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R EINFORCING THE T RANSFORMATIONAL D RIVERS

5. ANALYSIS

5.3. R EINFORCING THE T RANSFORMATIONAL D RIVERS

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Educating the customers aligns with Hörisch and colleagues (2014) claiming that if properly educated about sustainability, stakeholders will make decisions with sustainability in mind, resulting in decisions being based on circularity. This could also be achieved through conducting educational marketing (Bocken & Short, 2016).

Closely related to the responsible citizens was the fact that our case companies had to consider the need for infrastructure, aligned with the need for a system that needs to be put in place to re-integrate the resources into the supply chain and facilitate that these are sent back from the users into the loop (Hopkinson et al., 2018; The Ellen MacArthur Foundation, 2014). Some of the case companies had implemented take-back programs, while others suggested involving the B2B customers and incentivizing taking back materials through, e.g., deposit systems, involving the governments in implementing legislation, and setting up internal systems, such as recycling waste (see External Demands). However, getting the customers to re-integrate their products into the cycle was still one of the major challenges.

Creating clear incentives for the customers to engage in the take-back systems, thus becoming responsible citizens and adopting the role as a user rather than consumer, would address the recurrent challenge in the interviews; the companies struggling to engage the consumers in the reverse supply chain. Such incentives could take many forms. Facilitating pick-ups where the focal company is responsible for expediting the pick-up, for instance through setting up a standardized schedule or upon contact from the client. Mail-back systems and retailer drop-offs would both involve more engagement from the consumers, so to increase their commitment this initiative could be combined with discounts on the next sale if the clients return their products to the loop.

92 Education Fostering Change

Two thirds of our interviewees elaborated on how they use different types of education and training to inform their employees about the circular economy and the Cradle-to-Cradle

principles. The information allows the employees to lead the change and make decisions based on the idea of circular economy (Hörisch et al., 2014). Going back to the Implementation Plans section of the analysis, the goal of the change was for circularity to be reflected in the thousands of little decisions happening every day or, in other words, institutionalizing the change (Hiatt, 2006; Kotter, 1995; Lewin, 1947). According to Hörisch and colleagues (2014), this goal would be reached through education on the matter. One interviewee explains the importance: “[…]

education on C2C is very important for people to understand and to get everybody on board as to why we are doing this”. Adding to training and workshops, a head of marketing and

communication explained using a scheme with specific training for different groups of employees, depending on how deeply they each needed to know about the C2C standards and circularity.

Further, the interviewees underlined how fostering education also helped their employees find their place within the change, and to adapt their work processes, while ensuring that the knowledge on circularity and C2C is sustained within the organization, in line with acting as a transformational leader (Bass & Avolio, 1994; Kark et al., 2003; García-Morales et al., 2012). The different types of education tools may also align with the transformational leaders’ notion of intellectual stimulation through increased awareness and new perspectives on problem solving (Kark et al., 2003).

However, education did not only pertain to the employees. Our interviewees also underlined informing and educating other stakeholders, especially the suppliers. A sustainability expert indicated educating internally and externally, for both the employees and suppliers through workshops, while other interviewees also highlighted the importance of educating their suppliers on circularity and C2C. Passing on knowledge through education aligns with Lynch (2018) stressing the importance of leaders sharing their knowledge within the focal company and within the supply chain; thus fostering organizational learning, innovation, and performance (García-Morales et al., 2012).

Another tool that was used by the leaders to educate themselves and others was best practice sharing. As suggested by Lynch (2018), best practice sharing is essential and sharing information and knowledge both internally and externally can be beneficial – especially regarding

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sustainability and green strategies, considering the still rather new and changing topics.

Considering the importance our interviewees placed on collaboration pertaining to circularity, the idea of sharing information regarding circular change might carry more weight for this particular sustainability transformation than for other transformations. Our case companies had all profited from the knowledge, experience, materials, and framework the institute provided. Additionally, half of the interviewees benefitted from best practice sharing acquired through membership of advisory boards, engaging in partnerships with NGOs, offering talks on the matter of circularity and increasing visibility, or collaborating with companies to split the cost of material

developments.

Considering the importance our case companies attached to best practice sharing, interestingly none of them had specifically organized ways of sharing it, which is why we suggest introducing internal libraries and databases on detailed best practices to reinforce knowledge sharing. Adding contacts to further ask about the practice and initiative used might, thereby, help to foster cross-collaboration and support within the organization.

