MASTERS THESIS IN INNOVATION MANAGEMENT THE DRIVERS … · MASTERS THESIS IN INNOVATION MANAGEMENT...
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University of Eastern Finland Department of Social Science & Business MASTERS THESIS IN INNOVATION MANAGEMENT THE DRIVERS OF ECO INNOVATION. A CIRCULAR ECONOMY PERSPECTIVE MD AMINUL ISLAM Student No. 268314 Innovation Management Master’s Program University of Eastern Finland, School of Business & Economics October 30 th 2018
Transcript of MASTERS THESIS IN INNOVATION MANAGEMENT THE DRIVERS … · MASTERS THESIS IN INNOVATION MANAGEMENT...
University of Eastern Finland
Department of Social Science & Business
MASTERS THESIS IN INNOVATION MANAGEMENT
THE DRIVERS OF ECO INNOVATION. A CIRCULAR
ECONOMY PERSPECTIVE
MD AMINUL ISLAM
Student No. 268314
Innovation Management Master’s Program
University of Eastern Finland, School of Business & Economics
October 30th 2018
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ABSTRACT
UNIVERSITY OF EASTERN FINLAND
Faculty
Faculty of Social Sciences and Business Studies
Unit
Business School
Author
Md Aminul Islam
Supervisor
Kaisa Henttonen
Name of the Thesis
THE DRIVER OF ECO INNOVATION. A CIRCULAR ECONOMY PERSPECTIVE.
Major
Innovation Management
Description
Master’s thesis
Date
30/10/2018
Pages
82
Abstract
As lot of challenges facing the contemporary business, shift from traditional innovation to eco
innovation is required in order for business to meet the environmental objectives as organizations
must recognize the importance of environment in any aspect of innovation. The study aims to
identify the drivers of eco innovation in the light of circular economy from the overview of the
existing literature. The investigation of drivers of eco innovation is subjected to the one single
organization, a Finnish SME.
A case study was adopted as a research methodology to find out the drivers of eco innovation in
circular economy context. Conceptual model was drawn from the previous research with regards
to the drivers of eco innovation and verified through the empirical investigation. The scope of
research was limited to three categories of drivers of eco innovation based on general innovation
theory categorization. Findings suggest that technological competencies, research and
development and network and collaboration were the most dominant drivers of eco innovation and
they showed a strong relationship with circular economy. The study provides a discussion
regarding the drivers of eco innovation and presents the potential relationship between eco
innovation and circular economy based on the empirical data.
The study is deemed as exploratory in nature, an effort towards understanding the intricate
relationship between eco innovation and circular economy. The study provides relevant insights
that will enable business organizations, policy makers, environmental agencies and other
stakeholders to make an informed decision regarding environmental sustainability. The study also
showcases the practical insights regarding the promotion of how eco innovation contributes to a
transition to circular economy.
Key words
Drivers of innovation, Eco innovation, process innovation, sustainability, resource efficiency,
recycling, circular economy
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ACKNOWLEDGEMENTS
I express my deep gratitude to my thesis supervisor Kaisa Henttonen during the entire journey
of my thesis writing process. Her continuous supervision and guidance has helped me to stay
focus on my thesis topic. Besides her guidance and direction, she has been persistent in her
help and has given me ample time when I was going through tough time in fixing my research
topic.
In addition, I would like to thank also Ville-Veikko Piispanen for guiding and supervising my
thesis process together with Kaisa Henttonen. I would like to thank Professor Hanna Lehtimäki
for supporting me as well. Moreover, I am grateful to Kaisa Henttonen, Ville-Veikko Piispanen
and Hanna Lehtimäki for inspiring me to incorporate circular economy concept into my thesis.
In the end, I would like to thank the respondents of the case company X for allowing me to
interview them and giving time to respond to the research questionnaires.
30 October 2018 Kuopio, Finland
Md Aminul Islam
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TABLE OF CONTENT
ABSTRACT ................................................................................................................................ i
ACKNOWLEDGEMENTS ....................................................................................................... ii
Table of Content ....................................................................................................................... iii
1. Introduction ......................................................................................................................... 1
1.1. Background ................................................................................................................. 1
1.2. Literature review and Research gap ............................................................................ 2
1.3. Research framing......................................................................................................... 3
1.4. The objective of the study and research question ....................................................... 4
1.5. The structure of the thesis ........................................................................................... 5
2. Conceptual framework ........................................................................................................ 5
2.1. Key concepts of the study ........................................................................................... 5
2.2. Types of eco innovation .............................................................................................. 7
2.3. Eco innovation in practice ........................................................................................... 8
2.4. Perception of eco innovation from managerial perspective ...................................... 10
2.5. Key concepts of circular economy ............................................................................ 10
2.6. Cradle to Cradle ........................................................................................................ 13
2.7. Resource recovery ..................................................................................................... 14
2.8. Industrial symbiosis................................................................................................... 15
3. Theoretical Framework ..................................................................................................... 16
3.1. Regulatory drivers ..................................................................................................... 16
3.2. Demand-side drivers ................................................................................................. 17
3.3. Supply side drivers .................................................................................................... 19
4. Methodology ..................................................................................................................... 26
4.1. Case study ................................................................................................................. 26
4.2. Primary data collection.............................................................................................. 27
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4.3. Interviews .................................................................................................................. 28
4.4. Data collection........................................................................................................... 28
4.5. Secondary data collection.......................................................................................... 31
4.6. Data collection........................................................................................................... 31
4.7. Introduction of Company X ...................................................................................... 32
4.8. Production process of Company X............................................................................ 34
4.9. Eco innovation at company X ................................................................................... 36
4.10. Types of eco innovation at company X ..................................................................... 37
4.11. Analysis ..................................................................................................................... 39
4.12. The types of eco-innovation at Company X.............................................................. 39
4.13. Regulation and policy drivers of eco innovation ...................................................... 40
4.14. Demand side drivers .................................................................................................. 41
4.15. Supply side drivers .................................................................................................... 42
5. RESULT ............................................................................................................................ 52
6. Discussion ......................................................................................................................... 55
6.1. Eco innovation leads to resource efficient circular economy ................................... 61
6.2. Limitation .................................................................................................................. 67
6.3. Future research .......................................................................................................... 67
7. Reference:.......................................................................................................................... 68
7.1. Primary sources ......................................................................................................... 68
7.2. Secondary Sources .................................................................................................... 68
8. Appendix ........................................................................................................................... 80
8.1. Interview questionnaire for respondents at Company X ........................................... 80
9. Figures ............................................................................................................................... 81
10. Table .................................................................................................................................. 82
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1. INTRODUCTION
1.1. Background
In many countries, there has been economic stagnation due to the global financial and economic
downturn. Readjusting to the green growth economy is the only way to overcome this crisis.
(Nordic Workgroup, 2010). Natural resources such as discovered fossils fuels, minerals, fresh
water etc will be declining in the next two decades. Also, economy tends to double due to the
growth of population (population will reach 7.675 million in 2020). In other words, production
of the key resources need to increase in proportion to this growth. This global transformation
presents huge opportunity since new market for products and alternative ways of creating
business begin to emerge (FOR A, 2011). Green growth suggests cultivating new economic
growth and progression by making sure that natural resources keep producing the resources
and environmental services upon which the wellbeing of human being depends
Economies have to invest on innovation which supports sustainable growth. This sustainable
growth create new business opportunities. OECD strategy of green growth (OECD, 2011)
suggests that policies for green growth should trigger innovation which can then increase
efficiency in terms of using natural capital which in turn create economic growth stemming
from the adoption of eco activities. This dissemination of eco innovation leave positive impact
on economic social and environmental improvement in both OECD and non-OECD countries
(Jing & Bow, 2013). In addition, the environmental impact as a result of industrial activities is
a major problem in the world. In an effort to protect the earth from environmental damage,
concepts such as green image, eco innovation, eco marketing, eco production, eco management
etc are increasingly being discussed. (Chen, 2007)
It is an established fact that innovation is a prime driver of economic and social progress.
Innovation fosters business success for the firm enabling it to have competitive advantages.
Michael Porter suggested that innovation is at the heart of economic prosperity (Porter & Van
der Linde, 2006). In order for countries to incline towards more of an ecofriendly sound and
progressive society, promoting innovation is a must thing which enables firms to consider
finding different ways of addressing present and future environmental issues. This helps reduce
energy and resource consumption while at the same time developing sustainable economic
activity. This innovation is commonly known as eco-innovation (OECD, 2012). In the
European Union (EU), eco innovation was considered as single most contributing factor to the
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Lisbon strategy objectives for economic growth and competitiveness and also is important
element of new Europe 2020 strategy (OECD, 2010)
1.2. Literature review and Research gap
As opposed to the general innovation, firms consider eco innovation to be quite uncertain and
risky. Despite that fact that many institutions, regulations and policies are designed in a way
that can stimulate eco innovation. However, studies shows that those institutions regulations
and policies are not able to reduce the uncertainty and the risk of eco innovation. For instance,
according to Ashford (1993) identified the few barriers of eco innovation such as technological
barriers, consumer related barrier, financial barrier, managerial barrier etc. Empirical study to
identify eco innovation barrier as evidenced by Technopolis (2008) found that demands, costs
and lack of finance are some of the major barriers. Many firms are not really aware of long
term opportunities due to the high costs. Another empirical study as evidenced by Rehfeld et al
(2007) suggested that environmental products are much more expensive than conventional
products. European commission Environmental technologies Action plan (2004) also identified
the relevant barriers to eco innovation. These barriers are regulatory barriers, economic barriers
ranging from higher price to higher investment, technological barriers and diffusion barriers.
These barriers pose fundamental challenges to the success of eco innovation. Therefore,
identifying the drivers of eco innovation could provide solution to these challenges
Various studies Oltra (2008), Vinnova (2001) & Horbach (2008) and their focus on the drivers
of environmental innovation have been found. For instance, Horbach (2008) study on German
firms suggest that the improvement of the technological competencies and research and
development (R&D) knowledge capital triggers environmental innovation. Many literatures
have attempted to analyze the drivers of eco innovation with environmental promise in country,
industry and firm level (Porter and Linde, 1995; Bansal and Roth 2000; VINNOVA, 2001;
Frondel, Horbach and Rennings, 2008). The study of Vinnova (2001) focused on the existing
literature as to how external demand drive environmental innovation within firms. It is quite
evident from the literature review that theoretical and empirical evidence for the drivers of eco
innovation from resource efficiency perspective has not been addressed sufficiently in any of
the previous researches which is a significant research gap.
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1.3. Research framing
Empirical study as highlighted in the literature review revealed the growing challenges of eco
innovation barriers. That’s why, there needs to a shift in eco innovation approach in order to
address those challenges as industries now a days have been trying to looking at the pollution
level to control the discharge as eco innovation was mostly on discharge level traditionally.
Many industries build end of pipe technology in an effort to reduce the toxicity of their
discharge. However, end of pipe technology being costly, and in most cases, were inefficient in
terms of reducing the pollution. That’s why, industrial interest has been shifted to adoption of
more of an eco-innovation approach. Industries today are increasingly adopting eco innovative
cleaner production that significantly reduces the energy and materials used in the production
process. They are looking to check the entire product life cycle and integrate different strategies
such as closed loop production system that eliminates final disposal by recovering the wastes
and turning them into new resources for production.
Shifting towards cleaner technology approach divorcing the end of pipe technology is
imperative. Because the environmental benefits coming from cleaner technology far outweigh
the benefits derived from end of pipe technology (Horbach & Rennings, 2004). Another eco
innovative approach is eco efficiency. Eco efficiency implies the less environmental impact as
per unit of the product or service (World Business Council for sustainable Development, 2000).
Eco efficiency reduces the energy intensity, enhances recyclability and use of renewability for
instance redesign packaging and creating zero waste and so on.
In terms of sustainability, environmental reasons has received an interest in resources efficiency
among business, civil society and government with three billion people likely to join global
middle class by 2050 (WBCSD, 2009; McKinsey, 2011). The competition for resources are
growing. Therefore, there is a need for improving the productivity of resources so that they can
make significant contribution to reducing resource depletion and the threat of climate change
(McKinsey, 2011; BIO IS, 2012; Tukker, 2013). That’s why, the European Union (EU) has
labelled resource efficiency as one of the main agenda of its Europe 2020 strategy (EC, 2011).
For this reason, many influential policy makers are advocating for creating a ‘’lease society’’
(Merkies, 2012), a circular economy (Ellen McArthur Foundation, 2013), resource revolution
(McKinsey, 2011). EU Lisbon Strategy (2000) is also advocating for the development and
implementation of greener sustainable economy and proposed an action plan concerning eco-
innovation (EC, 2011a; EIO, 2011; 2013), resource efficiency (EC, 2011c; 2014) and circular
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economy (EC, 2015). Circular economy occupied a central place within EU agenda with
commission’s circular economy action plan emphasizing the EU’s commitment and support
for circular economy while at the same time recognizing its close connection with eco
innovation (EC, 2017). Circular economy is dependent on embracing a systemic approach to
eco innovation that create value and consider supply chains in their entirety and engages all
actors involved in that chains (EC, 2016: p. 7).
It is evident from the literature review that there have been an evolution of new understanding
to look at eco innovation from new perspective. Therefore, in this research, I tend to find out
the drivers of eco innovation in an organization through the prism of circular economy concept,
which is technically a resource efficiency view, a unique perspective which most of the
empirical literature review have failed to address. The rationale behind this framing is that
circular economy concept complements eco innovation and provides new solution that fits well
with the adoption of eco innovation approach e.g. closed loop production system, extension of
product life cycle, resource recovery, recycling, waste prevention etc. The reason why I am
using this framing is because this focus will unfold a vast areas of topic with regards to how
eco innovation drivers enable the transition to circular economy and usher a potential
relationship between eco innovation and circular economy.
1.4. The objective of the study and research question
The study aims to have deeper understanding on the drivers of eco innovation in an
organization. The focus of this research will concern circular economy concept, a guiding
principle through which I will attempt to address the research gap that was found in the
literature review. The purpose would be to find out the drivers of eco innovation in an
organization from the perspective of circular economy.
Existing literature and current research have been highlighted with regards to eco innovation
drivers and I will attempt to carry out the empirical research to have a better understanding of
eco innovation in an organization with new angle, contributing further to excel innovation for
environmental sustainability. The study will take into consideration one single company as case
study aiming to enhance the current body of knowledge that will aid companies to develop eco
innovation practice in new perspective. The main research question would be as follows:
1. What are the drivers of eco innovation in an organization from the viewpoint of circular
economy?
