The transition from a linear to a circular logic: Case studies of MNEs in the FMCG-industry.

Master Thesis by Nora Wei Qeen Foo MSc Business Administration - International Management

N.W.Q. Foo

Student Number: 11233079

First Reader: Francesca Ciulli

Second Reader: Erik Dirksen

Date: 26/01/2017

Word Count: 20860

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Statement of originality This document is written by Nora Wei Qeen Foo who declares to take full responsibility for

the contents of this document. I declare that the text and the work presented in this document

is original and that no sources other than those mentioned in the text and its reference have

been used in creating it. The faculty of Economics and Business is responsible solely for the

supervision of completion of the work, not for the contents.

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Table of Contents

1. ABSTRACT 3

2. INTRODUCTION 4

3. LITERATURE REVIEW 9

3.1. INSTITUTIONAL LOGICS 93.2. INSTITUTIONAL CHANGE AS SHIFT FROM A LINEAR TO CIRCULAR LOGIC 113.3. BUSINESS MODEL AND SUSTAINABILITY-ORIENTED BUSINESS MODEL INNOVATION 153.4. MNES AND (SUSTAINABILITY-ORIENTED) BUSINESS MODEL INNOVATION 19

4. THEORETICAL FRAMEWORK 21

5. METHODOLOGY 25

5.1. RESEARCH DESIGN 255.2. CASE SELECTION 255.3. DATA COLLECTION 285.4. DATA ANALYSIS 29

6. RESULTS 33

6.1. WITHIN CASE ANALYSIS 336.1.1. UNILEVER 336.1.2. NESTLÉ 376.1.3. DANONE 426.1.4. COCA-COLACOMPANY 476.2. CROSS-CASE ANALYSIS 52

7. DISCUSSION 55

7.1. PROPOSITIONS 557.2. THEORETICAL AND MANAGERIAL CONTRIBUTIONS 607.3. LIMITATIONS AND AVENUES FOR FUTURE RESEARCH 62

8. CONCLUSION 64

9. ABBREVIATIONS 67

10. REFERENCES 68

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1. Abstract Sustainability has become an increasing topic of conversation in the corporate world. The

earth’s natural fuels are suffering exhaustion, and the amount of pollution is increasing. This

is where the circular economy comes to light. Organizations who operate the circular economy

turn goods that are at the end of their lifecycle into resources for others, close loops in industrial

ecosystems, and minimize waste. This study will address how institutional change is able to

trigger business model innovations, and will thereby focus on the adoption of practices, values,

and beliefs consistent with the circular logic.

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2. Introduction In the last decade both scholars and practitioners have increasingly underlined the need for

businesses to change the economic logic that guides their activities, and move from a ‘linear’

logic towards a ‘circular’ logic, in order to, on one side, to reduce their impact on the

environment and, on the other side, to decrease their costs and seize new business opportunities.

The linear logic consists in the adoption of a ‘take-make-dispose’ model, i.e. in the lifecycle of

water bottles; after the consumer has used its content, the bottle will be disposed and not used

for further purposes. While organizations that operate a circular economy turn goods that are

at the end of their lifecycle into resources, close loops in industrial ecosystems, and minimize

waste. Different definitions have been developed of the circular economy, however according

to Murray et al. (2015, p.1) it is generally agreed that it is “an economic model wherein

planning, resourcing, procurement, production and reprocessing are designed and managed,

as both process and output, to maximize ecosystem functioning and human well-being.”

The circular economy is gradually becoming an idea accepted by policy makers and

businesses. Companies have increasingly transformed their business models to integrate a

circular logic, yet this process is still in its initial stages. In particular, for large, multinational

companies (MNEs), given their visibility and their significant use of resources, the

commitment to a circular model is increasingly crucial for their legitimacy and it may also be

financially profitable, but, at the same time, it represents a critical challenge, due their complex

‘activity system’ (Zott & Amit, 2010).

Despite the widespread call for a shift towards a circular economy, this subject has been

overlooked by management scholars, with very few exceptions (e.g. Murray et al., 2015;

Kortmann & Piller, 2016). A signal of a rising interest in management research is represented

by the call for papers on “Circular Economy: Managerial and Policy Implications”, published

recently by the California Management Review. However, neither the published papers or the

call for paper focuses on multinational enterprises (MNEs). Yet, examining how MNEs change

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their activities towards circularity is particularly valuable. Due to MNEs’ presence in multiple

countries, implementing the circular economy is a particularly complex process, as it requires

the transformation of an international system of activities.

The circular economy has become a highly relevant concept to examine, given the

increasing popularity of academic debates on sustainable and socially responsible business

(Russo & Tencati, 2008; Junior et al., 2013; Dossa & Kaeufeur, 2013). The adoption of both

the institutional theory and the business model lens is particularly appropriate to explore this

topic. Indeed, the shift from a linear to a circular economy requires a change both in companies’

‘material practices’ (Thornton & Ocasio, 1999), i.e. in their ‘activity system’ (Zott & Amit,

2010), and in the norms, values, and rules that guide them. For a MNE to achieve a fully closed-

loop system it has to engage in a substantial change of the values and principles, i.e. the

institutional logic that guide its activities and shift from linear to a circular logic. The linear

logic focuses on the conversion of natural resources into waste, through production. The

circular logic encompasses the principles of restoring any damage done in resource acquisition

while ensuring little waste is generated throughout the production process and in the life history

of the product (Murray et al., 2015). The emergence of a circular logic has led scholars and

practitioners to call for companies to innovate their business model, by integrating practices

that are consistent with the beliefs of the circular economy. Thus the change in logic has to be

reflected in a transformation of the MNE’s ‘material practices’, i.e. the system of activities on

which its business is founded.

Both the literature exploring the process of institutional logic shift and the one

investigating the change in business model, i.e. business model innovation, have highlighted

the challenges companies have to face in these transformations. Indeed, companies are subject

to path dependency (Bohnsack et al., 2014). Also, business model innovation is a ‘trial-and-

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error’ process (Sosna et al., 2010), entailing continuous and incremental adjustments. As

mentioned previously, the shift to a circular economy is particularly critical for MNEs, as they

have to change a complex activity system and norms and values across the subsidiaries located

in multiple countries. They have to decide whether and how the transformation to adopt should

be global or local. In order to develop a thorough understanding of the implementation of the

circular economy by MNEs, it is therefore crucial to adopt a longitudinal perspective, which

allows to capture the gradual nature of the transformations adopted.

Thus, in keeping with the importance of the topic and with the limited attention assigned

to it, this study aims to answer the following research question:

How do multinational enterprises in the FMCG-industry integrate the circular

logic into their business model over time?

In order to answer the research question, the study will adopt a multiple case study research

design. The cases will be represented by four multinational companies operating in the FMCG-

industry: Unilever, Coca-Cola Company, Nestlè, and Danone. FMCG-industry is in

particularly important because population growth places a strain on the world’s natural

resources, the raw materials that the FMCG-industry relies on to make its products. These

products are daily consumed by billions of customers across the world, making it one of the

most influential industries. The four chosen multinationals are key players in this industry, they

recognize the damage its operations have on natural resources and the need for a new economic

system.

"The concept of a circular economy promises a way out. Here products do not quickly

become waste, but are reused to extract their maximum value before safely and productively

returning to the biosphere. Most importantly for business leaders, such an economy can

deliver growth. Innovative product designers and business leaders are already venturing into

this space." – Paul Polman, CEO, Unilever

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These companies have sufficient archival data available to fully analyze their process

of integrating the circular logic into the business model. The qualitative data, specifically

archival data, is collected from the documentations released by the company, i.e. sustainability

reports and press releases.

Theoretically, the study aims to make a contribution to the field of sustainable business

model innovation as it provides an overview of how businesses can alleviate its environmental

footprint by changing its logics. It will explore the shift from a linear to a circular logic, during

the integration of the circular economy. It will identify patterns and implications of the process,

that will be generalizable for MNEs in the same industry. Research is limited on how the

circular economy is integrated across subsidiaries in multiple countries, so by focusing on

MNEs this study also aims to make a contribution to the field of international management. It

offers a deeper understanding of how the circular logic is integrated into a more complex

activity system. Simultaneously, this study adds to the current literature on institutional logics

by assessing the transition towards the circular logic of organizations that already face potential

heterogeneity in institutional logics. The empirical research will be practically relevant for

practice for managers and policy makers. Ultimately the goal of this study is to improve the

design, implementation, and performance of a closed-loop economy in the sustainable business

model in theory and practice.

First, the main concepts are discussed and the research gap will be explained in the third

chapter. The first paragraph will discuss institutional logics to create a better understanding of

the values, beliefs and material practices of institutions. The following paragraph will discuss

institutional change, specifically the transition from a linear logic to a circular logic. This

transition does not only require a change in the institutional logics, but it also changes a

businesses’ activity system. Therefore, the last paragraph will discuss the Business Model

(BM) and the sustainable-oriented Business Model Innovation (BMI). The fourth chapter will

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present the theoretical framework and the propositions. Subsequently, the fifth chapter will

discuss and elaborate the research design, case selection, data collection, and data analysis.

Based on the data analysis chapter 6 will present the results in a within-case analysis for each

company, followed by a cross-case analysis that includes all cases. Chapter 7 will discuss the

significance of the findings, the theoretical and managerial contributions, and the limitations

and avenues for future research. The last chapter will present the conclusion of this study.

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3. Literature Review In the following sections the core concepts examined in this research will be discussed and

illustrated. More specifically, the first section will introduce the construct of institutional

logics. The following section will discuss the institutional change consisting in the transition

from a linear logic to a circular logic. Next, the business model and the sustainable-oriented

business model innovations will be explained. The last section will elaborate on MNEs and

sustainable business model innovations.

3.1. Institutional Logics

The construct of institutional logics is one of the core components of institutional theory and

was conceptualized in 1985 by Alford & Friedland. Its purpose was to describe the

contradictory beliefs and practices inherent in the institutions of modern western societies. In

1991, Friedland & Alford extended the definition with the idea of exploring the

interrelationships between society, individuals, and organizations. Based on the definition of

institutional logics by Friedland & Alford (1991), Thornton & Ocasio (1999, p. 804) further

developed the concept of institutional logics by defining them as “the socially constructed,

historical patterns of material practices, assumptions, values, beliefs, and rules by which

individuals produce and reproduce their material subsistence, organize time and space, and

provide meaning to their social reality”.

Institutional logics are the basis of taken-for-granted rules guiding the behavior of field-

level actors, and they refer to the belief systems and related practices that predominate in an

organizational field (Scott, 2001). Reay & Hinings (2009) claim that logics are an important

theoretical construct as they help to explain connections that create a sense of common purpose

and unity within an organizational field. They argue that logics also play an important role

because a change in the field’s dominant logic is fundamental to institutional change.

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Over the last decades, the construct of institutional logics has increasingly been adopted

by management scholars to investigate firms’ behavior, indicating that companies’ activities

can be driven by multiple and diverse institutional logics. A relevant stream of research has

explored the institutional change that consists of the shift in the logic driving organizational

practices. For example, Thornton (2002) has explored how firms shift from an editorial logic

to a market logic. She explains how the differences between these logics showed a decrease in

the importance of professional determinants of organization structure and an increase in the

salience of its market determinants. She claims that the change in logic can be understood as

the movement of publishing houses from one institutional sector to another. Firms that embody

old organizational forms under old institutional logics are relatively immune from change

pressures, until the prevailing institutional logic changes. So when a shift to a new logic occurs,

firms that are embodied in the old organizational forms become deviants that are particularly

vulnerable to change pressures. Therefore, it can be expected that the emergence of the circular

logic creates changes pressures of which firms operating the linear logic are vulnerable to.

Faulconbridge & Muzio (2015) claim that as they operate across multiple and diverse

institutional contexts, MNEs are inevitably exposed to competing and potentially incompatible

institutional pressures, and therefore to experiences of complexity. This requires different

logics and can create different implications. They have the need to reconcile the different the

logics of home and host country. Scholars have highlighted that due to institutional complexity

the change in logics face barriers. Reay & Hinings (2005) argue that actors hold values and

beliefs that are consistent with a certain institutional logic. Since organizational fields are

composed of actors who make up communities, and are characterized by the interactions

between actors, logics, structure, and political factors are all important to field level change.

