Keywords

Introduction

The transition towards the circular economy—i.e., “an industrial economy that is restorative or regenerative by intention and design” (Ellen MacArthur Foundation, 2013, p. 14) is considered a viable solution to global environmental problems by both researchers and policymakers (Cristoni & Tonelli, 2018; Lieder & Rashid, 2016; OECD, 2018). Albeit worldwide firms are increasingly embracing the circular paradigm (Panwar & Niesten, 2022), it seems that economy-wide transformations in this direction still require time to be achieved (ibid.).

The academic literature unanimously recognises that implementing circular practices requires the action of both firms and other stakeholders (Aarikka-Stenroos et al., 2021; Bocken et al., 2018; Pucci et al., 2020). Indeed, stakeholders are considered “the ultimate sources of entrepreneurial opportunities for sustainability innovation” (Schaltegger & Wagner, 2011, p. 225), therefore they play a key role in developing circular practices as “they collaborate to maximise the value of products and materials and contribute to minimising the depletion of natural resources and create positive societal and environmental impact” (Bocken et al., 2018, p. 79). This is why the entrepreneurs embracing circular business models (CBMs) and establishing the so-called “born circular firms”—i.e., firms that “have been founded originally adhering to circular economy principles” (Zucchella & Urban, 2019, p. 91) as opposed to “growing circular firms”—are likely to establish high degrees of cooperation not solely with their customers, but also with diverse stakeholders along the supply chain (Urbinati et al., 2017).

Extant research found that organisations that succeed in building reciprocal trust with their stakeholders through mutual commitment can give rise to long-lasting relationships (e.g., Athanasopoulou, 2009; Beckers et al., 2017). Harrison and Wicks (2013) underline that the act of engaging stakeholders and creating value with and for them is critical for a firm to pursue sustained success.

Stakeholder engagement, which is defined as the “practices that the organisation undertakes to involve stakeholders in a positive manner in organisational activities” (Greenwood, 2007, pp. 317–318) is a key topic in management research. Greenwood (2007) and O’Riordan and Fairbrass (2014) use the term “stakeholder engagement activities” to refer to activities such as communication, collaboration, dialogue, and joint decision-making. Tapaninaho and Heikkinen (2022) refer to “joint value creation activities” to discuss how value is created in the case of circular economy business development. The literature employs a variety of alternative words to refer to stakeholder engagement practices/activities (Kujala et al., 2022), such as forms (Viglia et al., 2018), strategies (Herremans et al., 2016), and mechanisms (Pucci et al., 2020). Pucci et al. (2020) argue that “stakeholder engagement mechanisms” can be regarded as a series of mechanisms a firm with a proactive sustainable behaviour implements to engage its stakeholders in innovation and value creation.

We here opt for employing the term “mechanisms” to refer to those means and ways through which firms engage their stakeholders in the context of circular entrepreneurship, to synergistically find and/or implement ways to close, narrow, and slow resource loops. Some examples of these mechanisms could be, for instance, the development of experimental circular projects by sharing knowledge and expertise and the education about circular practices through communication activities.

Joint value creation is especially important to born circular firms since they aim to create value for multiple stakeholders’ groups such as non-profit organisations and society at large (Bocken et al., 2013; Dahan et al., 2010), while at the same time focusing on non-financial forms of value, such as social and environmental value (Bocken et al., 2014; Boons & Lüdeke-Freund, 2013; Boons et al., 2013).

According to the degree of intensity, stakeholder engagement with a firm can assume different forms, from the lowest degree consisting in “remaining passive” to the highest degree of “empowerment” (Salvioni & Almici, 2020). A recent literature review about external stakeholders in the circular fashion (Ki et al., 2020) shows that the engagement of customers and government plays a key role in developing circular practices. Nonetheless, we still know little about the way the engaged stakeholders “make a circular post-consumption behaviour” (ibid., p. 2407): despite the importance of the topic for academics and practitioners alike, no studies have so far investigated stakeholder engagement mechanisms in the circular entrepreneurship context. This is even more evident in studies involving small and medium-sized enterprises (SMEs) (Dey et al., 2020). Moreover, limits and challenges of stakeholder engagement to promote circular practices still need to be fully acknowledged and explored. We argue it is fundamental to fill these research gaps since the transition towards the circular paradigm requires firms to involve multiple stakeholders and maintain an open dialogue with them (Salvioni & Almici, 2020).

The present chapter is devoted to contributing to filling this gap through a multiple case study research involving circular firms and their key stakeholders. We address the following research question: “What kind of engagement mechanisms do circular firms employ to engage their stakeholders?” We also look at how these mechanisms lead to value creation. In doing so, we contribute to the emerging circular entrepreneurship literature (Cullen & De Angelis, 2021; Zucchella & Urban, 2019) as well as to the academic debate about stakeholder engagement in the circular entrepreneurship context (Salvioni & Almici, 2020).

