Training, secure supply chains key to success of circular startups: Report

Good training and mentoring, helpful government policies and keeping supply chain data secure are among key factors that help "circular startups" succeed, according to a report by Indian Institute of Management (IIM), Lucknow.

Circular startups are businesses that are designed from the start to reduce waste, reuse materials, and make efficient use of natural resources, rather than the traditional "take-make-dispose" model.

The research published in the Business Strategy and Environment journal offers insights into the key factors that help such startups succeed.

According to Suresh Jakhar, Professor, Operations and Supply Chain Management, with rising global temperature and fast-depleting natural resources, this study offers insights into circular models that have become critically important.

Projections show that global usage of natural resources is expected to double by 2050, posing serious environmental and economic risks. 

"The Circular Economy (CE) and Industry 4.0 (I4.0) have emerged as highly pertinent topics for both academic research and industrial practice in recent years. Given that many CE start-ups leverage I4.0 technologies, understanding their success factors is crucial," he told PTI.

"The findings of this research offer a roadmap for entrepreneurs, managers, and policymakers, facilitating the development of successful I4.0-powered CE start-ups, added Jakhar.

Krishna Chandra Balodi, Professor, Strategic Management, IIM Lucknow, explained that the circular economy emerges as a viable solution through its focus on reuse, recovery of resources and reduction in waste.

"However, only 7.2 per cent of the global economy follows this model which indicates that it is imperative for companies to adopt sustainability at the very beginning of their processes," said Balodi.

With a particular focus on these kinds of startups, the IIM Lucknow research team studied Industry 4.0 startups which integrated cutting-edge technologies like smart sensors automation, real-time data processing and interconnection into their operations for enhanced circularity.

To identify the factors that influence success of circular startups, the research team combined literature review, expert insights, and structured decision-making methods. The team identified 23 critical success factors and organised them into a practical framework that can help entrepreneurs, business leaders, and policymakers support the growth of these ventures.

Some of the most important factors that founders can focus on to help their startups grow and be profitable include -- having a clear circular business model, building the right technical skills, keeping supply chain data secure and transparent, working with other businesses. 

"This study reveals the Critical Success Factors (CSFs) for Circular Economy (CE) startups powered by Industry 4.0 (I4.0) technologies, offering a clear roadmap for success.

"After identifying 23 key factors, we ranked them by priority and found the top five to be-- Innovative Circular Business Models, I4.0-Related Technological Competency, Information Security, Privacy and Transparency, Inter-Supply Chain and Inter-Sector Eco-Friendly Partnerships, and Collaboration Across Various Functions," said research scholar Sagnika Dutta.

In addition, the study also pointed to several external drivers that influence a startup's chances of long-term success. These include -- access to funding, good training and mentoring facilities, helpful government policies and demand for circular products.

"By strengthening these external conditions, governments and industry leaders can create a more supportive environment for circular innovation in India," Dutta said.

To help stakeholders prioritise their actions, the researchers ranked the success factors in order of importance and examined how different factors influence one another.

"For instance, access to finance and physical infrastructure emerged as foundational drivers that enable progress in many other areas, such as skill development, collaboration and innovation," Dutta said.