The Next Neighbor Problem of the Circular Economy - A Life Cycle Theoretic Perspective on Occurrence and Mitigation Strategies

The transition to a circular economy remains a systemic challenge. Despite decades of pioneering work and initial policy efforts, large-scale implementation is still in its infancy, mainly due to persistent, unresolved barriers. This paper introduces and systematically defines one such critical barrier: the ‘Next Neighbor Problem’. We discuss two core dynamics that hinder circular economy progress. First, circular interventions, such as reuse, remanufacturing, or recycling, can unintentionally impose environmental or economic burdens on adjacent life cycle stages or actors, reducing overall effectiveness. Second, actors in complex value networks often focus circular solutions on direct upstream or downstream partners, neglecting broader systemic opportunities. Using real-world examples, we advocate for a shift from static to dynamic, life cycle-based decision-making and propose a range of mitigation strategies grounded in life cycle theory. These include the refinement of circular product-service systems, the application of dynamic and prospective life cycle assessment, the enhancement of digital traceability and data-sharing infrastructures, as well as enhanced cross-sectoral coordination mechanisms. Future research should focus on a more detailed description of the characteristics, patterns of occurrence and classifications of the problem in a temporal-dynamic context, the model-based investigation of cross-actor and -sector dependencies in evolving complex circular value creation systems as well as the more detailed derivation of recommendations for action for both individual economic units and political decision-makers.