This chapter is structured as follows. In the first part, we present the theoretical background that is based on the literature about stakeholder engagement and value creation, and we  frame it in the circular entrepreneurship context. We then illustrate our research methodology consisting in a qualitative multiple case study research including circular SMEs and their stakeholders. Subsequently, we present our four case firms, we analyse the emerging dyadic engagement mechanisms towards their key stakeholders, and we develop a conceptual framework of stakeholder engagement mechanisms. Then, we also offer a critical discussion of some key limits and challenges that the stakeholders’ engagement may have in creating value and promoting circular practices. Finally, we offer insights to practitioners, highlight the limitations of our work, and advance some avenues for future research.

Theoretical Background

Stakeholder Engagement

Within the stakeholder theory, stakeholders are defined as “those groups and individuals who can affect or be affected” by the actions connected to value creation (Freeman, 1984, p. 25). Their relationships with a focal business are seen as deeper than a transaction-oriented one since they aim for joint value creation (Freeman, 2010).

Stakeholder engagement is defined as a series of “practices the organisation undertakes to involve stakeholders in a positive manner in organisational activities” (Greenwood, 2007, p. 315), and as “processes of consultation, communication, dialogues, and exchange” (ibid., p. 322), and it requires firms to take into account their stakeholders’ desires and capabilities (Noland & Phillips, 2010). Stakeholder engagement is often associated with the concept of responsibility towards stakeholders: engaging stakeholders can indeed be a favourable practice as it allows knowledge capture and a way for social learning “where diverse stakeholders share a common forum, learn about each other's values, reflect upon their own values and create a shared vision and objectives” (Mathur et al., 2008, p. 601). However, as pointed out by Greenwood (2007), the concept of responsibility does not necessarily go hand in hand with stakeholder engagement, meaning that engaging stakeholders is not equivalent to treating them responsibly. In their model of stakeholder engagement and moral treatment, Greenwood (2007) distinguish four scenarios given by the different combinations of high/low stakeholder engagement and stakeholder agency, which is “a proxy for the responsible treatment of stakeholders” (ibid., p. 322).

Stakeholder Value Creation

Stakeholder value creation is the ability of an organisation to create long-lasting relationships with its stakeholders (Freeman et al., 2004). Creating value with and for stakeholders is of uttermost importance in sustainability-oriented business models (Freudenreich et al., 2020) since solving sustainability-related issues requires multi-stakeholder collaboration and sharing of expertise, skills, and appropriate resources (Hörisch et al., 2014). Scholars agree upon the fact that implementing successful circular business models being able to create durable value requires firms to engage multiple stakeholders through constant dialogue, involvement, and meeting of expectations (Bocken et al., 2018; Kujala et al., 2019; Mishra et al., 2019; Salvioni & Almici, 2020).

The concepts of value creation and value appropriation involving multiple stakeholders have been recently investigated by several authors (Bridoux & Stoelhorst, 2022; Garcia-Castro & Aguilera, 2015; Lepak et al., 2007; Tantalo & Priem, 2016; Volschenk et al., 2016), yet their notion of “value” somehow remains trapped in the search for economic gains while overlooking other dimensions such as the society and the environment (Harrison & Wicks, 2013). In a very broad view, “value” can be seen as “anything that has the potential to be of worth to stakeholders” (ibid., pp. 100–101). Several efforts to develop a more comprehensive conceptualisation of “value” have been made by scholars at the intersection of business and society. For instance, influential discussions aimed at theorising an equilibrium among business, society, and the environment have been those rotating around the concept of triple bottom line value creation (Elkington, 2004), “blended/shared value” (Crane et al., 2014; Emerson, 2003; Porter & Kramer, 2011), and “strategic corporate social responsibility” (Baron, 2001; Daudigeos & Valiorgue, 2011; McWilliams & Siegel, 2011). Recently, Freudenreich et al. (2020) investigated the concept of value creation for sustainability through the stakeholder theory perspective. The authors support the idea that value creation processes in sustainability-oriented business models are not solely focused on economic value as the traditional ones but are also aimed at generating ecological and social outcomes for all the firms’ stakeholders.

Instead of defining a very complex concept as “value”, Kujala et al. (2019) opt to rather focus on value-creating stakeholder relationships and their characteristics. They develop a model called Stakeholder Value Creation (SVC) which presents three main attributes in value-creating stakeholder relationships, i.e., joint interests (supported by common history, shared experiences, and mutual objectives), ability to collaborate (based on understanding the importance of information sharing and on mutual commitment), and trust (which is also an outcome of a successful relationship). However, stakeholder relationships are not devoid of boundaries and scholarly criticism. It has been argued that they can harm the value capture of a firm, for instance, because a stakeholder may use its bargaining power for rent appropriation thus negatively impacting the firm’s performance (Coff, 2010).