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The main research question in general gives the overall impression of the topic itself. The major
key concepts are highlighted in the research question. First part of the research question for
instance the drivers of eco innovation in an organization essentially formed the theoretical
framework of the study and the later part of the research questions will address the circular
economy perspective which is the main lens through which I will attempt to find solutions to
the main research question
The outcome of the study should contribute to enhance the existing the drivers of eco
innovation and to the emerging body of knowledge with regards to circular economy and eco
innovation.
1.5. The structure of the thesis
I have structured the thesis in the following ways:
First chapter introduction addresses the background of the study, explaining the reason and the
context of the study.
Second chapter shortly introduces the key conceptual framework of the study such as the key
concepts of eco innovation, eco innovation drivers and circular economy. Chapter 3 will
address the main theoretical framework of the study. In this section, the main drivers of eco
innovation in the organization will be addressed from the overview of the existing literature.
Chapter 4 will address the chosen methodology of the study, data collection and analysis.
Chapter 5 will shortly address the empirical result of the study from the case company. Chapter
6 will highlight the discussion section. In chapter 7, limitation and future research of the study
will be presented.
2. CONCEPTUAL FRAMEWORK
2.1. Key concepts of the study
The key concepts of the study in this research are eco innovation, drivers of eco innovation and
circular economy.
Eco innovation:
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Eco-innovation observatory (2013) highlighted the eco innovation as such: the introduction of
any new product or service, process or organizational change or marketing that reduces the
consumption of natural resources (Including materials, energy, water or land) and reduce the
detrimental substance throughout its lifecycle. Similarly, European commission (2007)
described the eco innovation as the following: Any form of innovation directing at significant
progress towards the objectives of sustainable development by reducing negative
environmental impact or obtaining more efficient and reasonable use of natural resources.
Drivers of eco innovation:
Previous studies on the drivers of eco innovation was largely dominated by technology push
and market pull theory (Rehfeld & Rennings, 2007) also in supply and demand side drivers
(Triebswetter & Wackerbauer, 2008). Technology push in particular is necessary for the initial
stage of the innovation and market factors play out in the diffusion of innovation. Both factors
are imperative for the successful innovation. However, another factor appeared in the empirical
studies and academic literature. Several recent studies on environmental innovation emphasize
on the regulation and policy and institutional effects (Porter & Linde, 1995; Oltra, 2008;
Ashfords, 2008; Horbach J, 2008). Also according to Horbach & Rennings (2007), the general
innovation theory has been enhanced by the influence of the regulatory policy and categorized
the drivers of eco innovation mainly in three categories demand side, supply side and regulatory
and policy side drivers. In this study, I tend to capitalize on three categories of drivers of eco
innovation and utilize the existing literature on the three categories of eco innovation as general
framework for the theoretical background.
Circular economy:
Circular economy is a concept that represents a model of production and consumption system
that relies on continuous reuse, recycling and the recovery of natural resources. Circular
economy’ is “an industrial system that is restorative or regenerative by intention and design. It
replaces the end-of-life concept with restoration, shifts towards the use of renewable energy,
eliminates the use of toxic chemicals, which impair reuse, and aims for the elimination of waste
through the superior design of materials, products, systems, and, within this, business models”
(Ellen McArthur Foundation 2012).
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2.2. Types of eco innovation
There are different types of eco innovation that offer benefit to the environmental problem and
offer competitiveness for the firms. These dimensions could be of various types’ for instance
technological or no technological nature or functional or operational dimension. Anderson
(2008) identified 5 different types of eco innovation.
Add-on eco-innovation: (Pollution and resource handling technologies and services) these are
considered to be products or services aiming to improve customer’s environmental
performance. The product does not necessarily need to be environmentally friendly rather they
handle environmental solution such as at the sink side (technologies or services that clean up,
dilute, recycle, control, measure and transport emissions) and resource side(supply of natural
resources and energy and extraction). These technologies and services are added on to current
production and consumption practice which have limited systematic effect (which is cost
effective).
Integrated eco innovations (cleaner technological process and cleaner products): These are
integrated innovation in that they make the product or production process more eco-efficient
(cleaner) than conventional or similar products or processes. Companies having invested in
integrated innovation can increase competitive advantage because environmental performance
of the products or processes is more eco-efficient than their competitors. Integrated innovation
provide solutions to the environmental problem of the organization within the company or other
organizations (e.g. public institution, families) enabling energy and resource efficiency and
substitution of toxic materials, enhancing recycling. The innovation are technical in nature,
however it can be organizational too. The dominant aspect of these integrated innovations is
the greenness of the product. Although they might change and represent the technological
continuity.
Alternative product eco-innovation (new technological paths): These innovations produce
radical technological discontinuity in that they are not cleaner than similar products rather
different in nature (new technological trajectory). These innovations are predicated upon new
theories, capabilities and practices and might trigger radical shift from the existing production
and consumption pattern to radical new production and consumption pattern. These innovation
have systematic effects and the environmental dimension of these innovations lie in the
product/production design alone in that it might be greener than the alternative. Examples of
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these innovations are renewable energy technologies contrary to fossil fuel technologies and
organic farming as opposed to traditional farming.
Macro-organizational eco-innovation (new organizational structures): These innovations offer
a radical new solution in terms of efficient organization of the society which implies that new
ways of managing the production and consumption at a more systemic level which also reflects
the functional interplay between companies and organizations, between workplaces and
families. Example of these innovations are industrial symbiosis and urban ecologies (new ways
of organizing cities and technical infrastructure). These innovation are said to be organizational
in nature. However they might be technical innovations too. They indicate the special
dimension of eco innovation therefore requires organizational or institutional change. These
innovations fall under the category of the public authorities who seek collaboration with
companies for novel solutions.
General purpose eco-innovations: These innovations falls under the range of other
technological innovations as they impact the economy and the innovation process significantly.
Innovation researchers associated how these technologies determine the technological
economical paradigm at any given time. General purpose technologies will have major impact
on eco innovation therefore further research needs to be conducted. The positive and negative
impacts technologies such as ICT, biotechnology and nanotechnology might have on eco
innovation deserves further scrutiny.
Now from the different categories of the eco innovation, it is quite apparent that dynamics of
eco innovation is very complex in nature. These dimension of eco innovation might contribute
to the environmental problem and enhance the competitiveness of the company differently over
times and space. Of course different eco innovation dimension influence each other and these
influences might be very dynamic in different industries depending on the context.
2.3. Eco innovation in practice
The development of economic activity has been guided by growing international concern for
environment such as climate change, scarcity of resources and energy security. As a result,
manufacturing industries in particular have shown interest in sustainable production and have
accepted new corporate social responsibility despite the growing challenges. According to
Johnson & Suskewicz (2009), in order for eco industries to evolve, it requires a balance among
key elements such as a technological system that is working, innovative and customized
business models and a market adoption strategy coupled with favorable government policies.
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In addition, reduction of greenhouse gas emissions has been one of the top most priority for
OECD government with many attempting to adopt long term framework such as Kyoto Protol
in an effort to tackle global warming. Therefore, OECD countries despite facing economic
crisis raising awareness for industrial effort to gain sustainable development. Many countries
are pursuing new ‘’Green new deal’’ or ‘’green recovery’’ policy with greater investment in
environmental technologies (OECD, 2008)
The companies need to adopt new environmental strategies for instance, manufacturing
industry alone has been responsible for a large part of resource consumption and waste
generation. According to IEA (2007), energy consumption of manufacturing industry increased
by 61% from 1971 to 2004. Similarly, they are also responsible for producing carbon dioxide
globally which is 36%. Especially, manufacturing industries have great potential to become a
determining factor in terms of creation of sustainable society. Also, they can improve the
environmental performance of the products or services by designing and implement integrated
sustainable practice (OECD, 2008). Now Maxwell et al. (2006) argued that there has to be shift
in the perception and understanding of the industrial production and this requires holistic
approach to conducting business. According to UNEP & UNIDO (2004), dispersing pollution
in less harmful way has been one of the objectives of the environmental impact of industrial
production historically which has been driven in part through environmental regulation. Since
industry has different treatment and control measures in order to cut the amount of emission
and effluents. Until recently, its attempt to develop environmental performance has been
moving towards lifecycle and integrated environmental strategies management system thinking
with growing companies beginning to adopt larger environmental responsibilities throughout
their entire value chains (OECD, 2008).
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Figure 1: The closed-loop production system
2.4. Perception of eco innovation from managerial perspective
Current innovation economics literature suggests that that technological development
(technology push) and demand factors (market pull) are the primary drivers of innovation
(Freeman & Soete, 1999). Top management is the one that initiates the environmental
innovation strategy of the firm. Prather & Gundry (1995) and Tushman & O’Reilly (1997)
argues that management plays a key role in terms of creating company’s expectation and norms
which triggers innovation and creativity. Because concerns of top management determine how
quickly firm reacts to environmental issue (Bansal, 2003). A number of other authors such as
Ashford (1993) & Schmidheiny (1992) supported Bansal’s argument that firms prioritize
environmental innovation strategy only when managers place a high value and concerns for the
protection of environment. Also, innovation and sustainability aspect can be beneficial for the
progress of the business in that they facilitate the condition for reducing cost through energy
management system, reduce risks (through enhanced safety features), increase sales and profit
margins, increase reputation and brand value, build up innovation capabilities by aligning
personal and company values (Schaltegger, 2011).
2.5. Key concepts of circular economy
The European commission (2015) defines the circular economy as follows:
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“Aims to maintain the value of the materials and energy used in
products in the value chain for the optimal duration, thus minimizing
waste and resource use. By preventing losses of value from materials
flows, it creates economic opportunities and competitive advantages
on a sustainable basis”
EU action plan for circular economy defined the circular economy which European
commission published in 2015. The plan drafted key strategies aiming to boost the support for
the progression towards circular economy in EU. The objectives is to create more jobs, promote
competitiveness and support sustainable growth (Reichel et al. 2016: p. 5). According to
European Commission (2015), the action plan in particular advocates the idea of material loop
and regulating the product lifecycle since circular economy constitutes the fundamental
elements on production, consumption, waste management, secondary materials market,
definite measures and innovation.
The principle of circular economy present an alternative to mainstream linear business model
which is based on take, make and dispose model (Reicheil & De Schoenmakere, 2016: p. 9).
The principles of circular economy include design out waste, build flexibility and resiliency
through diversity, renewable energy, think in system and think in cascades (Ellen MacArthur
Foundation, 2015b)
The linear business model depends on huge amounts of large competitive, easily available
materials and energy (Ellen MacArthur Foundation, 2015b). Resources are extracted in the
beginning in the linear model, then transformed into products, sold and disposed or incinerated
(McDonough 2002: p. 27). This linear business model is polluting the world over and
environmental in general. According to Nguyen et al. (2014) every year approximately 3.2
trillion worth of material which is about 80% used in the consumer good are not restored
leading to the shortage of the raw materials. As a result costs are rising.
On the other hand, circular economy, unlike linear economy, seeks to increase the share of
sustainable and recyclable resources, thus diminishing raw materials and consumption avoiding
negative environmental impact. In other worlds, it creates value while eliminating waste and
minimizes the use of product (European Environmental Agency, 2016).
Circular economy requires systematic change along the value chain. Policy and regulation are
different for different industry. There is no single way of creating circular economy. There has
to be an institutional change, cultural and social change, organizational change, technological
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innovation and stable regulatory framework in order to move towards circular economy.
Therefore, closer co-operation between business and government are required (van Eijk 2015:
p. 3).
Figure 2: Difference between linear and circular economy (RPS Ltd 2014)
According to Ellen MacArthur Foundation (2016) circular economic model tends to recover
the value of resources, products or materials in a way that enhance the product life cycle for
maximum amount of time, then causes the materials to go back to use in continuous cycle as
opposed to inducing waste, where the value of the resource is lost. Now this circular economy
concept associated with the concept called Industrial ecology, cradle to cradle philosophy and
natural capitalism. Industrial ecology deals with material and energy flows via industrial
systems that connects different operators within the industrial ecosystem which leads to
creating a closed-looped processes where waste serves as an input. Industrial ecology embraces
the holistic and balanced view where the designing of the production processes takes into
consideration the local ecological constrains while looking at the their global impact from the
very beginning, and trying to reconfigure them so they operate so close to the living system as
possible. In this way, industrial ecology focuses on the social wellbeing by emphasizing the
need for the restoration of natural capital (Ellen MacArthur Foundation, 2016).
European commission revealed an action plan regarding circular economy in 2015. According
to European commission (2015) the action plan contains a waste proposal which aims to
establish long term vision to increase recycling in an effort to cut down landfilling but at the
same time recommending proposals and initiatives to enhance waste management across
member states. The circular economy action plan supports the proposal where detailed
guidelines, initiatives and measures laid out that direct life cycle of the product in all stages
ranging from the production to consumption to waste management to finding market for
secondary raw materials (Reichel et al., 2016: p. 5)
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European member states, under the waste framework directive, wish to increase the reuse and
recycling rate of timber and different construction materials by increasing the landfill cost for
discarding construction and demolition waste. As a result, construction processes have been
improved resulting in the reduction of waste (European commission 2011: p. 89). According to
EU Waste Framework Directive, the top option prevention is considered to be the favorable
one and disposal at the bottom the least favorable one. The objective of this waste Hierarchy is
to prevent the waste, followed by reuse, recycling, energy recovery and finally disposal as last
resort.
Figure 3: European Union’s waste hierarchy (Recyctec Holding AB 2016)
2.6. Cradle to Cradle
Braungart & McDonough (2002) advocated the idea of cradle to cradle concept, a new
production model which is based on circular supplies business model. The concept of cradle to
cradle is deeply rooted in the nature in that the resources are circulating in a way that constantly
add value to each other. The main principle of this model is ‘’waste equals food’’ (Braungart et
al., 2002: p. 92). The main principle of this model is not to adopt eco efficiency approach where
wastes are reduced rather to design systems in a way that outputs can be addeed to nutrients by
other processes. And this principle can be applied to the production stages of a product and for
the product as well when it reaches disposal stage in terms of emission. Now according to this
model, materials and products are not diminishing but being reused which brings additional
monetary value for the material, nature or people (Braungart et al., 2002: p. 93).
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2.7. Resource recovery
Due to the global excessive consumption, resources are becoming more and more costly.
Therefore, more and more businesses are looking for alternative way to utilize, protect,
recapture and reuse the resources hidden within production output and discarded products. A
lot of companies are also paying for the disposition of the waste. However, there might be
profitable revenue stream, and that revenue stream might be realized in the form of materials,
that could, potentially after reprocessing, be of value to another company (Lacy et al., 2015,
1298-1299; 1336). The resource recovery business concept focusing on resource repairing and
recovering the value and utility of the products through recycling technologies, the aim of
which is not only to recycle the product but to enhance the utility and value of the product
(Ovaska, et al., 2016: p. 24.).
