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Institutional design

Institutional design serves to align ambitions and practice. It can shape economic actors’ decision-making, and promote interaction and collaboration between firms, consumers, and other stakeholders.[1] Transitioning from a linear into a circular economy requires the emergence of new rules which need to be aligned to CE principles and practices.[2] This instrument is largely being used for the deployment of comprehensive environmental and urban policies. Note: Institutions can be understood as formal and informal rules, enforcement mechanisms and norms of behaviour that structure repeated human interaction between individuals, within or between organisations, through incentives, constraints and enhancement.[3]


[1] Williamson, O.E., 2002. The theory of the firm as governance structure: from choice to contract. J. Econ. Perspect. 171e195.

[2] Fischer, A. & Pascucci, S., Institutional incentives in circular economy transition: The case of material use in the Dutch textile industry, Journal of Cleaner Production (2017),

[3] North, D. Institutions and economic growth: a historical introduction. World Development 1989;17:1319–32.

Relevant case studies and articles