Since value creation means different outcomes for diverse stakeholders (Bocken et al., 2013; Schaltegger & Wagner, 2011), looking at the dyadic relationships between each firm and stakeholder allows getting a thorough understanding of the engagement activities in place between the actors involved. In the sustainability context, these dyadic interactions have been recently investigated by Pucci et al. (2020), who focus their study on a firm with a proactive sustainable behaviour and their engaged stakeholders along all its value chain. The authors argue that stakeholder engagement requires several mechanisms that a firm can implement to motivate their stakeholders, and they unfold three mechanisms, i.e., co-creation, adoption/development, and exploitation/contamination. Furthermore, the framework developed by the authors focuses on stakeholder engagement mechanisms as “mechanisms through which a firm with a proactive sustainable behaviour engages its stakeholders in innovation development and value creation” (ibid., p. 366) and it shows some positive outcomes stemming from the engagement activities, namely value creation at different levels, i.e., firm, stakeholders, and local. We here aim to expand the empirical investigation of stakeholder engagement mechanisms in the specific context of circular entrepreneurship.

Stakeholder Engagement Mechanisms for Value Creation in Circular Entrepreneurship

Entrepreneurship can provide an effective answer to the current environmental crisis the world is facing (Global Footprint Network, 2020) by developing novel business models capable of creating value not solely for the ventures themselves and their stakeholders, but also for the planet and the whole society. By making a step forwards, circular entrepreneurs establish close relationships with their key stakeholders and at the same time they find market solutions to current environmental problems (Zucchella & Urban, 2019). Indeed, circular entrepreneurship, conceptualised as the processes of exploration and exploitation of opportunities in the circular economy domain, (ibid., p. 195) is conceived to narrow, slow, and close the resource loops since the firms’ foundation and it can offer concrete solutions to shift towards a circular use of resources (ibid.).

In the context of circular entrepreneurship, stakeholder engagement is considered crucial in creating long-lasting relationships and successful business models (Salvioni & Almici, 2020), yet the stakeholder engagement mechanisms, as well as the dynamics of stakeholder value creation, are still in need of a thorough investigation (Tapaninaho & Kujala, 2019).

Circular entrepreneurs adopting CBMs since their foundation give rise to the above-defined “born circular firms” (Zucchella & Urban, 2019), which are opposed to “growing circular ventures”—i.e., firms that are in transition towards a CBM. Circular business models can be considered part of the broader group of sustainable business models, that consist in going beyond delivering a mere economic value and creating other forms of value (e.g., ecological and social) for a broader range of stakeholders (Bocken et al., 2013). Studies regarding CBMs have boomed during recent years. According to Mentink (2014), a CBM is a rationale of how an organisation creates, delivers, and captures value with and within closed material loops. Rosa et al. (2019) define CBMs as specific types of business models whereby “the conceptual logic for value creation is grounded on keeping the economic value embedded into products after their use and exploit it for new types of market offerings” (p. 2). Linder and Williander (2017) define a CBM as “a business model in which the conceptual logic of value creation is based on utilising the economic value retained in products after use in the production of new offerings”. Henry et al. (2020) adopt the perspective of “born circular firms”—and, more specifically, of “circular start-ups”—and through an accurate analysis of 128 business models, they inductively propose a typology of CBMs which include five types: design-based, waste-based, platform-based, service-based, and nature-based.

In the present chapter, we adopt the classification of CBMs made by Lacy and Rutqvist (2015) which distinguish five archetypes of circular business models: circular supply chain, resource recovery, product life-extension, sharing platforms, products as-a-service (PSS). The first consists in employing renewable, recyclable, and/or biodegradable inputs into the supply chain. The second is based on the idea of taking materials that are commonly defined as waste and making new goods out of them. The product-life extension model aims at making long-lasting products or/and at increasing products life through upgrade and refurbishment, thus contrasting the planned obsolescence of most consumer goods. The sharing business model aims at increasing the use of otherwise idle goods, and finally, with the product as-a-service model companies retain the products’ ownership and ask clients to pay for their use.

Delivering value through circular business models implies circular entrepreneurs look for expertise and skills from different stakeholders since finding and implementing solutions to narrow, slow, or close the resource loops along the value chains require the commitment of all the actors involved, either at the upstream, downstream, or both levels (Urbinati et al., 2017).