More companies are reevaluating their production chains in order to find out alternative means
as to how waste could be transformed into product that has value. This in and of itself begins
the process of circular business and opens up opportunities for new revenue stream (Vaughn
2014, 16.). Waste is not considered as problem in the resource recovery model rather being
viewed as resource and opportunity, therefore, implementation of this model will potentially
eliminate waste material and enhance the value of the product because products are taken back
in this model. Through this recovery process, companies can remake the product and build new
products out of the discarded materials. To facilitate this process, products have to be designed
in a way that can be disassembled (Lacy et al. 2015, 1309-1313; 1300-1302; 1426).
15
Figure 4: Recovery & recycling closed loop (Lacy et al. 2015, 1338)
2.8. Industrial symbiosis
Industrial symbiosis is a holistic whole made of many companies in which everyone is creating
value for each other through better utilization of the technology, resources, energy and services.
For instance, the waste for one company might be a resource for the other and vice verca. The
practice of industrial symbiosis takes place usually at manufacturing and process level and also
might happen across different geographical areas (Bocken et al., 2016.)
The development of industrial symbiosis paved the way for improving product
innovation/process innovation while at the same time new knowledge is created which brings
new businesses. New production innovation reduces the operational costs and risk for instance
environmental fines and consequently contributes to ensure stable resource security. Business
are reducing costs across the entire networking by having collaborative agreement for example
by communal service sharing (recycling, maintenance), waste/byproduct exchanging. Also
business can create value at the same time through joint cost reductions (Bocken et al., 2016).
16
Figure 5: Industrial symbiosis (United Nations Development Programme 2010)
3. THEORETICAL FRAMEWORK
3.1. Regulatory drivers
Regulation is one of the drivers of innovation (Doran & Ryan, 2012 ; Horbach et al., 2012) and
aids its diffusion (Wagner & Llerena, 2011). According to porter hypothesis, environmental
regulation triggers innovation leading to win win opportunities whereby continuously pollution
is minimized and competitiveness of the firm’s increases. That’s why regulatory policy is
important. According to Williamson & Lynch-Wood (2012), both direct regulation and softer
version of regulatory governance are vital in terms of inducing eco-innovation as firms act quite
differently when faced with particular forms of regulation. Other scholars Kesidou & Demirel
(2012) claimed that less innovative firms have more likelihood to be affected by stricter
environmental regulations than those of more innovative firms. Veugelers (2012) pointed out
that firms are affirmative to eco-policy demand interventions, through which government needs
to exert influence internal strength of private firms, coupled with motivation by demand pull
from customers and voluntary codes of conduct. According to Doran & Ryan (2012), there is
no compromise or transaction between eco-innovation higher profit margins which is indicative
of the fact that policy makers can contribute to the growth of greener society.
Regulation is being singled out as an important driver of innovation in some empirical studies
(Brunnermeier & Cohen, 2003; Cleff & Rennings, 1999; Green et al.,1994; Rennings Zwick,
2002) which referred to as regulatory push/pull effect (Rennings 2000; del Rio Gonzalez 2009).
Popp (2006) pointed out the evidence from study based on patent data from USA, Japan and
Germany that national regulation by and large influences the companies’ innovation decisions.
17
Jacob (2005) suggested that eco innovation might be triggered by regulation adopted abroad
for instance eco innovative air pollutants was introduced in Japan due to the regulation in USA.
Survey from Spanish pulp and paper industry revealed that corporate image and regulatory
pressure are the main determinants of adopting cleaner technology in the firm (Del Rio
Gonzalez, 2005). Frondel et al.(2007) found out that policy strictness is an important driver of
eco innovation as opposed to single policy instruments which Arimura et al.( 2007 ) supported
arguing that green R&D facilities that face strict environmental regulation are far more likely
to conduct environmental R&D because the impact the regulation has. In addition, Frondel et
al. (2007) pointed out that the impact the regulation creates might be different in different field
of environmental technology. However, end of pipe technologies are motivated by regulation.
Also, the cost saving, environmental management system are imperative for the initiation of
cleaner technologies.
Eco process innovation also falls within the broader definition of eco innovation. Eco process
innovation needs to comply with market regulation and stringency (not necessarily
environmentally related) in an effort to avoid higher taxes or punishment. Furthermore,
ambiguity regarding future environmental regulation might influence firm’s decision about eco
innovation. Cleff & Rennings (1999) found that regulatory push/pull effect drives the eco
process innovation. Green et al. (1994) also identified the evidence and influence
environmentally related regulations have about eco process innovations.
3.2. Demand-side drivers
Kammerer (2009) also identified the market pull factors as the drivers of eco innovation arguing
that customer are the beneficiaries’ because of eco innovation resulting from market pull
factors. Although Rehfeld et al.(2007) argued that demand side does not stimulate eco
innovation that much. The rationale behind that is that products are more expensive while
Brohmann et al. (2009) & van den Bergh (2008) argued that the consumer can stimulate
innovation although there is little verification of this argument empirically. Kammerer (2009)
also pointed out that customer satisfaction and benefits play an important role in eco innovation
when a product provides its additional value to the customer.
Many authors identified key factors such as financing ability (Johnson & Lybecker, 2012);
market demand (Horbach et al.,2012), pressure group (Yalabik & Fairchild, 2011) or industry
characteristics (Peiró-Signes et al., 2011) affecting firms that has environmental orientation.
Pressure group and different stakeholder has been identified as another leading force affecting
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firm’s engagement in eco innovation practices. According to Guoyou et al. (2013) overseas
customers plays a vital role in triggering companies to accept the strategy of green process and
green product innovation despite foreign investor being identified as key factor influencing the
adoption of process eco innovation.
Public pressure and customer demand are important drivers of eco innovation (Horbach, 2008).
It’s not necessarily the case in general for instance, for eco innovation as opposed to general
innovation, customer motivations are influenced by environmental policies such as regulation
and taxes (Oltra, 2008). Other scholars also supported the similar argument to a certain extent
for instance according to Belin et al (2009), demand pull factors tend to be lower for eco
innovation than for innovation in general. They argued that when these factors are effective,
they are usually the result of provocation by policies. Therefore, demand factors are usually
associated with regulation and policy factors and their effects are not the same in every industry.
One empirical study suggested that real estate and construction industry is mostly customer
driven as opposed to petroleum products and metal manufacturing, therefore, their motif for
environmental work also varies in accordance with customer demand. Regulation and policy
pressure might be the other driver for environmental work for metal manufacturing and
petroleum products (IVA, 1995).
Customer demand, market demand and other demand trigger eco innovation. However, reaction
of the companies or industry to that demand and pressure from outside may not necessarily be
the same. For instance, Kemp (2000) explained that mature sectors of high volume show
behaviors that have positive correlation with environmental monitoring, regulation, process
control which can effectively improve the efficiency and show rigidity to demand and pressure.
Smaller firms are more reactive to pressure and demand as opposed to larger firms. It is obvious
that firm’s response to the pressure and demand are not the same for all sectors. However, larger
firms are adaptive and respond strategically to adopt and advance their present strategy on the
basis of existing and future demand. The study of Triebswetter et al. (2008) pointed out that
both internal and external factors drive eco innovation for the firm. They also suggested that it
is not just the regulatory pressure but also competitive advantages, technological lead, cost
pressure, customer pressure also drive eco innovation.
Porter & linde (1995) found that world demand is shifting towards the direction of low pollution
and products that are energy efficient. Therefore, environmental demand factor is an important
issue for the diffusion of eco innovation. For instance, Ugaglia et al., (2008) argued that demand
side is essential in the diffusion of eco innovation and many demand side factors influence the
19
way firms behave and react to eco innovation. Market related drivers such as market share
increases, customer pressures, competition are important drivers for environmental related
activities (Green et al., 1994). Competitors and their environmental performance influence
managers to adopt eco innovation in order to uplift their own environmental reputation and
standard and keep pace with the competitors (Hermosilla et al., 2009). Competition helps the
companies to practice eco innovation. Also, firm’s network, knowledge and co-operation might
help it to achieve the capability of the eco innovation (Technopolis 2008).
In other empirical study of Green et al (1994) indicates that external pressure and market
pressure are the drivers of product and process eco innovation. These pressures many come
from different actors such as retailers, whole seller, competitors, expanding market etc.
Therefore, the reactions of the consumers to new product act as enabler for innovation (Beise
& renings, 2005: p. 77). Also, the study of Florida (1996) showed that pressure from customer
is more important than green product market and environmental organization in that former
triggers eco innovation than the later
3.3. Supply side drivers
As opposed to the alternative production processes, eco innovation develops services and
products which is responsible for the causation of positive externalities on environment
(Rennings, 2000). However, at the firm level they are motivated internally and technological
competencies within the enterprise are therefore the key drivers of eco-process innovation.
Many environmental drivers of eco-process innovation might exist. However, environmental
process innovation are categorized into two broad technologies: clean technologies and end of
pipe technologies. EOP technologies are such instruments that are added at the end of
production process in an effort to convert primary emission into substance easier to deal with
without having to make any change in the production process. Cleaner technologies, on the
other hand, demands lessening of total waste and pollution and significant changes in the entire
production process. In addition, the main difference between EOP and cleaner innovation can
be linked to incremental and radical innovation. Both of them require expenditure of capital.
However, the EOP (incremental) might not necessarily reduce the production cost per unit.
Clean technologies, however, foster production process efficiency through the reduction of
consumption level of materials and energy. Consequently firms can increase its productivity
and competitiveness (Del Rio, 2005).
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Among other process innovations, managerial capabilities and technological competencies
normally build up environmental and non-environmental process innovation. Firm’s tangible
and intangible assets such as skills, know-how, relations with other firms and all other assets in
the firms are key consideration for process innovation. Particularly, environmentally conscious
and trained human capital for instance managers and employees facilitates environmental
process innovation. Also, the process innovation is also facilitated by the significance of
technical knowledge which is gathered from other external sources such as suppliers,
independent users, universities, joint ventures and other affiliated firms. Horbach et al. (2012)
argues that material and energy related eco-process innovation are positively influenced by co-
operation with universities, agencies, research institution.
Also, efficient use of energy and materials are important driver for environmental process
innovations (Green et al., 1994; Rennings, 2000). The outcome of the eco process innovation
is that it increases the eco efficiency. The essence of the eco innovation efficiency are predicated
upon the idea of lessening of input that are essential (e.g. energy and material). In this respect,
Cleff & Rennings (1999) argue that eco innovators place relatively higher emphasis to cost
savings as opposed to other types of innovators. Eco process innovations and recycling (cleaner
and EOP technologies) inspire cost savings to the firms. Apart from the importance of supply
side, processes that are environmentally friendly are positively associated with the reputation
and image of the firm (Rennings & Zwick, 2002). Also, adoption of ecofriendly processes is a
precondition for potential eco product innovation for firms.
Along the line of managerial capabilities, corporate social responsibility is also another
motivating factor for firms to adopt and implement eco innovation (Kesidou & Demirel, 2012).
Sense of accountability and awareness motivate the manager’s behavior, attitudes which
positively impact integrative capability (Chinander, 2001). Also, corporate commitment is very
important, the rational being that, environmental issues might have an impact on the firms
aligning their practices with the expectation of the society to ensure the legitimacy of their
businesses in which legitimacy is conformed to the social norms, values and expectation
(Palazzo & Scherer, 2006). As a result, CSR policy adoption is an indicative of the fact that
firms are committed to green issues and enhancing the reputation and positive green image of
the company
Technological competency is regarded one of the key factor for innovation. Firm’s
organizational capabilities and technological competencies are important means of eco
innovation (Doran & Ryan, 2012) which is supported by other scholars. For instance Horbach
21
(2008) argued that technology drivers’ triggers innovation in the development phase..
According to (Baumol, 2002; Paivitt, 1984), technological capabilities play a vital role in
triggering innovation. These competencies include the physical ability and knowledge capital
of firms to develop new products or processes. Research suggests that firms with advanced
innovation capabilities also secure long term future innovation success as Baumol labelled
these path dependencies with such ‘’ innovation breeds innovation’’(Baumol, 2002). To put it
another way, the available technological possibilities enhance integrative capability of the firm.
There is no clear uninamimous agreement whether or not technological competences triggers
eco innovation (Diaz-Garcia et al., 2015). However, Blum-Kusterer & Hussain (2001) noticed
that sustainability improvement and eco change might result from the adoption of new
technology. This argument is supported by number of authors for instance Segarra-Ona et al.
(2011) observed that eco orientation of the firms is predicated on the innovative activity
(patents) and expenditure on technology acquisition. Horbach (2008) argued that improvement
of technological competences (knowledge capital) by R&D facilitates environmental
innovation. However, other authors Cainelli et al. (2011) argued just the opposite suggesting
that R&D has very little to do with eco innovation adoption other than foreign ownership or
networking.
In addition, it is not the green innovation rather conventional innovation is triggered through
technological competencies such as R&D and human capital (Cuerva et al., 2014). Moreover,
environmental innovations can be obtained through technological and managerial capabilities
and through the technical knowledge derived from external sources (Horbach 2008; Triguero
et al., 2013). Cohen & levinthal (1990) argued that firms ability to take the value of external
information, to incorporate it and apply it to its innovation capacity is predicated upon firms
absorptive capacity, a view that is supported by Modejar-Jimenez et al (2013) adding that
absorptive capacity of the firms will enable them to perceive the potential of eco innovations
and develop them.
Other factors such as firms size have an influence on eco innovation (Rehfeld et al., 2007), a
claimed that is supported by Wagner (2008) suggesting that firms size has positively affect eco
innovation. The premise is that firm with small size firm has obstacle in terms of its skills,
resources, technological capabilities than larger firms which is why small firm are less likely
to be innovative while the larger firms are more related with eco innovation (Hermosilla, 2009).
However, smaller firms are less likely to be environmentally harmful than their larger
22
counterpart. Connell & Flynn (1999) pointed out that bigger firms go for eco innovation
through external and internal pressure while smaller firms by and large by external pressure.
Eco innovation is also determined by supply factors. Horbach (2008) suggests that development
of technologies and knowledge capital supported by R&D initiate the condition for eco
innovation. Canon de Francia et al. (2007) points out similar argument suggesting that technical
knowledge within a firm balances its burden when it comes to the demands of new
environmental regulation. Other innovations such as organizational innovations are important
driver of product and process innovations in that organizational innovation requires change the
way new organizational methods are implemented, firms’ new business practice and external
relationship (OECD & Eurostat, 2005). One such example is that environmental management
system.
