Blockchain for the circular economy: Theorizing blockchain's role in the transition to a circular economy through an empirical investigation [original]

SPECIAL ISSUE ARTICLE

Blockchain for the circular economy: Theorizing blockchain's

role in the transition to a circular economy through an

empirical investigation

Moritz Böhmecke-Schwafert

| Marie Wehinger

| Robin Teigland

Institute of Technology and Management,

Technical University Berlin, Germany

Chalmers University of Technology,

Gothenburg, Sweden

Correspondence

Moritz Böhmecke-Schwafert, Technical

University Berlin, Straße des 17, Juni

135, Berlin D-10623, Germany.

Email: moritz.boehmecke-schwafert@tu-berlin.

Abstract

Blockchain is increasingly lauded as an enabler of the transition to a circular econ-

omy. While there is considerable conceptual research and some empirical studies on

this phenomenon, scholars have yet to develop a theoretical model of blockchain's

role in this transition. Grounded in the sustainability transition literature, this paper

addresses this gap through the following research question: What role does

blockchain play in the transition to a circular economy? Following an abductive

approach, we conducted interviews with ground-level experts implementing

blockchain innovations for the circular economy across Europe and the

United States. Through a thematic analysis, we derived a theoretical model of the

relationships among (1) drivers and barriers of the transition to a circular economy,

(2) blockchain innovation for the circular economy, (3) technical challenges of

blockchain, and (4) the circular economy. While blockchain plays a moderating role,

interviewees considered it only an infrastructural resource rather than a panacea.

KEYWORDS

blockchain, circular economy, innovation, sustainability, transition

1|INTRODUCTION

Irreversible environmental change, biodiversity loss, and the depletion

of essential resources are increasingly catastrophic threats to human

well-being (Geels, 2011; Köhler et al., 2019; Rockström et al., 2009).

Recent reports by the Intergovernmental Panel on Climate Change

and the UN Environment's Sixth Global Environmental Outlook have

shown that society is facing a climate emergency, and planetary

boundaries are increasingly under severe pressure (Ekins et al., 2019;

IPCC, 2021). Systemic change is essential to halt continued resource

extraction and reduce emissions caused through human activity

(Geels, 2011).

The circular economy (CE) is gaining traction as a potential solu-

tion to reduce these threats (Prieto-Sandoval et al., 2018). The goal of

the CE is to transition from today's linear economic model to a

closed-loop economy based on resource regeneration and ecosystem

restoration (Ghisellini et al., 2016; Murray et al., 2017). A plethora of

studies suggest that the CE will lead to significant economic benefits,

and conceptual research has identified numerous drivers and barriers

to the transition (e.g., Suchek et al., 2021). In addition to changes in

consumer behavior, design approaches, and material choices, innova-

tion is viewed as a promising avenue to the CE (de Jesus et al., 2018;

Geissdoerfer et al., 2017; Kalmykova et al., 2018).

In this context, blockchain has received increasing attention from

scholars and practitioners alike as a potential catalyst for the transi-

tion to a CE. Blockchain can facilitate new business models and a new

era of transparency and, perhaps most importantly, generate econo-

mies of trust, thereby potentially transforming prevailing economic

Received: 1 October 2020 Revised: 21 October 2021 Accepted: 31 January 2022

DOI: 10.1002/bse.3032

This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium,

provided the original work is properly cited.

3786 Bus Strat Env. 2022;31:3786–3801.

wileyonlinelibrary.com/journal/bse

and institutional systems (Adams et al., 2018; Kouhizadeh, Sarkis, &

Zhu, 2019). Recent studies have explored blockchain's role in environ-

mental sustainability with different foci: supply chain sustainability

(Agrawal et al., 2021; Francisco & Swanson, 2018; Kouhizadeh,

Sarkis, & Zhu, 2019), product-service systems (Vogel et al., 2019),

product deletion (Kouhizadeh, Sarkis, & Zhu, 2019), and the CE in

general (Eikmanns, 2018; Faber & Jonker, 2019; Upadhyay, Laing,

et al., 2021).

More recent research has found that blockchain can support the

CE's three principles of reduce, reuse, and recycle. Blockchain-based

supply chain management systems can facilitate traceability in com-

plex supply chains (Agrawal et al., 2021; Venkatesh et al., 2020) and

increase responsible buying behavior by providing accurate informa-

tion (Saberi et al., 2019). In waste management, blockchain can sup-

port waste exchange platforms and recycling schemes through smart

contracts (Khadke et al., 2021). Moreover, blockchain can support the

use of renewable energies through peer-to-peer energy trading plat-

forms and source verification systems (Herweijer et al., 2018;

Yildizbasi, 2021).

Research investigating blockchain innovation for the CE, how-

ever, comprises primarily conceptual research and few empirical stud-

ies. As a result, scholars have yet to develop a theoretical model of

blockchain's role in this transition. This is not too surprising as the

phenomenon has appeared just within the past few years, and there

are few operational implementations across the globe (Böckel

et al., 2021). To fill this gap, we developed the following research

question: What role does blockchain play in the transition to a CE?

To address our research question, we turned to the sustainability

transition research, which focuses on dynamic, co-evolutionary, multi-

actor processes affecting economic development and social or envi-

ronmental spheres (Smith et al., 2010). In particular, we draw on the

literature investigating the drivers and barriers of a transition to a CE

in addition to the relevant blockchain literature. Following an

abductive approach, we conducted a thematic analysis incorporating

data from interviews with ground-level experts working on opera-

tional blockchain innovations for the CE (blockchain CE innovation)

across Europe and the United States. On the basis of the unantici-

pated empirical findings and new theoretical insights as our study

progressed (Dubois & Gadde, 2002), we developed and refined cur-

rent theory regarding the transition to a CE.

Our study makes three contributions. First, we contribute to the

extant sustainability transition and CE research with a theoretical

model of blockchain's role in the transition to a CE that we derived

from a thematic analysis of our interview data. To the best of our

knowledge, this model is the first to suggest relationships among the

following concepts: (1) drivers and barriers of the transition to a CE

(CE drivers and barriers), (2) blockchain innovation for the CE

(blockchain CE innovation), (3) technical challenges to blockchain, and

(4) the CE. In particular, our findings suggest that blockchain CE inno-

vation plays a moderating role between CE drivers and barriers and

the CE, primarily by strengthening technical drivers while reducing

market barriers. We also find that CE drivers and barriers directly

influence blockchain CE innovation both negatively and positively.

Emerging from our analysis, we further found that general technical

challenges of blockchain negatively influence blockchain CE innova-

tion, thereby weakening blockchain's moderating role. Our theoretical

model of blockchain's moderating role in the transition to a CE can

thus serve as the basis for future deductive research.

Second, our study contributes to the blockchain literature as it

moves beyond previous conceptual research of potential blockchain

applications based on anecdotal or secondary data and provides a

more comprehensive empirical study based on primary data of opera-

tional ground-level blockchain innovation for the CE. Findings suggest

that while blockchain plays a moderating role as noted above, many

interviewees considered it only an infrastructural resource that could

be replaced by other technologies rather than a panacea for the

CE. Finally, we discuss the implications of our study for practitioners

and policymakers on how to leverage the potential of this emerging

technology for the imperative transition to a CE.

