This article analyzes the adoption of circular economy practices in the supply chain of the dairy sector in Ecuador, with an emphasis on their potential to drive technological innovation and sustainable business development. Based on an exploratory descriptive design with a mixed methods approach, the study characterizes the environmental performance of primary producers, processing companies, and consumers, using oficial statistical sources such as ESPAC, ENESEM, and ENEMDU for the period 2021-2023. The results reveal a partial application of circular strategies, with greater development at the business stage, contrasted with structural limitations in primary production and limited active participation from consumers. Opportunities are identified for implementing clean technologies, digital traceability, and waste reuse mechanisms. The study concludes that the circular economy is not only viable in Ecuador's dairy sector but also represents a strategic pathway to promote sustainability, competitiveness, and resilience in the industry.
aligned with circular economy strategies, particularly through the implementation of reverse logistics practices in the dairy sector this being the central objective of the present study.
The Circular Economy (CE) ofers an alternative to the linear model, emphasizing resource regeneration, extended product lifecycles, and waste minimization—principles especially relevant in agro-industrial contexts with high organic waste and dependence on natural inputs. Lindahl and Dalhammar define CE as a system maintaining materials in continuous use through regeneration, recycling, or reuse. This systemic view supports the Sustainable Development Goals by reducing emissions and conserving resources.
Within this framework, reverse logistics becomes a critical strategy for recovering value from used
products or waste, reducing costs, and strengthening consumer relationships. In the dairy sector, it
enhances environmental performance and supports sustainable business models. Ecuador’s Circular
Economy White Paper prioritizes the dairy industry for its high water use, substantial waste generation,
and potential for circular practices 1. Key opportunities include improving energy and water eficiency,
reducing waste, valorizing by products like whey, and fostering public–private partnerships[
These factors underscore the strategic role of reverse logistics in CE and the need to assess its adoption in environmentally impactful sectors such as dairy—an objective central to this study. The adoption of sustainable technologies is a core driver in transforming the dairy supply chain toward circular economy models. In Ecuador, studies highlight clean technologies and process automation as essential for reducing water and energy use, improving eficiency, and minimizing waste, thereby enhancing both environmental and operational performance.
Digital traceability has gained relevance as a tool for monitoring each production stage, ensuring quality, facilitating packaging recovery, and improving waste control—thus reinforcing supply chain circularity. Additionally, ecodesign, life cycle assessment, and cleaner production practices are identified as key strategies for shifting from linear to regenerative models. These approaches enable compliance with environmental regulations, respond to evolving market demands, and create sustainability-based competitive advantages.
Assessing the application of these practices in Ecuador’s dairy sector is therefore crucial to gauge circular maturity and its alignment with reverse logistics—central to this study.
Ecuador’s legal framework provides the normative foundation for advancing a sustainable development model based on circular economy principles, aligned with constitutional environmental rights, international commitments, and public policies promoting innovation and resource eficiency.
The 2008 Constitution recognizes nature as a subject of rights (Arts. 71–74), embedding prevention, sustainability, and shared responsibility as guiding principles 2. This constitutional mandate underpins CE as a strategy consistent with Buen Vivir. The Organic Environmental Code (COA) supplies technical and legal tools for integrated waste management, pollution prevention, and cleaner production, with Articles 226, 232, and 233 establishing extended producer responsibility and mandating reuse, recycling, and waste valorization3. The Organic Code of Production, Commerce, and Investments (COPCI) 1Ministry of the Environment. https://www.produccion.gob.ec/wp-content/uploads/2021/05/Libro-Blanco-final-web_ mayo102021.pdf 2Constitution of the Republic of Ecuador. https://www.defensa.gob.ec/wp-content/uploads/downloads/2021/02/ Constitucion-de-la-Republica-del-Ecuador_act_ene-2021.pdf 3Código Orgánico del Ambiente. https://www.ambiente.gob.ec/wp-content/uploads/downloads/2018/01/CODIGO_ ORGANICO_AMBIENTE.pdf advances sustainable business practices through tax incentives and preferential financing for sectors adopting clean technologies, ecoeficiency, and environmental certifications 4.
The Organic Law on Inclusive Circular Economy institutionalizes systemic circularity, public–private coordination, grassroots recycler inclusion, and territorial planning based on regeneration. It requires productive actors to prioritize waste reduction, reuse, repair, recycling, and material recovery. Internationally, Ecuador’s ratification of the Escazú Agreement reinforces access to environmental information, citizen participation, and environmental justice 5.