EMS triggers eco innovation. For instance, Environmental Management System (EMS) can be
known as environmental organizational innovation (Rennings et al., 2006) which Khanna et al
(2009), Rehfeld et al (2007), Rennings et al (2006) and Wagner (2008) supported arguing
further that environmental management system is vital for eco process and eco product
innovation. Also, Wagner (2008) argued that environmental management system (EMS) is one
of the important driver for eco innovation, which helps boost reputation and image of the
company (OECD, 2009). Also, according to Wagner (2008), environmental management
system are positively associated with process innovations. However, his study cannot suggest
the fact that EMS is associated with positive product innovation.
In addition, organization having environmental capabilities considers EMS as one of the
important driver for product and process innovation (Blind, 2012; Rennings et al., 2006;
Wagner, 2008). The rationale being, it allows the firms to build the capabilities organization
require and practices such as resource reduction, recycling, pollution prevention, eco product
design which tend to enhance and promote process innovation toward environmental quality
ensuring eco efficiency. The bottom line is this, certified EMS plays an important role for
triggering eco innovation by allowing companies to set up environmental objectives and
programs regulating management structure and provide environmental related information to
achieve them (Melnyk et al., 2003) thus paving the way for eco innovation to flourish in the
firm.
In addition, collaboration and potential networking with other firms, institutions, authorities,
research institutes is considered vital for adoption of eco innovation (Cainelli et al.,2011;
23
Klewitz and Hansen,2013;Petruzzelli et al., 2011). According to Wong (2013), knowledge
sharing affects firms achieving green requirement positively. According to Halila & Rundquist
(2011), successful innovation is supported by a network with diverse competences, however,
eco innovators tend to use network for mitigating technological problem while other innovators
considers network to be of helpful for financing and marketing. Therefore, different companies
use networking and collaboration for different purposes depending on the objective of the
companies. For instance, Triguero et al. (2013) suggest that entrepreneurs giving priority to
alliance with research institute, agencies and universities are far more likely to instigate all
types of eco-innovations.
There are other factors of eco innovations. For instances, those firms that want to build
organizational capability in the field of eco product designing/sourcing and energy efficiency,
pollution control are far more likely to eco innovate (Doran & Ryan, 2012) while others such
as Kemp and Foxon (2007) argued that firms that are more innovative and more knowledgeable
are the ones that has the capacity to turn these factors into environmental innovation. Supply
chain management, research and development, technological improvement, corporate
citizenship, productivity increases, relationship with end user are found to be most important
driving factor for eco innovation (Florida, 1996). The study also revealed that dominant drivers
for eco innovations are top management, R&D staff, suppliers, customers, environmental
organizations, distributor, consultant, engineer and other stakeholders.
Also, the capacity for innovation (e.g. human capital accumulation, potential know-how)
trigger innovation. Also, technological capabilities which is developed by R&D investment and
training of the employees through education are some of the important driving factors for eco
innovation (Horbach, 2008) a view that is supported by Triebswetter & Wackerbauer(2008)
arguing further that technological lead drives to eco innovation. In addition, firms requires
skills for innovation so that they can develop or adopt them which is why these significant
skills are the function of R&D. Also, relationship and networking set the foundation for
technological capabilities and competencies for the development and adoption of eco
innovation (Hermosilla et al., 2009)
Until recently, firms shows eagerness about the company image through eco innovation. Firms
making eco innovation visible have a significant positive impact on customers, stakeholders
and investor. In addition, business leaders attempt to declare their position as eco innovator
which might influence others to emulate. This argument is supported by a number of other
studies that suggest that corporate image of the company is more significant than its
24
environmental aspects and product or services for eco innovation (Technopolis, 2008). This
view is enhanced by Rohracher (2006, p.58) claiming that firm image and brand value is much
more valuable than customer or regulatory demands.
Diaz-Garcia et al. (2015) argued that firms’ capabilities and resources are also important
determinant factors for eco innovation. The argument they put forward is that proper
environmental managerial system and its implementation might allow firm to minimize its
environmental impact and enhance its operational efficiency. One such example of firm
capabilities is to have ISO14001 certification which is useful in terms of increasing the positive
effect of environmental management system on environmental R&D and end of pipeline
technologies (Demirel & Kesidou 2011). Also, Leenders & Chandra (2013) argued that Quality
Management System referred to as voluntary scheme certifications can facilitate the adoption
of eco innovations. Development of eco innovations are also encouraged through both
managerial and organizational capabilities (Horbach 2008; Kesidou & Demirel 2012). For
instance, the activities of company related to training, information and diffusion of information
also stimulate the development of eco innovation (Mondejar-Jimenez et al., 2013). Firms’
capabilities by and large also depends on the eco orientation of the firm. Chand & Chen (2013)
argued that organizational green identity facilitate the development of eco innovation.
Cost saving also is an important factor for eco innovation. For instance, Porter & Linde (1995)
pointed out that the innovation that offsets the cost saving through the reduction of resource
inefficiency triggers eco innovation. Their argument is that productivity is increased by
monitoring, better resource utilization, and waste minimization and these are the driving forces
that influence eco innovation. Also, Green et al (1994) identify cost saving, networking and
collaboration and commitment on the personal level induce eco innovation.
25
Figure 6: The conceptual model of drivers of eco innovation
26
4. METHODOLOGY
The methodology is an indispensable part of any research. It is very important to employ proper
methods in order to find a solution to a particular problem. Proper application of chosen
methodological approach might lead to a greater conclusion that research seek to achieve. In
this respect, I would like to employ proper methodological approach that would be relevant to
the study. Now the case study approach is my chosen method. I have justified why I have
chosen case study as preferred option for this with theoretical reasoning. In the methodology
section, there would be systemic discussion of the essential elements of the methodological
approach for instance the discussion about qualitative case study method and data collection
process would be discussed
4.1. Case study
Contextual based empirical sources are key components for case study research (Tellis 1997).
Because case study examines the phenomenon in real life context in which it is difficult to
quantify the boundaries between phenomenon and the context. In other words, boundaries are
not clear or evident. In addition, case study also encourage using multiple sources of evidence.
Cases study is an investigation established in specific time and space which is carried out
through intensive data collection by having various sources of evidence (Creswell 1998, p. 61).
According to Eriksson & Kovalainen (2008, p. 115), the objective of the case study is to
examine the case in respect to social, cultural, historical and economic perspective. Moreover,
there are many ways of doing social science research and case study is one of them. Because it
is aiming to gather essential data for a particular case under investigation. It is according to Yin
(1993, p. 5) an attempt to answer to the questions of ‘why’ and ‘how’. Case study could be of
different types such as explanatory, descriptive or exploratory ( Yin 2003: p. 5).
Eriksson & Kovalainen ( 2008, p. 19-20) argued that intensive case study deals with individuals
and attempts to explain the single case by presenting a highly substantial or contextualized
description. Intensive case study is associated with altering research design, thus offering
enhanced understanding and extensive explanation of the case by the researcher in more
narrative way, a view supported by Dyer & Wilkins(1991) suggesting that the objective of
intensive case study is to produce a narrative worth hearing. This narrative view is also
supported by Eriksson & Kovalainen (2008, p. 120) in which they offer the reasons. The main
27
reasons they argued is to focus on the experiences, perceptions, relationship, sense making,
interaction and viewpoints of those who are involved in the study.
Yin (2003) argued that case study is particular method when the phenomenon under study has
positive correlation with its context, in other words, phenomenon is not so much different than
its context. However, the context and interaction of phenomenon might vary for a variety of
reasons. For instance, in this case study, it would be interesting to see how firm interact with
market for eco innovation in circular economy context. This context specific phenomenon can
be better understood through the use of case study. Apparently, case study method presents a
different set of driving forces that affect a particular situation. The case study in this research
would produce its research objectives, aims, queries through interviews, analysis of existing
reports and projects and available materials, interaction and observation.
Case study research design encompasses intensive and details analysis of a single case study
(Bryman & Bell, 2007). My objective is to find out the drivers of eco innovation of the firm in
the context of circular economy. Therefore, I would be focusing more on the understanding the
phenomenon of the case Company X. According to Bryman & Bell (2007), a case study could
be a single organization, person, location or event. The common characteristic of case studies
is predicated upon the integrated power to study a phenomenon to attempt to make sound
inference through combining the interpretation of research. Therefore, in my case study case,
the research design of single case study does not necessarily depend on the sample size, rather
requires the dynamic interpretation of the chosen case company.
In terms of the theoretical perspective above, in my opinion, it is quite reasonable that single
case study is quite relevant for my research problem and research objective. I would like to
find out as mentioned in the research objective, the drivers of eco innovation in circular
economy context. Therefore, I aim to conduct the single case study research on a Finnish
Textile company Company X in an effort to find out the drivers of eco innovation in the light
of circular economy. Despite single case having limitations, my understanding is that,
comprehensive analysis of the company would bring about satisfactory result.
4.2. Primary data collection
I have chosen the qualitative case study as the most preferable option. The reason is, it enables
me to have a deeper understanding of the intricate complexities of the chosen phenomenon.
For the purpose of the research, I will be collecting both primary and secondary data. I will
28
collect data through in-depth interviews. Structures of the interview will be open ended,
unstructured mostly. However, observation during the interview will be taken into
consideration to collect data as well
4.3. Interviews
Robson (2002, p. 270) identified different forms of interviews for data collection process. This
process requires a researcher and a participant. These forms of interviews are unstructured
structured, semi structured, informal, focus groups etc. Semi structured interview considered
to be a guided interview through which one can collect qualitative data. Because it restricts the
questions to a certain extent while giving reasonable space and scope to the respondent to
express his opinion, or thoughts on a particular topic. It is also kind of an open ended structure
or two way communication process or interaction. Questions type in semi structured interview
might be effective in terms of answering ‘what’ or ‘how’ questions. However, they could be
modified or changed during the interview process depending on the correspondent’s conception
of what is reasonable.
Now words that constitute the questions may not be the same for all respondents in this type of
interview and they might be altered depending on who the interviewee is (Robson, 2002: p.
270). On the other hand, unstructured interview, according to Eriksson & Kovalainen (2008, p.
82) are helpful from an interviewee perspective in that it allows for in depth understanding of
a phenomenon. These interviews are emphasizing what participants are talking about while
interviewer acts as an observant and produce questions based on the reflections of the narratives
of the participants. Of course, interviewer in this type unstructured interview setting has an area
of focus, however, he allows the conversation develop within that focus area (Robson 2002: p.
270). Now unstructured interview attempts to generate useful insights on key issues that
researcher would not have thought otherwise. However, well-thought out interactive skills such
as having the ability to produce questions instantly in response to the context is an absolute
necessity in order to conduct these type of interviews
4.4. Data collection
Data was collected from Company X website, a small Finnish SME known for leading circular
economy business. The company has only 5 employees. Before the data collection, several
29
emails were sent to the chairman of the company to familiarize himself with the topic. The
chairman of the company and human resource manager were selected in order to identify the
drivers of eco innovation in circular economy context. The methodology of the data collection
process was explained to them beforehand. Also, in order to fully comprehend the purpose of
the study, a brief managerial summary was sent to the chairman of the company. The
managerial summary contained three section such as purpose of the study, data collection
method and future implication of the research. The questionnaire surrounding the concept of
drivers of eco innovation and circular economy were mailed to them. Also, requests were made
asking them to participate in an oral face to face interview and ensuring the anonymity and
confidentiality of the information they share during the interview. The structure of the
questionnaire contains two section: 1) the contact information 2) a series of questions regarding
the topic. Of the participants, one was male who was the chairperson of the company is and
the other one was the human resource manager. The questionnaire covered one company in one
industry. Prior to the data collection, preliminary questionnaire were designed to test the
validity of the content. Firstly, supervisor of the thesis was asked to check and critique the
questionnaire for ambiguity. Secondly, I contacted chairman of the company to identify the
appropriate of the items. Based on their suggestions, the questionnaire were modified to
enhance the validity. Although final questionnaire was designed according to the objective of
the study
Initially, I had an oral agreement with the chairman of the company that interview would be
conducted through Skype meeting. However, due to the time constrain of the skype interview,
we had reached to an agreement that interviews would be conducted face to face for the sake
of collecting rich qualitative data. The company had prior information that a total of 5
interviews each consisting at least one hour in length would be conducted to gather rich
qualitative data. The chairman of the company, however, informed that it would not be possible
for them to arrange 5 interviews considering the size of the company.
Since the case company is very small in size and the chairman, who is an entrepreneur himself,
has been successful, has most of the technical, operational and management knowledge of the
company, that’s why, it was an obvious choice for him to be identified as the most significant
participant for the interview. Also, the participant made sure that the information he is going to
provide would be the equivalent to the length of the 5 interviews which technically will fulfill
the requirement of the data the study demands. However, to have a different perspective,
another participant, who is the human resource manager, was interviewed.
30
The interview took place in the business premises of the company on an agreed upon date. It
was conducted on 14th of December 2017. The duration of the interview was 3 hours and 30
minutes. Since, the case company had been successful in new start up circular economy
business, that’s why, as a natural progression, it has lots of collaboration with various
stakeholders and projects such as Teleketju projects (https://telaketju.turkuamk.fi/) and
Relooping fashion initiatives (http://reloopingfashion.org) that were identified as primary
sources also for collecting the rich qualitative data for the study. These two projects are related
to how different actors such as companies, government, NGO, environmental agencies,
universities, municipalities and other stakeholders came together to find a sustainable solution
for the business. Also, the two projects works deals with the circular economy concept that help
companies to find new ways of doing business. All of these important factors in the projects
provided the context and rationale that are relevant for the study which in the end has enabled
me to receive as much qualitative data as possible.
The interview was conducted in English since the study was done in English. Also, the
interview was recorded as well. In addition, all the quotation from the interview used in the
study are in English. The interview was then transcribed which was about 40 pages of
qualitative interview data.
There are varieties of ways researcher can collection data in the case study research. For
example, researcher can collect the empirical data in the following ways: first he himself can
collect the data which is known as primary data or they might be collected through existing
empirical data known as secondary data. According to Eriksson & Kovalainen (2008, p. 77-
78), one can collect primary data through various means of method for instance, interviews,
observation, questionnaire, survey, focus group etc. On the other hand, secondary data may be
collected through readily available published materials done by others (Saunders et al., 2007).
Also, Eriksson & Kovalainen (2008, p. 78) argue that collection and accumulation of secondary
data is done for the sole purpose of reuse in different setting.
Availability of empirical data may include documented or written or visual materials. One can
derive secondary data from booklets, note memos, stories, video recording, journal etc
(Eriksson & Kovalainen 2008, p. 77-78). Now there are many benefits of using secondary data.