To further empower the employees to act on the change, we suggest hosting circular talks to further educate on circularity. Here, the leader can invite other organizations that are also engaging in circularity, or internal speakers that are working mainly with circularity, for conversations about the struggles and successes working with a circular business model and exchange experiences and best practices.

Promoting Transparency and Teamwork

Just as with the education, our interviewees perceived transparency and open communication as important drivers for the circular change. Both when communicating with the suppliers and the employees, transparency and openness were perceived as crucial. The open communication and transparent approach towards the employees were described by a CEO, mentioning how

employees would ask why the company bought the more expensive machine and the CEO openly explained to the employees how this would give them a competitive advantage regarding lower energy usage and other aspects. This aligns with Wilson (2004) suggesting communicating the business case to the leadership team and stakeholders. Interestingly, adding to Wilson (2004), the business case is also presented to the employees. As mentioned in the negative responses, some of the interviewees expressed notions of admitting when they were wrong or had made a wrong

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decision and then adapting the circular change, which underlines the transparent approach some leaders practiced.

Another interviewee described the approach towards the suppliers: “We invite all of our suppliers and explain to them over and over again, what is our idea, our vision of the future, and our ideas on how to implement, and we explain to them how they could help us”. Aligning both with Gill (2002), Hiatt (2006) and Kotter (1995), sharing the vision and being open about the change and why it is necessary is crucial to successfully implement it, as well as aligning with Wilson (2004), who argues that communication underlines the sincerity of the change. Additionally, being open and transparent about the choices made and the change might further increase the trust due to perceived consistency (Wilson, 2004) and generally, reporting is essential for the stakeholders garner trust in the company (Kim, 2019).

Consequently, our interviewees considered transparency as being of importance regarding the employees and the supply chain but also regarding the certification, and the customers.

Transparency is necessary to be able to track the material flows, (The Ellen MacArthur

Foundation, 2014) and therefore, required for the certification as the companies have to declare all the ingredients used in their products (see About the C2C Institute). Further, being open and transparent towards the suppliers about why they have to disclose valuable information themselves is essential, as they are the ones that need to be transparent about their recipes and might hesitate to open up their books (see Managing External Demands). Additionally,

transparency towards the customers is needed, as they are buying the products and want to learn about the ingredients within, which aligns with Groza and colleagues (2011) and Khojastehpour and Johns (2014) claiming that transparent communication on sustainability initiatives have the potential to positively affect profits. One interviewee describes their approach: “We openly share data on the materials we use […] obviously in order to help people embrace circularity, we need to be open about those materials and share data”. Of course, this requires close collaboration with the suppliers (see Opportunities through Collaboration) and within the organization itself.

Accordingly, two thirds of our interviewees mentioned collaboration and teamwork, both

internally and externally, as drivers that support the change. One interviewee describes how all the different departments are involved when changing the business model: “HR, finance, operations – which includes all manufacturing, the commercial business and new product development, new product management. So it’s up to leaders, from that leadership team […] to move the

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information down and translate it to their employees”. Underlining the important role of leadership (see the Role of the Leader), the quote shows how the different departments are all affected by the change, aligning with the ripple effects described by Johnson and colleagues (2008), which makes it important for the different departments to work together. An

environmental expert describes the collaboration within his organization:

“I think a lot of the decisions are a collaboration between operation teams, design teams, and supplier teams […] Getting that high-level support is really important, but actually you need to recognize the people getting it done are the operations team and the people going out and talking to suppliers and the people of designing the product in specifying materials”

The quote illustrates the importance of leadership, aligned with the Role of Leadership section, but also that teamwork and collaboration between the different actors are the key to reaching the goal of institutionalization of circularity in the everyday decision-making. Consequently,

employees need to understand circularity and be educated about the topic to be able to integrate it into their own work (see Education Reinforcing Change). A sustainability expert connects the education, transparency, and collaboration, i.e., all of the above-mentioned drivers and summarizes their importance:

“The solution is to foster education on the C2C philosophy and to keep an open communication and partner up with those, who share your vision, because only by having the open doors on all sides and all parties involved being ready to identify the aspects that are problematic and are willing to actually invest in optimization”

The quote again shows how interconnected all of the topics are, while underlining the needed consistency and certainty of wanting to pursue this journey to a circular business model strategy.