Methods

The present empirical work is devoted to illustrating the dyadic stakeholder engagement mechanisms between circular firms and their stakeholders and exploring how such mechanisms lead to value creation.

We adopt a qualitative case study methodology embracing the epistemological position of interpretivism and constructionism—appropriate for the context of joint value creation—as advanced by Stake (1995) since “most contemporary qualitative researchers hold that knowledge is constructed rather than discovered” (ibid., p. 99). With the aim to “understand the meaning or knowledge constructed by people” (Yazan & De Vasconcelos, 2016, p. 137), we inductively let our interviewees’ narratives and collective case studies (Stake, 1995) unveil the stakeholder engagement mechanisms and outcome stemming from them.

Our data collection has been carried out between December 2020 and April 2021. To collect data, we departed from Sitra database (https://www.sitra.fi/en/), a widely known and used Finnish database of circular ventures, which reports 123 cases of circular firms founded in Finland, of which 65 can be classified as “born circular” according to the provided definition. We also found a few further cases on Sitra website. We opted for focusing on Finland since it is a European forerunner in the circular economy: in 2016, it has signed the world’s first roadmap on circular economy and it is currently leading the way in the Nordics for circular transformation (SB Insight, 2019). Case studies were selected purposefully (Patton, 2015). We looked for SMEs, i.e., with less than 250 employees (EU recommendation 2003/361), having a CBM, and that can be regarded as “born circular firms” (Zucchella & Urban, 2019). We contacted 30 firms out of 65 by looking at the widest variety in terms of industries and 4 of them were available for a semi-structured interview, therefore our sample is composed of 4 firms. Table 8.1 provides an overview of the selected case studies, highlighting the role of the interviewees, the engaged stakeholders, the number of employees, the operating industry, the CBM, the circular mission, and whether the firm operates in the B2B or B2C context.

Table 8.1 Key facts and figures of the case studies
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We in-depth interviewed the founder or a knowledge informant (e.g., CEO, head of sustainability, head of R&D) per each case firm and the related key stakeholders that have been mentioned during the interview—except for Spinnova’s and Kamupak’s clients and Spinnova’s supplier Suzano that have not been responsive. To overcome the lack of primary data related to the missing interviews, and to enrich them with more pieces of information, we triangulated the interviews with secondary data (companies’ newsletters, online press releases, and social media pages) (Denzin, 1978; Stake, 1995). Our total number of interviews equals 12. We adopted semi-structured interview schemes—see the appendix—and we maintained high flexibility as for the notion of “progressive focusing” (Parlett & Hamilton, 1976), which is based on the assumption that “the course of the study cannot be charted in advance” (Stake, 1995, p. 22).

Each interview was conducted via Zoom (due to Covid-19 pandemic restrictions that prevented face-to-face meetings), lasted approximately one hour, and was recorded through an electronic device and then transcribed within the following 24 hours. We also opted for investigator triangulation, meaning that we had discussions about data interpretation within the research until we reached a shared agreement (ibid.). The data collection allowed gaining thick descriptions (Stake, 1995; Welch et al., 2011) of the stakeholder engagement mechanisms emerging from their narratives in the context of circular entrepreneurship. After reading the transcripts to become “intimately familiar with each case” (Eisenhardt, 1989, p. 540), we manually coded each single case study (Stake, 1995) according to two variables of interest, i.e., dyadic engagement mechanisms and output in terms of value creation. After performing the single case analyses, we undertook a cross-case analysis, aimed at recognising emerging patterns of stakeholder engagement mechanisms and value creation across the cases.

Four Finnish Circular Firms and the Key Engagement Mechanisms with Their Stakeholders

Spinnova

Spinnova is a Finnish technological start-up founded in 2017 embracing the circular supply chain CBM. It aims to produce wood-based textile fibres that are completely free of chemicals, and it has the potential to revolutionise the textile industry. In the same year of its foundation, the world’s largest wood pulp producer, the Brazilian company Suzano, contacted the firm since it was highly interested in finding and investing in innovative technologies to produce fibres more sustainably. Since 2017, the two firms have closely worked together for three years to understand how to produce an innovative and chemical-free fibre from softwood pulp. As explained by Spinnova’s head of Communication:

Suzano found us because it has a lot of innovation in their operations, and it was scouting for new technologies like other people in the world. So, they found us and invested in us in the summer of 2017, and we began to develop the microfibre and cellulose together.

Albeit being Suzano the actor that first expressed interest in partnering, the circular firm Spinnova has been very active in the engagement activities by sharing its knowledge, innovative mindset, and technology, as well as its commitment towards introducing a disruptively sustainable innovation in the textile industry. The tight relationship and strong commitment that have arisen led them to reach their common goal: to produce a sustainable fibre by using 99% less water than in the production of traditional cotton fibres. The partnership looks very solid and fruitful: the two firms have also established a joint venture to share both the R&D and the financial expenses, and they have just invested 2 million Euro to build the first commercial-scale production facility in Finland, which will open in 2022.