For instance it is easier to get and easier to use. It is inexpensive as well, means of recovering
information is easy. Also, secondary data can facilitate framing and refining the research
question and problem with clarity. By and large, secondary data is a valuable source of
information for understanding the topic being studied more clearly and it can be investigated
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more later on with the primary data. In this way, phenomenon under study could be better
understood (Aaker et al., 2006: p. 100)
Now as a researcher, there are different ways of collecting data from case study for instance,
Eriksson & Kovalainen (2008, p. 97) identified two ways through which a researcher can do
search and collection information online. One is library service and the other one is on the
internet. Library service has well collection of e-books or electronic books, e-journal, diverse
range of database, library catalogue etc. On the other hand, internet service provides different
search engine option such as google, yahoo which provide a varieties of web pages to be used
for information search. In terms of company’s secondary data recovery, website of the company
or organization, annual reports, corporate and organization weblogs or blogs etc are viable
option for information (Eriksson & Kovalainen 2008, p. 101-103).
4.5. Secondary data collection
For my secondary data, varieties of sources was used to collect the data. Generally, I have
collected data from articles, reports, book, conference proceedings, journals, company
websites, documents, current research and the projects the company involved in. I have also
used University of Eastern Finland electronic database and OECD reports about eco innovation
and circular economy and other academic publications.
4.6. Data collection
In this section, result will be presented from the empirical study. In the beginning, I will
introduce the case Company X, including the general information about the products and
services they offer. The structure of the section is as follows. First, eco innovation in Company
X, second the definition of eco innovation for Company X and what it meant for them. Third
the drivers of eco innovation in Company X. In each phase, information from the interviews,
websites and research journals, project works are accumulated to outline the situation. The
interview was conducted on 14th December, 2017. The Company X has facilitated the
environment for me to conduct the interview in the premise of the company.
To have a brief overview of the Company X, general information of the company is given
below:
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Table 1: General information of Company X
Full name Company X
Company type SME
Number of employees 5
Total Revenue 800,000 € in 2016, expected to be 1.6 million
in 2018
4.7. Introduction of Company X
Company X is a textile manufacturing company that makes garments out of leftover waste by
doing 100% recycling. It is a distinct environmental company. The company has been
successful in converting waste into products. Company X believes that ecological thinking and
fashion should go together. The objective of the company is to offer sustainable solution to the
textile or fashion industry and contributes to create and effective society with minimum impact
on the environment. Company X was founded in 2013 by entrepreneur Respondent 1. The
company was inspired by its first born company Costo, a company that specialized in
sustainable textile accessories. Environmental care and ethics are at the center of company’s
vision and mission. Company X wants to be pioneer in textile manufacturing industry in terms
sustainability and eco innovation
The overall objective of the Company X is to offer cost effective products and services that
reduce negative environmental impact. In addition, it focus on environmental impact of
reduced emissions from the production process. The company offers environmentally friendly
products and services to its clients. Its establishment was deeply rooted in the idea of taking
care of the environment. They are also helping and educating the society regarding
environmental issues.
The company is small and medium size company. The total number of employees is 5. Total
revenue was 800,800 euros. Company is expecting that the total revenue will hit 1.6 million in
2018. It is operating within both competitive and niche market. However, according to the
company officials, company wants to grow and go mainstream and be operative within bigger
competitive market so it is not that niche market anymore as opposed to when started. Also,
they would like to make it a volume business because it is 100% recycled garment.
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The customer focus of Company X is international. However, 90% of company’s sales comes
from Finland. Therefore the largest customer segment is national and domestic market. In the
beginning, the company’s focus was on national or domestic market. However, in recent times,
the company has been able to capture good customers from Northern Europe. According to the
company officials, company would go to regional and then to international market. Officials
also said that from the beginning, the focus has been worldwide which is related to the
company’s objectives.
Since Company X is specialized producing 100% recycled yarns, fabrics and readymade
garments in India, that’s why, the company uses pre consumer textile waste as raw material.
Also it collects the textile waste from nearby factories which comes in the form of cutting clips
and spinning waste. After that, the material is sorted by quality and color and carded nicely
without destroying the quality of the fibers. After that, the cotton is spun into yarns and finally
turned into a 100% recycled high quality textiles. Customer can know the amount of water
saved which about 2700 litres after making the purchase decision. The company’s main
production facility is located in Tripura area of India. The company is environmentally
conscious in that it does not want to contaminate or destroy the area’s already sparse natural
resources. For instance, the plant has a system of rainwater collection and it utilizes and uses
solar power and wind as renewable energy. The company places high importance on social and
economic responsibility other than environmental responsibility in that it is giving back to the
society and offer favorable work condition for employees. The aim of the establishment of the
production facility in India is to produce mass quantities of fabric, made of recycled materials.
Company X is mainly operating within the B2B context which has a number of implications in
the business to business landscape. Since, Company X is building its business on the concept
of circular economy business, therefore, material flows, value chains and roles of the actors
remain quite the same. For instances, B2B textiles buyers or customers values and
environmental objectives remain almost the same and they play key role in decision making
and creating demand for circular design. For instances, B2B buyers are willing to take back of
used professional cloths which in turn makes the recovery of used textiles more efficient. In
addition, professional textiles buyers also receive quality services for utilizing the used textiles
products in professional manner which conforms to the waste management hierarchy and the
principle of circular economy. This is of course offer great opportunities for textiles producers
(exploring different product service systems based business model) and individual service
providers maintaining collection and sorting.
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4.8. Production process of Company X
Company X completely incorporated creativity, innovation and eco-friendly and cleaner
technology into the production process to create 100% recycled garment. According to the
company officials, Company X production facility is located in Tripura, India. Production
facility collects the raw materials from two main sources and other factories with whom
Company X has co-operation with. They collect the cutting clips of waste from CMT factories
and Yarn waste from spinning and weaving mills. After that they sort them out by color and
quality. The color of the waste determine the color of the final product which involves no dying.
When textiles are sorted out, the fraction of non-reusable textiles are processed on an industrial
scale. Producing recycled fibers for new clothing is the option in order to keep the value of
materials as high as possible while considering the environmental impact of the production
method and over all life cycle. Company X is doing the mechanical recycling. For instance,
material is being recycled in mechanical recycling where textile is broken down into separate
fibers in the pre-processing step. After that, new textile structures are formed out of
reproduction of these fibers. Since strength of the fibers might be reduced because of textile
processing and also post-consumer textiles by wear and washing cycle, typical products for
mechanically recycled fibers are non-woven made for instance by needle punching and carding.
It is also possible to produce cloths and textiles out of mechanical recycling of yarns for unworn
pre-consumer materials. For instances, Rotor spinning of yarns can be conducted using
weakened and shortened post –consumer based fibers. However, they are aided by stronger and
longer virgin fibers. Mechanical recycling is useful for both synthetic and natural fibers.
This recycling loop goes on from fiber manufacturing to the production of textiles. Due to the
usage of recycled fibers or reusing or cloths and fabrics, technological changes requires for
textile production. Although Yarn and spinning technologies and textile manufacturing
technologies can manage recycled textiles with some modification. Mechanical recycling
processes are able to produce materials which are mainly for nonwoven where the quality of
the fiber is not important. A small, yet relatively growing number of recycled textile producers
such as Company X use mechanically recycled fibers for yarn spinning and production of
recycled fabrics and cloths. Rotor spinning is applied for recycled processes and it is suitable
for sort fibers. In addition, ring-spinning is also being use for more quality recycled yarn grades.
There are lots of challenges regarding fiber quality in terms of length and strength. However,
Company X manages this challenge by using pre-consumer textile waste and other fashion
retailers such as H&M handle it by mixing post-consumer recycled fibers with virgin materials.
35
This initial phase is called collecting and sorting waste. Then in the second phase is recycling
in which each quality or color technically and mechanically open back into the fibers by
keeping the fiber length as long as possible for the finest yarn quality. Third process is blending
where cotton wastes are open mechanically which then is mixed through chemically recycled
polyester or viscose fibers so that they can reach a specific functionality depending on the end
use of the fabric. Fourth stage is spinning. In this stage the mixed recycled fibers are spun into
yarns and this part of the process is identical as with spinning fresh fibers. The fifth stage in
knitting and weaving where the yarns are knitted or woven depending on the end use of the
fabric. Then finishing process depends on how the final fabrics are used. There are varieties
of means as to how to finish the process. The known processes are compacting, brushing and
washing. Then the seventh stage is CMT and this stage requires the cutting, making and
trimming of the final garment product. The entire process of recycling of the textile fibers is
innovative, sustainable and environmentally focused (Company X, 2017).
The entire production process of Company X has environmental commitment to sustainability
which is motivated by the principle of circular economy. Company X’s project partner
relooping fashion initiative advocated for a model for future circular business ecosystem for
textile the whole value chain. This model created the platform to test and understand all the
stages necessary for creating a closed loop of textiles from consumer back to consumers and
offering new clothing line made of recycled fibers by taking back the product. Also this model
takes into consideration the actors that are working with reuse and recycle textile. This holistic
approach deems necessary for restoring the value of used textiles which is based on the concept
of circular economy. Recycle is the last value cycle in this proposed value cycle of circular
economy to regenerate and restore value with less environmental impact.
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Figure 7: Four (technical) value cycles of a circular economy (Ellen MacArthur Foundation,
2017a)
4.9. Eco innovation at company X
In the literature review, I highlighted that there is no specific definition of eco innovation. Few
broad definition of eco innovation has been highlighted. At the beginning, I asked to the CEO
of the company about the definition of eco innovation to see how they understand and how it
matches with the answers with selected definition in the literature. For better understanding, I
provided selected definition to the respondents beforehand to seek answer and opinion. The
term ‘eco innovation’ was new to them. However, respondents were well aware of green
innovation concept which is pretty close to eco innovation. Having read the selected
definitions, the reaction of the company CEO was the following:
‘’our entire production process is innovative and sustainable’’
(Respondent 1, Chairman of Company X)
The selected definition is perfectly aligned with production method of case Company X.
Adoption of environmental friendly production processes is a precondition for potential eco
product innovation for firms, in this case, the recycled garment. Through the mechanical
recycling, Company X are producing cloths made of superior fiber. The entire process is
technologically ecofriendly.
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4.10. Types of eco innovation at company X
Company X is eco innovative company which is owned by same owner who owns Costo, an
accessory business which is using leftover fabrics from furniture industry. Environmental
sustainability is at the center of all motivation and descriptions of Company X. They are
producing basic garments such as t-shirt and hats out of leftover fabrics by doing 100%
recycling. They are doing and developing the production process, treat and recycle the disposed
textile materials. Types of eco innovation according to the respondents are as follows,
‘’We have other company Costo which is doing hat spinning
accessories. With Costo, we are using leftover fabrics from the
furniture industry. That time we realized that with the leftover fabrics,
there is not enough because customers were getting bigger and bigger
all the time. If some big customers wants to have 1000 pieces of
certain kind of hat with certain kind of fabrics, we had something like
2 meters of that fabrics and we can’t make thousand pieces out of
that. And that way we had the own idea to make our own fabrics as
sustainable way as possible’’
(Respondent 1, Chairman of Company X)
Company X also leads the effort to create its own production technique which is different from
conventional technique. This new process improvement is innovative and sustainable. Waste
management technique in the new machine is dynamic. According to the respondent
‘’Together with the Chinese guy we started doing some development
for the machine and some testes to improve the process for instance
how to make separation for the wastes and how to make adjustment
for the machine to keep fibers as good as possible and within small
things, we got pretty good result’’
(Respondent 1, Chairman of Company X)
From the empirical case Company X, it is obvious that it has vision and ambition to use cutting
age technology and commercialize innovative concepts which takes into consideration the
environmental issues. It is very important for Company X to do research and development of
cutting age technology. Research and development at Company X is primarily driven by
environment oriented objectives. According to respondent,
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“We can manage to do 100% recycled yarns and fabrics. What we are
doing, we are doing a lot of research and development. We want to
use available technology to improve the performance and to help.
Because there is lot of technology can help and that is one thing for
the future. We need to implement some new technologies to help run
the shop. For the technology part we want to invest to develop the
recycling technology and production chain. Somebody builds in good
way we want to be first who is trying it out and may be using it but
mainly we are concentrating to develop the recycling, waste
collection, and waste separation, recycling and production methods.
Sustainability is the biggest thing in our process to take care of the
environment and make things better way”
(Respondent 1, Chairman of Company X)
Productivity and sustainability is at the heart of Company X’s increase sustainability target
areas. Company X continues to aim high in resource efficiency and try to make the price
competitive. Investment on R&D and in production facilities are planned in a way that can
achieve cost efficiency with regards to the development and environmental demand of the
customers and community.
Company X is well known locally and aiming to be known internationally as well. Company
X’s effective waste recycling technique and production method have the potential to attract a
lot of foreign investment. For instance, Company X has its own production facility in India and
Company X itself was motivated in co-operation with Chinese company.
Company X also focuses on customer awareness to environment. It is active on social
networking website such as LinkedIn, Facebook to create awareness about the ecofriendly
product. Of course customer awareness is vital for eco innovation. The rational for creating
customer awareness is that it can create demand in the market. Once customers are demanding
for environmentally friendly product, they engage themselves with various social activities
with this objective.
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Company X follows win-win situation concept. For example, they co-operate with their
partners and competitors to reduce environmental impact. Many of its partners and competitors
share same production methods and technology so they complement each other in the market.
‘’If there is some good methods how others are doing then checking
somehow we implement them to our operation’’
(Respondent 1, Chairman of Company X)
4.11. Analysis
Eco innovation in organization: eco innovation in organization would be discussed in the
context of case Company X with theoretical underpinning.
Definition of eco innovation: For conducting the research, I defined eco innovation that
consists of new or modified products, processes, technique, practice, organizations, markets or
systems to avoid or reduce environmental harms. As mentioned above, there is not yet standard
universal definitions of eco innovation. Academic literature attempted to define eco innovation
in different ways. Respondents were familiar with the concept of eco innovation to a certain
extent. However, they were familiar with green innovation mostly. Respondents, upon reading
the concept of eco innovation, recognized the fact that Company X is green, innovative and
environmental company. Respondents also knew the circular economy concept as this is the
term you use quite often in their business to business interaction. Company X has the
commitment to achieving its environmental goals to create a long term sustainable solution for
a viable sustainable society. It is actively managing its own internal environmental system that
guarantees the environmental performance of the organization.
4.12. The types of eco-innovation at Company X
Company X environmental focus in all of its efforts enabled this study to explore its
technological aspects such as operational and functional dimension with environmental impact.