This paper is structured as follows. In the next section, we present

the theoretical background and provide an overview of the relevant

literature. In Section 3, we describe our research methodology before

presenting our findings and theoretical model in Section 4. Section 5

discusses our results in light of theory and practice before concluding

our paper in Section 6.

2|THEORETICAL BACKGROUND

2.1 |The circular economy

The CE concept is rooted in general systems theory and industrial

ecology (Andersen, 2007; Geissdoerfer et al., 2017). The concept is

receiving significant attention from policymakers, firms, and

researchers alike as it offers a practical framework for sustainable

development (Ghisellini et al., 2016; Murray et al., 2017). Instead of

the linear economy paradigm (i.e., take, make, dispose) that focuses on

continuous growth, the CE postulates a closed-loop that operates

within the planet's ecological limits (Ghisellini et al., 2016; Merli

et al., 2018). While various definitions and models exist, we define the

CE as an “industrial economy that is restorative or regenerative by

intention and design”(Ellen MacArthur Foundation, 2013).

The CE literature articulates three main principles: reduce, reuse,

and recycle (Kirchherr et al., 2017). Reduction mandates minimizing

energy, raw material, and waste input by optimizing production effi-

ciency and promoting less consumption (Ghisellini et al., 2016;Su

et al., 2013). This includes promoting eco-efficient production pro-

cesses, lighter and more compact products, and a minimalistic lifestyle

(Ghisellini et al., 2016). Reusing refers to using a product or compo-

nent again in its original form or with little enhancement or change for

the same purpose (Ellen MacArthur Foundation, 2013). This principle

entails the maximization of product lifecycles, promotion of consumer

demand for used products, take-back incentives, and firms' use of

waste or by-products (Ghisellini et al., 2016; Su et al., 2013). Recycling

aims to reduce virgin material input (Su et al., 2013). Barriers to

recycling are natural limits (entropy law), the complexity of products

BÖHMECKE-SCHWAFERT ET AL.3787

and materials, material abuse (Stahel, 2013), and additional required

energy (King et al., 2006). Finally, renewable energy should replace

fossil fuels to support a resilient circular system (Ellen MacArthur

Foundation, 2013; Ghisellini et al., 2016; Korhonen et al., 2018).

While the concept is still evolving, the CE generally requires

increased involvement from numerous stakeholders and a common

ground for its implementation (Ghisellini et al., 2016). Two primary

implementation approaches for the CE have emerged: (1) top-down

approaches driven by government policy (Kalmykova et al., 2018) and

(2) bottom-up approaches driven by enterprises, environmental orga-

nizations, and civil society (Ghisellini et al., 2016; Lieder &

Rashid, 2016). Policies to drive the transition to a CE are manifold,

such as a reduction of taxes on renewable resources. In addition, edu-

cational programs and public campaigns can help raise awareness for

the CE.

CE research has found that innovation can improve product qual-

ity and extend product lifecycles, enable new circular business models

(Lieder & Rashid, 2016; Mont, 2002; Vogel et al., 2019), and facilitate

systemic integration (de Jesus & Mendonça, 2018). Relevant innova-

tion concepts include eco-innovation, green innovation, environmen-

tal innovation, and sustainable innovation, which are used

interchangeably in the literature (Díaz-García et al., 2015).

The transition to a CE has been studied through a sustainability

transition lens (de Jesus & Mendonça, 2018; Jackson et al., 2014;

Jurgilevich et al., 2016; Lazarevic & Valve, 2017). Sustainability transi-

tion research focuses on socio-technical systems, such as energy,

transport, or production and consumption systems (Köhler

et al., 2019; Markard et al., 2012), and emphasizes that transition is

not a linear process aimed at achieving maximum profits. Instead, it is

a dynamic, co-evolutionary, multi-actor process affecting economic

development and social or environmental spheres (de Jesus

et al., 2018; Smith et al., 2010). Sustainability transition requires active

policy involvement, and institutional support as sustainability is

viewed as a collective good while few incentives exist for private

actors to engage in such transitional processes (Geels, 2011; Köhler

et al., 2019; Markard et al., 2012).

2.2 |Drivers and barriers of a transition to a CE

Within the sustainability transition research, considerable studies

have focused on the drivers and barriers of a transition to a CE. These

drivers and barriers can include financial, governmental, market-

related, and cultural aspects (Govindan & Hasanagic, 2018; Kirchherr

et al., 2018; Rizos et al., 2016; Tura et al., 2019; Upadhyay, Laing,

et al., 2021). A review of the drivers and barriers by de Jesus and

Mendonça (2018) distinguished between “softer”(institutional/regu-

latory, social/cultural) and “harder”(technical, economic/financial/

market) factors. They concluded that the transition to a CE is mainly

hampered by harder factors, such as the lack of available technological

solutions and financial barriers including high investment costs and

linear lock-ins. In contrast, softer factors, such as effective public poli-

cies, awareness of environmental issues among consumers, and

demand for environmental-friendly products, drive the transition

(de Jesus & Mendonça, 2018). Prieto-Sandoval et al. (2018)

highlighted the importance of innovation for a transition to the CE by

demonstrating how eco-innovation determinants (regulation and pol-

icy, supply-side actions, and demand-side requirements) apply to the

CE concept. Their review found that regulation and policy support the

legal foundation to strengthen circular supply while consumers

(demand side) are described as crucial for accepting eco-innovation

and driving the transition through their changed behavior (Prieto-

Sandoval et al., 2018). Additionally, Cainelli et al. (2020) accentuated

the crucial role of public policy and demand-side factors as innovation

drivers. Their quantitative analysis of EU manufacturing and service

company data showcased that environmental policy and demand-pull

factors are instrumental in driving clean technology adoption. Finally,

Kirchherr et al. (2018) conducted an empirical study on the barriers to

the CE based on 208 survey respondents and 47 expert interviews in

the EU and concluded that cultural barriers are the primary obstacle.

We synthesize this literature on drivers and barriers of a transi-

tion to a CE (CE drivers and barriers) in Table 1. We find that despite

a general agreement on the primary categories (technical, economic/

financial/market, institutional/regulatory, social/cultural), the litera-

ture has primarily been conceptual and has produced varying results

regarding the respective relevance of CE drivers and barriers.

2.3 |Blockchain

Initially appearing in 2008 in a white paper, blockchain combines sev-

eral well-proven technologies: decentralization, consensus, immutabil-

ity of data entries, and cryptographic security (Tschorsch &

Scheuermann, 2016; Vogel et al., 2019). First, blockchain is a

decentralized technology that stores transaction data in so-called

blocks, chronologically linked in a blockchain (Yli-Huumo et al., 2016).