Within communities, actors can hold different institutional logics, and all fields can be

characterized by competing institutional logics to some degree. When a dominant institutional

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logic exists, it is because other logics are subordinate. Consequently, this process of moving

from one dominant logic to another requires time and actors using their power accomplish such

shifts. Lok (2010) argues that over time, new organizations (e.g. Ellen MacArthur Foundation)

enter fields, introducing new ideas to the market. Changes in social circumstances can enable

subordinated interests to successfully install and mobilize a new logic or reprioritize existing

ones. Over a longer period of time, institutional complexity unfolds, creating different

circumstances to which organizations must respond.

In the next section a specific type of institutional change is discussed; the transition

from a linear to a circular logic.

3.2. Institutional change as shift from a linear to circular logic The term linear economy has become popular in use, as the antonym of the circular economy,

by those writing about the circular economy and related concepts (Murray et al., 2015). The

norms and values of today’s linear logic, known as the ‘make-dispose-waste’ economic model,

is based on large quantities of cheap and easily accessible materials and energy. A linear

economy is defined by converting natural resources into waste, via production. Such

production of waste leads to the deterioration of the environment in two different ways: by the

removal of natural capital from the environment and the reduction of the value of natural capital

caused by pollution from waste. Also during the resource acquisition stage, pollution can occur

(Murray et al., 2015). After the use period, the product will partly become waste and the buyer

decides whether to dispose it. The optimization of generated waste or used raw materials is not

specifically addressed in the product’s technical specifications (Witjes & Lozena, 2016).

According to Stahel (2016), the linear economy aims to be efficient at overcoming

scarcity, but profligates at using resources in often saturated markets. It has been the heart of

industrial development and has generated an unprecedented level of growth, however, it is

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reaching its physical limits. The world’s key resources, as rare earth metals and minerals, are

diminishing. As a result, the costs of material extraction and exploration are rising. This has

drawn the attention of policy makers and business leader and forced them to rethink the use of

materials and energy (Ellen McArthur Foundation, 2015). Scholars and practitioners have

acknowledged the need for change in the economic logic that drives business and more widely

in society. According to Pearce & Turner (1990), are resource deficiency and product waste

typical characteristics of the linear economy. They argue that in order to address this issues it

is necessary to adopt a circular logic, where waste is considered a resource and resources have

to be maintained within the system. The time is right, many argue, to take advantage of the

potential benefits of the circular economy. The need for a new economic model is increasing

as population growth places a strain on the world’s natural resources, and the new possibilities

in technology and social factors have enabled the transition towards a circular economy.

The concept of Circular Economy, inspired by Swedish and German loop-closing, was

first introduced in China by Zhu (1998), and in 2002 it got officially accepted by the by the

Chinese central government. This new strategy is aiming to enable rapid economic growth and

counteract the shortage of raw materials and energy (Su & Zhou, 2005). Over the last years,

support for the circular economy has emerged, and the application of this concept has also been

seen in western economies. According to Hill (2015), the circular economy started as a

theoretical construct but is now gradually becoming an idea accepted by some policymakers

and businesses within Europe as conveying an aspiration to keep resources in economic use

for as long as possible. Since 2009, the Ellen MacArthur Foundation, a leading proponent

founded by the round-the-world yachtswoman, has been promoting the idea of circular logic

to manufacturers and policymakers. The EU Horizon 2020 program and the Swedish

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Foundation for Strategic Environmental Research published their first call for circular

economy proposals in 2014.

However, there is still a lack of agreement on definitions of the circular economy.

According to Murray et al. (2015), the circular logic is defined by having no net effect on the

environment; rather it restores any damage done in resource acquisition while ensuring little

waste is generated throughout the production process and in the life history of the product. By

increasing a product lifecycle through better manufacturing and maintenance, the rate of

product replacement decreases, thus resource use is reduced. This is how the ‘waste-as-food

concept’, wherein unwanted outputs of one industrial process are used as raw materials in

another industrial process, and the three Rs of Reduce, Reuse, and Recycle have become central

concepts to the circular economy.

Literature has been discussing what the components are of the circular logic. The

European Commission submitted a Circular Economy Package to the European Parliament in

December 2015. It identified four sources of economic and sustainable value creation within a

circular economy: the power of inner circle (less cost production); the power of circling longer

(lengthening lifetime of products); the power of cascading use (waste-is-food); and the power

of pure circles (where source materials remains uncontaminated, and therefore improving

redistribution efficiency and material productivity) (Ellen MacArthur Foundation, 2012).

Stahel (2016, p. 1) claims “the circular economy would change economic logic because it

replaces production with sufficiency: reuse what you can, recycle what cannot be reused,

repair what is broken, remanufacture what cannot be repaired”. He argues that organization

integrating the circular economy can be divided into two groups: the first group supports reuse

and extended life service through repair, upgrades, remanufacture and retrofits; and the second

group that turns old groups into as-new resources by recycling the materials. He says that these

forms of circular economy create the need for new skilled jobs in remanufacturing old goods,

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buildings, and infrastructure. However, since it is a fairly new concept, lack of unfamiliarity

slows down the process of adoption to circular logic. Stahel (2016) claims that the idea of

creating wealth by extending product lifecycle is the opposite of economist’s idea of creating

wealth. Promoters of the circular economy have argued that it is valuable both from a

sustainability and from an economic perspective. Indeed, the widely acknowledged definition

of sustainable development is the closed flow of materials and use of energy and raw materials

in multiple phases (Yuan et al., 2008). The principles, norms, values, and material practices of

both the linear and circular logic are highlighted in table 1.

Circular activities of multinationals are hardly investigated. To be able to succeed in

integrating the circular economy, MNEs have to adapt their business model to one wherein

planning, resourcing, procurement, production and reprocessing are designed and managed, as

both process and output, to maximize ecosystem functioning and human well-being (Murray

et al., 2015). A change in logic will not only lead to a change in norms and beliefs, it also leads

to an important change in material practices of a company. These practices can be found in the

design of a firm’s business model. MNEs who are integrating the circular logic into their

business model, have to implement these changes in multiple countries, requiring a more

complex ‘activity system’ (Zott & Amit, 2010). This is particularly interesting because of

potential heterogeneity in institutional environments. To create a full understanding of

sustainable business models the following section will discuss the business model and the

sustainability-oriented business model innovation.

Linear logic Circular logic Principles, norms, and values

Based on large quantities of cheap and easily accessible materials and energy. Efficient at overcoming scarcity.

Waste is considered as a resource and have to be maintained within the system. It should have no net effect on the environment.

Material practices

Make-dispose-waste. Reduce, reuse, and recycle.

Table 1: The linear vs. circular logic

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3.3. Business Model and Sustainability-Oriented Business Model Innovation

Business model (BM) and business model innovation (BMI) have received significant attention

in industry and management literature. It has been increasingly suggested that business model

innovation is a key to business success (Chesbrough, 2010; Lüdeke-Freund, 2010; Zott et al.

2011). Bellman et al. (1957, p. 474) were the first to mention the term “business model” in an

academic article, defining it as “a representation of reality, a simulation of the real world

through a model”. However, the number of articles on business models remained low until the

1990s, when the use of the term increased due to information and communication technologies

(ICT) and internet companies. Nowadays, the term ‘business model’ is often misinterpreted

and misused, and has consequently been inadequately understood and applied by both scholars

and practitioners (DaSilva & Trkman, 2013).

According to Zott et al. (2011), researchers have begun to converge on the following

common themes that characterize business models: (a) business models center on the logic of

how value is created for all stakeholders, not just how it is captured by the focal firm; (b)

activities performed by the focal firm as well as by partners, suppliers, and even customers

play an important role; (c) business models emphasize a system-level, holistic approach toward

explaining how firms “do business”; and (d) the business model is emerging as a new level and

unit of analysis. A subject of debate among scholars has been the components of a business

model. According to DaSilva & Trkman (2013), a business model does not give strategists all

the answers for how to operate a business and generate a sustainable competitive advantage.

Instead, it creates an image of the company and shows how the various elements of the business

work together at a certain moment in time. Zott & Amit (2010) created a conceptual toolkit

that enables entrepreneurial managers to design their future business models. They argue that

an activity in a focal firm’s business model can be viewed as the engagement of human,

physical and/or capital resources of any party to the business model to serve a specific purpose

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towards the fulfillment of the overall objective. They discuss that one set of important design

parameters that characterize this activity system are the design elements of ‘content’,

‘structure’ and ‘governance’, which go beyond interdependencies among activities or notions

of network structure. These elements can be used to identify different categories of BMs related

to the circular logic.

- Activity system content refers to the selection of activities, i.e., those that are performed.

For example, a firm can adopt waste collecting activities to achieve a closed loop

system.

- Activity system structure describes how the activities are linked, and it also captures

their importance for the business model, i.e., in terms of their core, supporting or

peripheral nature. When a firm makes the transition from a linear to a circular logic it

has to change its core and peripheral activities. For example, it has to change new

activities in product development and manufacturing.

- Activity system governance refers to who performs the activities. To integrate the

circular logic, it is likely that the firm has to collaborate with partners outside its original

value chain.

For simplicity and conceptual clarity, they described the design parameters of activity

systems as independent and ethical, but they could also be highly interdependent.

With the increasing pressure of competition and institutional changes, organizations

have to constantly be innovative to keep their position in the market, this is where BMI enters

the strategic plan. Zott & Amit (2010, p.1) define BMI as “a tool for entrepreneurs and general

managers to create and appropriate value, especially during an economic change”. They claim

that BMI consists in creating a new or adjusting an existing activity system by recombining

resources of a firm and its partners. Entrepreneurs and managers should be focused on BMI for

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several reasons. Firstly, it creates a source of value for future businesses. Secondly, by

executing a BMI which competitors find hard to imitate, a company is able to create a

competitive advantage. And as last, because BMI is a competitive powerful tool, managers and

entrepreneurs have to be able to analyze the competitors’ efforts in this area. Companies face

a number of barriers when innovating their BM. According to Chesbrough (2010), companies

need an effective attitude towards business model experimentation. Companies trying to

change their business models are highly likely to fail by experimenting with different business

models until the right one is found. Business model innovation is a trial-and-error process

(Sosna et al., 2010) entailing continuous and incremental adjustments. Furthermore,

Chesbrough (2010) argues that companies need to identify the right internal leaders for a

business model to change. These leaders need to manage the results of the processes of BMI

and deliver a new and better business model for the company. Moreover, the culture of the

organization has to learn to embrace the new model, while keeping the effectiveness of the

current business model until the new one can be taken over completely.

Companies are subject to path dependency; the idea that path events guide future action

and history matters, which also implies a persistence in decision-making patterns over time

(Sydow et al., 2009). Large companies, according to Helfat & Lieberman (2002), have vast

resources that provide a wide variety of starting points for business model innovation and allow

experimentation with multiple business models simultaneously (Doz & Kosonen, 2010). This

increases the chance of adopting a business model that will become the standard eventually

(Bayus & Agarwal, 2007). Therefore, the transformation of the business model can take much

longer as there is no need to make a definite choice right away, which leads to a greater

diversity in business models over a prolonged period (Bohnsack et al., 2014).

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Nowadays, within the research exploring BMI, increasing attention has been assigned

to sustainability-oriented BMI. In line with the circular economy, Kortmann & Piller (2016)

have developed a framework of SBMs involving a closed-loop value chain. They argue that a

holistic perspective is driving the emergence of a closed-loop value chain and requires

managers to design, control, and operate a system maximizing value creation over the entire

lifecycle of a product, striving to dynamically recover value from different types of returns

over time. They conceptualize this by means of three consecutive stages in an extended product

lifecycle, comprising the production stage, the consumption stage, and the subsequent

circulation stage. Firms need to develop competitive and integrated business models that extend

the traditional production function, include service offerings in the consumption stage, and

emphasize the circulation or recovery of distributed products. Bocken et al. (2014, p. 44) define

BMIs for sustainability as “innovation that create significant positive and/or significantly

reduced negative impact on the environment and/or society, through changes in the way the

organization and its value-network create, deliver value and capture value or change their value

propositions”.