Company X is focusing on incremental innovation. The rational for this is that incremental
innovation is added to the existing production and consumption resulting in a solution that is
innovative. Technical change in the production process/mechanical recycling in this case has
environmental implication. Such technological change or innovation enabled resource
efficiency of textile waste, recycling and enable the substitute of the toxic materials that has
less environmental impact. According to the respondent:
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‘’We are reducing the waste when we are collecting the cutting waste
from the factory so basically its more or less 15% would be wasted
during the production process. And that 15% what we are collecting
what is our raw materials. So we are reducing the waste, then when
we are doing the recycle, recycle with yarns and fabrics. We can save,
if compared with fresh cotton t shirt, we will save 2700 litters of
water. Everything what we are doing is sustainable’’
(Respondent 1, Chairman of Company X)
Company X also provides technical and macro-organizational innovative solutions in areas
where it operates. For instance, this innovative solutions include environmentally focused
technology, new ways of organizing the society, preservation of natural resources, creation of
circular business ecosystem, complying with domestic and international regulation and
requirements that prevent environmental accidents, collaboration with partners on the
environmental quality and safety issues and supporting other companies to provide quality
services to the customer.
4.13. Regulation and policy drivers of eco innovation
As highlighted before, Company X has environmental commitment. It constantly attempts to
achieve long term sustainable solutions for textiles industry with minimum impact on the
environment. Its production facilities follows domestic and international laws, environmental
permits and conditions. Company X complies with all laws and other requirements plus GRS
(Global Recycling Standard). Although its production facility has not been certified under
International standard ISO 14001. However, they are about to receive BSCI in the beginning
of 2018 which means they will have environmental regulation in place which can offer a
systematic approach and a sensible solution to environmental issues and problems.
Environmental laws and legislation to a certain extent played a role for eco innovation for
Company X.
During the interview at Company X, respondents mentioned the relative importance of
legislation as being the driver of eco innovation. When asked about the regulation, respondent
said, ‘’we have own internal regulation and system’’. Although they are not regulated by
international audit. They will, however, implement external regulation and public policy,
international regulation at some point in the future, the respondent stressed. Because regulation
and policy drivers advance the cause of business organization towards eco innovation. From
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the empirical study, it is evident that regulation and policy drivers are not the dominant driver
of eco innovation for Company X as opposed to the supply side drivers of eco innovation.
4.14. Demand side drivers
Company X is continuously engaged with customers to create more awareness and demand for
the recycled garment what they are producing. They are engaging with customer via social
media which acts as effective tool in terms of promoting the 100% recycled garment. The
company is quite active in social media such as Facebook, LinkedIn and other social media
platforms to influence the perception of the client for recycled garment products. That’s how
they are creating awareness for eco products. The company also creates strong narratives as to
why their process of creating 100% recycling garment is better than competitors. Respondent
said:
‘’We do not want to produce 50% fresh and 50% recycled garment
but we want to do 100% recycled garment. And we tell our customers
the benefits what is within our process, the production technique, then
they can evaluate if they are sustainable enough’’
(Respondent 1, Chairman of Company X)
The company is also producing awareness and demand through face to face interaction, sales
event and other collaboration projects. For instance, the company created a story about its
production process and promote the idea through different projects in co-operation with the
school and research centers. According to the respondent,
“We are telling how we are doing what we are doing when we are in
sales event and use other kind of platforms where we share the stories
about production technique or recycling method. Because our
production technique is innovative but in terms of style and fashion
way no. Because we do not want to make any fashionable garment,
rather we want to make basic garment”
(Respondent 1, Chairman of Company X)
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By creating narratives about the production technique, the company is creating more public
awareness and knowledge regarding eco product or recycled garment.
Also, competition facilitates the condition for eco innovation. There is, of course, a general
concern among actors within the textile industry as to how they can make recycling technology
more circular based for instance if production chain is more sustainable. These same actors
also concern other issues such as global climate change, environmental issue. It is not so much
about the competition what has motivated Company X to adopt environmentally friendly
recycling technology, rather it’s combining co-operation with competition better known as co-
opetition to see where market is turning next. Sometimes competitors might share the same
technology but they constantly complement each other. They do not see other companies as
pure competitor’s rather co-operative partners where they exchange information regarding
recycling technology and improve the process. Respondent said,
“We can show to our competitors that we can do better way than
them. But also we collaborate with others and exchange information
and idea and benchmark from other companies and vice verca”
Respondent 1 (Chairman of Company X)
Profitability is one of the important factor for Company X’s effort for sustainable innovation.
According to the respondent:
“Profit also motivates us, it should be, and otherwise we are not here.
But at the moment all the profit what is coming that is going for future
development for research and development. So basically what we are
profiting we are using to develop our process. And to do more
research. If there is someday there is too much profit it’s not needed
for research then where we can fund and start to keep money for good
project and nice projects where we can clean the ocean to support
that”
(Respondent 1, Chairman of Company X)
4.15. Supply side drivers
43
In the theoretical section, various drivers of eco innovation have been highlighted and those
drivers to a large extend correspond with the data collected on the drivers of eco innovation
from case company Company X. Collected data from the case company indicated similarities
with the previous supply side drivers of eco innovation and revealed some extra drivers of eco
innovation. For instance, technological competencies, research and development (R&D) and
collaboration and networking drivers of eco innovation in particular were motivated by the
concept of circular economy with strong focus on environmental sustainability. For the
Company X, the environmental responsibility is always an important issue to make eco
innovative solution for the customers.
Research and development (R&D) at Company X is one of the important driving force for eco
innovation. Finnish and European Textile industry rely heavily on great scientific knowledge
and know-how, fashion and creativity and innovations, which form the basis for competitive
advantage. Environmental awareness is the center of discussion among the textile industry in
Europe (Euratex, 2004).
It can be concluded that Company X is leading this R&D effort in close collaboration with
Telaketju project and relooping fashion initiative to explore the range of possibilities to use
greener and cleaner technologies for the sustainable production of finer fiber and yarn out of
textile wastes. The company is seeking available fund, availability of investment for more eco
or green initiative projects and drive the new ideas forward through collaboration and
brainstorming. It is doing research and development by themselves and also with other industry
partners for process improvement to make it as sustainable as possible. Environmental
sustainability is crucial factor for Company X. They give green light to new, big and creative
ideas. Since the company is flat organization and open ideas are encouraged and discussed
from bottom to top. This corporate mentality diffuses during the R&D phase which create the
necessary condition for more eco innovation for the company. According to the respondent,
“What we are doing, we are doing a lot of research and development.
We want to use available technology to improve the performance and
to help. Because there is lot of technology can help and that is one
thing for the future. We need to implement some new technologies to
help run the shop. For the technology part we want to invest to
develop the recycling and production chain. Somebody builds in good
way we want to be first who is trying it out and may be using it but
mainly we are concentrating to develop the recycling, waste
44
collection, and waste separation, recycling and production methods.
Sustainability is the biggest thing in our process to take care of the
environment and make things better way”
(Respondent 1, Chairman of Company X)
Research and Development (R&D) at Company X is largely inspired by circular economy
concept. In order to make the readymade garment, the company is doing joint research
collaboration with VTT where they are making the trial with mechanical recycling. In the
mechanical recycling of waste materials, less chemical and less pesticides are used in the
production process. It’s much easier to recycle. Consequently, the life cycle of the material
extends. According to the respondent,
“We are collecting the waste and processing them into fabric and for
the ready garment. We have couple of projects where we are
researching and investigating the possibilities to use that kind of post-
consumer waste which is basically used cloths. We are making small
scale trials and they look good. In the future, we can use post-
consumer waste as our raw materials. Circular economy is the way
we need to go in the future. With the existing technique, for the cotton
fiber, at least 3 lives are possible. However, with the new technology
improvement in the textile industry, it can be at least 4-5 lives for the
cotton fiber. So it’s easier to recycle to have strong cotton fiber as
possible”
(Respondent 1, Chairman of Company X)
Technological competencies is one of the leading factor, if not the most, for eco innovation for
Company X. According to Euratex, (2006) there is always a need for the development of
environmentally friendlier production process which complies with stiff environmental
regulations. Green technologies might encompass bio-based and recycled raw materials and
utilization of enzymes. More sustainable production of textiles requires environmentally
friendly technology For instance, water free textile dyeing and finishing technologies,
integrated and intensified processes and replacement of chemical processing by biotechnology
are now being developed for sustainable production of textiles.
Development of recycling of textile fibers is required to increase the sustainability and reduce
the environmental load of textile production. For instance, the company is doing joint research
45
and development with VTT and other companies are coming up with 100% recycling
technology which is based on circular economy concept. For instance, it is developing cellulose
carbamate (CCA) technology based recycling method for cotton fiber in co-operation with
VTT. In this new production technique, fiber can be used for a wide range of textile applications
ranging from fashion to home textiles and to technical applications. Company X through this
mechanical recycling is opens up the new possibilities of using post- consumer waste for
producing durable, high quality recycled fabrics and clothing. Also, the company is designing
the prototype and a clothing line made of new fiber and to test the characteristics and
possibilities of new material together with another company Seppälä. The idea is to bring
ecological clothing lines based on circular economy to the market.
According to the respondent:
“Our production process is innovative and sustainable. We make it
more efficient. We can automate the sorting when we are sorting the
waste and it can be automated’’ We are using less electricity, less
water and no chemical in our production method. Sustainability and
circular economy is the future way to go. We need to start to recycle,
we need to use raw materials, and we need to keep better use of those
because of the whole global environmental issue”
(Respondent 1, Chairman of Company X)
Now a number of theoretical arguments also supports the technological achievement of
Company X. This technological achievement is related to the improvement of the production
process which is also cleaner than the conventional production system in a sense that it
consumes less electricity and less water and less energy, the respondent highlighted. This new
production recycling technique is considered to be an closed loop manufacturing system based
on circular economy concept in that it reduces the amount of textile waste materials over a
prolong period of time.
According to Altham (2007), SMEs preferring cleaner production can transform their way of
using recourses, operate the product output through closed looped production or industrial
symbiosis, thus increasing the long term eco-efficiency of business activities and operation. As
SME, Company X has certainly achieved this unique technological competencies by
transforming the conventional production system into eco, cleaner, efficient production method
which is deeply rooted in circular economy. Also, Doran and Ryan, (2012) supports the idea
46
that firm’s organizational capabilities and technological competencies are important means of
eco innovation which is supported by Horbach (2008) arguing that technology drivers’ triggers
innovation in the development phase.
According to (Baumol, 2002; Paivitt, 1984), technological capabilities play a vital role in
triggering innovation. These competencies include the ability to create physical knowledge
capital of firms to initiate different, new and products/processes. In an effort to create such
capital stock, firms have to focus on increasing R&D investments. Firms with advanced
innovation capabilities also achieve higher innovation success in the future as Baumol labelled
these path dependencies with such ‘’ innovation breeds innovation’’ (Baumol, 2002). To put it
another way, the available technological possibilities enhance integrative capability. All of
these theoretical arguments are reflected in the practice of R&D effort of Company X. As a
SME, Company X with this technological competencies leads the effort for 100% recycling
resulting in a competitive advantage for the company.
Networking and collaboration with different industries, suppliers, customer, stakeholders’ joint
research and development (R&D) also create eco innovation for Company X. Company X are
effectively engaging with customers, suppliers to learn from each other, benchmark from each
and to build something together. And the company has been successful in doing that. According
to the respondent:
‘’There is lot of companies who would like to collaborate with us. Of
course there are companies who want to benchmark also. But many of
those companies want to collaborate with us at some level. There is
one huge international brand who would like to collaborate with us
many B2B and there is really many from different industries. But the
main and potentials one from they are textiles brands. They are
smaller domestic Finnish brand. But there is really huge international
players. Also, what we are doing, we are doing lot of research and
then when we are discussing with other companies, we need to have
something ready to offer for them. Then we are telling what we are
doing, what we have been testing, if they are interested, then we can
start to build something together with’’
(Respondent 1, Chairman of Company X)
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Company X is collaborating with customers in terms of implementing large scale circular
economy concept into their production method. For instance, according to the respondent:
‘’We are testing different kind of circular economy style. We have
couple of bigger customers and it’s easier to operate those with
bigger customer who have lots of selling point. They have ready
collection points and everything, we are partnering with them. Also,
collaboration with different industries, environmental agencies and
other NGOs to share information, share good habits and to learn
from each other so we will learn from them and they will learn from
us and we see that collaboration with different organizations its
beneficial for us and that’s the main issue for making green effort.
Because some issues they will have lot more knowledgeable than us
and when we are collaborating with them, we can get ideas and some
help from them how it would be best way to organize’’
(Respondent 1, Chairman of Company X)
It is obvious that networking and collaborative effort is shaped by the concept of circular
economy. In terms of the nature of co-operation Company X has, it is important to say that co-
operation is very dynamic. Company X is engaged in different projects with government and
non-government organization in an effort to create a cluster of networks. One of the co-
operation network Company X is involved is called Telaketju, a pilot projects which forwards
the concept of the textile recycling also brings together end of life textiles collectors, sorters,
operators developing primary processing and automized sorting, companies utilizing final
products, work centres arranging social work, waste centres, charity organization and
municipalities. This projects aims at developing the collecting, sorting out and refining
processes of end of life textiles. The project was held by Lournais-Suomen Jätehulto, Turku
University of Applied Science, and regional wastement company. Also, this project is
coordinated by Lounais-Suomen Jätehuolto Oy and VTT. Through this project, textile
recycling with regards to whole life cycle became interesting for many companies in Finland.
Telekatu project is supported and funded by Ministry of Environrment and Tekes. Teleketju is
building a strong platform in terms of the creation of new and strong industry with
multidisciplinary collaboration. Companies involved in this project including Pure Waster
Textiles are encouraged to design new business model in accordance with circular economy
(Telaketju, 2018).
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Another collaborative project Company X is involved in is called the relooping fashion
initiatives. The relooping fashion initiatives deals with the quality of the reproduced fibers in
way that can improve it. This new process use cutting age-technology that grant for unlimited
recycling of cellulose based fabric without the extension of any harmful chemicals or new
materials. In this way, global textile industry today has positive impact on the environmental
issues. And this closed looped value chain manages the value of the materials, eliminates the
waste and introduce a completely new line of sustainable future designs (Relooping Fashion
Initiative, 2016).
In the Relooping Fashion Initiative, Company X main job is to test the spinning of fibers into
yarn, and manufacturing of the fabrics and clothing for the pilot. The company is of the opinion
that there is a huge potential for textile waste recycling. The reason being, world’s population
is growing and not sufficient cotton and other raw materials could be produced to meet the
demand. According to the company, ‘’we have no choice but to increase the use of recycled
materials’’. Chemical recycling bring new opportunities so that post –consumer textile can be
used for producing durable, high quality recycled fabrics and clothing (Relooping Fashion
Initiative, 2016).
