Circular economy, the transition of an incumbent focal firm: How to successfully reconcile environmental and economic sustainability?

Abstract

Circular economy (CE) has garnered increasing attention in political circles and practitioner literature thanks to its potential to overcome the harmful consequences of linear patterns of growth. Nonetheless, the adoption of sustainable practices entails a holistic approach requiring businesses to make significant changes to their production, technologies and stakeholder management. These challenges resulted in limited progress in terms of the practical implementation of CE. This paper addresses the need for more literature focused on the pragmatic aspects of applying this paradigm to incumbent firms. The author presents the journey that Lucart S.p.A., a major European tissue paper manufacturer, has undertaken between 2014 and 2020 to apply CE principles to its practices. Insights from the transformation process, reconstructed through interviews with the firm's management and environmental impact data, suggest that to succeed it takes innovating (plants, products and marketing strategies) and setting up supply chains that reconcile environmental and economic sustainability.

Circular economy‐based new products and company performance: The role of stakeholders and Industry 4.0 technologies

“…Stakeholder theory is considered relevant when moving from a linear consumption system to a circular model (Gandolfo & Lupi, 2021; Gupta et al, 2019), since a well‐designed business model seeks to create value for a company and its customers (Moggi & Dameri, 2021), as well as stakeholders, such as suppliers and business partners. Stakeholder theory has also found its way into research on the CE and company performance (Jakhar et al, 2019).…”

“…The circular economy (CE) and its effects on company performance and the sustainability of society is an emerging topic, which has attracted significant attention from both scholars and policymakers. While a number of scholars point out that the CE may be a limited concept (e.g., Barreiro‐Gen & Lozano, 2020; Gandolfo & Lupi, 2021; Korhonen et al, 2018), which is not fulfilling its promises (Clube & Tennant, 2020), it is clear that more systemic research should be conducted on the relationships between the CE, emerging economies, stakeholder pressure, and company performance.…”

How to renew business strategy to achieve sustainability and circularity? A process model of strategic development in incumbent technology companies

“…The reason is that sustainability demands that incumbents drastically rethink and renew their existing operations, competences, organizational culture, and stakeholder relationships (Bertassini et al, 2021; Gandolfo & Lupi, 2021; Hofmann & Jaeger‐Erben, 2020; Kaipainen & Aarikka‐Stenroos, 2021). Therefore, for incumbents, strategic development for sustainability is a complicated process that fundamentally shifts their way of doing business (Engert et al, 2016; Gandolfo & Lupi, 2021; Keijzers, 2002); hence, this type of strategic development is called “strategic renewal” (Agarwal & Helfat, 2009). Prior research has focused on how sustainability and circularity change incumbents' business logics and demand that incumbents reshape their established business models (Frishammar & Parida, 2019; Gandolfo & Lupi, 2021; Ranta et al, 2020; Rovanto & Bask, 2020).…”

“…In examining the integration of sustainability into a business strategy and following the process approach, sustainability can be understood as a “continual process of organizational innovation and development on all fronts” (Fowler & Hope, 2007, p. 36), which meets the environmental, economic, and social needs of present and future generations (World Commission on Environment and Development [WCED], 1987). For incumbents, reconciling the environmental and economic dimensions of sustainability in this process is strategically attractive because the improved use of energy, resources, and waste (i.e., environmental sustainability) allows incumbents to generate profits and positive returns on assets and equity (i.e., economic sustainability) (Bryson & Lombardi, 2009; Bassetti et al, 2020; Gandolfo & Lupi, 2021; Gimenez et al, 2012; Porter & Van Der Linde, 1995). One of the key solutions applied to achieve this goal is for companies to implement a circular economy (CE) in which material and energy loops are slowed, closed, and narrowed (Geissdoerfer et al, 2017).…”

“…Although managing business strategy development to promote sustainability is critical, it is extremely challenging for incumbent companies. The reason is that sustainability demands that incumbents drastically rethink and renew their existing operations, competences, organizational culture, and stakeholder relationships (Bertassini et al, 2021; Gandolfo & Lupi, 2021; Hofmann & Jaeger‐Erben, 2020; Kaipainen & Aarikka‐Stenroos, 2021). Therefore, for incumbents, strategic development for sustainability is a complicated process that fundamentally shifts their way of doing business (Engert et al, 2016; Gandolfo & Lupi, 2021; Keijzers, 2002); hence, this type of strategic development is called “strategic renewal” (Agarwal & Helfat, 2009).…”