The Ecuador Circular Economy White Paper further identifies the dairy sector as a priority, outlining measures to improve water and energy eficiency, valorize organic waste, integrate clean technologies, and strengthen institutional and business capacities. It ofers a policy and cooperation roadmap for applying CE principles to key value chains such as dairy agribusiness.
The Ecuadorian dairy supply chain comprises three main actors, following the functional structure
outlined by Gómez Verjel et al. [
The Ecuadorian dairy industry plays a key role in food security and rural employment. Between 2019 and 2023, daily milk production ranged from 6.6 to 5.58 million liters, with a significant 7% decline in 2021 attributed to postpandemic efects and changing market conditions (see Table 1). In 2023, the Sierra region contributed 77% of national production, with Pichincha (18%) and Azuay (14%) as the leading producing provinces.
Data show higher productivity in the Sierra (7.7 liters/cow) compared to the Coast (4.3) and Amazon (5.5), due to favorable agroclimatic conditions and the availability of natural and cultivated pastures. Most of the dairy cattle (67%) are located in this region.
Regarding the destination of milk, in 2023, 76.98% was sold in liquid form, 15% was processed on-farm, and only 0.14% was wasted (see Figure 1). However, this small percentage represents 7,936 liters of milk wasted per day, primarily concentrated in the provinces of Manabí (59%) and Pichincha (16.8%), due to issues related to transportation, storage, or inadequate milking practices.
In terms of the milking system, analysis is fundamental to understanding production levels and losses in the dairy sector. Manual milking consists of extracting milk by pressing and massaging the cow’s teats with the hands, collecting the milk in a container, usually a bucket. In contrast, mechanical milking uses machines that simulate natural suction through teat cups, creating a vacuum to extract milk more eficiently, which is then stored in tanks. In 2023, out of the daily production of 5.58 million liters from 841,529 cows, 62.63% of the milk was obtained through manual milking, while 37.37% was produced mechanically (see Table 2).
Despite manual milking accounting for the larger share of production, it was responsible for 76% of total milk losses—equivalent to 6,063.98 liters per day—whereas mechanical milking contributed
5Economic Commission for Latin America and the Caribbean. https://repositorio.cepal.org/bitstream/handle/11362/43595/ S2200798_es.pdf
Sierra
Coast
Amazon
Other areas
National to only 24% of losses (1,872.70 liters daily). This significant disparity highlights a technological gap and structural issue within the sector, especially considering that 80% of the 300,000 dairy producers are small scale farmers with limited access to technology and low profit margins. Closing this gap by promoting the adoption of mechanical milking systems could substantially reduce losses, increase productivity, and improve profitability in the dairy industry.
These conditions directly afect the feasibility of implementing circular economy practices such as whey valorization, energy eficiency, or reverse logistics. Additionally, an informality rate of 38.5% in commercialization further undermines producers’ income and reduces sanitary control over dairy products.
From a critical perspective, the primary sector reveals structural vulnerabilities that hinder the
Milking System Liters Produced Number of Cows Liters of Milk Wasted Mechanical 2,085,307 219,148 1,872.70 Manual 3,495,827 622,38 6,063.98 Total 5,581,134 841,528 7,936.68 Note: The table shows that manual milking, although it results in a higher production volume and involves more cows, also presents a higher level of waste compared to the mechanical . transition to circular models. A coordinated intervention is required—one that combines technical assistance, formalization, technological investment, and cooperative schemes to optimize resources, reduce losses, and promote sustainability.
The dairy product manufacturing sector in Ecuador comprises 204 active companies under ISIC code C1050. Of these, 146 submitted financial statements in 2023. About 46% focus on liquid milk, 23% on ice cream, and 14% on cheese. Guayas (26.6%) and Pichincha (19.9%) host the majority of these companies, reflecting a geographical pattern aligned with national consumption and logistics centers (see Figure 2). Data were obtained from the oficial company directory, based on 2023 records 6.
From an economic perspective, the dairy manufacturing companies included in the ENESEM–MIEAE sample exhibited highly volatile net results: USD 62.1 million in 2021, USD 815 thousand in 2022, and USD 16.3 million in 2023 (see Table 3) 7. Net profit per unit of product fell sharply, from USD 1.18 in 2020 to just USD 0.00084 in 2022. These figures reflect limited operational eficiency, high sensitivity to production cost fluctuations, and minimal financial flexibility among the surveyed firms.
