The road to circularity is paved with unintended rebound effects

A recent study shows that circular business models can trigger unintended changes in consumer behaviour that undermine the anticipated environmental benefits of circularity. To tackle this, business models must be designed with measures promoting sustainable consumption and supported by policies moderating consumer demand, argue the authors.

A circular business model is an approach to business that focuses on minimizing waste and maximizing the use of resources throughout the product lifecycle. Unlike traditional linear business models—which follow a "take, make, dispose" pathway—a circular model aims to create a closed-loop system by reusing, recycling, and repurposing materials and products. This reduces resource consumption, waste, and environmental impact.

 A clear example of these unintended changes—known as behavioural rebound—can be seen with the growth of online second-hand clothing marketplaces. “The possibility of resale has led many consumers to justify buying more new clothing than they did before” says Michał Bączyk lead author of the study published in Sustainable Production and Consumption. “The second-hand clothing sector is therefore less sustainable than one might think.”

Two opposing forces at play: conservation vs rebound mechanisms

Bączyk and colleagues Vivian Tunn, Blanca Corona, and Ernst Worrell looked at the implementation of 30 circular business models across a wide range of sectors. While there were many examples of environmental benefits, when rebound effects were taken into account the overall environmental savings tended to be modest. For example, emissions from mobility were reduced between 3% and 17% thanks to car sharing platforms and second-hand clothing marketplaces have reduced emissions by between 13% and 31% thanks to avoided purchases of new clothing.  However, in some cases, the environmental drawbacks significantly outweighed the benefits of replacing conventional consumption. For example, shared e-scooters have resulted in 19% more emissions than the modes of transport they displaced, and shared laundry facilities proved to be 216% more polluting than laundry done at home.

Causes are systemic

“Circular business models must be designed with measures promoting sustainable consumption and supported by policies moderating consumer demand,” says Bączyk. Furthermore, the authors highlight the importance of considering consumer behaviour and potential rebound effects in lifecycle assessment of prospective circular business models.

“In the debate about circular economy rebound effects, we should avoid consumer scapegoating,” explains Bączyk. “While consumer behaviour is what we can easily see, the consumption patterns are the outcomes of the less visible economic system and societal norms.” Consumer choices matter but they are the product of the larger context shaping these choices. Circular consumption is a step in the more sustainable direction, not a panacea for sustainability challenges.

Looking ahead: bridging gaps in research

“This research paper is the first step in connecting the dots,” says Bączyk. “Future work should integrate psychological and sociological perspectives to understand consumer behaviour in circular economy and how it can be leveraged to prevent and mitigate rebound effects”.