Every time a new transaction is conducted, it is added to the chain

and linked to the previous block (Yli-Huumo et al., 2016). Instead of

centrally storing transaction records, the technology operates in a dis-

tributed manner with a ledger of transactions stored on all nodes par-

ticipating in the network (Zheng et al., 2017). Hence, the ledger is

available to all network participants, making blockchain technology

more transparent than traditional databases in which all information is

controlled by one party (Yli-Huumo et al., 2016). Second, a consensus

mechanism ensures data consistency in such a distributed system

(Zheng et al., 2017). Forged transactions cannot be recorded on the

blockchain, thereby eliminating the need for a trusted third party to

validate transactions (Yli-Huumo et al., 2016). A public ledger is only

updated if network participants reach a consensus; however, consen-

sus mechanisms vary significantly between specific blockchain appli-

cations. Third, records on a blockchain are immutable, preventing

previously verified transactions to be modified (Hofmann et al., 2018).

The concepts of immutability and consensus ensure the data integrity

and security of blockchain technology (Hughes et al., 2019; Yli-

Huumo et al., 2016). Finally, public-key cryptography provides the

data security of ledger entries. The existence of public keys and

3788 BÖHMECKE-SCHWAFERT ET AL.

private keys for each user enables secure and pseudo-anonymous val-

idation of transactions (Preikschat et al., 2020). Moreover, a one-way

cryptographic hash function and timestamp ensure the unique identi-

fication of a block (Zheng et al., 2017).

Scholars argue that blockchain can significantly impact socio-

technical systems on various levels and domains (Crosby et al., 2016;

Iansiti & Lakhani, 2017). While Bitcoin and its underlying blockchain

technology have already transformed significant aspects of the finan-

cial market (see, e.g., Teigland et al., 2018), it also has the potential to

influence the prevailing global economic, legal, and political structures

(Preikschat et al., 2020). Besides providing a trusted system of records

for transactions, blockchain facilitates decentralized applications

through smart contracts (Crosby et al., 2016; Yli-Huumo et al., 2016).

Smart contracts automatically evaluate pre-defined requirements and

self-execute determined terms of agreements, which substitutes the

need to verify transactions through a trusted third party (Crosby

et al., 2016). Since the technology is still relatively nascent, empirical

research on its implications for societal, political, and economic struc-

tures is scarce (Beck et al., 2017; Hughes et al., 2019). For a more

comprehensive overview of blockchain technology, we refer to

Crosby et al. (2016) and Zheng et al. (2017).

2.4 |Blockchain innovation for a transition to a CE

While blockchain innovation has been lauded as an enabler of the CE

through its application within the three principle areas of reuse,

reduce, and recycle (e.g., Upadhyay, Mukhuty, et al., 2021), extant

research is primarily conceptual. Upadhyay, Laing, et al. (2021) con-

ducted a literature review of the role of blockchain for the CE and

noted on a more general level that the technology can reduce transac-

tion costs and carbon footprints and improve performance and com-

munication. Possible blockchain applications for the CE fall primarily

under five categories: supply chain transparency (e.g., Agrawal

et al., 2021; Narayan & Tidström, 2020; Saberi et al., 2019; Shojaei

et al., 2021; Venkatesh et al., 2020; Vogel et al., 2019), waste manage-

ment (Khadke et al., 2021; Kouhizadeh, Zhu, & Sarkis, 2019), sharing

economy (e.g., Kouhizadeh, Sarkis, & Zhu, 2019), renewable energy

(Andoni et al., 2019; Wu & Tran, 2018; Yildizbasi, 2021), and

incentivization of sustainable behavior (Herweijer et al., 2018; Khadke

et al., 2021; Saberi et al., 2019).

Vogel et al. (2019) highlighted several blockchain characteristics

enabling these application areas: secure data records, public data

transmission, immutability, and decentralization. Immutability and

tamper-proof data records on a blockchain can significantly increase

the tracking and transparency of supply chains and raise customer

awareness of a product's manufacturing process (Saberi et al., 2019;

Vogel et al., 2019). Blockchain-based supply chains can provide accu-

rate real-time information on material and product flows, and waste

management applications can enable efficient recycling and

reutilization of resources. The benefits of these areas of blockchain

applications are transparency and traceability of product components

and materials (Kouhizadeh, Sarkis, & Zhu, 2019). Reverse logistics is

TABLE 1 Drivers and barriers of the transition to a circular economy

CE drivers CE barriers References

Harder

factors

Technical Availability of technologies that facilitate resource

optimization, remanufacturing and regeneration

of by-products as input to other processes,

development of sharing solutions with superior

consumer experience and convenience

Inappropriate technology, lag between design and

diffusion, lack of technical support and training

de Jesus and Mendonça (2018)

Economic/financial/

market

Related to demand-side trends (rising resource

demand and consequent pressures resource

depletion) and supply-side trends (resource cost

increases and volatility, leading to incentives

towards solutions for cost reduction and stability)

Large capital requirements, significant transaction

costs, high initial costs, asymmetric information,

uncertain return, and profit.

Rizos et al. (2016), Prieto-Sandoval et al. (2018),

Govindan and Hasanagic (2018), de Jesus and

Mendonça (2018), Kirchherr et al. (2017), Tura

et al. (2019), Cainelli et al. (2020), Upadhyay,

Laing, et al. (2021).

Softer

factors

Institutional/

regulatory

Associated with increasing environmental

legislation, environmental standards and waste

management directives

Misaligned incentives, lacking a conducive legal

system, deficient institutional framework

Rizos et al. (2016), Prieto-Sandoval et al. (2018),

Govindan and Hasanagic (2018), de Jesus and

Mendonça (2018), Kirchherr et al. (2017), Tura

et al. (2019), Cainelli et al. (2020), Upadhyay,

Laing, et al. (2021).

Social/cultural Connected to social awareness, environmental

literacy and shifting consumer preferences (e.g.,

from ownership of assets to service models)

Rigidity of consumer behavior and businesses

routines

Rizos et al. (2016), Prieto-Sandoval et al. (2018),

Govindan and Hasanagic (2018), de Jesus and

Mendonça (2018), Kirchherr et al. (2017), Tura

et al. (2019), Upadhyay, Laing, et al. (2021).

BÖHMECKE-SCHWAFERT ET AL.3789

required for the repair, remanufacturing, and recycling of products

and can benefit from an extension of supply chain transparency based

on blockchain beyond the point of consumption (Bekrar et al., 2021).

Additionally, blockchain supports sharing economy platforms, elimi-

nating the need for a trusted third party and reducing the need to rely

on intermediaries to ensure information trustworthiness, such as user

ratings (Kouhizadeh, Sarkis, & Zhu, 2019).

As for renewable energy, blockchain can facilitate energy source

verification systems (Herweijer et al., 2018), and disintermediation

and smart contracts can enable peer-to-peer energy trading between

individual (solar) energy producers and consumers (Andoni

et al., 2019; Eikmanns, 2018; Herweijer et al., 2018). However, exis-

ting legal frameworks in some countries prohibit specific applications,

such as peer-to-peer energy trading (Andoni et al., 2019). Blockchain

can improve investment in renewable energies and carbon market

platforms by mitigating current market inefficiencies, such as double

counting or information asymmetries (Herweijer et al., 2018;Wu&

Tran, 2018). Lastly, blockchain can attribute value to things

(e.g., plastic waste) that are currently wasted but that could be of eco-

nomic value (Herweijer et al., 2018), thereby incentivizing responsible

behavior among individuals and organizations (Eikmanns, 2018;

Khadke et al., 2021; Le Sève et al., 2018).