Due to rising pressures, collaborations between firms and other key stakeholders are

becoming more important (Lowitt, 2013). The approach of system thinking and the need to

consider a business entity as an element of a wider system of stakeholders and the environment

in which it operates has been long discussed in the business literature (Mason & Mitroff, 1981;

Pauchant & Mitroff, 1990; Hester & Adams, 2014). As Zott & Amit (2010) mentioned, a

business model is geared toward total value creation for all parties involved. It lays the

foundation for the focal firm’s value capture by co-defining the overall ‘size of the value pie’,

which can be considered the upper limit of the firm’s value capture potential. Bocken et al.

(2014) claim that a sustainable business model (SBM) incorporates a triple bottom line

approach and consider a wide range of stakeholder interests, including society and

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environment. SBMs are important in driving and implementing corporate innovation for

sustainability, can help embed sustainability into business purpose and processes, and serve as

a key driver of competitive advantage. Kortmann & Piller (2016) argue that, nowadays, the

integration of external partners into the new product or service development process has

become almost a routine activity for many organizations. They conceptualize the firm as a

system of interdependent and transcending activities that span internal and external firm

boundaries and enable the creation and capture of value in concert with external partners.

Firms increasingly seek to identify opportunities to gain a competitive advantage in a

world characterized by tightening regulation, resource supplies, climate change effect, and

shifting social pressures (Bocken et al., 2014). Due to the resource scarcity, one of the most

recent types of SBM is the one integrating the circular logic. However, it appears that limited

attention has been given to the integration of circular economy principles in the BM across

multiple institutional environments. As mentioned before, in particular, for large, multinational

companies, given their visibility, the commitment to a circular model is increasingly crucial

for their legitimacy and it may also be financially profitable, but, at the same time, it represents

a critical challenge, due their complex ‘activity system’ (Zott & Amit, 2010).

3.4. MNEs and (sustainability-oriented) business model innovation For all companies, reconfiguring the existing business model is a challenging process. It is

however particularly demanding for MNEs, which need to implement the business model

innovation across their complex, international ‘activity system’ and they need to decide to what

extent and how to implement it across the multiple locations in which they operate (Zott &

Amit, 2010).

Sustainability-oriented BMI is a core necessity for MNEs, due to the strong impact their

businesses have on the environment and on the society and due to the higher pressures they

face from multiple stakeholders (Zott & Amit, 2010). Yet, although MNEs represent a unique

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context to examine (sustainability-oriented) BMI, to the author’s knowledge extant literature

has given very scant attention to this topic. Some studies, e.g. Bohnsack et al. (2014) examine

MNEs, but take a ‘monolithic’ approach to their sustainability-oriented BMI and do not take

into consideration the international nature of their activities and the challenges they face due

to this. Other studies (e.g. Sosna et al. 2010) address international expansion as a way to scale

the BMI, but not as a pre-existing condition of the company.

To have a thorough understanding of a MNE’s BMI, it is instead crucial to adopt an

international perspective to the study of the change in the BM components. This consists for

example in examining to what extent the transformation of MNE’s activity system content

occurs globally or in defined locations, whether and how the change in the activity system

governance relies on the involvement of global and/or local partners, how the change to the

international network of the MNE’s activities unravels over time.

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4. Theoretical Framework In the last year, both scholars and practitioners have increasingly agreed on the need to rethink

the use of resources and energy (Stahel 2016; Ellen McArthur Foundation, 2015; Murray et al.,

2015). The widespread call for a closed-loop production system has triggered an increase in

interest among researchers for the study of the circular economy. As mentioned in the previous

sections, a signal of this is represented by the call for papers on the circular economy by the

California Management Review. Yet, research on the circular economy among management

scholars has focused on its origins and conceptualization (Kortmann & Piller, 2016; Murray et

al, 2015), overlooking the process of transformation towards a circular economy. Also, scholars

have given very scant attention to the adoption of an international perspective to the

investigation of firms’ transition towards circularity. For MNEs the transition towards a

circular economy is particularly important for two main reasons. First, MNEs due to the size,

are primary actors in the supply and transformation of materials and resources. Since the

world’s key resources are diminishing, and costs of materials extraction and exploration are

rising, pressures from multiple stakeholders are increasing in favor of a shift from linear to a

circular system. Second, due to their presence in multiple countries, MNEs face critical

challenges in the change of norms, values and materials practices towards circularity. Turning

their complex, international ‘activity system’ (Zott & Amit, 2010) into a circular one requires

time and significant efforts.

This is even more critical when confronted to what is stressed both by the literature on

the shift in institutional logics and on business model innovation. These two streams of research

highlight the difficulties and the gradual nature of these transformation processes. Path

dependency (Bohnsack et al., 2015), the need for a trial-and-error approach (Sosna et al., 2010),

the importance of keeping the effectiveness of the current business model until the new one

can be taken over (Chesbrough, 2010) are core features of these processes. Logics are important

within an organizational field and play a role in institutional change. The process of moving

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from one dominant logic to another involves actors using their power to accomplish such shifts

(Reay & Hinings, 2005).

Given the absence of research that focuses on the transformation of MNEs towards the

circular economy and the need to adopt a longitudinal approach to gain a thorough

understanding of the transformation in institutional logics and BM, this study aims to answer

the following research question:

“How do multinational enterprises in the FMCG-industry integrate the

circular logic into their business model over time?”

Drawing on Zott & Amit’s (2010)’s categorization of the BM component, the study focuses on

examining how the circular logic has been integrated into the MNEs’ activity system content

and activity system governance from a longitudinal perspective. Given the international

presence of the MNE, the study will examine whether the changes have been implemented at

a local, regional, and/or global level. More specifically, with regard to the activity system

content, I expect that MNEs take a holistic perspective when integrating the circular logic into

the product lifecycle. Firms need to develop competitive and integrated business models that

extend the traditional production function, include service offerings in the consumption stage,

and emphasize the circulation or recovery of distributed products (Kortmann & Piller, 2016).

Murray et al. (2015) agree with this theory by arguing that increasing product lifecycle through

better manufacturing and maintenance, the rate of product replacement decreases, thus resource

use will be reduced. The three Rs of Murray et al. (2015) of Reduce, Reuse, and Recycle can,

therefore, be related to the production function stage, consumption stage, and subsequent

cycling stage respectively. The three stages and the three Rs form the four sources of the

circular economy identified by the Ellen MacArthur Foundation (2012); the power of inner

circle, the power of circling longer, the power of cascading use, and the power of pure circles.

Because recyclable package designs are needed in order to recycle the products, it is expected

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that MNEs are likely to first integrate the circular logic in the production stage before focusing

on the consumption stage and the subsequent circulation stage.

Proposition 1: over time MNEs are likely to start integrating the circular logic in the

beginning of the product lifecycle, and then extend it to the end of the product lifecycle.

Secondly, as regards the activity system content, I expect that the MNEs initially focus

on recycling activities. According to Pearce & Turner (1990), a closed-loop value chain should

consider waste as a resource and resources should be maintained within the system. Resource

cycling is fundamental to the circular economy since it is part of the reversed value chain and

embraces all firm activities from product returns to the potential recovery of the products

maximum value via recycling and up-cycling activities (Kortmann & Piller, 2016). Upcycling

and downcycling activities are strongly related to the third and fourth source of the circular

economy; the power of cascading use (waste-is-food) and the power of pure circles (Ellen

MacArthur Foundation, 2012). Downcycling refers to the recycling process of converting

materials into new materials of lesser quality and reduced functionality, whereas upcycling

processes converts materials into new materials of higher quality and increased functionality

(Ellen MacArthur Foundation, 2013). Since upcycling is a more complex and costly process,

MNEs are likely to initially adopt downcycling activities and then move to adoption of

upcycling activities.

Proposition 2: over time MNEs are likely to initially adopt downcycling activities and

then integrate upcycling activities.

As regards the activity system governance, I expect that over time the MNEs establish

increasingly partnerships outside their ‘traditional’ value chain. Nowadays, integrating external

partners into the new product or service development process has become almost a routine

activity for many organizations (Kortmann & Piller, 2016). This is also consistent with the idea

of “system thinking” that has been associated with the circular economy (Pauchant & Mitroff,

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1990; Mason & Mitroff, 1981; Hester & Adams, 2014). Since circular activities often involve

technologies and processes that might be unfamiliar to the MNE’s current business model, it is

expected that over time MNEs establish partnerships with external actors that have the

authority or technology to develop these circular activities.

Proposition 3: over time MNEs are likely to increasingly establish partnerships outside

their ‘traditional’ value chain.

The last proposition regarding the geographic scope is related to the scale on which the

activities regarding the circular logic are practiced. Given a MNE’s visibility, the commitment

to the circular logic throughout the whole business model is crucial for their legitimacy (Zott

& Amit, 2010). MNEs operate across multiple and diverse institutional contexts, thus face

different logics that can lead to different implications (Faulconbridge & Muzio, 2015), which

makes experimentation crucial to business model innovation (Chesbrough, 2010). Therefore, I

expect that MNEs initially perform circular activities on a local scale, and then extend it to a

global scale.

Proposition 4: over time MNEs are likely to integrate the circular logic on a local scale

then extend it to a global scale.

It is expected that closed-loop business models will have a foundation based on reduce,

reuse, and recycle. The lifecycle of the companies’ products increases through better

manufacturing and maintenance, which leads to the result of resource use reduced because of

a decrease in the rate of product replacement (Murray et al., 2015). It is expected that these

MNEs faced barriers that when making the transition towards a circular logic. The reason for

this is because firms that embody old organizational forms under old institutional logics are

relatively immune until the prevailing logic changes (Thornton, 2002).

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5. Methodology

5.1. Research Design This exploratory research aims to analyze and understand how multinationals integrate a

circular logic in the business model. A multiple case study design is adopted in order to answer

the research question. According to Yin (2013) a case study method is a preferred method

when; (a) “how” or “why” questions are being posed, (b) the investigator has little to no control

over events, and (c) the focus is on a contemporary phenomenon. These characteristics

correspond to the research conducted in this thesis. By adopting a longitudinal case study this

research aims to answer questions such as: “how do MNEs operate a circular economy?”, “what

patterns can be discovered?”, “what are the main changes in the BM when integrating the

circular logic?”, and “what actors are needed to integrate the circular logic?”. The conclusions

that answer these questions are drawn carefully because these answers are only tentative

(Saunders and Lewis, 2012). Yin (2013) argues that a multiple case study design has two

rationales. Each case must be carefully selected so that it either (a) predicts similar results

(literal replication) or (b) predicts contrasting results but for anticipatable reasons (theoretical

replication). Since it is expected to discover similar patterns for each case, this study is based

on the rational of literal replication. Yin (2013) also claims that a few cases, no more than 4,

can be used to base a study on literal replication. Therefore, this study will focus primarily on

4 cases.

5.2. Case Selection The cases will be represented by 4 multinational companies operating in the FMCG-industry

specified in table 2: Unilever, Coca-Cola Company, Nestlé, and Danone; The FMCG-industry

is one of the most powerful industries since it supplies a substantial portion of the world’s daily

consumed products. Fast-moving consumer goods account for 35 per cent of material inputs

into the economy, a significant part of total consumer spending on tangible goods, and 75 per

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cent of municipal waste. Moreover, the consumer goods sector uses more than 90 per cent of

agricultural output, possibly the most embattled resource in the future (Ellen MacArthur

Foundation, 2013). Altogether, the FMCG-industry is pressured to look for a new economic

model to alleviate its environmental footprint. The companies representing the cases were

selected for a number of reasons.

First, the four chosen multinationals are one of the main key players in the FMCG-

industry that focus on the same type of sustainable business model innovation; the integration

of the circular logic. According to Statista (2015), the selected companies belong among the

top 15 FMCG companies based on net sales in US dollars. These 4 companies were selected

out of the 15 because of a number of reasons. First, the selected companies have in common

that they are all operating in the food and drinks industry which is, according to the European

Commission is responsible for 23% of global resource use (Euractiv, 2012). The food industry

faces many significant risks from public criticism of corporate social responsibility issues in

the supply chain (Maloni & Brown, 2006), therefore Unilever, Nestlé, and Danone were

examined. Coca-Cola Company, the world’s largest beverage company (Jones, 2013), is the

only company among the cases that solely operates in the beverage industry. However, it is

still a valuable case to include in this research as it generates a significant amount of plastic

waste. The current plastic economy has drawbacks that are becoming more apparent each day,

this makes it one of the main issues the circular economy is focusing on. After a short use, 95

per cent of plastic packaging material value is lost to the economy. A shocking 32% of plastic

packaging does not end in the collection systems, generating significant economic costs by

damaging the productivity of vital natural systems. As the world’s largest beverage company

Coca-Cola is a key player in the plastic packaging industry. One of the core proposals of the

Ellen MacArthur Foundation (2014) is inspired by polyethylene terephthalate (PET) in plastic

packaging that was first introduced in 1973. Coca-Cola Company has introduced PET material

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in the production of plastic beverage bottles in the late 1970s, setting an example for many

other companies in the FMCG-industry (Ellen MacArthur Foundation, 2014), including the

other 4 companies representing the cases in this study. Nowadays, PET is also used for many

other consumer products, not just beverages.