Before reaching the commercialisation phase, Spinnova has opened a pilot plant in Jyväskylä, Finland, to trial and test the new fibres in partnership with fabric and clothing manufacturers, such as Bergans, a high-quality sportswear clothing company. Again, it was the latter to contact Spinnova in 2019 since it was looking for sustainable fibres to make backpacks and it saw the potential that partnership could have had. Through an informal conversation, they realised to have common values and to share a strong commitment towards sustainability. As explained by our interviewee, Spinnova’s head of Communication:

Bergans is genuinely thereafter the same thing as we are, i.e., “making a better material foundation for the textile industry as our bedding in terms of sustainability and mitigating climate change”. We were able to do things fast probably because it is a matter of a “cultural thing” that they just have. It is an agile company and a culture that they’re really committed, and passionate about sustainability issues, so they have the will and the way of acting. All the brands we work with are early adopters, pioneers, they just they have a different mindset.

And reiterated by Bergans’ designer:

We immediately realised that we had common values, and mindsets, but especially companies’ values were completely aligned. We had common ambition on how the industry needs to evolve, and we have a shared interest in pursuing these possibilities and we are open to experimentation. The relationship has been built on common trust and openness in the belief we are doing this together.

Spinnova organised a visit to its pilot plant to make Bergans aware of its technology, thus building trust and transparency. The firm saw Bergans as an excellent partner to understand and test the market and therefore engaged it through involvement in the experimentation project and the establishment of a continuous and reciprocal learning process. In only 6 months, the two firms launched a collection called the “collection of tomorrow” consisting of a limited edition of sustainable backpacks that the final clients could buy and then return to Bergans at end-of-life to be recycled. The firm played a key role in helping Spinnova understand the market: Bergans deliberately asked for feedback from their pioneering clients to improve the backpacks’ features and make a step towards circular practices.

Kamupak

Kamupak is a start-up founded in 2018 by three young entrepreneurs: Iida Miettinen, Karri Lehtonen, and Eero Heikkinen, and it offers a takeaway reusable packaging addressed to restaurants and grocery stores. The adopted CBM is the product-as-a-service: clients pay a 3-euro deposit for taking Kamupak, buy their takeaway food, and finally return the empty package to the restaurant/bar, which proceeds washing and reusing it.

To develop its reusable packaging, Kamupak contacted Orthex, a well-known large Finnish company producing household products and committed towards sustainable practices since the 1990s (e.g., use of a material made from industrial plastic waste). Kamupak engaged Orthex by asking it to refine together the circular business model, i.e., make decisions about the packaging size and materials (the idea was to produce a material coming from renewable sources thus causing less CO2 emissions than traditional materials for packaging) as well as about how the deposit system could work.

As stated by our interviewee, the co-founder of Kamupak:

We are making with Orthex a pilot for new materials that could reduce the CO2 emissions from the production, so we have some sort of testing at this stage. We need to experiment to find the material with a less life-cycle impact.

Kamupak engaged Orthex through sharing knowledge and expertise and constantly experimenting to find the best packaging solution suitable to the circular project.

Other key engaged stakeholders are the restaurants with whom Kamupak tested the product and service. As from our participant’s narratives:

We have had a close relationship with some of our restaurants to prototype our system, validate our functions, so we have had some of the restaurants with whom we operate in a collaborative sense through piloting.

One of these restaurants is Silta Cafeteria, a café located in Finland, which can be considered both a customer and a partner. Silta was among the first Kamupak customers and the engagement mechanisms consisted in its full involvement in the piloting phase to prototype the system. In this phase, the café tested the system and provided feedback to improve the service according to final clients’ reactions and usage behaviour. For instance, Silta found out that clients were not using the application, which was rather employed mainly by the firm for statistical purposes about the product usage, and that clients were discouraged to adopt the service because of the lack of cash to pay the deposit while being at the cashier. From Kamupak’s perspective, the engagement mechanisms with final customers result in value creation in terms of improvement of its product’s features and experimenting and learning from their consumers’ behaviours. The firm is now in the phase of implementing rewards systems towards their final customers and their customers’ employees to further engage them in their mission of reducing plastic pollution caused by takeaway meal boxes.

Lovia

Lovia is a fashion firm founded in 2014 in Helsinki by the young designer Outi Korpilaakso by embracing the recovery business model in the specific form of upcycling, i.e., giving new value to materials that are either discarded, or are not being used anymore (Fletcher & Grose, 2012).