In terms of environmental performance, 100% of companies reported having staf dedicated to environmental activities in 2020, 2021, and 2022. However, in 2023, a decline was observed, with 15% of companies no longer reporting such personnel (see Table 4). The average number of full-time 6Superintendencia de Compañías, Valores y Seguros del Ecuador. https://mercadodevalores.supercias.gob.ec/reportes/ directorioCompanias.jsf 7Instituto Nacional de Estadística y Censos (INEC). https://www.ecuadorencifras.gob.ec/ encuesta-de-informacion-ambiental-economica-en-empresas/ environmental workers per company ranged from 2.6 to 3 people, while part-time environmental staf saw a significant decrease, from 7 in 2020 to just 2 in 2023.
Likewise, annual salaries for full-time environmental personnel decreased from USD 794,504 in 2021 to USD 708,110 in 2022, then rose slightly to USD 794,874 in 2023, reflecting adjustments prioritizing operational eficiency without necessarily expanding technical capacity. For part-time staf, salaries dropped sharply from USD 59,832 in 2020 to just USD 11,043 in 2023.
The Ecuadorian manufacturing sector exhibits high variability in its use of water sources, with groundwater extraction standing out as the primary source—particularly in 2022, which recorded an anomalous volume of 568 million 3 (see Table 5). This outlier may be attributable to reporting errors or operational changes. Even excluding this peak, the increasing trend in groundwater use raises concerns about the sustainability of aquifer resources.
Public network water consumption has remained stable (1.2–2.2 million 3 per year), though it sufers from low traceability due to its inclusion in lease agreements or bundled service contracts without itemized records. The use of tanker trucks, notable in 2020 and 2022, reflects infrastructure deficiencies and poses environmental risks due to the intensity of transport activities. Surface water is used by few companies and may be underreported or unregulated.
Overall, there is a clear preference for direct water extraction and weak regulation of water resources. This highlights the need to strengthen traceability, regulate the use of non-conventional sources, and promote eficiency, reuse, and wastewater treatment in order to transition toward a circular water economy.
Wastewater generation in the manufacturing sector has shown a stable trend, with a 40.7% increase in reported volume—from 1.3 to 1.88 million m³—reflecting either enhanced operational capacity or improved reporting practices (see Table 6). Discharges are frequent (14 to 17 hours per day, 26 days per month), indicating continuous industrial activity.
Between 20 and 22 companies reported generating efluents during 2020–2023, although underreporting remains an issue. Between 94% and 100% of wastewater volume is treated, predominantly using
Year Public Network Tanker Water
No 3 USD No 3 USD 2023 20 2,168,621 2,525,255 4 4,333,444 156,866 2022 21 2,234,438 2,577,436 5 4,863,419 112,868 2021 23 1,224,583 2,382,828 5 2,780,771 77,102 2020 17 1,714,663 2,003,569 2 4,863,419 31,886 Year Surface Water Groundwater
No 3 USD No 3 USD 2023 3 210,696 1,139 10 165,595,008 92,320 2022 4 1,716,406 1,254 11 568,211,283 90,684 2021 - - - - - 2020 4 4,419,936 81,708 8 908,118 100,003 Note: The table presents corporate water consumption between 2020 and 2023, broken down by source (public network, tanker, surface water, and groundwater), showing variations in volume, cost, and type of water intake, with a notable increase in the use of groundwater in 2022. physical, chemical, and biological technologies—the latter showing significant growth in 2023. However, 2 to 8 companies do not maintain discharge records, and untreated discharges were reported in some years, revealing weaknesses in environmental compliance.
Despite progress in mitigation, no practices of reuse or treated water recirculation were recorded. This indicates that the sector still operates under a control-based approach rather than a water circular economy framework, limiting closed-loop systems and comprehensive resource utilization.
Companies that received wastewater Companies that generated wastewater Companies that did not generate wastewater Discharge record (yes) Discharge record (no) Flow generated (3/ℎ) Discharge hours per day Operating days per month Total wastewater (INEC estimate) (m³/year) Type of treatment Physical treatment 21 15 17 16 Chemical treatment 19 14 18 12 Biological treatment 21 13 13 11 Electrochemical treatment 0 0 0 0 No treatment - 1 0 2 Percentage of treated water 94% 96,84% 95% 100% Note: The table presents wastewater management by companies between 2020 and 2023, bhighlighting that none received wastewater, around 20 generated wastes annually, and most maintained records of discharge and treatment, achieving high percentages of treated water.