Company X is working together with VTT, Technical Research Centre of Finland and other
joint venture collaboration projects where there are many companies, NGOs and organizations
are involved. These companies are working together in these projects to come up with new
different ways to work with post-consumer waste. So for instance, VTT Technical Research
Centre of Finland developed a method that requires dissolving worn and thrown away cotton
and use it as substitute raw material for the creation of new fiber. The model developed at VTT
reveal the fact that recycled fiber could be converted into a yarn and refreshing fabric. On the
basis of carbamate dissolution process, first batch of recycled fiber was created in a pilot facility
using this technology. (VTT, 2017).
VTT method is part of a project called Teki, an internationally launched project, better known
as Relooping Fashion Initiatives. The objective of the project is to pilot and model closed
looped ecosystem that correspond with the principle of circular economy enabling new
industrial applications of discarded textile waste unusable previously. The number of other
companies other than Company X are also involved in this project. These companies are: VTT,
Ethica, The Helsinki Metropolitan Area Reuse Centre, Seppälä, Remeo, Repack,and Lindström
(VTT, 2017).
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Different collaborative projects and networking helped Company X to improve the production
process for recycled garment. Existing literature also suggest the same thing. Potential
networking with other firms, institutions, authorities, research institutes is considered vital for
adoption of eco innovation (Cainelli et al.,2011; Klewitz and Hansen,2013;Petruzzelli et al.,
2011). Also, Wong (2013) pointed out that knowledge sharing affects firms achieving green
requirement positively. According to Halila & Rundquist (2011), successful innovation is
supported by a network with diverse competences, however, eco innovators tend to use network
for mitigating technological problem while other innovators considers network to be of helpful
for financing and marketing. Now Triguero et al. (2013) suggest that entrepreneurs giving
priority to alliance with research institute, agencies and universities are far more likely to
instigate all types of eco-innovations. It is fair to say that Triguero’s argument is reflected in
Company X prioritization of alliance with research institute and universities for conducting
research and development to initiate green effort for eco innovation. Also, according to Dosi
(1988), SMEs have access to sophisticated technology and technological expertise if they can
engage and participate in the network of innovation (Dosi, 1988).
As a SME, Company X was benefited directly by all these projects work that emphasize
primarily eco-efficiency, that is, the unification of environmental and economic performance
to achieve economic gain while at the same time reducing adverse environmental impact.
According to Schaltegger & Synnestvedt (2002), SMEs can create eco efficiency innovation
with limited resources such as time, knowledge and finance in order to initiate more sustainable
mode of business operation. The case company successfully created eco efficiency platform by
allowing these co-operative project activities to trigger for continuous change in the future.
Brand reputation drives eco innovation for Company X. According to the company CEO,
“To create a common future for the company that is one of the main
thing and promote brand reputation that way that is really important.
Because that is how we can affect the others. When others can know
that’s ok this company can do 100% recycling and they are using less,
less energy, and we need to do the same so that is the thing how we
can affect bigger scale that only what we are selling”
(Respondent 1, Chairman of Company X)
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To reflect upon on the core message of the manager regarding the brand reputation, Company
X really focused on the environmental awareness which is reflected in company’s effort to
make 100% recycled garments. Now also the motivation and spirit of the chairman are also an
important ground breaking factors that laid the foundation for initiation of eco innovation
within Company X. This environmental awareness coupled up incremental technological
development in this area are crucial point of differentiation for Company X which has enabled
the company to stand out uniquely among other companies within the textiles industry,
something that is reflected in company’s vision for creating common future. Company X has
successfully identified itself as green innovator by aligning its core values with the behavior
and goal of the organization. The company is exploiting and exploring the environmental image
and the brand identity in different ways. For instance, they are raising eco innovative awareness
regarding the 100% recycling technology by participating in social media platform such as
Facebook, LinkedIn and other social media platform. They also have partnership with other
organizations that work on humanitarian relief work etc.
As SMEs, Company X made an important breakthrough in the aspect of ecofriendly recycling
technology. The size of the firm did not really affect the firm’s ability to come up with 100%
recycling garment. Although mainstream literature suggest that firm size has positive impact
on the firm to adopt eco innovation. Bigger firms are prone to eco innovation while smaller
firm or SMEs are not. For instance, according to Connell and Flynn (1999), bigger firms go for
eco innovation through external and internal pressure while smaller firms by and large by
external pressure. For Company X, firm size did not matter most. According to respondent:
“In terms of innovation and sustainability, size doesn’t matter. It’s not
the way big companies can be sustainable and small companies can’t.
Everybody can be innovative and sustainable but its different kind of
actions what you are going to do but size doesn’t matter”
Respondent 1, (Chairman of Company X)
Cost saving factor triggers eco innovation. However, in the empirical study of Company X,
cost saving factor is not found to be an important factor for eco innovation. According to the
respondent:
“Cost saving factor is small side thing and secondary issue. Even the
raw material price is cheaper for us than fresh cotton. The cost of our
production should be 30% cheaper than the fresh cotton. But in terms
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of calculation, it’s not coming like that because we want to develop
and we are doing lots of research and development for high quality
yarns. Even though, our cost level is 10-20% expensive than fresh
cotton. However, it’s not main factor for us. Sustainability is the main
factor even though the cost is higher”
(Respondent 1, Chairman of Company X)
Environmental management system (EMS) does play a role to a certain extent to trigger eco
innovation for Company X. The company does not have formal EMS. However, they have
internal mechanism and own system in place and environmental management roadmap. The
respondent of Company X highlighted the importance of having internal formal environmental
management system that comply with environmental regulation and policy. They stressed that
environmental regulation guides the organization into adoption of improvement of the
production method.
“Of course we have the environmental management system but it’s
not audited yet. Of course there are couple of processes we want them
to be audited but at the beginning, it’s mostly India where we are
making the production. There we are going to take couple of audits.
First would be GRS global recycling standard. Then many of our
customers they are asking for social issues they are asking BSCI. So
basically those are the first ones. Those are what we are going for
now and BSCI would be in the beginning of next year. We have our
own internal environmental management system but not certified
audited ones. It’s only what we have been building ourselves.
Because of course we have our own internal system how we are
working but that we have not been audited by any international
organization yet. We will implement this kind of Environmental
Management System in the future EMS”
(Respondent 1, Chairman of Company X)
Sustainability is one of the main driving force of eco innovation and process improvement at
Company X. Everything the company is doing is motivated by sustainability. Mechanical
recycling technique of noble fiber is itself more sustainable, innovative and environmentally
friendly than the conventional process. The respondent said:
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‘’Sustainability is one of the biggest driving force and everything
what we are doing’’
(Respondent 1, CEO of Company X)
New recycling method of producing superior fiber out of textile materials has number of
implications for Company X in terms of its environmental objectives. The company has
commitment to sustainability and it achieved that sustainability by reducing negative
environmental consequences. For instance, 100% recycling method is saving a lot of water,
using less energy and less electricity, thus achieving its economic and environmental
objectives. The company’s environmental objectives corresponds with mainstream literature.
For instance, according to Hansen et al., (2009), sustainability oriented innovation tries to
integrate the environmental, social and economic dimension. This sustainability oriented
innovation better known as eco innovation. Another scholar Huber, (2008) pointed out that
process innovation is associated with the concept of production of goods and services in order
to increase the eco-efficiency, a term better known as eco effectiveness (Huber, 2008). Huber’s
position and argument regarding process innovation perfectly aligned with the production
method of Company X in that it has achieved eco effectiveness by transforming its
conventional production process into 100% recycling method, a method which is
environmentally friendly.
5. RESULT
I have found the drivers of eco innovation from the case company Company X, by conducting
the unstructured qualitative interview process. The information was found from the Company
X website, reports and the projects they are involved in such as relooping fashion initiatives
and Teleketju project. The drivers were categorized and analyze on three fronts such as supply
side drivers, demand side driver and regulatory drivers. The results derived from the case
company is quite diverse and provided the answer to the research question.
The main research question is, what are drivers of eco innovation in an organization from the
view point of circular economy?
Supply side drivers of eco innovation summarize a range of drivers found in both primary and
secondary study such as R&D, cost savings, EMS (Environmental Management System), brand
reputation, collaboration and networking. From the empirical case study on Company X found
additional drivers such as sustainability and networking and collaboration. However,
networking and collaboration driver shows its strong relationship with circular economy
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concept. In the demand side drivers from the literature, customer demand, competition and
market share increase were appeared to be the main drivers of eco innovation. However, market
share increase was not found to be an important demand side driver from the empirical case
study. But economic factor such as profitability came out as new driver for eco innovation. In
terms of the regulatory drivers, both secondary and primary study found the same result, mostly
unchanged. Although, it was obvious that regulatory aspect was not the dominant driver of eco
innovation for Company X. It is important to note that no study was found in the previous
literature that showed the relationship between eco innovation and circular economy. However,
in the empirical investigation of the case study, mostly the supply side drivers such as
technological competencies, R&D and networking and collaboration showed a strong
correlation with circular economy. New conceptual model of drivers of eco innovation is
realized from empirical findings with supply drivers showing strong relationship with circular
economy.
The literature shows that regulation, R&D, environmental management system, technological
competencies, and customer demand are the main drivers of eco innovation. However, in the
empirical study it suggests that R&D, technological competencies, sustainability, networking
and collaboration are the important drivers of eco innovation. Although, brand reputation,
competition, economic factor such as profitability are found to be somewhat important factors
for eco innovation in the empirical study. But they are not the dominant drivers of eco
innovation. So there has been changes between primary study and literature study regarding
the major drivers of eco innovation. R&D, and technological competencies are found to be
common denominator in both secondary and empirical study and they are found to be the most
dominant drivers of eco innovation in both secondary and empirical study. One other driver
networking and collaboration is found to be particularly important in the empirical study
alongside R&D and technological competencies. They are mostly supply side drivers with
networking and collaboration being the additional driver in terms of its relationship with
circular economy.
Now among all these drivers of eco innovation, particularly in the empirical study, the R&D,
technological competencies and networking and collaboration are found to be most dominant
factors of eco innovation in terms of their relationship with circular economy. The reason
being, all these three factors are motivated by the concept of circular economy. This new
outcome of empirical study reveals the relationship the between eco innovation and circular
economy concept. Company X has been very active and successful in integrating eco
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innovation with circular economy concept, thus achieving its economic, environmental and
social objectives.
Figure 8: Modified concept of drivers of eco innovation in relation to circular economy
The empirical investigation presents a completely different pictures of how a resource
efficiency view, in this case circular economy concept, contributes to trigger eco innovation for
companies on three fronts supply side, demand side and regulatory and policy side. The
investigation also presents a new insight to eco innovation definition as highlighted in the
literature. The result provides the necessary inceptives to further advance the definition of eco
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innovation which is a significant contribution of this study. Because the resource efficiency
view is outside the scope of the definition of eco innovation. Also, the empirical investigation
further contributes to the discourse of eco innovation drivers
6. DISCUSSION
The objective of the research was to analyze the drivers of eco innovation from the viewpoint
of circular economy. Also the research focused on one small and medium size company in one
industry. In order to find out the factors of eco innovations, the selected respondents were asked
to identify the factors influencing the eco innovation in the organization. Many firm level
drivers of eco innovation were discussed in the literature from supply, demand and regulatory
perspective. Respondents identified many of the factors as potential stimuli for eco innovation
for the firm.
The dominant supply side drivers found at Company X are technological competencies (100%
recycling technology), R&D, collaboration and network and all three of them showed strong
relationship with circular economy. The dominant demand side drivers found from the
empirical studies are customer demand and profitability and competition to a certain extent.
Although regulatory drivers remained unchanged in both primary and secondary studies.
However, respondents pointed out the importance of regulatory factors for eco innovation.
The findings suggest that research and development (R&D) was among the leading factors for
eco innovation for Company X. The respondents particularly stressed the importance of
research and development (R&D) to improve the efficiency of the production/recycling process
which enabled the firm to stay ahead of its competitors. The new innovative production
technique/mechanical recycling is helping the firm to produce more units of cloths while
reducing the negative environmental impact. Now this factor corresponds well the current
literature as to how R&D triggers eco innovation in the company. For instance, a number of
theoretical arguments supports the technological achievement of Company X. Doran & Ryan,
(2012) regards the technological competencies to be an important mean for eco innovation.
Also, Horbach (2008) enhanced that similar idea suggesting that technology drivers’ triggers
innovation in the development phase of the firm, an argument which is reflected in the practice
of R&D effort of Company X. Therefore, the findings and R&D as driving force for eco
innovation correspond with the existing literature with regards to the initiation of eco
innovation for the firm. Now the inference can be drawn about the impact this R&D has on
firm attaining environmental sustainability, and that is, Company X has achieved greater
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environmental sustainability which in turn has enabled the firm to stand out unique from its
competitors in the market.
Also, sustainability was identified as one of driving forces of eco innovation. According to the
respondent, everything Company X doing is motivated by sustainability. In the case of
Company X, process improvement meaning new waste recycling technique is much more
sustainable and environmentally friendly than the conventional system which is reflected in
every aspect of company’s operation. This new process improvement is supported by number
of theoretical constructs within the literature. For instance, eco innovation embodies the idea
of new product or enhanced processes, new organizational forms or technologies that offer
benefits to the environment in a way that can avoid negative environmental consequences
(Beise & Rennings,2005; OECD, 2005; Rennings, 2000). This process improvement at
Company X can be labelled as process innovation which is related to the concept of production
of goods and services in order to increase the eco-efficiency sometimes known as eco-
effectiveness (Huber, 2008).
In addition, the respondents identified brand reputation is one of the important driving force
for eco innovation at Company X. The respondents emphasized the importance of brand
reputation as one of the main factor for eco innovation within the firm claiming that company
should be deemed as green company as it produces 100% recycling garments which in unique.
Consequently Company X is creating many business opportuning by promoting its brand value.
As a result company is recognizing many competitive advantages in the market as compared
to other competitors within the textile industry. The ways Company X promote its brand
reputation and communicate its brand image correspond with existing literature. According to
Sarkar (2013), business is gaining many competitive advantages and creating opportunities for
business which are stemming from eco marketing effort and eco-sustainability. This kind of
green marketing effort plus the promotion of its circular economy concept reflect Company
X’s commitment to sustainability. Also, the company is using different social media platform
such as Facebook, LinkedIn and other medium to promote its brand.
Another motivating factor of eco innovation is profitability which is the demand side drivers.
Respondent stressed the need for the expansion of the company as SME. According to the
chairman of Company X, new technique, new ideas, new technologies and motif are the main
resources of the company to compete with bigger players in the market. They bring profit and
are important sources of revenue for the company. This profitability aspect is what motivated
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Company X to come up with 100% recycling technique which is not only innovative but also
unique in the market, respondent added.