Table 2categorizes the blockchain literature across the three CE

principles. In summary, we find that the extant literature tends to

focus on potential blockchain applications on a conceptual level, pri-

marily using secondary data rather than analyzing primary empirical

data collected from operational blockchain CE innovations

(e.g., Eikmanns, 2018; Saberi et al., 2018; Upadhyay, Mukhuty,

et al., 2021).

2.5 |Technical challenges to blockchain

While blockchain holds potential for a transition to a CE, our literature

review revealed that the technology is rife with more general techni-

cal challenges, regardless of whether it is used for the transition to a

CE or for some other area. The high energy consumption of many

blockchain applications poses a significant challenge (Faber &

Jonker, 2019; Herweijer et al., 2018; Kouhizadeh, Sarkis, &

Zhu, 2019; Le Sève et al., 2018; Yli-Huumo et al., 2016). Bitcoin net-

work's annual emissions in 2018 were argued to be comparable to

those of Sri Lanka or Jordan (Stoll et al., 2019), thus mainstream adop-

tion of traditional proof-of-work-based blockchain applications might

have negative environmental consequences (Herweijer et al., 2018).

Security is also an issue, and several significant manipulation and fraud

cases have occurred, e.g., DAO hack (Hofmann et al., 2018). These

cases are not directly associated with blockchain technology but with

flaws in additional software layers of decentralized applications

(Preikschat et al., 2020). Other technical challenges are high develop-

ment costs, limited scalability, the complex usability of decentralized

applications, the often required stable and fast internet access, and

limited digital literacy (Andoni et al., 2019; Herweijer et al., 2018;

TABLE 2 Blockchain applications supporting circular economy's

three principles

Application Examples and References

principle

Supply chain

transparency and

traceability

Improved transparency

through tamper-proof,

distributed data records

can impact consumer

behavior and drive more

firms to responsible

production (e.g., less

hazardous chemicals; less

emissions) (Kouhizadeh,

Zhu, & Sarkis, 2019;

Saberi et al., 2019; Vogel

et al., 2019)

Ability to track complex

supply chains/products'

lifecycle and their

sustainability (Agrawal

et al., 2021; Herweijer

et al., 2018; Narayan &

Tidström, 2020)

Reutilizing and reusing

products requires

complete product and

material information

(Kouhizadeh, Sarkis, &

Zhu, 2019; Shojaei

et al., 2021; Wang

et al., 2020)

Reuse

Recycle

Waste management Smart contracts to improve

recycling efficiency

(Herweijer et al., 2018)

Waste exchange platforms

(Khadke et al., 2021;

Kouhizadeh, Sarkis, &

Zhu, 2019)

Reverse logistics (Bekrar

et al., 2021; Kouhizadeh,

Sarkis, & Zhu, 2019)

Reuse

Recycle

Sharing economy Sharing platform provision

(no third party,

trustworthy information)

(Kouhizadeh, Sarkis, &

Zhu, 2019)

Reduce

Reuse

Renewable energy Peer-to-peer energy trading

(Andoni et al., 2019;Wu

& Tran, 2018;

Yildizbasi, 2021)

Reduce

Reuse

Recycle

Incentivization of

sustainable behavior

(examples)

Incentivizing individuals to

recycle through token

rewards (Khadke

et al., 2021; Saberi

et al., 2019)

Plastic cleanup incentive

mechanisms (Herweijer

et al., 2018)

Reduce

Reuse

Recycle

Note: CE principles cannot be completely differentiated from each other

as interdependencies exist. Hence, the applications might also have an

influence on other CE principles.

3790 BÖHMECKE-SCHWAFERT ET AL.

Le Sève et al., 2018; Preikschat et al., 2020; Yli-Huumo et al., 2016).

In addition, the so-called oracle problem constitutes a technical chal-

lenge that has been increasingly recognized in the literature

(Caldarelli, 2020). Oracles are the means of communication between

blockchain and the physical world, and unlike blockchain nodes, they

are centralized and must be trusted (Caldarelli, 2020). A final technical

challenge is the lack of standards and a high level of technological het-

erogeneity among terminology standards (Ingram et al., 2016).

2.6 |Research question

In summary, our literature review revealed that scholars have yet to

develop a theoretical model of the role that blockchain plays in the

transition to a CE as this phenomenon is still nascent and research has

been primarily conceptual with few empirical studies. To truly under-

stand the potential of this emerging technology, it is imperative that

we investigate the relationships among CE drivers and barriers,

blockchain CE innovation, technical challenges to blockchain, and the

CE. Thus, we have developed the following overarching research

question to guide our investigation:

RQ: What role does blockchain play in the transition to a CE?

3|METHODOLOGY

To address our research question, we followed an abductive

approach. This approach is appropriate when the phenomenon has a

high degree of novelty and the aim is to investigate the underlying

variables and their relationships (Coffey & Atkinson, 1996; Dubois &

Gadde, 2002). An abductive approach allows for theory refinement

rather than new theory generation or theory testing (Dubois &

Gadde, 2002; Reichertz, 2004). The approach comprises identifying a

particular phenomenon and then relating this to broader concepts

through systematic combining, moving back and forth between the lit-

erature and the empirical data (Coffey & Atkinson, 1996; Dubois &

Gadde, 2002). This approach allowed us to investigate blockchain's

role in the transition to a CE from a broader sustainability transition

perspective and to thereby derive a theoretical model of the relation-

ships among the relevant concepts (Dubois & Gadde, 2002). Figure 1

details our research approach.

3.1 |Data collection

In line with the abductive approach, we applied theoretical sampling

to select experts in the relevant subject domain (Coyne, 1997). In con-

trast to purposeful sampling, where a fixed sample is selected a priori

(Conlon et al., 2020), theoretical sampling is a “method of data collec-

tion based on concepts derived from data”(Corbin & Strauss, 2008,

p. 134) and is “more of a continuous process than a separate stage in

the study, resulting in a preset sample on which data collection is

based”(Dubois & Gadde, 2002, p. 559).

In our first round of data collection, we conducted extensive desk

research and expert consultation on blockchain CE innovations to

identify organizations across the globe active in this area. We then

FIGURE 1 Our abductive research approach

BÖHMECKE-SCHWAFERT ET AL.3791

selected 13 interviewees based on two criteria. First, the experts had

to be founders or senior employees of organizations that were cur-

rently involved in blockchain innovation that enabled or supported

the CE in its main principles of reduce, reuse, and recycle. We also

included organizations working with the clean energy principle. Sec-

ond, the experts had to be actively involved in implementing

blockchain CE innovation on the ground. The initial experts were from

organizations developing blockchain innovations for waste-related

applications, supply chain solutions, and renewable energy applica-

tions. While some organizations were well-established, the majority

were in an early operational stage. The organizations were located in

Germany, Greece, Netherlands, Norway, Sweden, the

United Kingdom, and the United States.