To further increase transparency and teamwork, we suggest hosting events in the form of Big Room Planning. This type of event brings all program and team members together every quarter to plan the next steps on circularity. Within these events, the teams plan internally but also cross-functionally, i.e., with other teams and departments and therefore it provides an overview of how everyone else is working with and on circularity matters, while also fostering an understanding for interdependencies. During these events, potential challenges and problems can also be addressed.

However, this could also be done in Internal Solution Camps that are focusing on trying to find solutions or new perspectives on challenges the company is confronted with and hoping to solve them together with employees of other teams or departments. Working together on solutions might not only foster a culture of teamwork and collaboration but also create a sense of

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togetherness and working towards the same goal, which was identified as a driver for circular change.

Another way to foster transparency, teamwork, and cross-collaboration could be incentivizing work-shadowing. Here, the employees would accompany other employees for half a day or a day in their jobs to learn about what others in the organization work on and how they integrate circularity in their line of work. This could also be extended to the suppliers that, through work-shadowing, might gain more insights into how the company is working and through increased understanding be able to better collaborate with their buyers.

Additionally, to further reinforce transparency, also regarding the leader and their own mistakes, we suggest hosting ‘Fuck-up nights’. Here, the leaders and the employees talk about challenges they did not solve successfully, or tasks where they had failed. These types of events might foster transparency and openness, while also making it acceptable to talk about failure and view failure as part of growth, which further aligns with our argument of encouraging a culture of

experimenting (see Managing Circular Product Development).

Working with the Culture

The majority of the interviewees emphasized the significance of incorporating circularity and sustainability not only in the work processes but also in the culture (see Culture Embracing Change). This can be considered a driver for furthering the implementation of the circular strategy and corresponds to Gill's (2002) element of values and culture, which the leadership is part of shaping and, which plays an essential role for leaders when implementing change.

One tool for driving the change and affecting the organizational culture is the management systems, i.e., how the management evaluates the work of the employees, as well as clear communication for the direction the leadership envisions for the company. This was a recurrent theme in several of the interviews and can be seen as a way of influencing the negotiated order of the organization. Changing award systems or setting requirements for product development, potential sales, as well as supplier facilities and conditions suggest new indications of ideals and goals for the organization, i.e., the espoused values and beliefs, as described by Schein (2004), and the reward systems and established requirements become the artifacts representing these goals. For instance, one interviewee described how the new Head of Sustainability measured each working group based on their sustainability efforts, which can be seen as a ritual, thus an artifact,

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representing the circular espoused values and beliefs. Moreover, it functions as a motivational effort put in place to inspire the employees, as described by Wilson (2004) and Gill (2002). As a culture is ever-changing (Schein, 2004; Watson, 2006), these initiatives become influencing elements that have the potential to affect the negotiated order, thus affecting the organizational culture.

Building on Wilson’s (2004) adapted management measurement systems, we further suggest adapting old bonus systems for profitability to new systems incorporating circularity gains in line with quantifiable metrics inspired by the environmental bottom line of the triple bottom line. Such circular metrics could be lifecycle impacts of products produced, and material and water usage and re-usage, thus considering initiatives that reduce leakage of the resource loops. Additionally, considering the C2C Institute’s five assessment categories, circularity gains could incorporate social fairness and employ metrics indicating the company’s effect on internal and external stakeholders vis-à-vis issues such as safety, training, and employment of underprivileged people.

To ensure that as many employees as possible would be able to influence these metrics, and thus, benefit from the new bonus system, we suggest encouraging employees to submit suggestions and awarding the initiatives with the largest impact.

Further influences on the organizational culture involve the leaders’ personal examples, adding to the sense of trust in the leaders and the new direction (Neves & Caetano, 2006; Reinke, 2003). As all of the case companies are family-owned, the notion of trust might be stronger between the employees and the leaders (Carlock & Ward, 2001). Congruently, some of the interviewees in a leadership position explained how they went to great lengths to signal personal commitment to the circular strategy, for instance by acquiring an electric car or by personally engaging with the management of their suppliers to ensure their commitment. This speaks to the organizational commitment, which ultimately affects the organizational culture, while publishing visible examples can function as short-term wins (see the Role of the Leader). Moreover, the public recognition as well as the inclusion in working groups empower the employees through recognizing and applauding their work and involving them in the process. Additionally, the working groups motivate the employees to think about the changes and focus on solutions, rather than problems (Appelbaum et al., 2012). These initiatives, related to heightened desire and added motivation, similarly function as rituals that speak to the circular espoused values and beliefs (Schein, 2004), as well as they can be linked to Kotter's (1995) notion of creating a powerful guiding coalition and empowering broad-based action.