Inspired by circular principles, the business idea was to commercialise high-quality leather bags, accessories, and jewellery made through upcycling processes, i.e., using leftover materials to create new valuable products. In developing this circular business model, Lovia had to accurately find the proper stakeholders that would have been ready and committed to working differently, namely departing from low-value materials and transforming them into high-quality products and accessories. Finding partners willing to embrace this circular mission has been a quite difficult journey, also because Lovia was looking for full transparency in every single step of the business process—as reported on its website—to establish transparent communication with its clients (B2C). Consequently, the search for stakeholders to become partners was based on “sustainability” and “transparency” criteria. As stated by our interviewee, Lovia’s manager:

Every time we look for a partner, we want to see that it is interested in sustainability. Someone does not want to collaborate with us because they don’t want to be transparent.

In 2014, Lovia found a key stakeholder to produce the items, i.e., an Italian leatherwear, “Pelletteria Clio”, whose owner Fulvio Galbiati has a long experience in working with leather and with luxury brands.

Lovia initially engaged Clio in its circular project by asking Fulvio to experiment with new materials (leftovers from other leather firms) and sharing knowledge and expertise with him. Lovia and Clio have progressively developed a strong trust and mutual understanding, two key features that made their relationship valuable and unique. As highlighted by our interviewee, Clio’s co-owner:

Lovia asks me suggestions regarding the use of materials; our relationship is based on trust, and I feel like I am an important partner.

Another key stakeholder is Kokkolan, a Finnish firm producing high-quality and ecological leather, which has been engaged by Lovia as a supplier. Kokkolan provides Lovia with leftovers of elk leather and considers Lovia as a “spotlight” in the transition towards circular practices. Kokkolan has been challenged in its production process: Lovia motivated it to improve the quality and extend the life cycle of the leather to make long-lasting bags and reduce the environmental impact caused by the production. Doing so, Lovia could obtain a durable material obtained from leather patches that were destined to the trash and it also contributed to improving Kokkolan’s product thus representing a motivator to take further steps towards a more sustainable production. Moreover, Kokkolan took advantage of Lovia’s business philosophy based on transparency as it could gain further customers thanks to “free advertisement” made by Lovia.

Furthermore, Lovia constantly engages its B2C clients, which are at the heart of its decision-making process. It asks for feedback and insights after purchase, and it organises co-design events during which clients can design their bags that will subsequently be produced by the Italian manufacturer. These events in the showroom are very important moments to directly interact with clients also about the environmental issues linked to the item production, to hear about their experiences, and to promote education regarding circular practices.

As reported by Lovia’s manager:

We try to be as close as to customers as we can, we want to know what they think about the design, we want them to give us feedback. Every time we sell a bag or a piece of jewellery, we say that if there is any problem or if the customers feel like giving some inputs, we would love to hear from them and implement their suggestions. Based on some customers’ feedback, we have changed some models, some details, it is an ongoing process. We also organised a co-design event/workshop: anyone could design its own bag.

These in-store events are very important to engage clients. Lovia seeks to develop a personal relationship with them. During these designing events, it asks the clients to create their personalised bags by choosing materials, colours, and patterns to create fully personalised items. The step forward in the engagement takes place with Clio’s co-owner sending a video to the clients personally explaining all the performed production steps; doing so, the clients get the impression that the production phases are very close to them, and they feel like proper designers, and this strengthens the relationship with the brand.

As from the narratives of the interviewed client:

I went to Lovia’s showroom to attend a co-design event with a friend. We didn’t decide in advance to buy a bag, but after we designed it, we realised how nice it was and how great and fun it has been the experience, and we loved the idea to buy something unique, so at the end we decided to buy the bag we designed.

Lovia is also developing a “care program”, consisting in asking its clients to bring their bags back to be sent to its producer for repairing, thus contributing to educate and promote circular practices among its clients.

Sulapac

Sulapac is a company founded in 2016 by two biochemists, Suvi Haimi, and Laura Tirkkonen-Rajasalo who have patented innovative biodegradable granulates that are employed to make packaging for cosmetics. The CBM they adopted is circular supply chain (Lacy & Rutqvist, 2015). The firm is R&D-focused and it collaborates with research centres such as the Finnish VTT to constantly improve the recipe and the degree of sustainability of its material, as well as the “look and feel” of the final products. As stated by our interviewee, Sulapac’s sustainability director:

Sustainability is the core in everything we do, starting from the raw materials, then the manufacturing and also the end of life.