Second, the 4 MNEs are committed to actively promote the circular economy in their

practices, on their website, and in press releases. Unilever and Danone both joined the Ellen

MacArthur Foundation as Global Partner. Coca-Cola Company and Nespresso, an operating

unit of Nestlé, are member of the Circular Economy 100 Initiative (CE 100); a global platform

led by the Ellen MacArthur Foundation bringing together leading companies to support the

circular economy.

Third, it is particularly important to examine MNEs because of the following reasons.

MNEs operate on a global scale that makes their operations more visible to the consumers,

which makes it more urgent for them adapt a sustainable business model otherwise it may affect

their legitimacy. Due to the size, they are primary actors in the supply and transformation of

materials and resources. Since the world’s key resources are diminishing, and costs of materials

extraction and exploration are rising, pressures from multiple stakeholders are increasing in

favor of a shift from linear to a circular system. Furthermore, because of their presence in

multiple countries, MNEs face critical challenges in the change of norms, values and materials

practices towards circularity. Turning their complex, international ‘activity system’ (Zott &

Amit, 2010) into a circular one requires time and significant efforts. Literature is limited on

how MNEs integrate the circular logic, therefore it is valuable that the companies representing

the cases have an international orientation.

Unilever Nestlé Danone Coca-Cola Company

Founded in 1930 1905 1919 1886

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Headquarter location

Rotterdam, the Netherlands & London, United Kingdom

Vevey, Vaud, Switzerland

Paris, France Atlanta, Georgia, United States of America

Core products Food, beverages, cleaning agents, and personal care products

Food and beverages

Fresh airy products, waters, early life nutrition, medical nutrition

Beverages

# brands 400 2,000 unknown 500 # countries it operates in

190 189 130 200

Net sales in US Dollars

59,145 million 92,361 million 44,294 million 23,113 million

Table 2: Company specific information

5.3. Data Collection This study is based on secondary data and specifically focuses on the analysis of archival data.

The data will be collected from annual reports, sustainability reports, press releases, and other

corporate documentations released by the company itself. The data sources do not include

interviews with individuals, since the main interest was understanding the change in logics for

each company. According to Reay & Hinings (2005), if there is enough data to conduct the

research, the analysis of archival data should be enough. The data shows the prevalence of the

publicly accessible communications in the FMCG-industry, which provide insights into the

change process of a firm. Since this data is created by the company itself, this data is useful to

create a full inside knowledge of its operations and how it integrates the circular logic. These

documents represent the end result of decisions and negotiations made within the company.

Furthermore, the methods of using archival data also have an advantage when the research goal

is to be predictive of certain outcomes (Yin, 2013), thus is suitable for researching propositions.

Annual reports are analyzed because they form a comprehensive report of a firm’s

audited accounts for the preceding year, as required in corporate legislation. Sustainability

reports form the majority of the analyzed data in this research because it presents the economic,

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environmental, and social impacts of a firm’s everyday activities. It presents the firm’s values

and governance mode and discusses the firm’s strategy and its commitment to a sustainable

global economy. The press releases included in the data collection consist mostly out of news

releases or statements written by the company itself that are formatted for public consumption.

Other corporate documentations used in the data analysis include documents such as strategic

reports and Global Reporting Initiative (GRI) reports. The number of corporate documentations

collected and analyzed can be found in table 3.

Unilever Nestlé Danone Coca-Cola Company

Annual Reports 6 6 6 6

Sustainability Reports 6 6 5 6

Press Releases 7 19 5 8

Other corporate documentations 5 1 6 3

Total 24 32 22 23

Table 3: Overview of data collection

The collected data will originate between 2010, the first full year that the circular economy was

supported by the Ellen MacArthur Foundation, and 2015, the most recent year from which

similar corporate documentations of all cases can be found. This time frame is believed to be

sufficient to observe the emergence of the circular logic in the business models of key players

in the FMCG-industry.

5.4. Data Analysis This study will use a priori approach to analyze the data. The design elements of Zott & Amit’s

(2010) business model design will form the themes for each company to identify activities

within the business model that are part of the circular economy. For each activity the following

parent codes existing out of ‘activity system content’ and ‘activity system governance’ are

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determined. In addition, the activities will be coded based on whether they have been adopted

on a local, regional, or global level. The activity system content codes will have a value chain

orientation in line with the holistic perspective of Kortmann & Piller (2016) in order to answer

the first proposition with regard to the positioning of the circular activities in the product

lifecycle. The stages will include all three Rs of Reducing, Reusing, and Recycling identified

by Murray et al. (2015) that are central to the concept of the circular economy. The codes

‘innovation’ and ‘reducing’ are linked to the early stages of the value chain and represents the

production function stage of the closed-loop value chain. In this stage, the traditional

production function is extended. Innovative activities are expected to improve product

packaging and reducing activities are expected to decrease the amount of generated waste or

materials used during production. The code ‘reusing’ is linked to the consumption stage, where

it includes service offerings to encourage consumers to reuse a particular product of when the

company itself reuses materials or sources. The production and consumption stage aim to

increase products lifecycle through better manufacturing and maintenance, the rate of product

replacement decreases, thus resource use is reduced (Murray et al., 2015). The codes

‘collecting’ and ‘recycling’ are associated with the subsequent circulation stage. The collecting

activities are referred to as the reversed value chain that embraces all firm activities that

encourage product return and waste collecting behavior. To answer the second proposition, the

‘recycling’ code exists out of 2 subordinate codes; ‘upcycling’, and ‘downcycling’. In this last

stage, the circulation or recovery of distributed products is emphasized. Upcycling activities

refer to the conversion of waste into high-value products, whereas downcycling activities refer

to the conversion of waste into low-value raw materials.

In order to answer the third proposition, the activity system governance codes can be

divided into two groups; actors within the traditional value chain and actors external to the

traditional value chain. The codes ‘internal’, ‘consumers’, ‘suppliers’, and ‘competitors’

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belong to actors within the traditional value chain, whereas ‘NGOs’, ‘government’, and

‘companies in unrelated industries (CUI)’ are external actors. During the data analysis the

‘local community’ code was added, as it appeared that all companies integrated activities that

not necessarily involved its consumers, but local inhabitants or visitors from a specific area.

The last theme regarding the geographic scope is related to the last proposition in

relation to the scale on which the circular activities are performed. The circular activities are

performed on either a local, regional, or global scale. According to Asmussen (2008), local

activities are practiced on a subsidiary level and global activities are initiated by the

headquarters. In this study, regional scale activities are developed in a specific administrative,

area, division, or district, such as the North America or the Amazon Rainforest area.

Last of all, since this study aims to analyze the integration of the circular economy over

time, the data needs to be organized with a longitudinal perspective. Thus, each activity found

in the dataset will be categorized to the year it is initiated in. The themes and corresponding

codes are specified in table 4.

Themes Codes Coding strategy

Activity system content

Innovation Changing packaging designs to save materials, reduce weight, and make it more recyclable

Reducing Reduce waste disposal or material use Reusing A product or elements of the product that

are reused again Collecting Post-consumption activities that include

waste collection Recycling The process of converting waste into new

products, recycling consists out of two subcodes:

- Upcycling: Converting waste into high-value products.

- Downcycling: Converting waste into low-value raw materials.

Creating partnership Joining other organizations in an alliance in order to achieve a collective goal

Internal The activity has exclusively been developed by the respective company

Consumers Individuals who consume products of the respective company

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Activity system

governance

Suppliers A party that supplies goods or services to the respective company

Competitors A company in the same industry that offers similar products

NGOs A non-profit organization that operates independently of any government

Government The system by which a state or community is controlled

Companies in unrelated industries (CUI)

Companies not operating in the FMCG-industry

Local community Inhabitants/visitors of the respective area Geographic Scope

Local Activities developed in one or a few countries (subsidiary level)

Regional Activities developed in a specific administrative area, division, or district

Global Activities developed across the world (headquarter level)

Year

2010 The year in which the activity was initiated in

2011 2012 2013 2014 2015

Table 4: Themes and codes

To analyze and code the unstructured data, the qualitative data analysis software NVivo

was used. NVivo provides a set of tools to assist in undertaking an analysis of qualitative data

by helping to manage data, manage ideas, query data, visualize data, and report from data,

however, it is not able to ensure a bias-free analysis (Bazeley & Jackson, 2013). Therefore, to

ensure the validity strong and clear explanations are given and rival explanations are addressed

(Yin, 2013). In spite of this study having a deductive approach, during the data analysis there

was an open approach for new activities and actors. A case study database was created and the

information was put in chronological order to analyze the activities adopted, the changes in the

business model over time, and to ensure reliability of this research (Garud and Rappa, 1994;

Yin, 2013).

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6. Results The results obtained from data analyzes will be presented in this chapter consisting out of a

within-case-analysis and a cross-analysis. The within-case-analysis will illustrate the results

for each case separately, starting with a summary of the company’s circular activities related

to the propositions. Subsequently, the results will be discussed in chronological order from the

year 2010 to 2015. The data presented in this section has been retrieved from the case study

database that is created for this research.

6.1. Within Case Analysis

6.1.1. Unilever

The results show that the amount of circular activities of Unilever increased over the years and

peaked in the year 2012. Unilever has been active in reducing and recycling activities over the

full period examined. They have also been active in innovating its packaging over the year,

except for the year 2014, in which no data was found of new innovations in packaging. The

results show that Unilever has invested more in activities related to the beginning of the product

lifecycle than activities related to the end of the product lifecycle. More investments were made

in downcycling than upcycling activities, however, the first investments were made in

upcycling activities. When it comes to the activity system governance Unilever has developed

most activities exclusive internally. The activities that involved partnerships with other actors

have been equally developed with actors within and external to the traditional value chain.

However, in 2015, there was a significantly higher amount of activities that involved actors

outside the value chain. The majority of these collaborations exists out of partnerships with

companies in unrelated industries. These were mostly focused on recycling activities and R&D

projects to innovate packaging. Collaborations with governmental organizations were needed

to commence partnerships with other competitors or enable waste collecting activities. The

highest amount of partnerships started in 2015, of which the majority involves collaborations

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with local municipalities for research and waste collecting purposes. In general, the majority

of partnerships over the years involve actors outside Unilever’s traditional value chain. With

regard to the geographic scope, over the examined years, Unilever has always initiated more

circular activities with a global scope than with a local scope. Regional activities were not

common at all. New packaging designs were implemented in markets depending on the

countries in which the product is available in. Most of the improvements in packaging were

made on flag brands, thus implemented on a global scale. The results from the data analysis

for Unilever can be found in table 5. The following paragraphs provide a more detailed

overview of Unilever’s circular activities initiated in 2010-2015.

Unilever’s main circular activities were recycling, reducing and innovating its

packaging. With the data analysis starting in 2010 Unilever’s main circular activity initiated

involved a partnership with retailer Tesco to create consumer awareness about sustainability

and recycling. This program has been implemented in nine markets from the UK to China. This

was also the year that Unilever published its board and packaging sourcing policy. The policy

outlines the company’s goal to source 75 per cent of its paper and board packaging from

sustainably managed forest or from recycled materials by 2015, rising to 100 per cent by 2020.

Furthermore, Unilever changed the packaging of different flag brands to reduce the amount of

material used in each unit, and therefore reduce waste.

In 2011 they continued innovating the packaging of many flag brands both in local as

global products. To create a new design for the Vaseline Petroleum Jelly Jar, Unilever started

a collaboration with Blue Marlin’s New York studio to create a jar that uses less plastic and is

more recyclable. A collaboration with the RecycleBank in the United States aimed to

encourage consumers to recycle.