The analysis of our first set of interviews through open coding

and theory-data matching revealed that these interviewees focused

primarily on their own organization's perspective and generally

avoided critically expressing problems or challenges they were facing.

To address this potential interviewee bias and take a more holistic

approach, we extended our initial sample to include additional experts

from the blockchain CE innovation domain. We again conducted

extensive desk research and expert consultation and selected five fur-

ther experts based on our identified categories and concepts

(Corbin & Strauss, 2008; Urquhart et al., 2010). However, we modified

the two criteria above and excluded founders and employees who

were working with blockchain innovation as part of their own organi-

zation's business. Thus, while this second set of experts did not work

for organizations implementing their own blockchain solutions, the

interviewees were actively working on one or more ground-level

blockchain CE innovations at other organizations. This set included

individuals who were consultants for organizations implementing

blockchain CE innovation, researchers affiliated with blockchain

research institutes, and an associate working for a blockchain devel-

opment agency. They came from Austria, Germany, and the

United States. The perspectives and experiences of the second set of

interviewees were, therefore, more diverse, more objective and pro-

vided an excellent counterbalance to the initial interviewees.

TABLE 3 Overview of interviewees

First set of interviews

No. Length Position CE area

Organization

type CE activity CE principle/implementation

1 44 min Founder, CEO Waste Private Incentivization of plastic cleanups Recycle/pilot projects

2 1 h 4 min Consultant Waste Private Incentivization of plastic cleanups Recycle/operating

3 48 min Project manager Waste NGO Open platform for plastic CE Recycle/pilot projects

4 57 min Founder, CTO Waste Private Deposit scheme, incentivization Recycle/testing

5 55 min Co-founder, CEO Supply

chain

Private Digital twin for products/materials Recycle/pilot projects

6 43 min Co-founder Supply

chain

Private Fashion supply chain traceability Recycle/operating

7 41 min Co-founder Supply

chain

Private Supply chain platform Recycle/pilot projects

8 57 min Co-founder Supply

chain

Private Fashion supply chain traceability Recycle/pilot projects

9 32 min Co-founder, CEO Supply

chain

Private Second-hand market for fashion

items

Reuse/pilot projects

10 1 h 6 min Founder, CEO Energy Private Operating system renewables Renewable energy/pilot

projects

11 49 min Co-founder, CEO Energy Private Carbon offset platform Carbon offsets/demo version

12 1 h

18 min

Founder Energy Private Solar energy incentivization Renewable energy/operating

13 56 min Co-founder,

director

Energy Private Tracking system for renewable

energy

Renewable energy/operating

Second set of interviews

No. Length Position Area Organization type

14 1 h 3 min Research employee Consulting/research Registered association

15 49 min Project lead Consulting Private

16 47 min Professor Research Academic institute

17 50 min Research employee Research Non-profit

18 58 min Project associate Development agency Private

3792 BÖHMECKE-SCHWAFERT ET AL.

In total, we conducted 18 semi-structured interviews with an

average duration of 53 minutes (Table 3) during a 3-month period.

Interviewees were contacted via email or LinkedIn, and interviews

were conducted via Skype. Audio records and transcripts were care-

fully maintained and stored. We discussed amongst ourselves the con-

cepts and relationships emerging from our ongoing analysis of the

interview data throughout the interview process, leading to a constant

back and forth between data collection and our thematic analysis

(Dubois & Gadde, 2002). We reached theoretical saturation after

18 interviews when we could no longer derive any additional or dif-

ferent conceptual patterns from the interview data, and the identified

concepts and key themes continuously re-emerged (Charmaz, 2006).

3.2 |Data analysis

An abductive approach requires literature immersion before delving

into the data analysis (Timmermans & Tavory, 2012). Hence, we drew

on the literature on the CE and in particular drivers and barriers to the

transition in Table 1, blockchain innovations supporting the CE in

Table 2, and the technical challenges to blockchain to compare, match,

and extend our data. We used the qualitative analysis software

MAXQDA to code the data. The coding process followed the

approach of Gioia et al. (2013), which particularly emphasizes the

importance of qualitative rigor. We first screened transcripts and

highlighted relevant passages. After that, we applied in vivo coding to

the transcripts. This resulted in numerous codes, which we then con-

solidated by mapping the similarities and differences. We continu-

ously moved from our empirical material, even collecting more data

during the second set of interviews, to theory and then back again. In

this manner, we could identify patterns and thematic focus areas and

compare them to existing theory and findings from our literature

review. This “double fitting”(Timmermans & Tavory, 2012) of data

and theory led to the final formulation of our second-order themes.

We further categorized these themes and mapped them onto aggre-

gate dimensions from our analytical framework, thereby revealing

relationships among our core concepts. Figure 2shows the second-

order themes and the aggregate dimensions.

To secure the trustworthiness of our data and the credibility of

our findings, we continuously reflected on our abductive approach

FIGURE 2 Second-order themes and aggregate dimensions

BÖHMECKE-SCHWAFERT ET AL.3793

and followed advice by qualitative researchers, e.g., Dubois and

Gadde (2002), Elo et al. (2014), and Gioia et al. (2013). Theoretical

sampling enabled us to acknowledge biases in our initial sampling and

to conduct further data collection until we reached theoretical satura-

tion. We encouraged interviewees to speak freely and informed them

that their responses and any derived findings would be anonymized.

Multiple co-authors participated in the open coding process, and we

openly discussed emerging themes while challenging assumptions and

initial findings and reflecting on any personal biases. While we used

rich, thick verbatim interview extracts in our analysis, we repeatedly

revisited the semi-structured audio recorded interviews to ensure that

the final themes stayed true to the interviewees' original accounts.

Finally, we continuously moved from our empirical material to theory

and then back again while scrutinizing the trustworthiness of every

phase of our data collection and analysis process. In this manner, we

strived for triangulation to ensure the convergence of our findings

and to reduce the risk of bias and increase the confirmability of our

results (Connelly, 2016).

4|FINDINGS

Our analysis suggested a set of relationships among our core con-

cepts, which we used as the basis for our theoretical model. Below,

we present first a simplified model highlighting the primary relation-

ships among our core concepts (Figure 3) and then at the end of this

section a more granular model summarizing second-order themes and

aggregate dimensions (Figure 4).

Our findings suggest that blockchain CE innovation has a moder-

ating effect on the relationship between CE drivers and barriers and

FIGURE 3 Simplified model of blockchain's

role in CE transition

FIGURE 4 Granular model of blockchain's role in CE transition

3794 BÖHMECKE-SCHWAFERT ET AL.

the CE. In other words, blockchain CE innovation can both reinforce

CE drivers and reduce CE barriers. Furthermore, some CE drivers and

barriers can also have a direct effect on blockchain CE innovation.

However, technical challenges to blockchain can also indirectly influ-

ence a transition to the CE through their direct negative impact on

blockchain CE innovation. Below, we discuss our results in more

detail.