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In order for the organizational commitment to be completely ingrained in the organizational culture, it has to be part of the basic assumptions among the organizational members, i.e., the organizational DNA as described by Schein (2004). This entails that the employees have

embraced the change and carry out the circular strategy unquestioned and by default and is in line with Hassan and colleagues’ (2013) notion of employees’ commitment to the organizational goals, based on a shared sense of values. As the basic assumptions are an intrinsic understanding among the organizational members, this takes time. Thus, the sense of long-term orientation described by the interviewees (see Circularity as a Strategy), draws parallels to Kotter (1995), Hiatt (2006), as well as Whelan-Berry and Somerville's (2010) notion of institutionalizing new approaches. This last step is considered crucial for the long-term success of a change initiative and is dependent on the corporate culture (Kotter, 1995). Interestingly, the significance of cultural DNA was recognized by the majority of the interviewees, exemplified in the following quote by an environmental expert:

“If circularity is going to take hold, we need to try and influence their each day decision-making so that people will make a more sustainable choice you know rather than being these sort of announcements, big policies, sort of big things, when it’s actually about the small things. It’s where we need to have a cultural change”

As this quote indicates, many of the interviewees acknowledged that the long-term success of the circular transformation depends on the institutionalization and implementation within the focal company’s culture. Furthermore, the interviewees extended the need for institutionalization to the external stakeholders, especially the customers and the suppliers. Such institutionalization among external stakeholders denote the necessary responsible citizens, who engage in the take-back systems, as well as suppliers who engage in the necessary forms of production, thus necessitating a cultural change. This is elaborated in the Coping with the Transformational Challenges section of the analysis.

The notion of institutionalizing the organizational commitment to circularity in the organizational culture, i.e., the employees’ identification and involvement within the organization (Hassan et al., 2013), can be further extended to the notion of the organizational image and identity. Following the characterization of the change as including aspects of planned, emergent, and continuous change (see Defining the Change), the organizational identities of our case companies can be related to the ever-changing approach to organizational identity. As mentioned in the Internal Demands section, the basic value proposition of a company, linked to the business model (Geissdoerfer et al., 2018; Johnson et al., 2008), is intrinsically connected to the notion of ‘what

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we do’, i.e., the organizational identity (as defined by e.g. Albert & Whetten, 1985; Kenny et al., 2016). Therefore, there is an connection to working with the organizational culture, which was reflected in one interviewee’s statement: “I think that now our purpose is not to make a profit, but our purpose is to promote change and transition in the circular economy, so, that’s our purpose in life, so to say. I think that’s very noble”.

Changing the organizational identity aligns with Wilson's (2004) as well as Linnenluecke and Griffiths' (2010) assertions that to successfully implement change, the leadership has to rethink the organizational purpose. Correspondingly, some interviewees recounted that the employees of the organization appreciated the new purpose or strategic values (see Culture Embracing Change) and that this had worked as a motivational driver for the change. Further, in some cases the purpose functioned as talent attraction, in line with Aguinis and Glavas (2012), and higher levels of performance (Wilson, 2004). However, the identity shift of going from a linear to a circular business model strategy necessitates a corresponding shift in the organizational image to avoid an identity-gap (Gioia et al., 2013), thus developing an aligned perception of what the company does among the external stakeholders. This extends to the second order concept of working with circularity as a strategy (see Findings).

Promoting the new purpose or strategic values can be further linked to Gill's (2002) leadership element of a vision that works to inspire the employees, which builds on the sense of urgency established around the change (see the Root of the Change), might further entice the employees.