In 2012 Unilever both focused on the reduction of waste disposed at their

manufacturing sites across the world and the reduction of materials used in packaging. Which

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led to a significant increase in globally initiated activities. Efforts were made to not only reduce

materials used and waste generated during manufacturing, but to also create awareness among

the consumers about waste management. Unilever has appointed packaging mangers dedicated

to increasing recycling and an advocacy manager who will encourage positive change in

government policy on waste.

In 2013 the amount of initiated activities remained high, still focusing on reducing

waste/material but also on innovating packaging. The focus laid on R&D projects to develop

new technologies to create new packaging designs that will lead to waste reduction. An

important innovation was the continuing improvement of Dove packaging design, starting with

the new up-side down deodorant pack in 2010 till the new Dove Body Wash bottles in 2013.

Investments in downcycling factories were made to achieve zero non-hazardous waste disposal

to landfill. Moreover, Unilever launched a research project with the University of Liverpool to

develop the next generation of renewable chemicals from biomass to use in the manufacturing

of its home and personal products.

The year 2014 was the beginning of the official Global Partnership between Unilever

and the Ellen MacArthur Foundation. Another important collaboration was the UK industry

collaboration, the REFLEX Project, which included Nestlé as one of the project partners. The

collaboration aims to remove several barriers to create a circular economy in flexible plastic

packaging that involves the whole supply chain. Furthermore, Unilever has continued reducing

and recycling activities from the year before and launched the ‘Design for Recyclability’

guidelines.

The year of 2015 involved an important milestone for Unilever since they have

achieved to be the world’s first zero to landfill company in Europe, which means that no waste

from Unilever-owned premises, such as factory and offices, goes to landfill in Europe. Similar

to previous years, Unilever continued innovating its packaging by reducing weight and

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materials. Another milestone was achieved when Unilever’s research in India has proved that

pyrolysis technology can convert sachet waste into and industrial fuel through extended

production runs. Based on this we can expect more downcycling projects to be introduced in

the following years, more than that, that year they already placed an order for equipment to

build a pilot plant to prove the commercial viability of this technology. Unilever has also

achieved its goal of the paper and board packaging sourcing policy that was set for 2015. Lastly,

2015 has been the starting point for 2 new partnerships; they partnered with Greenredeem to

encourage people to recycle and live more sustainable, and they brought together over 100

representatives to create a movement for change on zero waste.

Overall, research shows that over time Unilever initiated more activities that were

related to the production stage of the product lifecycle; of which the majority started in the first

3 years of the research period. Consumption stage activities were only found in the middle of

the research period, whereas data shows that recycling activities were initiated in a continuous

pace over time, existing out of more downcycling then upcycling activities. The one upcycling

activity found in the data appeared to be initiated before the downcycling activity. As regards

the activity system governance, it is found that more external than internal actors were involved

in circular activities. During the first half of the research period, Unilever developed more

activities within the value chain, then gradually started to involve more external actors. Finally,

as to the geographic scope, during the research period, Unilever has continuously performed

the majority of its activities on a global scale rather than a local scale. The regional performed

activities were only found in the data once.

Unilever Activity system content 2010 2011 2012 2013 2014 2015 Total Innovating packaging 2 3 2 3 1 11 Reducing 2 3 5 2 2 3 17 Total production stage 4 6 7 5 2 4 28

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Reusing 2 1 3 Total consumption stage 2 1 3 Collecting 1 1 2 Recycling 2 2 4 4 1 4 17 Downcycling 2 1 3 Upcycling 1 1 Total subsequent stage 3 2 4 4 1 5 19 Creating partnership 2 2 4 Total activities 6 8 13 10 5 10 52 Activity system governance Internal 2 2 5 2 3 2 16 Consumers 1 1 2 1 5 Suppliers 1 1 1 1 1 1 6 Competitors 1 1 2 Total actors within 2 2 3 1 2 3 13 NGOs 1 2 2 5 Government 1 1 1 2 5 CUI 1 2 2 3 8 Local community 1 1 2 Total actors outside 2 1 3 3 3 8 20 Geographic scope Local 3 2 1 4 10 Regional 1 1 Global 4 1 7 4 5 3 24

Table 5: Data results Unilever

6.1.2. Nestlé Based on the results it can be seen that Nestlé has been active in all categories of circular

activities during the examined time frame. The amount of circular activities was increasing

significantly from 2012 and onwards. Even though it is known that Nestlé’s operating unit

Nespresso has joined the CE100 initiative, no data was found on when this collaboration

started. With regard to the activity system content, Nestlé has initiated more circular activities

related to the subsequent circulation stage. They have significantly been active in recycling

activities that included a similar amount of down- and upcycling activities. It should be noted

that during the research period, Nestlé first invested in an upcycling activity before investing

in downcycling activities. With regard to the activity system governance, Nestlé has developed

the majority of its circular activities with actors external to the traditional value chain. The

majority of the activities within the traditional value chain were developed exclusively by the

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company itself. They have partnered with companies in unrelated industries mostly for R&D

investments and innovations in packaging. Partnerships with recycling banks and local

municipalities were initiated to roll out more recycling programs in new markets, install more

Nespresso capsule collecting points, and home collection services. Furthermore, it appears to

be uncommon for Nestlé to develop activities that include competitors. The only activity found

that involved a competitor was the UK collaboration the RESEARCH Project, which included

Unilever as a project partner. With regard to the geographic scope, it appears that Nestlé has

equally performed their circular activities on a local and global scope throughout the years. It

was uncommon to operate circular activities on a regional scale. The majority of the local

activities involve investments made in local factories that are either opening up or

implementing a new system. If these new systems turn out to be effective, Nestlé shows

initiative to replicate the process in other locations in different countries. Most global initiated

activities were related to innovations in packaging for flagship brands that are available in

multiple countries. The results from the data analysis for Nestlé can be found in table 6.

Starting in 2010, Nestlé made an investment in the Cagayan de Oro Nescafé factory in

the Philippines. This factory uses a state-of-art boiler to recycle and burn spent coffee grounds

and other biomass. That same year, they launched the Special.T in France, a specialized tea

machine that produces tea using recyclable aluminum capsules that contain tea leaves. These

aluminum capsules can be collected through the same national recycling collection points

system as the Nespresso coffee cups. In the following years, Nestlé introduced Special.T in

other European markets.

In 2011, Quantis, a sustainability and lifecycle assessment consulting company, has

conducted a study that showed that the Nespresso aluminum capsule, that is recycled after use,

is the option with the best overall environmental impact. They have also developed a “cascade

system” at the Nestlé Waters San Pellegrino plant, which allows them to reuse water for rinsing

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and washing of bottles. Furthermore, in a joint venture between Nestlé and General Mills,

known as Cereal Partners Worldwide, a leading example of sustainable design was set. They

have constructed an environmentally friendly building of which more than half the building

was constructed using locally-sourced recycled materials. It was the first time a Swiss building

has obtained the highest level of certification the United States Green Building Council award

to recognize leadership in energy and environmental design (LEED).

In 2012, the number of circular activities initiated increased with a significantly higher

number in reducing and innovating activities. Nestlé has invested in R&D projects to improve

their packaging, and lifecycle assessments were conducted for all their product categories.

They started to roll-out an Ecodesign tool called EcodEX, that is used to assess and optimize

environmental sustainability holistically across the entire value chain. This tool will be used

throughout the whole research period to conduct further training of packaging specialists in

different locations. Furthermore, Nestlé has actively encouraged its factories to reduce waste

by introducing new systems and setting new consumption and transportation requirements. It

has resulted in 39 Nestlé factories generating zero waste for disposal. Also, Nestlé has invested

in a specially designed train in India that will educate school children about recycling and

renewable energy. It aims to raise more than 1,5 young people’s awareness of the impact and

challenges of global climate change.

In the following year, 2013, most activities from 2012 were continued in line with

reducing waste and the innovation of packaging. Nestlé started the Commitment on Water

Stewardship, which means that Nestlé has to actively seek new opportunities to reduce, reuse

and recycle water in their operations. A ‘Water Ventures Learning Lab’ was installed in Florida

as an interactive touring exhibition that aims to raise awareness about sustainable water usage

and recycling among more than 100,000 people. On top of that, a combination of employee

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awareness training and new technology has enabled a Nestlé factory in la Panilla, northern

Spain, to reduce its water use by two-thirds through recycling.

In line with the Commitment on Water Stewardship, they have introduced a global

‘Watership Stewardship Master Plan’ in 2014. In this year there has been a significant increase

in circular activities. The majority of newly introduced activities involve recycling purposes,

such as new factories, manufacturing systems, and recyclable packaging. One of these includes

an investment in a new anaerobic digestion system at the Nestlé’s Fawdon confectionary

factory. It enables the upcycling of solid and liquid sewage waste to be converted into clean

water and methane gas using natural biological digestion processes. Moreover, in Mexico,

Nestlé has opened its most water-efficient factory, the Cero Agua diary factory in the state of

Jalisco. The factory uses the water vapor generated from evaporating cow’s milk. This water

is condensed, treated, and recycled for use as potable process water, and then again for cooling

and cleaning. They plan to replicate the process in other dairy factories, such as in South Africa.

Nestlé has also introduced a new downcycling activity in collaboration with small livestock

farmers providing them bio-digesters that turn animal waste into gas for cooking and liquid

fertilizer. Furthermore, by the end of the year, Nestlé joined the two-year UK industry

collaboration, the REFLEX Project, that includes Unilever as one of the project partners.

In 2015, Nestlé continued introducing projects spread over different categories of

circular activities. They have launched the Nestlé commitment to reduce food loss and waste,

and played a leading role in developing the consumer Goods Forum’s Resolution against food

wastage. Nestlé Waters started the construction of an agricultural biogas facility in Switzerland

that will provide renewable energy for production, as well as natural fertilizer for local farms.

In California, Nestlé invested in innovative technology to help reduce the amount of water it

uses at four facilities where food or pet care products are manufactured, and five water bottling

plants.

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Altogether, Nestlé initiated most of its circular activities from 2012 and onwards.

Results show that the amount of initiated activities related to the production stage of the product

life-cycle were the highest in 2012, and in the following years, they continued launching these

activities with a continuous pace of 2 à 3 activities each year. Subsequent cycling activities

were mostly initiated in the last 3 years of the research period, the same goes for the

downcycling activities. Only one upcycling activity started in 2010; the recycling activities

involved more down- than upcycling. Nestlé has involved more external than internal actors in

its circular activities. The majority of the activities within the traditional value chain were

developed exclusively by the company itself, and the majority of the partnerships that involve

external actors were developed in the last half of the research period. Furthermore, data shows

that Nestlé, over time, has almost equally performed its activities on a local as well as on a

global scale. No pattern was found on when Nestlé initiated activities on a local scale, however,

the results do show that most global performed activities were performed in the last half of the

research period. No activities were found with a regional scope.

Nestlé Activity system content 2010 2011 2012 2013 2014 2015 Total Innovating packaging 1 3 1 1 1 7 Reducing 3 2 2 1 8 Total production stage 0 1 6 3 3 2 15 Reusing 1 1 2 3 1 8 Total consumption stage 1 1 2 3 1 8 Collecting 1 1 1 3 Recycling 2 2 3 3 4 4 18 Downcycling 1 1 2 Upcycling 1 1 2 Total subsequent stage 2 2 4 3 5 5 21 Creating partnership 1 1 Total activities 2 4 11 8 12 8 45 Activity system governance Internal 1 1 5 2 3 2 14 Consumers 1 1 1 3 Suppliers 1 3 4

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Competitors 1 1 Total actors within 1 1 2 4 8 NGOs 1 2 2 2 7 Government 1 1 2 4 CUI 2 2 1 2 1 8 Local community 1 1 1 3 Total actors outside 5 4 4 6 3 22 Geographic scope Local 1 3 4 2 5 2 17 Regional 0 Global 1 1 4 3 4 3 16

Table 6: Data results Nestlé

6.1.3. Danone The results show that Danone has been continuously active on innovating and recycling

activities over the years. The amount of activities initiated were higher in the first half of the

research period and started decreasing in the second half. Moreover, they have initiated more

activities related to the subsequent circulation stage of the product lifecycle than to the early

stage of the product lifecycle. It appears that with regard to the recycling activities Danone did

not invest in any upcycling activities during the years 2010-2015. Furthermore, Danone joined

2 partnerships one starting at the beginning and one at the end of the examined time frame.

