Dynamics of circular business development: The case of social clothing recycle

Abstract

Nowadays, scholars and policymakers see circular economy (CE) as a relevant paradigm to pursue sustainability. Despite the mushrooming literature on CE, management studies lack in describing CE implementation features at a firm level and the driving forces for circular conversion. This paper thus seeks to investigate the key dynamics occurring in native circular firms to support hypotheses generation on the development and diffusion of circular business models. For this purpose, two representative case studies in the social clothing sector have been performed with a qualitative and participative approach, making use of system dynamics (SD) tools. Cases' narrative and embedded SD causal structures depict the organization's business, environmental, social and educational features. The model illustrates self‐reinforcing dynamics of circular consumptions and sales, organizational capacity building and consumer conversion to circularity. Composite learning mechanisms and educational initiatives catalyse the commercial business and disclose a role for circular companies in the affirmation of CE as an alternative paradigm to the linear economy. Furthermore, case‐based inductive understanding is discussed through a typological matrix that contains a classification of CE businesses. Overall, the paper attempts to contribute to the management field by describing the development dynamics of CE business models. The case studies, faced with an SD approach, provide insights on implementation mechanisms of CE at a company level and are the basis of new hypotheses generation on circular development and conversion.