The working groups that several of the interviewees described, functioning as guiding coalitions, can result in the internal ripple effects described by the interviewees (see Culture Embracing Change), where the employees are motivated to expand on the circular strategy. This motivation might partly also derive from employees appreciating the organizational purpose (see Culture Embracing Change) and is exemplified in the following quote by a research and product development:

“I do think that it really helps a lot that we are an organization, where everybody has their role in implementing this vision, so that it’s not a top-down roadmap of this is how we’re going to do it. It’s also organized quite organically”

The internal ripple effects further extend to Kotter's (1995) concept of change agents, ingrained in the step of empowering broad-based action, as well as Karp's (2006) and Stouten and colleagues' (2018) emphasis on empowerment. This draws parallels with what several of the interviewees

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described as ambassadors for change or banner-carriers. One commercial director, for instance, described how they empowered these employees to develop the vision and strategy:

“We know that there are a lot of people in the company that have something on social responsibility that they do themselves and we want to help and support their

initiatives in the future so […] we can kind of lock them in into the total project of doing good for the environment in general”

Consequently, the interviewees expressed awareness of the need to include their employees and connect the circular strategy to the organizational culture. Drawing on Karp's (2006) suggestions for how to entice change ambassadors, we further suggest creating incentives for the employees to adopt these roles, thus furthering the implementation as well as influencing the negotiated order by affecting the discourse around the change. These incentives could include offering pay raises and new responsibilities as well as providing training to the employees who express an interest in working with the circularity implementation (Karp, 2006). This would further play into the leadership value of embodying empowerment and fostering action.

Extending the effects of working with the organizational identity, we additionally suggest that the leaders display the vision within the organization, adding to the graspable examples. Such visual presentations could include illustrations or written displays of the adapted values in the office areas, strengthening the awareness of the values the leaders wish to promote in the culture.

Considering the nature of the circular change as continuous and emergent (see Figure 4), successfully implementing circular awareness in the culture will strengthen the employees’

understanding of why and how these continuously emerging challenges should be solved, drawing on the skills they gather from the educational initiatives.

Advancing Through Partnerships

Another driver for change was connected to the opportunities that were achieved through collaboration. As illustrated in the Transparency and Teamwork Driving Change section,

collaboration played a major role for the ability to change the linear business model into a circular one. The collaborative approach, which our case companies all pursued, led to some opportunities for both them and for their suppliers, which helped them manage the partly negative responses from the suppliers (see External Demands). In line with Lynch (2018), who argues that it is important to build a network, our interviewees also partnered up with different associations and suppliers (see section above). One interviewee describes this the relationship with the suppliers:

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“Sharing knowledge and being in a close alignment with your supply chain as well with your assessor is of vital importance in terms of solution […] we don’t see our suppliers as suppliers, they are not just compliant with us, we see them as our partners, that we grow together and we develop things together”

The quote underlines the importance of seeing the suppliers as partners as well as educating and collaborating with them to drive the change forward, while also underlining the close relationship with the C2C assessors. Both the suppliers and assessors help the organization implement the circular business model; the suppliers work on the recipes for the products they manufacture, and the assessors help adhering to the standards set by the C2C Institute.

These findings are closely aligned with Perez-Aleman and Sandilands' (2008) argument that companies should engage in partnerships with their suppliers and Grosvold and colleagues' (2014) argument that the focal company should engage in a combined effort of both managing and measuring. Managing efforts that are taken by our case companies are; being collaborative with the suppliers and offering them training, as well as requiring third-party certifications and establishing sanction systems (Grosvold et al., 2014). As elaborated on in the Education

Reinforcing Change section, the suppliers are also educated on the C2C principles and circularity, and regarding a sanction system, many interviewees underlined, how they would openly

communicate to the suppliers that if these standards were not adhered to, they could not continue to uphold the partnership. Measuring efforts are made by our case companies through

documenting how the suppliers work and by receiving data and documentation from them.

Further, the suppliers are audited by a C2C assessor, in line with Pedersen and Andersen's (2006) suggestion to include third-party monitoring.

Adding to the Business Case of the Change section, many of our interviewees underline the long-term orientation they have, which is also portrayed in their supplier relationships. Several

interviewees have collaborated with the same suppliers for many years and one CEO even describes the close partnership as a “marriage”. They further elaborate: “It’s a strategic

partnership because we all of a sudden are so closely knitted together when developing a product together”. However, the interviewees also underline the risk that comes with this close

partnership; the suppliers could increase the prices, knowing they are the only few with this recipe, even though the risk was not perceived as too high, since, if they would increase the prices too much, they would lose the sale to the case companies. The approach of our case companies show how the involvement of both the planning and implementation is resulting in mutual trust and close partnership (Pedersen and Andersen, 2006).