With regard to the activity system governance, Danone has continuously been developing its

circular activities mostly with actors external to the traditional value chain. When it comes to

activities developed within the value chain, the majority of them were developed internally.

No data was found on circular activities that involved competitors. The results also show that

Danone has involved more external actors in the first half of the examined time frame than in

the second half, especially in 2010 they have developed a high amount of partnerships with

external actors. All the waste collecting projects required partnerships with local municipalities

and/or NGOs to be developed. These include partnerships with NGOs such as Mundo

Sustenable, Reksa Buana Utama, INSEA, and FACE. Danone established a partnership with

Quantis to research its water footprint, they analyzed inventory consumption at each stage of

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production, transportation, consumer use and end of life. This partnership continued its

research over the full research period by contributing to the development of international (ISO)

and European (ENVIFOOD protocol) standards. The results with regard to the geographic

scope show that Danone has initiated an equal amount of local and global activities, equally

spread over the years. The number of regional activities is significantly low. The waste

collection projects were all installed on a local scale, remarkably most of them were launched

in Latin-American countries. Packaging innovations were mostly implemented on a global

scale since these were mostly related to Danone’s flagship brands that are available in multiple

countries. The results from the data analysis for Danone can be found in table 7.

Starting in 2010, Danone started multiple waste collecting projects in different

countries through its Danone Ecosysteme Fund. This fund aims to strengthen and develop the

activities of the partners who make up Danone’s ecosystem: farmers, supplier, local authorities,

transport and logistics operators, etc. The waste collection projects created by this fund required

partnerships with NGOs, local municipalities, and the local community. As a result, jobs were

created for waste pickers, and living conditions for local families were improved. Remarkably,

the majority of Danone’s waste collecting project were launched in Latin American countries

such as Mexico, Argentina, and Brazil. One of the waste collecting programs was launched in

Indonesia, it helped the local community called ‘Pemulung’ to generate more income for

families, provide health services in collaboration with the government, and provide a safe

working environment. Furthermore, in 2010 Danone has improved packaging of some of its

brands to either reduce waste or make it more recyclable. A partnership with Quantis was

established to conduct a lifecycle assessment on their Water Division. This partnership will

continue on doing research and improving packaging throughout the years of the research

period.

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In 2011, Danone kept on innovating its packaging specifically to increase the

percentage of recycled rPET used in bottles, these includes brands like Volvic, Evian, and

Bonafont. The same year Danone Ecosystem Fund added another waste collecting project in

Brazil, which was specifically focused on recycled PET. The project involved 900 waste

pickers in 24 cooperatives in 22 cities of the state of Minas Gerais.

In 2012 there was a significant increase in activities regarding packaging innovation.

Investments were made to include more sustainable materials, reduce weight, and develop new

standards for packaging, which includes investments in their Polish subsidiary Zywiec Zdroj.

Moreover, the MNE also further introduced the use of rPET down its production lines.

Downcycling projects were initiated by investing in a biomass boiler at the Baby Nutrition site

in Wexford, Ireland, and contributing to the Bio-Plastics Feedstocks Alliance platform with the

World Wildlife Fund to develop a “sustainability” standard for bio-based packaging materials.

Another initiative was launched to step up the efforts to recycle glass; partnerships were set up

to collect empty glass bottles from client restaurants that will be stored and transferred to glass

treatment plants for recycling. Furthermore, Danone introduced a policy that includes actively

reducing the weight of all paper and board packaging for each product, prefer the use of

recycled fibers and, where is not possible, prefer FSC certified virgin fibers. The policy

particularly aims to preserve the tropical forests in Indonesia and Congo and Amazon basins.

In the year 2013, another downcycling activity started in the Tschekov plant in Russia

in order to install a methanizer to recover sludge from treatment and produce biogas. The

energy produced represents 8% of thermal on the site. The production sites also use water for

production line cleaning cycles, these were optimized to reuse the most during pre-cleaning

cycles. Several investments in different production sites have been made to improve water

recuperation. Furthermore, Danone continued efforts to increase the proportion of recycles PET

used in bottles.

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In 2014, Danone started new waste collection projects which have a similar concept as

the one that started in 2010. Except, the project initiative of 2014 in Brazil formed an informal

waste collection system “Novo Ciclo” since no governmental organizations were involved.

This projects solely includes collaborations with NGOs, recycling banks, and the local

community. With this project, Danone Brazil experimented with a new supply chain model

that should enable them to collect 25 per cent of its packaging volumes on the market, while at

the same time improve living conditions of waste pickers working in the garbage dumps. In

France, Danone started a recycling project “LemonAide” by implementing a socially inclusive

and environmentally-friendly business model to tackle recycling and unemployment issues.

The project empowers people away from employment through a new job by providing them

social support, training, mentoring, and develop a new network of collection & recycling of

PET and other recyclables. Not unimportantly, the project will also create an innovative

mechanism to pass on the gift to promote social entrepreneurship in the circular economy.

Furthermore, Danone launched the ‘Terragre’Eau methanization’ project together with the

Association for the protection of rainwater catchment for Evian mineral waters. The project

involves a methanization unit to manage soil fertilization by recovering agricultural waste from

within the region.

In 2015, Danone formed a partnership with Veolia, a global leader in waste, water, and

energy management solutions. Its goal is to transform consumer habits and waste management,

adapt to scarce water, energy and raw materials, and make the transition to the circular

economy. That same year, Danone’s Lemon Tri system, which was introduced the year before,

was now used at Evian-sponsored events in France, such as the women’s golf championship

and the Parisienne women’s cycling race.

Overall, Danone initiated most of their activities during the first half of the research

period. They have invested more in subsequent cycling activities than in activities in early

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stages of the product lifecycle. With regard to the consumption stage, only one reusing activity

was found in the data. According to the data, Danone did not participate in any upcycling

activities. The first downcycling initiative was made in 2012, and included 2 more in the

following 2 years. More partnerships with external actors were formed than with actors within

the value chain, especially in the first half of the examined time frame. As to the geographic

scope, Danone has almost equally performed its activities on local and global scale. No pattern

was found in when these activities were initiated.

Danone Activity system content 2010 2011 2012 2013 2014 2015 Total Innovating packaging 2 2 4 2 1 1 12 Reducing 1 1 Total production stage 3 2 4 2 1 1 13 Reusing 1 1 Total consumption stage 1 Collecting 3 1 2 6 Recycling 2 1 5 2 2 2 14 Downcycling 2 1 1 4 Upcycling 0 Total subsequent stage 5 2 5 2 4 2 20 Creating partnership 1 2 3 Total activities 9 4 9 5 5 5 37 Activity system governance Internal 2 1 2 3 1 9 Consumers 1 1 1 3 Suppliers 1 1 2 Competitors 1 1 Total actors within 2 2 2 6 NGOs 3 1 2 3 1 9 Government 2 1 1 4 CUI 1 2 2 1 6 Local community 3 1 1 1 6 Total actors outside 9 3 5 3 2 22 Geographic scope Local 3 1 3 2 2 1 12 Regional 1 1 2 Global 3 2 3 2 1 2 13

Table 7: Data results Danone

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6.1.4. Coca-Cola Company The collection has led to the results that show that Coca-Cola Company (CCC) has initiated a

significant amount of recycling activities over the years. Remarkably, right after the year that

CCC invested the most in packaging innovations the amount of recycling activities increased.

The majority of activities involved in the early stages of the production lifecycle were initiated

in the first half of the examined time frame. In 2012, CCC made major investments in recycling

activities, which decreased in the following years. Despite the fact that CCC initiated a lot of a

recycling activities, from the data it cannot be found whether these activities involve

downcycling or upcycling activities. Only one downcycling activity was found in 2013. With

regard to the activity system governance, the results show that CCC has developed the majority

of its activities with actors external to the traditional value chain. In the first half of the time

frame the majority of the internal actors were introduced, however in the second half year, the

total amount of both internal and external actors decreased. When it comes to packaging

innovations, CCC is likely to develop these innovations internally. During the years,

partnerships with NGOs and governmental organizations were established to install waste

collecting and waste management programs in different markets. The data on geographic scope

shows that CCC has a remarkable high amount of activities performed on a local scale,

especially in the first half of the research period. In the second half of the time frame CCC’s

initiated activities were almost equally performed locally and globally. The majority of

recycling programs were launched on a local scale or focused on a specific target group.

Regional performed activities were the least initiated. The results from the data analysis for

Coca-Cola Company can be found in table 8.

In 2010, CCC invested in R&D projects and new packaging designs to reduce

packaging waste. They have launched a new recycling program in Thailand together with the

Thailand Institute of Packaging and Recycling Management for Sustainable Environment, a

new partnership with authorities in Thailand’s Pathum Thani province. The project’s goal is to

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develop a more comprehensive and effective integrated waste management program. A

partnership with a furniture manufacturer Emeco was formed to create a chair made of recycled

material; the 111 Navy Chair. The chair was created by combining 111 recycled PET plastic

bottles and other materials.

In 2011 CCC continued to encourage recycling and support the recycling cooperatives,

trying to make recycling a more common activity. They have implemented the successful I

LOHAS Japanese bottle design, which was introduced to Japan the year before, to several other

markets. The bottle is lighter than the traditional packaging and invites consumers to twist and

crush the bottle when it’s empty, helping to save space in recycling bins and saving money and

energy required for transport. The design uses their PlantBottleTM material, the first-ever fully

recyclable material that is made partially from plants. The material is similar to the traditional

rPET material, but with a lighter footprint on the scarce natural resources. Other bottle designs

were improved by reducing the use of material in its packaging design. Furthermore, a new

waste management systems were launched in line with the Regional Initiative for Inclusive

Recycling for Latin America, an effort to transform the recycling market in Latin America. The

project involved improving the socioeconomic status of recyclers and families; enhancing

private sector roles so that recycling cooperatives thrive in a competitive market, and

supporting public policy so that recycling cooperatives become part of the local waste

management system. This required partnerships with the Inter-American Development Bank

and Fundación AVINA. In Israel a campaign was launched to promote recycling that involves

online advertising and radio coverage. Pop-up stores in central Tel Aviv were installed to sell

handbags, T-Shirt, hats and other items made from recycled materials, these were designed by

local artists and fashion designers. Furthermore, CCC’s new bottling plant was installed in

South Africa for Valpré Spring Water. The plant uses energy obtained from non-fossil sources

and maximizes use of recycled materials.

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In 2012 CCC initiated recycling activities that both encouraged recycling behavior as

created collection points to dispose recyclable material. In Singapore, CCC brought together

civil society and government by introducing a special kind of vending machine to help increase

recycling rates across the country. The machine allowed consumers to dispose their empty

plastic beverage bottle and receive an award for being environmentally responsible. In the US

a grant from the Coca-Cola Foundation to Keep America Beautiful enabled 25,000 single-

stream curbside recycling carts to be donated to the city of Chicago. Moreover, Coca-Cola

Recycling, part of the Company’s North America Group, collaborated with Envipco to pilot

Reimagine Beverage Containers recycling centres that provide interactive collection kiosks to

encourage recycling. Another initiative in Thailand, Project Recover, was launched to provide

job opportunities for the local community and collect recyclable materials to turn them into the

cooperative for payment. This year was also the beginning of the EKOCYCLE program that

was launched in collaboration with musical artist and producer will.i.am, and other consumer

brands. It is a stand-alone brand initiative to encourage recycling and sustainability among

consumers through the marketing of lifestyle products made from recycled material. As the

longest continuous sponsor of the Olympic Games, CCC implemented a ‘zero waste

infrastructure’ during the London 2012 Olympics including waste and recycling bins designed

and positioned to maximize recovery rates. Even outside the Olympic venues, CCC installed

260 new recycling bins. On top of that, to further drive progress a new plant-PET technology

collaboration was formed that included Ford, Heinz, Nike and Proctor and Gamble.

In early 2013, CCC has joined the Ellen MacArthur Foundation as part of the Circular

Economy 100 Initiative, and the Bioplastic Feedstock Alliance together with seven major

consumer brands and the World Wildlife Fund. In collaboration with Zero Waste Scotland,

through using interactive recycling bins and social media more than 178,000 people were

encouraged to recycle at four events in France and Great Britain. Furthermore, the same

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partnership that was formed in 2011 has launched additional waste management systems in

Mexico, Panama, and Chile, that will benefit more than 2,600 recyclers via training and

formalization of their roles. For Brazil’s 2013 FIFA Confederations Cup, approximately 3,800

recycling bins and boxes were installed, and dozens of volunteers were trained to encourage

recycling by the spectators. In late 2013, a partnership with Ford was announced to use

PlantBottle technology beyond packaging for the first time. The material will be used for the

interior of a demonstration of the plug-in hybrid Ford Fusion Energi.