To implement its highly innovative material, Sulapac engages diverse stakeholders, first its producer and partner Quadpack, a global manufacturer producing packaging solutions for beauty brands, which was looking for alternatives to plastic and therefore committed to sustainability-oriented projects. As explained by our interviewee:

We have as important partner Quadpack, big cosmetics jar manufacturing brand, and they also do marketing together with us, selling our jar. They made us more visible and credible towards companies and brands.

Quadpack has been selected as a partner in 2019 since it has the expertise to inject Sulapac’s granulates into the cosmetics jars it produces, and it also has several brand partners that were potential buyers, and this helped Sulapac in building brand awareness within the cosmetic industry. By leveraging on reciprocal knowledge, Sulapac and Quadpack have developed a unique offer that nobody has in the market, namely an entirely compostable product line called “Nordic Collection Jars” as well as new products that are constantly under development. Their mutual commitment and common goals are leading the partnership towards the expansion of Quadpack’s Q-Line range (fully customisable) by using the Sulapac biodegradable materials.

Other important stakeholders that have been engaged by the firm are both B2B customers and final customers, having a key role in implementing Sulapac’s business model. As in our respondent’s narratives:

With some customers we have kind of joint research initiative, meaning that they can influence the recipes that have been developed. Currently, we are developing take-back campaigns together with our customers so that for example when you have used your Sulapac jars, you can bring them back to the shop and it is collected by the value chain and then it will return into Sulapac granulates and then into new items, so it is a kind of reverse logistics, which is quite common in the circular economy.

The relationship with some B2B customers is so close that they are considered more as partners. For instance, the firm Lumene, a large Finnish cosmetic company, has been engaged by Sulapac from the very beginning (2016) to start experimenting whether the biodegradable granulate would have been applicable as packaging materials for beauty products, guaranteeing appropriate shelf life. After several trials, the two firms succeeded in developing a suitable recipe for cosmetics packaging. As regards B2C clients, they are involved in the circular mission since they are asked to bring the cosmetic packaging back to the shops to be reused and recycled. Doing so, the firm actively promotes the adoption of circular practices and educates its customers.

Discussion

The cross-case comparison among the four case studies allowed us to identify nine recurrent engagement mechanisms in relation to each stakeholder involved (i.e., producer, customer, and final client) as well as the resulting output in terms of value creation (see Table 8.2).

Table 8.2 Key engagement mechanisms and stemming value creation
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Regarding producers, the mechanisms we find in all the four firms are co-production of circular products/services, knowledge sharing, and involvement in experimentation. Co-production refers to the stakeholder involvement in the development of circular products/services in terms of features, design, and introduction of improvements. Knowledge sharing consists in exchanging technical notions, know-how, and expertise acquired over time to generate innovation. Involvement in experimentation refers to the joint process of trials, errors, and reciprocal learning, within the process of developing circular products/services. These three mentioned mechanisms allow continuous interactions between the involved actors, strengthening their bond and commitment to producing innovative circular solutions.

For what concerns customers, Spinnova, Kamupak, and Sulapac (the B2B firms) engage their customers through involvement in experimentation. Experimentation projects may take a variety of forms according to the product/service the circular firm is developing; for example, in the case of Spinnova experimenting consists in performing constant trials and tests to create innovative backpacks and anoraks from the wood-based fibre patented by the circular firm. Spinnova and Sulapac, the two firms introducing disruptive technologies, are also engaging customers in R&D activities, and this approach allowed them to move from having a patented technology to developing marketable products. In these cases, the role of partnering with B2B customers is crucial to perform research and learn from established brands that know the market and have long-term experience in a specific industry. Lovia, our sole B2C firm, engages a supplier instead, by motivating it to challenge its linear supply chain by showing it the path towards sustainable ways of thinking and producing.

Lastly, we find that Spinnova, Kamupak, and Sulapac engage their final clients (B2C) by involving them in the testing process of products/services, asking for feedback, and engaging them in reverse logistics (take-back of products) thus also educating them with respect to circular practices. The testing phase allows the circular firm to either test the prototypes or to improve the product/service features according to the final clients’ feedback. Clients are also educated about circular practices being asked to close the resource loop by bringing the products back to the firms (as in the cases of Spinnova and Sulapac)—thus taking part in reverse logistics—or adopting Kamupak’s product-as-service circular business model. Likewise, Lovia educates its clients about circular practices (upcycling and repair) as an engagement mechanism, but it also organises in-store events to involve them in co-design workshops, thus making them feel like designers, and in implementing a “care program” for old bags, thus incentivising the reuse and repair of used items.