During the 2020-2023 period, data analysis reveals a clear concentration of corporate eforts on environmental current expenditures, peaking in 2021 (USD 3.04 million) and remaining above USD 1.7 million in other years (see Table 7). Environmental investments, although more limited, reached their highest point in 2022 (USD 908,500), followed by 2021 (USD 547,606) and 2023 (USD 471,612). Meanwhile, the production of goods or services with environmental purposes was virtually nonexistent in 2020 and marginal in subsequent years, with 2021 standing out as the year with the highest reported
Year Environmental Environmental In- Environmental Oper
Production (USD) vestment (USD) ating Costs (USD) 2023 96.000 124.899 1.838.016 2022 1.767 908.500 1.729.346 2021 888.400 547.606 3.045.780 2020 0 124.899 1.594.065 Note: The table shows that between 2020 and 2023, companies were primarily involved in environmental objectives through current expenditures, especially in environmental protection, while production and investment were minimal and sporadic.
The consumer analysis is based on data from the 2023 ENEMDU survey, which interviewed 8,779 household heads, representing nearly 5 million households 8. The results reflect a moderate level of environmental awareness, with 38% of households being very concerned about the environment and 42% moderately concerned. However, only 3% actively participated in environmental activities over the past year, revealing a gap between perception and action.
A total of 82% of households still use disposable plastic bags, while only 17% use reusable alternatives. This pattern illustrates a linear consumption culture, with limited adoption of sustainable practices. Regarding perceptions of environmental responsibility, 46% of respondents attribute responsibility to individuals, 41% to companies, and 37% to the government, indicating a shared view, albeit with high institutional expectations. Nevertheless, over 26% believe that caring for the environment increases the cost of living, and 31% see it as an additional burden in terms of time and efort.
These findings point to an urgent need for educational strategies, awareness campaigns, and incentive policies that can mobilize citizen engagement toward concrete actions. The transition to a circular economy cannot rely solely on industrial supply; it requires a cultural shift in consumption and the strengthening of collaborative networks among businesses, citizens, and the State.
This study adopts a mixed-methods research design of an exploratory–descriptive nature, employing a sequential approach that combines quantitative analysis of oficial surveys and financial records with a qualitative review of regulatory and institutional frameworks.
The characterization of the primary dairy sector draws on data from the Encuesta de Superficie y Producción Agropecuaria Continua (ESPAC) for 2020–2023, conducted annually by the Instituto Nacional de Estadística y Censos (INEC) 9. ESPAC employs a multiple-frame sampling design, integrating an area-based frame (segments stratified by agricultural land use intensity) with a list frame of key production units, to ensure precision and representativeness at national and provincial levels. In 2023, coverage included approximately 5,768 area segments and 3,499 list frame units, excluding dense urban zones, protected areas, and high altitude lands above 3,000 meters. Data collection was carried out by trained interviewers using structured questionnaires with georeferenced validation. For this study, only dairy producing units were considered, providing variables on total production volume, cultivated area, and livestock counts to characterize the structure and dynamics of the primary sector.
9Instituto Nacional de Estadística y Censos (INEC). https://www.ecuadorencifras.gob.ec/ encuesta-de-superficie-y-produccion-agropecuaria-continua-2023/
Microdata on environmental and operational practices were obtained from the Módulo de Información Económica Ambiental en Empresas (MIEAE) of the Encuesta Estructural Empresarial (ENESEM) for 2022 and 2023. ENESEM covers medium and large enterprises nationwide, with disaggregation by firm size and CIIU Rev. 4.0 activity, using a sampling frame based on the Registro Estadístico de Empresas (REEM) 2022. From 16,425 registered enterprises, a probabilistic sample of 4,860 was drawn (mandatory inclusion for large enterprises, random selection for medium enterprises), yielding a 91.3% response rate (4,435 firms). The environmental module provided key variables including use of natural water sources (binary), total environmental investment (USD, log transformed), and number of environmental management employees.
The analytical dataset was structured as an unbalanced short panel comprising 38 observations from 19 manufacturing companies in the dairy sector for 2022 and 2023. A consistency check ensured that the same firms were present in both years and that complete information was available for the selected variables. To estimate the efect of environmental variables on economic and operational performance, two random efects panel econometric models were applied in Stata 19: the first used the natural logarithm of annual revenue as the dependent variable, and the second used the natural logarithm of total production (both in USD). The explanatory variables were: (i) use of natural water sources, (ii) natural logarithm of total environmental investment, and (iii) number of environmental management personnel. The Hausman and Breusch–Pagan tests confirmed the appropriateness of the random efects specification (p < 0.01 in both cases). Robustness checks with fixed efects models and Prais–Winsten regression with panel corrected standard errors (PCSE) supported the reliability of the estimates for the 2022–2023 period.
