilience by reducing reliance on virgin materials and extending the availability of critical resources; work on electric vehicle battery supply chains, for example, has shown that circular strategies can ease dependence on scarce raw materials. Other studies warn of the opposite effect. Kennedy and Linnenluecke, in an influential 2022 research agenda, cautioned that efficiency-oriented circular strategies may remove the buffers, diversity, and slack resources that systems need to withstand and adapt to shocks. A third group of studies reports conditional results, finding that outcomes hinge on network topology, supply-risk exposure, institutional anchoring, business model design, and organizational capabilities. Rather than treating these findings as contradictory noise, the German team treats them as the phenomenon to be explained.

The key to their explanation is a distinction borrowed from resilience theory in social-ecological systems research: the difference between specified and general resilience, a distinction that traces back to Carpenter and colleagues’ famous question of resilience ‘of what, to what?’ Specified resilience refers to the capacity of a particular supply chain, infrastructure, territory, or material system to withstand an identifiable disturbance. General resilience refers to the broader capacity to absorb, adapt to, or reorganize under unfamiliar or cross-cutting disturbances. Once this distinction is applied, the heterogeneous findings in circular economy research fall into a coherent pattern. Positive results typically concern specified resilience to known risks such as raw-material scarcity or supply-chain interruption, while critical results concern losses of general resilience through reduced response diversity, diminished slack, and eroded adaptive capacity.

The mechanisms by which circularity erodes general resilience are concrete and, in some cases, counterintuitive. Closing loops can reduce import dependence but create dependence on specialized reverse-logistics systems that did not previously exist. Standardizing secondary-material streams improves efficiency and interoperability but reduces diversity and substitutability. Tight network integration improves the circulation of materials but also increases the speed at which a disruption at one node propagates around the loop, eliminating the exit option of sourcing outside the network. In a linear economy, interdependencies arise incidentally; in a circular economy, they are deliberately engineered. A disruption to a standardized secondary-material stream therefore cannot simply be bypassed, because the stream itself depends on ecosystem-wide participation.

To capture what is lost when these capacities disappear, the authors introduce the concept of ‘system options’: collectively valuable capacities that preserve alternative courses of action under disturbance. These include redundancy, modularity, response diversity, adaptive slack, and learning infrastructures. What makes system options distinctive, the authors argue, is their cost structure. Their benefits are diffuse, delayed, or system-wide, while their costs are concentrated on particular actors. Redundancy requires spare capacity, slack requires carrying costs, modularity requires design investment, and diversity may sacrifice economies of scale. Under competitive pressure, such capacities are systematically underprovided, because no single firm captures the full value of maintaining them. This is not a technical problem but a governance problem: which options should be preserved, who pays, how are costs and benefits distributed, and how are commitments sustained over time?

To organize this governance challenge, the study applies the ordonomic approach, an analytical framework developed by Pies that distinguishes three interdependent levels of social order: operations, governance, and semantics. At the operational level, circular strategies such as repair, reuse, remanufacturing, and recycling are enacted under given rules and competitive pressures. At the governance level, rules, standards, incentives, contracts, and collaborative institutions determine whether costly system options are designed, financed, monitored, and sustained. At the semantic level, ideas and narratives determine whether resilience costs are interpreted as reasonable and necessary, or dismissed as wasteful and inefficient. The framework’s diagnostic power lies in showing how failures at one level can masquerade as problems at another: treating a governance problem as an operational one leads to efficiency optimization that strips out system options, while treating a semantic problem as a governance one produces institutional designs that collapse under discursive contestation.

The framework yields testable propositions with direct policy relevance. Efficiency-oriented circular strategies are likely to strengthen specified resilience when they measurably reduce exposure to identifiable disturbances, but likely to weaken general resilience when they increase systemic interdependence, narrow response diversity, reduce adaptive slack, and deepen dependence on specialized infrastructures. General resilience is more likely to be preserved when governance arrangements match each system option to its cost structure, observability, and beneficiary structure: reserve obligations and capacity contracts for slack and redundancy, standards and procurement for modularity, ecosystem governance for shared infrastructures, and anti-concentration rules for response diversity. Mismatched governance fails in patterned ways, the authors predict: free riding when benefits are diffuse, resistance when costs are concentrated, capture when standards allocate rents, and the quiet dismantling of reserves during calm periods when disruption memories fade.

Perhaps the most provocative element of the paper concerns legitimation, the discursive work of making resilience costs publicly intelligible. Many circular economy discourses are strongly efficiency-coded, equating circularity with waste elimination, lean operations, and short-run cost minimization. Within such frames, redundancy appears as duplication, slack as waste, and diversity as fragmentation. The authors argue that resilience-oriented governance is more politically durable when the costs of system options are framed as preparedness, insurance, option value, fairness, continuity protection, or strategic autonomy. Notably, they suggest that post-2022 strategic-autonomy discourse in Europe has opened political space for interpreting circularity not only as environmental policy but also as material-security policy. They even caution against a reflexive assumption that broader stakeholder participation always strengthens governance: in circular contexts, widening participation can surface cost-distribution conflicts that resilience reframing had suppressed, potentially destabilizing otherwise workable arrangements.

The implications reach both boardrooms and ministries. For managers, the study recommends asking of every circular strategy which disturbance it protects against, which options it removes, whether it deepens dependence on a specific supplier, recycler, standard, or platform, and whether fallback pathways remain available. Because many system options cannot be maintained by individual firms alone, firms have a strategic interest in inter-firm and public-private arrangements that share the costs of reverse logistics, interoperable standards, and reserve processing capacity. For policymakers, the message is sharper still: resilience is not an automatic co-benefit of circularity. Policies that improve protection against one risk may weaken adaptability if they create dependence on a narrow infrastructure, a single technology, or a rigid recovery pathway. Policymakers should specify the resilience object and the disturbance, distinguish specified from general resilience, map costs and beneficiaries, and select governance mechanisms matched to each system option.

The study’s conclusion reframes the entire debate in a single sentence: circular systems remain resilient not simply because they close loops, but because they preserve alternative pathways when preferred loops fail. The authors call for future research to measure specified and general resilience separately, using indicators such as supply continuity and recovery time for the former, and response diversity, modularity, substitutability, network redundancy, and cross-shock performance for the latter. They also flag a critical failure condition: when a small set of actors bears concentrated, visible, and immediate resilience costs while system-wide benefits remain contingent and delayed, no amount of framing can sustain the arrangement without transfers or participation rules. The circular economy, on this reading, will deliver security not when it becomes perfectly efficient, but when it remains capable of acting otherwise under disturbance. In an era of geopolitical volatility and critical-material insecurity, that distinction may prove to be one of the most consequential ideas in industrial ecology.

Subject of Research: The relationship between circular economy strategies and specified versus general resilience, conceptualized as the governance of system options

Article Title: Circular economy resilience as the governance of system options: specified and general resilience in circular transitions

Article References: Schultz, F. C., Valentinov, V., & Pies, I. (2026). Circular economy resilience as the governance of system options: specified and general resilience in circular transitions. Journal of Industrial Ecology. https://doi.org/10.1007/s44498-026-00158-1

Image Credits: AI Generated

DOI: 10.1007/s44498-026-00158-1

Keywords: circular economy, resilience, specified resilience, general resilience, system options, governance, supply chain, industrial ecology, critical raw materials, redundancy, adaptive capacity, strategic autonomy