Unfolding Challenges of Business Model Innovation towards Circular Economy: The case of fashion industry

Kerli Kant Hvass

Research output: Chapter in Book/Report/Conference proceedingConference abstract in proceedingsResearchpeer-review


Over the last decades there has been a call for finding solutions and implementing strategies that aim for more efficient use of natural resources and sustainable development within our societies (Brundtland et al. 1987). In addressing this, the concept of circular economy has recently gained extensive attention (EMF 2012; 2013), even though the concept is not a new and traces back several decades to Stahel & Reday’s (1976) work on the ecology behind product life extensions and their sketched vision for “an economy of loops” or “circular economy.“ Addressing circular economy is an emerging field in industry, academia and policy, however, there is limited research that studies this concept from a business model perspective supported with empirical evidence. Traditional fashion companies’ business models mainly focus on creating and capturing value from the sale of new products, while aspects related to circular economy principles, such as product take-back, reuse and recycling are often not an integral part. The aim of this article is to explore the organizational and supply chain related issues in relation to implementing a closed loop recycling-focused circular economy strategy in an existing business model. The paper is based on empirical findings from a 34 month long qualitative case study of a leading Scandinavian fashion brand and the study followed an engaged scholarship strategy (Van de Ven, 2007). The findings identify issues and challenges that impact the successful implementation of a product take-back system and closed loop recycling into an existing business model. The study shows that closed loop fashion is a complex matter with several uncertainties and difficulties that span across the entire value chain. Moving towards a circular textile system implies wider systemic change and innovation, not only in business models, but also in technologies, production practices, policies and consumer behaviour. At a micro level, the findings conclude that in order to integrate circular economy practices into the existing business model, rethinking existing value propositions and modifying several or all business model elements is required. For example, the findings reveal a need for organizational learning and a common understanding of the circular economy value proposition among internal stakeholders. An additional finding is that circular business models require an extended understanding of customers where it is important to see them as suppliers and co-producers of post-consumer value of products and materials. Finally, integrating circular economy strategies into business models may bring along radical changes to how companies perceive its products and relationships with customers and other stakeholders. Overall, the research provides a unique contribution as it synthesizes the theoretical and empirical insights from the field of business model innovation and circular economy with a focus on product and material circularity and management of post-consumer waste streams in a specific industry context.
Original languageEnglish
Title of host publicationExploring a Changing View on Organizing Value Creation: Developing New Business Models : Contributions to the 2nd International Conference on New Business Models
EditorsRomana Rauter, Martina Zimek, Aisma Linda Kiesnere, Rupert J. Baumgartner
Number of pages2
Place of PublicationGraz
PublisherUniversity of Graz
Publication date2017
Publication statusPublished - 2017
Event2nd International Conference on New Business Models. NBM 2017 - Hotel Das Weitzer, Graz, Austria
Duration: 21 Jun 201722 Jun 2017
Conference number: 2


Conference2nd International Conference on New Business Models. NBM 2017
LocationHotel Das Weitzer
Internet address
SeriesInstitute of Systems Sciences, Innovation and Sustainability Reports


  • Circular economy
  • Business models
  • Closed loop
  • Fashion industry
  • Qualitative case study

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