Variable Coeficient Standard Error Z p-value 95% Confidence Interval Water captured from natural sources 0.0120 0.0065 1.86 0.064 [-0.0007, 0.0247] In (Total environmental investment) 0.9898 0.0040 249.59 0.000 [0.9820, 0.9976] Environmental management personnel 0.0025 0.0011 2.28 0.022 [0.0003, 0.0046] Constant -0.9161 0.0700 -13.09 0.000 [-1.0533, -0.7789] Note: Estimates obtained using a random efects model applied to unbalanced short panel data (2022–2023).
Table 9 reports the model with ln(total production) as the dependent variable. Total environmental investment remains highly significant and positive (coef. = 1.0240, p < .001). In contrast, water captured from natural sources now shows a negative and significant efect (coef. = -0.0290, p = .006), and environmental management personnel also display a negative coeficient (-0.0047, p = .018). These shifts in sign suggest that the impacts of resource use and personnel allocation are context-dependent.
Variable Coeficient Standard Error Z p-value 95% Confidence Interval Water captured from natural sources -0.0290 0.0105 -2.75 0.006 [-0.0497, -0.0083] In (Total environmental investment) 10.240 0.0075 136.14 0.000 [1.0092, 1.0387] Environmental management personnel -0.0047 0.0020 -2.37 0.018 [-0.0085, -0.0008] Constant -15.198 0.1330 -11.42 0.000 [-1.7805, -1.2590] Note: Estimates obtained using a random efects model applied to unbalanced short panel data (2022–2023).
The consistently positive and highly significant coeficients in both models confirm that sustainabilityoriented investments generate tangible economic and operational returns, supporting prior research linking environmental investment to eficiency gains and competitiveness. This positions environmental investment as a decisive lever for the Ecuadorian dairy sector’s transition toward circularity, directly aligning with SDG 9 (Industry, Innovation and Infrastructure) and SDG 12 (Responsible Consumption and Production).
The positive efect on revenue but negative efect on production suggests that environmental staf may be primarily engaged in administrative, compliance, or reporting functions rather than directly improving operational processes. This functional mismatch can limit productivity gains from human resource allocation in environmental management. Redefining their roles to connect more closely with technical and process improvements could enhance their impact.
The negative and significant relationship between natural water intake and production indicates ineficiencies in resource use, potentially due to excessive consumption without adequate treatment or recirculation technologies. Advanced water management systems are essential to reduce dependency on natural sources, lower costs, and support sustainability targets.
Econometric evidence underscores that environmental investment—when directed toward digitalization and automation—can magnify returns. Technologies such as IoT sensors, SCADA systems, blockchain for traceability, and AI-based analytics optimize processes, reduce waste, and improve resource eficiency. Process automation, from milk reception to packaging, strengthens control over energy, water, and emissions, enhancing both environmental performance and competitiveness.
Whey valorization into functional foods, protein supplements, or fertilizers through ultrafiltration and fermentation, along with the conversion of organic residues into biogas or compost, can close material loops. In rural areas, community-based packaging and waste collection models—supported by mobile technologies—can address infrastructure gaps and informality, fostering inclusion in circular systems.
The Ecuadorian dairy sector shows measurable progress toward circularity, driven mainly by targeted environmental investments that improve operational eficiency and competitiveness. However, production remains concentrated in the Sierra, technological gaps persist, and by-product valorization is still underdeveloped.
Corporate performance is volatile, with environmental management largely reactive and limited adoption of advanced water recirculation, waste valorization, and digitalization systems. While consumer concern for the environment is moderate to high, behavioral engagement remains low.
Key opportunities include expanding whey and organic waste valorization, integrating IoT and automation for resource optimization, and strengthening reverse logistics schemes. Overcoming ifnancing constraints, technological deficits, and weak public–private coordination is essential.
Strategic actions should focus on enhancing Extended Producer Responsibility schemes, promoting green tax incentives, and developing local technical capacities to accelerate the sector’s transition toward a resilient circular economy.
Promote eco-eficient technologies, water reuse, and waste valorization in the dairy sector; strengthen public–private collaboration through targeted regulations, financing, and innovation partnerships; and engage consumers via education and incentives, while future research should assess the long-term economic and environmental impacts of these measures
During the preparation of this work, the authors used ChatGPT and Claude to assist with grammar, style, and spelling checks, as well as with paraphrasing and rewording suggestions. The authors reviewed and edited all content generated with these tools and take full responsibility for the final version of the manuscript.