Exploring paradoxical tensions in circular business models-cases from North Europe

Abstract

Circular Business Models (CBMs) are a tool that allows private sector organizations to reconcile circularity (i.e., narrowing, slowing and closing resource flows) and commercial value creation. However, these two elements are not always aligned; they can be contradictory. This makes the relationship between circularity and commercial value creation, in the context of CBMs, a paradoxical tension. These types of tensions are particularly challenging since the elements that create the tension cannot be removed, instead, both elements must remain in place and the tension between them must be continuously managed. This article explores the main paradoxical tensions and management strategies in the context of CBMs through an integrative literature review as well as an empirical study. The integrative review helped identify three literature streams that provide key insights regarding paradoxical tensions of CBMs, namely corporate sustainability, servitization and circular economy. The empirical study suggested six paradoxical tensions inherent to CBMs: (1) using waste as a resource; (2) design of circular products; (3) improving aesthetics of used products; (4) matching supply and demand; (5) Balancing costs in circular activities; and (6) managing resistance from the value chain. The findings from the literature review as well as the empirical study are compared and discussed. Overall, this article sheds light on the paradoxical tension between circularity and commercial value creation that sits at the core of CBMs as well as the potential managerial strategies suitable for dealing with this tension.