In 2014, investments were made in new plants and line start-ups to increase CCC’s

rPET capacity in countries including China, Japan, Taiwan, Ecuador, Colombia, and many

more. A water restoration project started in partnership with Belgian non-profit organization

Natuurpunt, an effort to help replenish and enhance groundwater at the Stappersven nature

reserve, located near one of their production facilities. Another collaboration involved CCC

joining the Recycling Partnership aiming to increase curbside recycling initiatives in the US.

Furthermore, in line with the EKOCYCLE program, more than 1,500 new AKOCYCLETM

Cube 3D printers were donated to more than 125,000 middle and high school students. The

printer converters recycled plastic into an almost infinite variety of products. On top of that,

EKOCYCLE opened its own special shop-in-shop at Harrods in London.

Unfortunately, not a lot of data was found on the year 2015. The only activity found is

a collaboration with W Hotels Worldwide to shake up the hotel industry. New EKOCYCLE

brands were introduced to W Hotels around the world including bedsheets and bedside

chargers.

Overall, over the years CCC has initiated subsequent cycling activities more frequently

than activities related to the production stage of the product lifecycle. The majority of the

initiated production stage activities started in the first half of the research period, which

decreased afterward. The results show only one downcycling activity that was launched in

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2013. With regard to the activity system governance, CCC has formed more partnerships with

actors that are external to the traditional value chain, especially during the years 2012 and 2013.

The majority of the activities that were developed within the value chain were developed

exclusively by the company itself. As regards the geographic scope, more activities were

implemented on a local scale than a global scale. The majority of the locally performed

activities were developed in the first half of the examined time frame, whereas most global

performed activities were developed in 2012 and 2013.

Coca-Cola Company Activity system content 2010 2011 2012 2013 2014 2015 Total Innovating packaging 5 2 1 1 9 Reducing 1 4 5 Total production stage 1 9 2 1 1 14 Reusing 0 Total consumption stage 0 Collecting 1 2 2 5 Recycling 2 5 10 7 5 1 30 Downcycling 1 1 Upcycling 0 Total subsequent stage 2 6 12 9 5 1 35 Creating partnership 1 1 2 Total activities 3 16 14 10 6 1 51 Activity system governance Internal 3 3 2 2 10 Consumers 3 3 1 7 Suppliers 1 1 2 Competitors 2 2 4 Total actors within 4 5 4 13 NGOs 1 2 2 5 2 12 Government 1 2 3 CUI 1 3 5 4 2 1 16 Local community 2 4 3 1 10 Total actors outside 3 7 13 12 5 1 41 Geographic scope Local 2 6 6 3 3 1 21 Regional 1 2 2 1 6 Global 1 2 4 4 2 13

Table 8: Data results Coca-Cola Company

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6.2. Cross-case analysis The following paragraph will present the cross-case analysis that involves all cases. The 4

MNEs will be compared to each other in relation to the propositions in order to assess

similarities and differences in how these MNEs have integrated the circular logic into their

business model. First, a comparison is made per activity system content, activity system

governance, and the geographic scope, afterwards an overall comparison will be presented.

Regarding the activity system content, all four MNEs were the most active in recycling

activities. The results show that majority of the activities of the MNEs that are related to the

early stages of the production life-cycle were often initiated in the first half of the research

period. Over the years, all four MNEs have gradually integrated the use of polyethylene

terephthalate (rPET) plastic in their packaging, especially in plastic bottles. The amount of

subsequent cycling activities was the highest in 2012, from where on it gradually decreased.

As regards the recycling activities, the results show that CCC was significantly the most active

MNE in recycling. Unilever and Nestlé both first invested in an upcycling activity before

making investments in downcycling activities, whereas CCC and Danone only invested in

downcycling activities. However, over time, all four MNEs invested more in down- then

upcycling activities. Also, Nestlé, Danone, and CCC initiated more subsequent cycling

activities, where on the contrary, Unilever focused more on ways to innovate its packaging in

order to reduce packaging material, weight, and waste. Furthermore, not unimportantly, all four

MNEs actively promote the circular economy by joining alliances or other partnerships. The

MNEs are well known by the Ellen MacArthur Foundation by either official partnerships or

support by press releases.

In regard to the partnerships formed along with the circular activities, the results show

that all four MNEs have developed more partnerships with actors that are external to the

traditional value chain, than internal ones. Of the activities that were developed within the value

chain, they have been mostly developed in the first few year of the examined time frame. The

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majority of these internally developed activities were exclusively developed by the company

itself. For Unilever, Danone, and CCC the amount of exclusive internal activities started to

decrease over the years, whereas for Nestlé it stayed on a continuous level. Unilever and Nestlé

started to involve more external actors towards the end of the time frame. Danone, on the other

hand, did the opposite and involved most of its external actors during the first few years.

However, the majority of Danone’s partnerships started in 2010 when they launched their waste

collecting program that required partnerships with NGOs, governmental organizations, and

local communities. They remarkably all involved people who were not necessarily consumers,

but visitors or inhabitants of the respective area. CCC involved the most external actors in 2012

and 2013 in which it was highly active in subsequent cycling activities. Overall, during the

years 2010-2015 activities involving external actors were more common than with internal

actors. Furthermore, the MNEs developed partnerships with same organizations or with each

other. Unilever and Nestlé both joined the REFLEX Project along with other organizations.

Nestlé and Danone both started a partnership with Quantis to perform a lifecycle assessment

on its products. Danone and CCC have 3 common partnerships that include the Bioplastic

Feedstock Alliance coupled with the World Wildlife Fund, and a collaboration with AVINA.

The results show irregularity with regard to the geographic scope of the circular

activities. Danone and Nestlé equally perform their activities on a local and global scale,

equally spread over the years. Unilever performed more globally implemented activities, where

on the other hand, CCC performed more locally implemented activities. Regional activities

appear to be the least common for all 4 MNEs. However, CCC still implemented a significant

higher amount of regional activities compared to the other 3 MNEs. All 4 MNEs invested in

either formal or informal waste collecting activities. Unilever launched a recycling projects

with retailer and NGOs, whereas Nestlé installed waste collecting points particularly for the

collection of their Nespresso cups. A significant amount of waste collecting programs by CCC

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and Danone launched where specifically launched in South American countries. These projects

were installed to collect waste in a certain region, while at the same time jobs were created,

which in turn improved living conditions of the local community.

Overall, of all 4 MNES, CCC has initiated the most circular activities within the time

frame of 2010-2015, where on the other hand Danone has initiated the least. The MNEs focused

more on activities related to the early stages of product life-cycle in the first half of the time

frame examined. Whereas subsequent lifecycle activities remained important throughout the

years, however for each MNE it was the highest in the year 2012. For all 4 MNEs, downcycling

activities were more common than upcycling activities, and all upcycling activities were

initiated before the downcycling activities were introduced. The MNEs all developed most of

their activities with external actors. Patterns show that over time, MNEs start to gradually

decrease the amount of activities developed within the value chain. Furthermore, the results

show no pattern in the geographic scope of the activities, it appears that each MNE has its own

strategy to decide on which scope the new activity should be performed.

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7. Discussion This section will discuss different aspects of this study. First, the findings of this multiple case

study will be discussed in order to answer the research question in relation to the literature.

Secondly, the contributions to different streams of literature will be discussed. The last

paragraph contains the limitations of this research and possible avenues for future research.

7.1. Propositions Each proposition developed in section 4 will be discussed in relation to the findings and

literature in order to answer the research question “How do multinational enterprises in the

FMCG-industry integrate the circular logic in their business model over time?”. Table 9 shows

an overview of the proposition and whether these are supported or not. Revised propositions

were formulated, if necessary, in order to take the findings into account.

Based on the literature review it is expected that a closed value chain requires managers to

design, control, and operate a system maximizing valuef creation over the entire lifecycle of a

product, striving to dynamically recover value from different types of returns over time

(Kortmann & Piller, 2016). This goes in line with the idea of Murray et al. (2015) the ‘waste-

as-food’ concept, wherein unwanted outputs of one industrial process are used as raw materials

in another industrial process, and the three Rs of Reduce, Reuse, and Recycle that have become

central concepts to the circular economy. These stages and concepts are identified in the four

sources of economic and sustainable value creation within the circular economy developed by

the Ellen MacArthur Foundation (2012); the power of inner circle (less cost production); the

power of circling longer (lengthening lifetime of products); the power of cascading use (waste-

is-food); and the power of pure circles (where source materials remains uncontaminated, and

therefore improving redistribution efficiency and material productivity). The findings show

that not all companies initiated activities over the entire product lifecycle. CCC did not develop

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any reusing activities at all, whereas Unilever and Danone only developed a few. Moreover,

the findings show that subsequent cycling activities were not necessarily initiated after

production stage activities were developed. Most subsequent cycling stage activities performed

by Danone and CCC were developed at the beginning of the time frame and then decreased

afterwards, whereas Unilever and Nestlé developed the majority of its subsequent cycling

activities later in the research period. This might be explained based on the complexity of

subsequent cycling activities that might require more time and experimentation to be

implemented. One of these experimentation can also be identified in Danone’s waste

management projects, launched in Brazil in 2014, that was designed as an experiment with a

new supply chain model that should enable it to collect 25 per cent of packaging volumes on

the markets. According to Chesbrough (2010), it is important for firms to have a positive

attitude towards business model experimentation, these trial-and-error processes belong to

BMIs, entailing continuous and incremental adjustments (Sosna et al., 2010). Waste

management programs might be more complex since they incorporate a triple bottom line

approach and consider a wide range of stakeholder interests, including society and

environment, which are key drivers of competitive advantage (Bocken et al., 2014). In general,

initiating subsequent cycling activities appeared to be more common when integrating the

circular logic. Therefore, the first proposition regarding the product lifecycle is only partly

supported.

Revised proposition 1) It is likely that MNEs initiate more subsequent cycling than production

function activities when integrating the circular logic.

Findings show that the MNEs were likely to adopt more downcycling activities than

upcycling activities over time. Moreover, Danone and CCC did not make any investments in

upcycling activities at all. This might be because upcycling activities converts waste into

products with a higher value, which involves a more complex and expensive process.

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Furthermore, another important factor is that there might be more waste available that is only

suitable for downcycling and not for upcycling. For example, downcycling applies to most

plastics, whereas upcycling might only apply to rPET plastics. Therefore, it might be more

profitable for the MNEs to develop downcycling activities instead of upcycling activities. As

the circular logic is defined by ensuring that little waste is generated throughout the production

process and in the life history of the product (Murray et al., 2015), downcycling would be the

most sensible way of recycling since it is able to consume more waste than upcycling.

Therefore, the second proposition is only partly supported, and the following revised

proposition is formed based on the data.

Revised proposition 2) It is likely that MNEs initiate more downcycling activities than

upcycling activities when integrating the circular logic.

Due to rising pressures, collaborations between firms and other key stakeholders are

becoming more important (Lowitt, 2013). However, based on the literature it is expected that

over time MNEs establish more partnerships with actors external to the traditional value chain.

Kortmann & Piller (2016) argue that the integration of external partners into the new product

or service development process has become more frequent today, because the firm is a system

of interdependent and transcending activities that span internal and external firm boundaries

and enables the creation and capture of value in concert with external partners over time. The

MNEs have established more partnership with external than internal actors over time. The

majority of the activities that are developed within the traditional value chain are mostly

developed solely by the company itself. Chesbrough (2010) stresses the importance of internal

developments; companies need to identify the right internal leaders for a business model to

change. To deliver a new and better business model, these leaders need to manage the results

of the processes of the BMI. For example, employee training and engagement campaigns

launched by Unilever and Nestlé teaches the culture of the organization to learn to embrace the

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new model while keeping the effectiveness of the current business model until the new one can

be taken over completely. According to Zott & Amit (2010), a business model is geared

towards total value creation for all parties involved, which implies that all stakeholders should

be involved in the transition to a circular logic. Over time the MNEs have established

partnerships with all kinds of actors both internal as external to the traditional value chain,

capturing value by co-defining the overall ‘size of the value pie’. Therefore, the external actors

involved in the circular activities might eventually become part of the traditional value chain.