The value creation stemming from all the above-mentioned engagement mechanisms (for the dyads involved, for the clients as well as for the external context) is multifaceted since it does not concern only the economic sphere of value (i.e., commercialisation of the developed products/services), but it also includes the environmental and social spheres of value—as highlighted by Harrison and Wicks (2013). More in detail, regarding the environmental sphere, we find that the value creation is realised with the introduction of sustainable technologies, the reduction of plastic pollution caused by take-away single-use plastic, and the recovery of scrap materials. From the social point of view, the value creation consists mainly in educating customers about circular practices and gradually changing their consumption habits. Moreover, circular firms inspire other firms in starting the transition towards the circular economy, thus representing spotlights in this direction. Together, circular firms and their engaged stakeholders contribute to spreading a sustainability-oriented mindset within society at large.

Furthermore, our empirical investigation allows us to confirm that the three attributes identified by Kujala et al. (2019), i.e., trust, joint interests, and ability to collaborate are necessary to build solid relationships with stakeholders. According to our findings, we shall add to the Authors’ model that a “shared sustainability-oriented mindset” is crucial to develop effective engagement mechanisms between circular firms and their key stakeholders. Vice versa, we do not encounter instances of harmful value appropriation due to unbalances in bargaining power, as found by Coff (2010). Furthermore, in our cases, we find that the stakeholder engagement co-creation mechanism revealed by Pucci et al. (2020) occurs in the forms of the already explained co-production and co-design activities.

Figure 8.1 summarises our findings through a framework illustrating stakeholder engagement mechanisms and resulting value creation in circular entrepreneurship, as well as the limits and challenges that engagement mechanisms may present in promoting the transition towards circular practices.

Fig. 8.1
A circular framework represents the process that encompasses the producers, customers, and clients of stakeholder engagement mechanisms and results in value creation.

Stakeholder engagement mechanisms and value creation in circular entrepreneurship

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With regard to the latter, our study reveals that finding the appropriate stakeholders is certainly not a simple task. Circular firms’ willingness to challenge the status quo by transiting towards circular value chains and practices requires searching for those stakeholders that are prone to experimentation, trials, errors, as well as keen to invest in finding alternative solutions.

Furthermore, circular firms tend to ask high commitment to the engaged stakeholders, either in terms of time and/or in terms of demanding activities, such as those concerning R&D and experimentation. This may prevent some actors to accept being engaged by a typically new-born firm without an established brand or a reputation on the market. Circular firms may more easily create partnerships and with those stakeholders showing a sustainability-orientation mindset since goals and values alignment is likely to represent a binding force within the dyadic relationship.

Lastly, it may take time to build strong trust and the full transparency that such rewarding relationships may require. This means circular firms might need to be compelling in explaining their circular mission to the stakeholders they wish to engage, to establish a real connection with them from the very beginning.

Conclusions

This chapter has investigated stakeholder engagement mechanisms implemented by four Finnish firms in the novel context of circular entrepreneurship. Despite being popular in management literature, stakeholder engagement lacks empirical studies in this context. We contribute to fill this gap by empirically investigating key stakeholder engagement mechanisms between a set of circular firms and each of their key stakeholders.

Our study has both theoretical and practical implications. From the theoretical perspective, our findings contribute to the academic debate about stakeholder engagement in the context of circular entrepreneurship (Cullen & De Angelis, 2021; Salvioni & Almici, 2020; Zucchella & Urban, 2019), by uncovering nine key engagement mechanisms underpinning dyadic relationships between circular firms and their stakeholders. We also provide a framework of stakeholder engagement mechanisms and resulting value creation which acknowledges a multifaceted conceptualisation of value creation and includes the environmental and social perspectives.

From the managerial perspective, first, we suggest to circular entrepreneurs but also to managers willing to guide the transition towards the circular economy to look for committed stakeholders and to engage them through the illustrated stakeholder engagement mechanisms by considering and acknowledging the resulting multidimensional value creation. Second, we highlight some of the limits and challenges that the engagement of stakeholders and the underlying mechanisms may have in fostering value creation and circular practices. The most evident challenges are related to finding the appropriate stakeholders to engage, the high commitment required to the engaged stakeholders, and the time needed to develop trust and transparency, key elements for a long-lasting and constructive relationship.

Finally, the cases highlight that the output stemming from the engagement mechanisms is not solely beneficial for the circular firms and the stakeholders involved, but also for the environment and the society at large. Some of our circular firms are in fact developing disruptive technologies to reduce the environmental impact of the production processes, others are promoters of the education concerning circular practices and are sources of inspiration for other firms aiming to start the transition towards CE.

Our study’s main limitations are represented by its context-specificity (the Finnish circular entrepreneurship context), the paucity of evidence regarding B2C firms, and the limited number of cases. Future studies might collect more in-depth case studies of circular firms established in different countries (both in the B2C and in the B2B contexts) to provide more empirical evidence of stakeholder engagement mechanisms and related value creation stemming from them.