Integrating Circular Economy Principles into Commercial Contracts Design: Challenges and Strategic Solutions

Abstract

This paper explores the integration of Circular Economy (CE) principles into commercial contract design. It demonstrates the traditional commercial contracts character-istics, often focusing on cost reduction and performance targets without integrating sustainability and CE principles as a primary focus element. This is highlighted as a key weakness that may be considered a barrier, as it does not obligate contractors to retrieve any resources after products or materials reach their end-of-life cycle. The paper proposes designing commercial contracts using several strategies that extend supplier responsibilities, introduce incentive-based payments for product recovery actions at the end-of-life cycle, and integrate these requirements into the commercial contract Scope of Work. By aligning contract terms with CE principles, companies can strengthen sustainability outcomes while sustaining business operational excellence and long-term business goals.