It was found that in general all waste management programs required partnerships with actors

external to the traditional value chainto be developed, whereas packaging innovations were

often developed company itself. In general, the amount of partnerships with external actors

appears to increase faster than partnerships with internal actors. Therefore, the third proposition

is only partly supported.

Revised proposition 3) It is likely that MNEs develop more partnerships with external actors

than internal actors when integrating the circular logic.

Reconfiguring the existing business model is a challenging process for all businesses,

however, for MNEs it is particularly demanding since they need to decide to what extent and

how to implement it across multiple locations in which they operate. MNEs have to take into

account potential heterogeneity in institutional environments when implementing changes,

therefore a more complex ‘activity system’ is required (Zott and Amit, 2010). Based on the

literature review it is expected that MNEs are likely to perform circular activities locally, before

extending it to a global scale. A finding that confirms this statement is the opening of Nestlé’s

water-efficient factory in 2014 after the project turned out to be a success Nestlé planned to

replicate the process in other countries across the world. However, based on the findings no

pattern was found in when the MNEs performed the activities on a local or a global scale. It

appears to be highly dependent on the kind of activity that is initiated. For example, the MNEs

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implemented new packaging designs of their flag brands globally, since they are available in

multiple countries. Waste collecting and recycling campaigns were developed more locally

since these projects were often targeting the local community. Findings show that regional

activities were the least common to be developed. Therefore, the fourth proposition is not

supported and a revised proposition is formulated.

Revised proposition 4) MNEs are likely to integrate the circular logic both on a local and

global scale.

After all, by testing the propositions in order to answer the research question all

propositions needed to be adjusted based on the findings of the data analysis. The findings

show that MNEs are more likely to initiate subsequent cycling activities when integrating the

circular logic since they already form two sources of economic and social value creation of the

circular economy (Ellen MacArthur Foundation, 2012). Downcycling activities are developed

more than upcycling activities since it has more waste available to consume and is more

profitable. The findings show that MNEs do not change their strategy of initiating activities as

they have further integrated the circular logic, but instead have a preference for one strategy in

general, which in this case are; subsequent cycling activities, downcycling, and external actors.

Furthermore, circular activities appear to often require partnerships with actors outside of the

traditional value chain that might eventually become part of the traditional value chain. Finally,

findings showed that activities related to the circular economy can be performed on both a local

or a global level depending on the kind of activity.

Proposition Per company In

general Revised proposition

P1) Over time MNEs are likely to start integrating the circular logic in the beginning of the product lifecycle, and then extend it to

Unilever: Supported Nestlé: Supported Danone: Not supported CCC: Not supported

Partly supported

RP 1) It is likely that MNEs initiate more subsequent cycling than production function activities when integrating the circular logic.

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the end of the product lifecycle. P2) Over time MNEs are likely to initially adopt downcycling activities and then integrate upcycling activities.

Unilever: Not supported Nestlé: Not supported Danone: Supported CCC: Supported

Partly supported

RP 2) It is likely that MNEs initiate more downcycling activities than upcycling activities when integrating the circular logic.

P3) Over time MNEs are likely to increasingly establish partnerships outside their ‘traditional’ value chain.

Unilever: Supported Nestlé: Supported Danone: Not supported CCC: Not supported

Partly supported

RP 3) It is likely that MNEs develop more partnerships with external actors than internal actors when integrating the circular logic.

P4) Over time MNEs are likely to integrate the circular logic on a local scale then extend it to a global scale.

Unilever: Not supported Nestlé: Not supported Danone: Not supported CCC: Not supported

Not supported

Revised proposition 4) MNEs are likely to integrate the circular logic both on a local and global scale.

Table 9: Result of the propositions

7.2. Theoretical and managerial contributions This study has made several contributions to management literature. First of all, this study

contributes to the current literature on sustainable business model innovation as it provides an

overview of how businesses can alleviate its environmental footprint by changing its logics.

Resource deficiency and product waste are typical characteristics of the linear economy (Pearce

& Turner, 1990), which in combination with population growth is placing a strain on the

world’s natural resources. The need for a new economic model is increasing, and the new

possibilities in technology and social factors have enabled the transition towards a circular

economy. Therefore, many argue that the time is right to take advantage of the potential

benefits of the circular economy. This study helps to improve the design, implementation, and

performance of a closed-loop economy in the sustainable business model in theory and practice

by providing an overview of initiated activities, involved actors, and activity scopes that are

involved in the integration of the circular economy. As a result, this study adds to the literature

on the circular economy in particular. Simultaneously, this study answered to the California

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Management Review’s call for papers on the “Circular economy: Managerial and policy

implications”, due to its increase in attention in both business and political discussions. The

call asked for papers that provide a timely debate on the circular economy in both theory and

practice.

By examining how the circular economy is integrated by companies with an

international business model, a contribution to the international management literature is made.

The findings of this study go beyond the study of Kortmann & Piller (2016) as the results show

findings on a business model that involves a more ‘complex’ activity system (Murray et al.,

2015). MNEs have to decide whether to implement new activities locally, regionally, or

globally, and gradually change the material practices across the subsidiaries in multiple

countries. Another contribution is made to the literature on institutional logics by assessing the

transition from a linear to a circular logic. MNEs face potential heterogeneity in institutional

logics, due to their presence in multiple countries. This creates critical challenges in changing

norms, values and materials practices towards the circularity. Since research is limited on

changing logics in multiple institutional environments, it is valuable that the companies

representing the cases have an international orientation. Furthermore, this study also

contributes to the waste and resource management study as it elaborates on the implementation

of reducing, reusing, and recycling activities. As the circular economy is a fairly new concept,

waste and resource management literature is limited on how organizations operate a value chain

in which waste is being considered as a resource, and resources are maintained within the

system (Pearce & Tuner, 1990).

Altogether, by researching how MNEs have integrated the circular logic in their

business model this study has contributed to the literature on sustainable BMI, management,

international management, institutional logics, and waste and resource management. The

empirical research is relevant for practice for managers and policy makers.

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7.3. Limitations and avenues for future research Along with its contributions, this study has also faced limitations. In order to reduce researcher

bias and increase rigorousness, the data was analyzed with qualitative data analysis program

NVivo. Nevertheless, as the archival data existed out of corporate documentations it could be

argued that the available data can be biased in favor of the respective company. Since the

collected data was only analyzed by one researcher the findings might be biased as well. A

suggestion for future research would be to involve multiple researchers and sources to avoid

bias. A follow-up research is also recommended since the findings of this exploratory study,

even when drawn carefully, are only tentative (Saunders & Lewis, 2012). Another limitation

might be the length of the research period. Although, the circular economy is a fairly new

concept, activities that were initiated before 2010 might be valuable because they might

contribute to the circular economy as well. Therefore, it would be advisable for future research,

to replicate this study and starting the research period in the year 2002; in which the circular

economy got officially accepted by the Chinese government (Su & Zhou, 2005).

As the findings of this study show that MNEs mainly initiated downcycling activities,

it is still possible that the MNEs integrate more upcycling activities in the future. Perhaps no

pattern of; the MNEs first integrating downcycling activities and then integrating upcycling

activities, has been able to be discovered yet because the research period was not long enough,

and thus the circular logic was not integrated sufficiently. Therefore, an avenue for future

research might be to replicate this study focusing on the research period 2015-2020. The

findings need to be compared to the findings of this study to see if any patterns can be

discovered and whether the second proposition of this study is supported or not.

Another limitation is that the findings of this study cannot be generalized for other

industries. Therefore, a future avenue in line with this particular study would be to analyze how

companies integrate the circular economy in the service industry. Possible companies to

represent the cases would be companies like Google and Cisco that are both Global Partner of

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the Ellen MacArthur Foundation. Since it is not applicable for this industry to initiate circular

activities that involve tangible products, i.e. innovating package designs, it would be interesting

to examine what activities this sector can adopt to integrate the circular logic into their business

model. Furthermore, a follow-up research examining the pattern and differences between the

two industries might be interesting for literature on the circular economy in general. Key

norms, values, and material practices of the circular economy can be identified based on the

findings of this comparative analysis. Another interesting avenue is to do research on

environmental and financial benefits that firms operating the circular logic can provide. The

study could research what the effects of circular activity that is initiated, i.e. the amount of

water that is saved due to a new water-efficient system. Based on the findings, the study could

provide an overview of the most and least effective circular activities.

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8. Conclusion Population growth places a strain on the world’s natural resources. The need for a new

economic model increases, and the new possibilities in technology and social factors make it

possible to make the transition towards a circular economy. Therefore, this study aims to

answer the question in how MNEs in the FMCG-industry integrate the circular logic into their

business model over time. An explorative multiple case study is conducted based on MNEs

that are key players in the FMCG-industry and actively promote the circular economy;

Unilever, Nestlé, Danone, and Coca-Cola Company.

The widespread call for closed-loop value chains has triggered an increase in interest

among researchers for the study of the circular economy. Yet, research on the circular economy

among management scholars has focused on its origins and conceptualization (Kortmann &

Piller, 2016; Murray et al, 2015). Both literatures exploring the process of institutional logic

shift and the one investigating business model innovations have highlighted the challenges

companies have to face in these transformation. Kortmann & Piller (2016) argue that in order

to create a closed-loop value chain managers need to develop competitive and integrated

business models that extend the traditional production stage, include service offerings in the

consumption stage, and emphasize the circulation or recovery of distributed products in the

subsequent circulation stage. However, literature still lacks in how the circular logic is

integrated into the business model of a MNE. Due to a MNE’s presence in multiple countries,

it has to face critical challenges in the change of norms, values, and material practices towards

circularity, thus requiring a more complex ‘activity system’ (Zott & Amit, 2010). Path

dependency (Bohnsack et al., 2015), the need for a trial-and-error approach (Sosna et al., 2010),

and the importance of keeping the effectiveness of the current business model until the new

one can be taken over (Chesbrough, 2010) are core features of this transition process.

Furthermore, as a result of operating in different institutional environments, MNEs have to face

potential heterogeneity in institutional environments. The process of moving from one

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dominant logic to another involves actors using their power to accomplish such shifts (Reay &

Hinings, 2005). Since this research focuses on the transition from a linear to a circular logic, a

longitudinal approach had to be adopted in order to gain a thorough understanding of the

transformation towards the circular economy.

Findings show that, when integrating the circular logic, they are more likely to initiate

subsequent activities since they contribute to the circular economy the most. Downcycling

activities are more profitable and effective than upcycling activities since there is more waste

available suitable for its process. The majority of the circular activities require partnerships

with actors that are external to the traditional value chain. Furthermore, it also appeared that

the activities are either performed locally, regionally or globally, depending on the activity’s

stage in the product lifecycle.

By doing research on the integration of the circular logic into the business model this

study contributes to the field of sustainable BMI by helping to improve the design,

implementation, and performance of a closed-loop economy in the sustainable business model

in theory and practice. This study has also answered the call of California Management Review

for papers on the circular economy and contributed to management literature. Specifically, by

focusing on the change in logics in business models of MNE’s this paper has made a

contribution to the literature on institutional logics, international management, and waste and

resource management.

Future research suggestions can be derived from this study. In order to identify any

overlooked patterns, it is suggested that this research is replicated taking into account the years

preceding the research period in this study, and an additional research that examines the next

6 years. Another possible avenue would be a research focusing on the integration of the circular

economy of companies in the service industry. Since it is not applicable for this industry to

initiate circular activities related to tangible products, it would be interesting to examine what

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activities this sector can initiate to integrate the circular into their business model. Furthermore,

a follow-up research examining the pattern and differences between the two industries might

be interesting for literature on the circular economy in general. Key norms, values and material

practices of the circular economy can be identified based on the findings of this comparative

analysis. Another interesting avenue would be to research the effectiveness of each circular

activity based on environmental and financial benefits. In doing so, an overview can be created

with the most and least effective circular activities.

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9. Abbreviations BM Business Model

BMI Business Model Innovation

CCC Coca-Cola Company

CSR Corporate Social Responsibility

FMCG Fast Mover Consumer Goods

GDP Gross Domestic Product

GRI Global Reporting Initiative

LEED Leadership in Energy and Environmental Design

MNE Multinational Enterprise

SBM Sustainable Business Model

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