4.1 |Blockchain CE innovation acts as a moderator

4.1.1 | Blockchain CE innovation strengthens CE

drivers

Our analysis suggests that blockchain CE innovation significantly

strengthens CE technical drivers through the following aspects. First,

blockchain is viewed as a tool that provides a technical infrastructure

for CE processes. Interviewees mentioned that blockchain offers a plat-

form for the CE ecosystem as it facilitates physical and non-physical

transactions. This aspect demonstrates that the technology itself does

not take a direct role in the CE transition, but instead has a supporting

role, as stated by an interviewee:

The technology is one that enables you to build infra-

structures so that you can, for example, ship containers

without having to fly freight papers around (…), or so

that you can trace supply chains without the need for

some form of surveilling authority that you do not

want. But it is ultimately an infrastructure that enables

me to do other things.

Second, blockchain CE innovation optimizes CE processes. Experts

mentioned smart contracts that can automate decentralized pro-

cesses, cost-sharing, and payment processes among platform partici-

pants (e.g., tokenization). In addition, the technology's open-source

character facilitates the interaction of different stakeholders. Third,

the governance structure of blockchain enables transactions that do

not require a trusted intermediary for monitoring and authorization.

This contrasts with existing supply chain initiatives aiming to advance

the CE that often do not scale because their centralized technological

solutions hinder information sharing. Also, stakeholders can embed

the rules of engagement in smart contracts to avoid conflicts and

enable extensive cooperation.

Fourth, blockchain provides improvement in security aspects as it

is a complete record of data transactions on a distributed ledger,

thereby enabling fraud detection and improving transaction traceabil-

ity. Several interviewees mentioned the immutability paradigm of

blockchain and highlighted that data entries cannot be modified after

they are recorded on a blockchain, as one interviewee noted here:

It was important not to do the whole thing with a sim-

ple SQL, where in the end any kind of data can be

manipulated afterward, but to use the blockchain so

that the data is collected directly from the value chain

and cannot be manipulated afterward.

The ability to uniquely identify transactions avoids problems such

as double-spending or copying, which can also play a crucial role in

the traceability and accountability of transactions.

In addition, our results suggest that blockchain CE innovation

positively influences CE social/cultural drivers. Several interviewees

argued that blockchain CE innovation changes consumer behavior by

incentivizing sustainability activities, such as the proper recycling of

waste. While similar mechanisms already exist (e.g., Germany's deposit

bottle scheme), the digitization of these through the blockchain was

argued to enable “individual value creation”and “dynamic economic

rewards”on a global basis.

4.1.2 | Blockchain CE innovation reduces CE

barriers

Interviewees noted the lack of information availability as a primary CE

barrier. As blockchain CE innovation improves information provision

and transparency, it reduces current information asymmetries. Pro-

ducers can document information from each part of the supply chain

process on a blockchain. Moreover, producers can provide informa-

tion on specific materials and products, which is a condition for recy-

clability. Further, consumers can consider transparent information for

materials and production processes stored on the blockchain in their

buying decisions. Solutions also aim to enable brands to benchmark

their supply chain's status. In addition to information provision, inter-

viewees highlighted the value of improved transparency through

blockchain CE innovation as this interviewee noted:

And at the moment, I believe that for the circular econ-

omy, transparency is key. Because everybody needs to

know and trust what's happening.

Blockchain CE innovation can also reduce CE social/cultural bar-

riers through creating trust. One interviewee noted, “When we are

talking about sustainability efforts, especially ones that are driven by

cultural change, the trust and credibility is the most important part.”

Blockchain's immutability paradigm and decentralized nature enable

trust between contracting parties. Interviewees stated that blockchain

CE innovation extends trust from within a small group of stakeholders

to many. Others mentioned that it replaces the necessity to trust each

other. Either way, the experts were of the opinion that an essential

aspect of blockchain's potential is its ability to create trust that is

required for CE, as supported by this interviewee:

I think the important part about blockchain is not actu-

ally the technology; it's about the trust that it facilitates

between humans. And the technology is just the way

that it does that. I mean, that has always been the way

that I've thought about it.

BÖHMECKE-SCHWAFERT ET AL.3795

4.2 |CE drivers and barriers influence blockchain

CE innovation

Our analysis also suggests that CE drivers and barriers can either

directly foster or impede blockchain CE innovation. In terms of CE

drivers, we found that the financial/economic/market driver fosters

blockchain CE innovation. Our analysis shows that using blockchain

for marketing purposes, such as the potential benefit from a “positive

image effect,”drives blockchain CE innovation. This driver can be

summarized by a company's aim to gain a competitive advantage,

resulting in higher revenues and profits. Particularly in commodity

markets, it is difficult to prove sustainable material sourcing. Small,

sustainable firms can differentiate themselves using blockchain solu-

tions for market signaling.

Further, the CE institutional/regulatory driver (e.g., environmental

legislation) can play a significant role in driving blockchain CE innova-

tion through various governmental initiatives. Public CE funding sup-

ports the development of blockchain applications, and increasing

environmental regulations assert pressure on firms. Our analysis sug-

gests that one motive for organizations is to be ahead of the market

regarding environmental conditions or regulations. One interviewee

stated, “A lot of brands that are […] approaching us right now are just

trying to be prepared for an impending regulation that may come up

anytime.”Our analysis suggests that in particular the EU's activities

have been deemed productive for the CE as one interviewee noted,

“The EU has done a good job in opening its innovation arms.”

Finally, CE social/cultural drivers, such as a general increase in CE

awareness and demand for increased responsibility, can drive blockchain

CE innovation. Interviewees showed different perceptions, however,

ranging from the positive opinion that it is “very obvious kind of, yeah,

it's growing very fast […]”to a more pessimistic judgment that “the

only thing that has been achieved in the last ten years is actually an

awareness of the problems.”Moreover, interviewees described end

consumers as a driving force of blockchain CE innovation. An example

is individuals donating money for plastic collection initiatives who

then demand transparency about how their financial support is used.

We also found that all four CE barriers can directly influence

blockchain CE innovation. Technical barriers were less related to spe-

cific difficulties but rather more to a general uncertainty as to whether

blockchain truly fits circular economy needs. Interviewees were con-

cerned that the technology alone is not sufficient despite its inherent

potential. One interviewee noted, “It's just the technology. A lot of

people, they see it as the solution for everything. That's definitely not

it.”The interviewee further explained that providing information

about products or materials will not have any impact if the product

itself cannot be dismantled. This is in line with the interviewees' tenor

about the necessity for organizations and individuals to actively shape

the potential of CE principles and the use of blockchain to fulfill them.

A considerable number of interviewees specifically questioned the fit

of blockchain solutions for CE implementations and raised concerns

that other technological solutions might be more applicable,

e.g., traditional databases. For example, one interviewee noted, “If

blockchain did not exist, could we do this? Yes, we could,”while

another interviewee stated, “It just makes it easier. I hate to say that

(…) we can do it with other technologies.”A few interviewees also

argued that several blockchain CE innovation projects do not have

coherent arguments about why they have chosen this technological

approach. However, some interviewees stated that they regarded

blockchain as superior to other technologies or approaches.

