Risk perceptions in circular economy adoption in the Australian construction industry

Abstract

Risk refers to the uncertainty associated with achieving a particular objective. Innovative approaches often involve greater risk because they are not fully realised or widely validated in real-world contexts. The Circular Economy (CE) represents such an innovation, replacing traditional linear material flows with regenerative principles. Given its transformative nature and the conservative characteristics of the construction industry, CE adoption in Australia involves considerable uncertainty. This can lead to risk aversion among decision-makers, particularly clients who act as project initiators and investors. Therefore, how these decision-makers perceive risk is critical, as it strongly influences the initial decision to adopt CE. Therefore, this study examines the perceived risks faced by decision-makers in the Australian commercial construction industry. Eleven industry experts were interviewed, and the data were analysed using content and thematic concurrence analysis in NVivo. The findings show that financial ambiguity, material quality, supply chain reliability, stakeholder coordination, end-of-life planning and longer construction time are perceived as critical risks shaping early-stage decision-making. Experts explained that perceptions even exceed objective risk realities, consistent with the principles of Prospect Theory, which highlight the divergence between perceived and actual risk. In contrast, uncertain regulatory changes, corruption and health and safety concerns were generally not considered decisive in the initial decision-making process. The study highlights that perceived risks, rather than objective risks, dominate decision-makers in the early stages of CE adoption, underscoring the need to address perception gaps to facilitate effective implementation of circular practices in Australian commercial construction projects, leading to future research.