ABSTRACT
This chapter discusses the theoretical foundation for circular economy (CE) and sustainability challenges. It presents the theoretical foundation of the CE. Innovation is only about qualitative changes of physical material or energy, it also includes the way these resources are organized, the skills and knowledge and the institutional mindset of what sustainability transition. However, in order to solve the market-failure and system-failure problems there is a present need to renew and develop more targeted nuanced policies that aim to stimulate new circular business models as well as more environmental consumer behaviour. A CE is best explained as an evolutionary system that strives to be regenerative and restorative while reducing the speed of waste generation. In an ideal economy, the equilibrium stage happens when the three markets of product, finance and labour are in balance, where households offer labour and pay for product and services.
