Regenerative Spirits: A Systems Thinking Analysis of Circular Economy Implementation in the Distilling Industry

Abstract Transitioning toward a circular and regenerative economy requires more than technological innovation; it demands a shift in the underlying systems that shape how value, knowledge, and legitimacy are defined [Meadows D, Randers J, Meadows D, The limits to growth: the 30-year update , Routledge (2012); Raworth K, Doughnut economics: seven ways to think like a 21st-century economist , Chelsea Green Publishing (2017)]. While the circular economy (CE) is widely promoted as a pathway to sustainability, its implementation across industrial sectors remains uneven and frequently limited to efficiency-driven, technical interventions [Voulvoulis N et al., Glob. Environ. Change 75:102544 (2022)]. This paper examines the systemic conditions that constrain the adoption of circular economy principles through a case study of the craft distilling industry in regional Victoria, Australia. Guided by Sposito’s (2021) Rational–Holistic Model of Planning and Decision-Making, the study applies a multimethodological systems approach, integrating thematic analysis, boundary critique, and soft systems tools (PQR and CATWOE). This enables an exploration of how system structures - particularly those relating to motivation, control, knowledge, and legitimacy - shape what is considered feasible and acceptable in practice. The findings reveal that barriers to circular economy implementation are not solely technical or economic but are embedded within broader institutional and cultural frameworks. Regulatory fragmentation, compliance-driven definitions of legitimacy, and economically dominant worldviews constrain the uptake of more regenerative practices. By contrasting existing (“is mode”) and alternative (“ought mode”) system configurations, the study highlights the importance of reconfiguring underlying assumptions about system purpose and governance. The paper contributes methodologically by demonstrating how systems thinking combined with thematic analysis can reveal structural constraints, and conceptually by positioning CE as a pathway dependent on a broader shift toward a sustainability-oriented worldview.