Our study also finds that tensions between sustainability and profit

objectives is a market barrier that hinders blockchain CE innovation

and constitute a systemic gap between actors that want to drive sus-

tainable development and others that predominantly aim to generate

profits. This originates from competitive behavior and a lack of coop-

eration among CE market actors. Some interviewees also argued that

the uncertainty of revenues and suitable business models complicate

adopting blockchain CE innovation. Several challenges intensify this

dilemma. For instance, there is considerable complexity in defining

value propositions for every involved organizational actor, as one

interviewee noted, “That is, of course, a social problem, for the time

being, you have to see quite clearly that the individual company does

not necessarily benefit from it yet.”

The ambiguity between advancing sustainable development while

simultaneously seeking profits is related to another market barrier,CE

market uncertainty. Early-stage markets are characterized by uncer-

tainty concerning future developments, as noted by one interviewee,

“There is also this problem where if you have a lot of different

approaches for the same problem, in the end, there is no clear way to

move forward.”Several interviewees noted intense competition

between CE initiatives and, as a result, very little collaboration.

When it comes to institutional/regulatory barriers,ouranalysis

shows that a lack of policymaker support creates challenges for organiza-

tions implementing blockchain CE innovation. A lack of funding and rel-

evant regulations reduces the potential progress of the innovation.

Multiple interviewees agreed that governments are not doing enough

to foster the application of blockchain to the CE principles. One inter-

viewee stated, “Because the responsibility for the circular economy lies

first and foremost with society, politics would have to push much har-

der to accelerate such solutions.”Interviewees discussed the lack of

policymaker commitment to innovation and the need for more CE-

related regulation, such as an increased obligation for firms to ensure

product recyclability or improved transparency of electronic consumer

good composition. Additionally, blockchain innovations in the energy

sector seem hindered by existing regulations (e.g., peer-to-peer trading).

As for the social/cultural barrier, our findings suggest that firms'

resistance to change and slow decision-making and implementation pro-

cesses hinder blockchain CE innovation. Interviewees commented that

companies often lack motivation to undertake the necessary invest-

ments. Developing blockchain CE innovation requires the willingness

to establish it as part of business processes and a profound desire to

contribute to sustainable development, including the motivation to

provide financial and human resources to implement relevant applica-

tions. However, a prevailing finding in our study was that organiza-

tions were not ready to change their culture or existing operations,

such as shifting their business model or decentralizing their organiza-

tion. One interviewee described this in the following way:

3796 BÖHMECKE-SCHWAFERT ET AL.

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It's just that the decision-making on implementing is

slower than expected, like way slower. So, for the plas-

tics companies, for instance, we have been working on

a contract now for half a year. And it's not that they do

not want it. It's just that every time there's this new

question.

4.3 |Technical challenges to blockchain negatively

influence blockchain CE innovation

Our analysis also revealed three primary technical challenges to

blockchain: premature blockchain solutions, highly complex applica-

tions involving multiple actors, and threat of inaccurate data entry

known as the oracle problem. These three challenges negatively

influenced blockchain CE innovation and therefore indirectly weak-

ened blockchain's moderating role in the transition to a CE.

The consensus among interviewees was that blockchain technol-

ogy is premature, and most solutions are still in a very basic research

and early development phase. The majority of interviewees agreed,

however, that the technology would become better in the future.

Many of the technical problems, such as scalability or privacy con-

cerns, are related to public blockchains, and some interviewees noted

these could be overcome by deploying private blockchains at the

expense of, for example, anonymity. Another issue relates to a lack of

consensus as to which blockchain solutions should be developed. For

example, opinions differed on the token economy and whether a

blockchain solution is really necessary. Whereas one interviewee

noted how some initiatives “create this artificial demand for the token

that does not actually have any real demand,”another portrayed a

token economy as essential.

Additionally, interviewees repeatedly mentioned the problem of

high energy consumption. However, they did not consider it as a sig-

nificant challenge because it would be solved in the future,

e.g., through other consensus mechanisms. For example, one inter-

viewee stated, “I mean the energy example, I'm a bit tired of it

because this killing argument is always used.”

Second, blockchain solutions tend to be highly complex applica-

tions involving multiple actors. The transparency of blockchain solu-

tions comes at the cost of collecting and sharing data among

organizations and even the public. Our analysis indicates that the pro-

tection of confidential information and the reluctance to share data

with others represents a significant challenge, especially when

implementing blockchain solutions for supply chains. Many firms

require maintaining confidentiality to protect their competitive advan-

tage. One interviewee stated, “Simple data collection for brands and

simple data sharing for suppliers, but without compromising the busi-

ness confidentiality, that would be the key value proposition.”

Furthermore, the complexity of blockchain challenges organiza-

tions with data fatigue and limited technical capacities, as another

interviewee stated, “Decentralized applications require an incredible

amount of technical savviness.”However, interviewees partially dis-

agreed on the notion of complexity of decentralized applications, and

some interviewees argued that usability is no different from other

technological solutions.

Third, a significant technical challenge is the threat of inaccurate

data entry, which refers to the oracle problem. As blockchain solutions

are not solely digital but connected to the physical world, a reliant

gateway between relevant physical assets and the digital system is

required. For example, a blockchain supply chain application requires

information about the provenance of products. Hence, data from the

physical world (e.g., from a human or sensor) are necessary. One inter-

viewee exemplified this in the following statement:

And that physical to digital relationship is a problem

that goes beyond just supply chain; like that's one of

the fundamental problems with pretty much every-

thing blockchain-related is that it's a piece of solely

digital technology that is desperately trying to interact

with the real world.

This issue deals with the difficulty of ensuring that no malicious

or incorrect data from the physical world are submitted to the

blockchain. Blockchain innovations seek to minimize this risk using

sensors for data input or scans of existing certificates (e.g., about

materials). However, as mentioned by one interviewee, “Whether the

certificate itself (…) is authentic or not is done by the certifying body,”

and it cannot be verified by the blockchain application. Therefore, the

interviewees agreed that current blockchain technology is not entirely

secure from fraud or human error. Developing a blockchain innovation

that overcomes the physical-digital relationship hurdle was regarded

as a major challenge to the development of blockchain for the CE.

Below is our granular model we developed based on our analysis

in which we have included all concepts, aggregate dimensions, and

second-order themes.

5|DISCUSSION

The implications of our findings are threefold. We contribute (1) to

the sustainability transition and CE literature through deriving a theo-

retical model of blockchain's moderating role in the transition to a CE,

(2) to the blockchain literature through an empirical investigation of

blockchain innovation for the CE based on primary data across several

organizations and countries, and (3) to practitioners and policymakers

through implications for blockchain's role in the transition to a CE.

5.1 |Theoretical model of blockchain's role in the

transition to a CE

Our study contributes to the sustainability transition and CE literature

through a theoretical model relating CE drivers and barriers,

blockchain CE innovation, technical challenges to blockchain, and the

CE. To the best of our knowledge, this study is the first to derive a

theoretical model of blockchain's role in the transition to a CE based

BÖHMECKE-SCHWAFERT ET AL.3797

on a thematic analysis of empirical data. Our findings suggest that

blockchain CE innovation indirectly supports the transition to a CE by

playing a moderating role instead of a direct role. Our more granular

findings suggest that blockchain CE innovation strengthens technical

and social/cultural drivers while mitigating financial/economic/market

and social/cultural barriers.

