Value Chains in a circular economy

Value Chains assessment is an important step to bring innovative solutions to market

From the fish you eat to the TV set in your living room, any product we consume follows a large chain of involved producers to get to us. With globalisation, those chains have increased in complexity and now cover large geographical distances. 


Value Chains were first introduced by Michael Porter in 1985, describing a chain of activities that a firm operating in a specific industry performs to deliver a valuable product or service for the market.


Circular Economies further complicate the analysis of Value Chains. Instead of linear, the extended value chains go in loops,  made with multiple value chains throughout the production process, of all kinds: economic, social, and environmental. To have a comprehensive view of value chains in a circular economy, it is necessary to assess the different scales of circularity and consider all actors, directly and indirectly, involved in the chain. Thinking circularity in terms of value chains means identifying circularity loops as gains of competitiveness.

Value chain and business models

Value chains analysis complements business models analysis as it allows to identify where value is created in the production activities. Here value represents both the potential creation of new commercial value – hence the development of a new business model – and the potential avoided costs and expenses in the production process. As such, it allows to assess how can a company lower its costs while reusing materials and energy or benefits from findings new output for their waste.


Significant progress needs to be made to lower the CO2 consumption in the water sector, and the circular approach can be an essential step for that. It is designed to keep materials at their highest value for as long as possible by repurposing and recycling them once they have reached the end of their operational lives. By adopting this approach, organisations in the sector create a more sustainable materials flow across schemes, reducing supply risks and price volatility for water and other infrastructure owners and operators – and achieving cost savings.

Water Circular Economy and Value Chains

However, being mainly composed of  public institutions results in a funding gap for sustainable investment as public stakeholders depend on tax revenue and not on profit from production sites. The water service is in many cases delegated to private operators; however, the funding gap still exists as public services aim to reduce the cost for citizens.


To close the investment gap, financial incentives for the private sector to become more sustainable are identified as a potential solution. The circular economy aims to transform waste in resources. Savings or profits from new value could play the role of incentives for the private water sector. Capturing value where it did not exist before, requires considering every possible circular loop.

Further, considering the water sector governance and importance as a vital resource, it is critical to consider the public receptivity to water products from the circular economy. It seems important to take the public into consideration to identify potential barriers or drivers within value chains that could facilitate their implementation.

Assessment of NextGen's value chains

Considering the complexity of the theme, NextGen created a deliverable presenting 23 circular value chains from its 10 demo cases. The scope of the deliverable is to explore value chains, stakeholders’ ecosystems, drivers and barriers, and overall benefits.


The objectives of the deliverable were:

  1. Provide a holistic point of view of selected circular value chains of NextGen project.

  2. Highlight the good practices and foster mutual learning among demo cases.

  3. Identify success and failure factors of the value chain implementation thanks to

    partners experience.

  4. Facilitate the replication activities with lessons learned in NextGen demo cases.

  5. Propose recommendations for policymakers and circular project leaders to solve

    challenges and difficulties hindering circular value chain implementation and development.

Do you want to learn more about Value Chains in the water sector? Check our Deliverable ‘Assessment of NextGen value chains‘.