Innovation for Circular Economy: Overview of Estonian Enterprises’ Transition Journey
4. Results Analysis and Discussion 1. Group Interview
4.2. Questionnaire
This section presents the results of the survey study which will provide a broader understanding of the results. To investigate survey responses, the Statistical Product and Service Solutions (SPSS) software version 27 was used to sort, code and analyze using descriptive statistics such as percentage and frequency distribution. Analysis of variance was used to measure constraints hindering technical innovation implementation for circular practices by Estonian SMEs.
According to the participants’ answers, 42 % of the participants had been engaged in an innovation implementation for circular practices in some way, which was done in the phase of product design (Figure 1). The results presented in Figure 1 demonstrated the application of innovation for circularity along the life cycle of the product. Most of the participants have not implemented any innovation at the end- of- life phase and material phase which accounts for 89 % and 82 %, respectively.
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Figure 1. The proportion of implementation of innovation for circular practices Source: Author’s own, N = 190 firms
The SME’s involvement in innovation for circular practices in Estonia varies based on the industry. Figure 2 demonstrates the share of innovation implementation for circular practices within industries. In the computer industry, technical innovation is implemented mostly in the use phase and followed by the design phase. The production and distribution phase also innovated in the computer industry compared to the material and end- of- life phases where the innovation is only 17 % and 15 %, respectively. Meanwhile, data from the electric industry demonstrate that most innovation for circular practices takes place in the design phase at 42 % and follows by the production and distribution as well as use phase (31 % and 30 %). End- of- life phase is the least innovative phase in the electric industry in Estonia, where only 6 % of participants are involved in innovation for circular practices. The chemical industry, on the other side, is mostly involved in production and distribution as well as the use phase with 29 % and 24 %, respectively. The other three phases, share a similar result for innovation implementation, between 13– 16 %. Results from the metal industry demonstrate the current involvement in innovation for circularity takes place in the design, production and distribution and use phases with 47 %, 36 % and 33
%, respectively. Also, some technical innovation is implemented in the material phase, as 20 % of respondents from the Estonian metal industry confirm their
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engagement with technical innovation for circular practices. End- of- life phase of metal products comes as the least innovative phase, only 10 %.
Figure 2. Share of innovation implementation for circular practices in each phase of a product life cycle in four industries. Shares as a percentage of each industry’s innovative activities in the relevant phase
Source: Author’s own, N = 190 firms
The questionnaire also covers the aspect of why technical innovation is not implemented in each phase of the product life cycle of Estonian SMEs. To uncover the reasons, a set of options is developed based on the literature and provided: (1) We lack necessary knowledge; (2) There is a lack of trust; (3) Our current financial situation does not allow it; (4) It is hard to get a loan; (5) It is
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not a priority; (6) Lack of potential cooperation partners; (7) It is not applicable to us; (8) Other. Questionnaire participants also could specify other reasons in each section of the above- listed options did not cover the barrier that they face.
Figure 3. Share of SMEs that encountered any of the following issues when undertaking innovation for circular practices
Source: Author’s own, N = 190 firms
Figure 3 shows the reasons Estonian SMEs for not implement technical innovation for circular practices. The majority of the respondents selected the “it is not applicable to us.” The reason for SMEs to select “it is not applicable to us”
or “it is not a priority” can be as a barrier to the implementation of innovation for CE, either due to the unfamiliarity of the concept of CE (Ormazabal et al., 2018) or due to the non- existent exchange of information among companies (Piñeiro- Chousa et al., 2019). The majority of firms selected this reason for not implementing innovation for circular practices the reason for this is probably that the sample includes all SMEs, regardless of their knowledge of CE. To dive
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more into the reasons, the author excluded the option of “it is not applicable to us” in Figure 4 to show the details of what Estonian SMEs perceive as a barrier to innovation implementation.
Figure 4. Share of SMEs that encountered any of the following issues, excluding the “it is not applicable to us” option when undertaking innovation for circular practices Source: Author’s own, N = 190 firms
Figure 4 shows the survey respondents lack the necessary knowledge to implement technical innovation for circular practices. One of the barriers that empirical investigation brought is collaboration. CE implementation involves complexity and interdependence between the actors that no company can achieve alone, so joint action by an entire ecosystem is necessary (Parida et al., 2019). Gregory et al. (2020) also concluded that the transition to CE depends on the recognition by stakeholders that no single actor can address the core issue alone. Respondents also could specify their reason why they are not engaged with innovation. Among
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the answers, some SMEs respond as: “We do not engage in production ourselves”
“the final product is 95 % completed by a subcontractor” where they outsource the production part or “we are not product owners and what is left from our facility, does not come back” or “our production is handicraft, there is no such technology” which is not applicable to them or “there are no technologies used in our field” which might be based on the lack of awareness and knowledge in the field or “small business, not so financially reasonable” which the financial aspect seen as the barrier or “we deal with very old designs. … as a result, the design does not allow for change” or “we are subcontractors” where they do not involve in the product design phase of the product life cycle. Similar to the findings from the literature, SMEs in Estonia see finance as the barrier to the innovation implementation for CE and it is followed by a lack of potential cooperation partners. Lack of trust and access to a loan for innovation implementation is not considered an important barrier in the case of Estonia.
5. Conclusion
The results have shown that Estonian SMEs’ involvement in innovation for circular practices is uneven across the product life cycle. The most interest is given to the product design phase, while the material and end- of- life phases are neglected. This result can be explained by the firms’ perceived barriers on their journey for innovation which are lack of knowledge, missing technological know- how, and lack of awareness that leads them to not prioritize sustainability.
The innovation is necessary to leave behind the traditional business practices and commit to new circular practices and new ways of operating in the supply chains that allow the circle to be closed and all the waste to be taken advantage of.
Based on the results of the empirical investigation of Estonian SMEs’
involvement in innovation for circular practices, some recommendations are drawn to policymakers to accelerate the transition of SMEs in Estonia toward CE.
To foster the transition toward a CE, a policy framework needs to be developed and strengthened; there must be diverse support mechanisms in addition to institutional support; implementation support programs need to be developed for companies to help them engage with partners to straighten collaboration.
Finally, end consumers and citizens should be educated on the environmental, economic and social advantages of purchasing close- the- loop products. This would lead to support for CE- oriented companies that have undertaken a strategic path to sustainability, generating a positive return on their investment.
To conclude, some future research directions are suggested that emerge from the findings. Future research could investigate organizational factors to map
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more in detail the human aspect of the challenges that Estonian SMEs face. In addition, explore the impact of public incentives on the uptake of CE among businesses of different sizes and sectors. Finally, researchers could also examine the extent to which a company’s inclination toward the CE effectively affects its creditworthiness.