CE drivers and barriers were also found to directly influence

blockchain CE innovation in both a negative and positive manner. For

example, our study further accentuates the need to mitigate financial/

economic/market barriers, such as tensions between profit and sus-

tainability objectives (Kouhizadeh, Zhu, & Sarkis, 2019) and insuffi-

cient market demand (Cainelli et al., 2020), in order to encourage

further blockchain CE innovation. In terms of social/cultural barriers,

our study supports the work by Kouhizadeh, Sarkis, and Zhu (2019)in

the case of blockchain CE innovation in particular and by Kirchherr

et al. (2018) for the CE in general as we find that companies' resis-

tance to change and slow decision-making and implementation pro-

cesses impede blockchain CE innovation.

Furthermore, we find that more general technical challenges to

blockchain indirectly impact the transition to a CE as they can deceler-

ate blockchain CE innovation. This supports previous eco-innovation

and CE literature, which emphasizes technology-related obstacles

(de Jesus & Mendonça, 2018) and technical difficulties, such as the

energy issue (Herweijer et al., 2018; Kouhizadeh, Zhu, & Sarkis, 2019;

Le Sève et al., 2018).

5.2 |Blockchain within the CE context

We also contribute to the blockchain literature by providing an empir-

ical investigation of blockchain's role in the transition to a CE. As this

phenomenon has a very high level of novelty, the majority of the liter-

ature to date is conceptual and primarily based on secondary data.

Our study provides a deeper understanding of the role that this digital

innovation has in developing an infrastructure for the CE. This is in

line with the work by several scholars who proposed that blockchain

might help to develop an infrastructure for the CE ecosystem, e.g., de

Jesus et al. (2018); Kouhizadeh, Sarkis, and Zhu (2019), Limata (2019),

and Prieto-Sandoval et al. (2018). However, our findings also echo

other scholars' views that the technology alone cannot be a panacea

for shifting to a closed-loop economy (de Jesus et al., 2018). Instead, a

robust multidimensional approach from several stakeholders

(e.g., organizational change) is necessary, and the technology only

holds a supporting, moderating role.

While our findings indicate that blockchain CE innovation

strengthens technical drivers, there is considerable uncertainty about

the exact fit between the technological requirements for CE applica-

tions and blockchain. We suggest two reasons. On the one hand,

there is a general concern that the technology alone is insufficient to

enable the CE, which can be related to the finding that blockchain CE

innovation has an indirect moderating influence. On the other hand,

the interviewees' perception that blockchain is not always inherently

superior to different technological approaches contributes to general

uncertainty and, sometimes, even skepticism about the potential of

blockchain CE innovation (Chowdhury et al., 2018).

While interviewees discussed several general technical challenges

of blockchain, they were of the opinion that these will fade as

blockchain matures in the future, which follows Yli-Huumo et al.'s (2016)

insights. However, one significant challenge was the oracle problem that

has previously been discussed in the blockchain literature but not spe-

cifically in the case of blockchain CE innovation (Caldarelli, 2020). As no

perfect solution for this challenge will likely be developed within the

near future, the risk of incomplete and inaccurate data entries on the

blockchain can impede blockchain CE innovation since most blockchain

CE innovations require a link to the physical world.

5.3 |Implications for practitioners and

policymakers

We derive four recommendations for practitioners and policymakers.

First, blockchain CE innovation is a multi-actor driven endeavor, and

the resulting complex ecosystems and diverse stakeholders compli-

cate innovation development. Therefore, we recommend establishing

interdisciplinary teams (e.g., behavioral economists, sustainability

experts, and policymakers) and collaboration among different actors in

a pilot project or industry consortium in order to create a common

understanding of the technology's potential and challenges. Second, a

fundamental pillar is education about blockchain and the CE to avoid

skepticism and increase knowledge of the technology's potential

among organizations and policymakers. Also, education about

blockchain is crucial to improve decision making regarding the fit of

blockchain for the specific CE use case so that organizations do not

expend unnecessary resources and time falling for the “sheer hype of

blockchain.”Third, to address the oracle problem, increasing automa-

tion of processes and the technological convergence with Internet-of-

Things technologies (e.g., sensors and RFID chips) can reduce the risk

of inaccurate data entry while additional external data sources

(e.g., GPS) can be harnessed to triangulate data entries.

Lastly, our findings also stress the importance of appropriate poli-

cies to enable the CE. Our study supports previous literature that has

identified regulations on data protection and the energy sector as bar-

riers to blockchain innovation (Andoni et al., 2019; Herweijer

et al., 2018). While scholars tend to emphasize the crucial role of pol-

icy to drive the CE (de Jesus & Mendonça, 2018; Ghisellini

et al., 2016; Kalmykova et al., 2018; Upadhyay, Mukhuty, et al., 2021),

our study revealed that interviewees were of the opinion that

policymakers are not doing enough to support the transition. Regula-

tions may need to be revised to account for the decentralized nature

of blockchain technology, which includes the definition of jurisdic-

tional responsibilities (Andoni et al., 2019; Herweijer et al., 2018)or

facilitation of data protection compliance (Andoni et al., 2019; Saberi

et al., 2019). Therefore, for blockchain to achieve its potential in

enabling the CE, policymakers should focus on regulations and stan-

dards governing smart contracts and blockchain adoptions (Upadhyay,

Mukhuty, et al., 2021).

3798 BÖHMECKE-SCHWAFERT ET AL.

6|LIMITATIONS AND CONCLUSIONS

This study is subject to the inherent limitations of qualitative research.

First, our findings are based on specific blockchain CE innovations

(primarily reuse and recycle), their development status (primarily pilot),

the type of initiative (primarily bottom-up), and the interviewees' nar-

ratives that depend on their background and personal convictions.

Hence, contextual findings might emerge. Second, the co-authors'

personal experiences, knowledge, and moods could have influenced

the expert interviews and the coding process. Third, even though the

findings have been discussed along prior insights in the domain, the

generalizability of these findings is limited, and further empirical analy-

sis is required, especially beyond Europe and the United States.

In conclusion, this study contributes to the sustainable transition

and CE literature along with the blockchain literature by developing a

theoretical model of blockchain's role in the transition to a CE. To the

best of our knowledge, this study is the first to empirically investigate

the relationships among relevant CE and blockchain concepts and to

derive a theoretical model based on a thematic analysis of empirical

data. Our finding suggests that while blockchain plays a moderating

role, it is not a universal solution to the CE. Our theoretical model pro-

vides a basis for future research as scholars could test hypotheses on

the suggested relationships through methods such as surveys or experi-

ments. Moreover, future research could investigate blockchain-enabled

business models to help identify short- and long-term economic bene-

fits and solve the trade-off between profitability and environmental

sustainability. Also, potential policy recommendations supporting and

regulating CE blockchain innovation demand further investigation.

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M., & Teigland, R. (2022). Blockchain for the circular economy:

Theorizing blockchain's role in the transition to a circular

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