Regulation was identified as important source for eco innovation for the Company X. The
company is following the regulation in the environment where they operate, in this case Indian
law and regulation. Respondent claimed that Company X is fully complying with domestic and
international regulations coming from different organizations. For the process improvement for
better fiber they are also following international laws and EU regulation. The company is
implementing the best regulation coming from the EU side for the recycling operation of finer
fiber. Although the regulatory aspects were not the dominant drivers of eco innovation found
in the empirical study.
Through the adoption of circular economy concept, Company X has been able to ensure the
resource efficiency which technically means the reduction of the usage of virgin materials,
elimination of waste, new potential for business, innovation, employment and sustainable
lifestyle and foster the socio-economic wellbeing. Company X, through collaboration with
relooping fashion initiative and teleketju projects, significantly reduced the inequalities in the
textile value chain such as lack of water, exposure to toxic materials and unfair working
condition by reducing the environmental and social costs that cotton farmers and manufacturers
bears. Since circular economy requires collaboration in the entire value chain, therefore it has
the capacity to increase transparency throughout the entire life cycle by distributing the value
more equally (Becker, 2017).
Company X, through green and transformative innovation, the outcome of which is 100%
recycled garment, has been able to ensure resource efficiency and material use and it did that
through the adoption of the principle of circular economy. Also one of the other objective of
Company X was also to focus on improving the product life cycle through its supply chain,
that is, to minimize cost by sustainably regulating and managing the lifecycle of the textile
from the beginning (e.g, less textile material and less energy use in the production process,
same applies to the packaging and delivery) to the end of life (e.g. reuse, reduction of textile
waste, creating recovery networks). This enabled the Company X to save its cost. Cost savings
is an important drivers of eco innovation in an effort to minimize energy and use of raw
materials and avoidance of higher taxation (Horbach et al., 2012) particularly for
environmental R&D (Demirel & Kesidou, 2011) and eco process innovation (Triguero et al.,
2013).
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And Company X successfully did that by incorporating the environmental aspect into the
supply chains from the onset and made collaboration between other actors and stakeholders
such as companies, suppliers and customers to close the loop. For instance, Rashid et al., (2013)
argued that the conversation of existing supply chain is supported by technological
development which enhances the resource efficiency, reuse and recycle plus the organizational
innovation which in turn leads to new distribution, collection and business model.
This kind of transition towards circular economy lays the foundation for companies to move
more towards clean conformity. Although the relationship between the concept of eco
innovation and circular economy is still in an evolving stage in the literature. And the
respondents also admitted the fact that Company X is not 100% circular economy business.
Some authors pointed out the fact that circular economy strategies are also important drivers
for eco innovation for instance circular economy act as a leading principle for eco innovation
whose aim is to create zero waste society and economy (Mirabella et al., 2014: p. 29). Company
X embodied that principle through its capacity for eco innovation that provided new business
opportunities for the company and contributed to a transformation towards a sustainable
society.
There are number of implications can be drawn from the drivers of eco innovation at Company
X. Those drivers of eco innovation has contributed to the decline of the negative environmental
impact of business activities. As a result, the role of eco innovation at Company X has served
as force for good towards creating sustainable society where the vision of society, economy
and environment has intermingled in a dynamic way. Green technology such as 100% green
recycling technology at Company X has provided the real mechanism for the potential creation
of zero waste society. For instance, the relooping fashion initiatives helped Company X and
other textiles companies to find new connections and collaboration partners and circular
business opportunities by exchanging information about new technologies and solutions with
regards to making recycled fabrics. This technology aspect and research and development at
Company X increased the co-operation between actors and business partners, facilitated the
knowledge sharing and green and clean technology transfer which helped reduce the cost of
the resource material and minimize the use of non-recyclable materials.
And the other implication is that eco innovation is also reflected on the organizational level as
well. Different public and private agencies and organizations and environmental agencies
provided the institutional standard, laws and regulations that also support the concept of
circular economy and Company X successfully implemented those policies and regulations in
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the operation of 100% recycled garment business and created a successful circular economy
business for others to emulate in near future. Also, the drivers of eco innovation at Company
X facilitates the integration triggering alternative ways of collective eco innovation such as
different actors and companies sharing services and other schemes as to how to collect the
textile waste materials, sorting out the textiles and reusing of the textiles in an effort to
maximize the value of resources and post-consumer textile wastes. Company X achieved this
organizational innovation by co-operating with other companies and industries, by involving
with projects such as relooping fashion initiatives and teleketju to test the spinning of the fibers
into yarn and manufacturing of the fabrics and clothing to increase the use of recycled
materials, thus producing durable, high quality recycled fabrics and clothing. Consequently,
through the promotion of the co-operation and interrelationship of companies and collective
collaboration. This intertwined relationship enabled Company X to create more circular system
that better utilizes the textile waste materials for longer time possible to close its loop.
Another implication is that, in terms of creating goods and services, government provided all
the necessary regulatory framework for circular economy business which also encourage the
awareness of social participation among different actors. Due to the replacement of the take-
make-dispose business model, Company X had to emphasize more on creating new products,
services and resources based on the circular economy business model. That’s why, eco
innovations at Company X ensures the designing of efficient garment product, quality and
durability of recycled garment. The cause and effect relationship between eco innovation and
circular economy is so prevalent that it has created competitive advantages for the company in
that circular economy consideration created lot of opportunity for long term positive business
differentiation, the implication of which is increased resource efficiency.
The adoption of circular economy concept and 100% recycled garment has enabled Company
X to achieve competitive advantages over its competitors, which corresponded with existing
literature for instance Porter and van der Linde (1995) argued that it is imperative to deem
whole product life cycle while making product and process design decision. They also argued
that green product and process aids the company to boost its competitive advantage by reducing
negative environmental impact. On all front of the eco-innovation, Company X has been
relatively successful in reducing negative environmental impact, thus creating new business
opportunities. For instance, Chen (2008) argued that companies can constantly create new
business opportunities and enhance competitive advantage by increasing their environmental
performance and corporate green image.
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Company X pioneered itself in the production of recycled fibers and cloths. Since it has adopted
closed loop ecosystem which is based on the efficient use of discarded textiles materials.
Therefore, as a natural progression, it had to implement new recycling technologies to come
up with 100% recycled garments. As a result, the company achieved greater competitive
advantages. A number of studies supported pure of textiles practical implementation of closed
looped ecosystem or circular economy concept. For instance, Young, (1991) argued that an
environmental innovation strategies is determined by how efficiently raw materials are used.
Porter and van der Linde (1995) agreed with Young on the aspect of resource efficiency
suggesting that prioritizing the productivity of the resources, change in the process and new
innovative products can earn competitive advantage over competitors. It helps firms to find
different ways of transforming waste into saleable products leading to more revenues (Porter
& van der Linde, 1996). This resources based economic outlook has helped Company X to
enhance its brand image which leads to enhanced business performance.
All of these motivating factors of eco innovation at Company X are deeply rooted in circular
economy concept, therefore, Company X has achieved great economic success and enhanced
its business performance by adopting closed loop production system. It has created shared
value by meeting its economic, societal and environmental objectives in a fashionable way.
This is something what Porter and Kramer, (2011) advocated, and that is, the principle of
creating shared value promotes the idea of economic value by addressing the challenges and
needs of the society, something which is reflected in case company’s visions for creating
sustainable and better world. Through stakeholder’s involvement, the company has been able
to address social needs that offers a huge potential for a variety of business, thus creating a
condition to create more business ideas, and to seek new potential market.
Through this collective supportive action and co-operation (Relooping Fashion initiatives and
Teleketju projects), such as sharing technology and information, the company has been able to
get a lucrative supplier network, which in turn create a dynamic society for business. It has
been able to establish new profitable/distribution channel which has essentially reduced the
resource use. By this dynamic collaboration with other stakeholders, the Company X achieved
resources efficiency through the minimization of textiles wastes, increased its know-how and
innovative capacities through research and development which gave them competitive edge.
For instance, Porter & Kramer (2011) is of the opinion that the cluster of collaborative network
enable firms to create more productivity, innovations and competitiveness for local business
and economy.
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6.1. Eco innovation leads to resource efficient circular economy
Company X has lead the effort in moving from linear business to circular economy business
through the adoption of closed loop production system that are deeply rooted in circular
economy concept. The transition towards circular economy brings significant opportunities in
creating new jobs which contributes to the sustainable economic growth for Company X.
Significant innovation effort such as development of new products, materials, and the design
of new business model is required in order for this transition to be fruitful. Also, this transition
requires system innovation that change the value chain supporting the idea of current product
and consumption pattern. This concept of innovation ‘change ‘and ‘transition’ in business and
social practice is directly connected to the idea of circular economy (O’ Brien, M et al., 2013:
p. 9).
Eco innovation is any kind of innovation that reduces the use of natural resources and lessens
the release of harmful substance during the whole product lifecycle (EIO 2010). That’s why,
eco innovation has the capacity to facilitates this transition to a circular economy business
model which in and of itself is an effort to transform the mainstream business model, alter the
way citizen engages with new products and services (ownership of the product, leasing and
sharing etc). This results in an improved system which offers value (for instance sustainable
cities, green mobility, smart energy system). Eco innovation in this way creates a condition for
the shift towards more sustainable production and consumption practice. This focus of eco
innovation in relation to circular economy is important because it enables the process of
change, circular economy model represent an economic system that can support future resource
efficiency society and economy. Eco innovation is causing the systemic process of change such
as new production and consumption system but during the transition towards circular economy,
it already is supported by the incremental change or evolution within the existing system such
as improved recycling technologies or material efficient manufacturing (O’ Brien, M et al.,
2013: p. 9).
If the theoretical underpinning on the role of eco innovation in transition towards circular
economy can be applied to the empirical evidence found from the case Company X, few
insights can be drawn. First of all, eco technological competencies such as 100% recycling
technologies, research & development and networking and collaboration were found to be the
most important drivers of eco innovation and those were in accordance with the principle of
circular economy. For instance, Company X implemented eco technology or 100% recycle
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technology in the production process which facilitated resource optimization by
remanufacturing and regenerating textile waste materials to make finer fiber and cloths and
provided superior customer experience. 100% recycling technologies falls under the category
of cleaner technologies. Cleaner technologies, demands lessening of pollution and waste and
significant changes in the entire production process and foster efficiency of production process
by reducing the consumption of materials and energy, thus enabling the firm’s productivity and
competitive advantage (Del Rio, 2005).
In addition, technology changes the economy. The reason being, technology is the prime driver
of change. Also, information and industrial technologies are changing at a rapid scale which
supports the closing the reverse loops. Therefore, there is already a technology solutions that
enables circular economy for instance, advanced materials, renewable energy, energy storage
technology that reduce the imbalance between demand and production of renewable energy
(Timmermans 2015: p. 23). Existing literature also the supports the Company X resource
optimization which can be related to circular economy concept. For instance, the efficient use
of materials and energy are also important driver for environmental process innovations (Green
et al., 1994; Rennings, 2000). Cleaner recycling technology or eco process innovation increases
the eco efficiency of the firm. The essence of the eco innovation efficiency depends on the
reduction of needed inputs (energy and material). Company X as SME achieved this eco
efficiency which corresponds with the principle of circular economy. Existing literature also
support this position for instance, according to Altham (2007), argued that SMEs preferring
cleaner production can transform their way of using recourses, operate the product output
through closed looped production or industrial symbiosis, thus increasing the overall eco-
efficiency of business operation.
R&D was considered to be another driver of eco innovation for Company X. Because it
facilitates the condition for scientific knowledge, innovation and creativity. The central theme
guiding the research and development at Pure was textile was circular economy. According to
Euratex (2004), Finnish and European textile industry lies in great scientific knowledge and
know-how, fashion and creativity and innovation. As a natural progression, being as SME,
Company X had to collaborate with others such as VTT, which is, a leading research and
technology company providing resource efficiency and circular economy solutions related to
textiles. VTT played a huge role in the development of technology based recycling method for
cotton. This kind of research and development co-operation essentially helped Company X to
increase the efficiency of textile waste materials in cyclic fashion. The other research and
development partner pure has textile has been involved with is the relooping fashion initiatives,
63
whose objective, is to create a model for closed looped ecosystem based on the principle of
circular economy, thus producing business opportunities and creates value for parties within
the value chain. Consequently, the case company increased its knowledge base and
technological competencies on modelling and practical implementation of post-consumer
textile recycling, thus processing and producing noble fibers and cloths. Through this joint
research and development projects, the case company and other parties involved facilitated the
delivery of the cloths and returning of used cloth from the consumer back to the cycle, thus
closing the loop. At each stage of the R&D initiatives, negative environmental impact was
reduced which is a direct result of environmental innovation. Horbach (2008) argued that
improvement of technological competences (knowledge capital) by R&D facilitates
environmental innovation.
Networking and collaboration was appeared to be another important driver of eco innovation
for pure waste in relation to circular economy. Knowledge is exchanged through collaboration
and networking. For instance, according to Wong (2013), knowledge sharing affects firms
achieving green requirement positively. Collaboration and potential networking with other
firms, institutions, authorities, research institutes is considered vital for adoption of eco
innovation (Cainelli et al.,2011; Klewitz & Hansen,2013;Petruzzelli et al., 2011). Through the
collaboration and networking with government organization, Universities, NGOs, Research
and development institutes such as VTT, Relooping fashion initiatives, teleketju projects, and
consultancy firms, Company X mitigated the technological problem, resulting in the reduction
of negative environmental impact of business activities.
This network and collaboration brought together different actors in cyclic manner that placed
environmental awareness at the top of their agenda. For instance, Teleketju project in which
the case company involved brought together end of life textiles collectors, sorters, operators
developing primary processing and automatized sorting, companies utilizing final products,
work centers arranging social work, waste centers, charity organization and municipalities
promoting the concept of textile recycling and circular reasoning that are rooted in circular
economy concept. Consequently, cutting age recycling process technology developed through
this collaboration enabled case company to produce unlimited recycling of cellulose based
fabric without the extension of any harmful chemicals or new materials, thus reducing the
negative impact on the environment. So the entire collaborative effort created a value chain
that restored the utility of the resources in each stage of the collaboration. And this closed
looped value chain manages the value of the materials, eliminates the waste and introduce a
completely new line of sustainable future designs (Relooping Fashion Initiative, 2016).
64
Company X achieved this from an economic point of view, Company X achieved greater
economic and financial success in that it achieved competitiveness domestically through the
eco efficiency across all dimensions such as the allocation of waste resources, efficient use of
the waste materials and efficient production of resources out of waste materials. Also, there is
demand for ecofriendly fashionable cloths as environmentally conscious customers are
increasingly looking for eco products. So it fulfilled the demand trend by utilizing depleting
waste materials. And on the other hand, resource cost increases because of supply side trend.
Due to the rising resource cost, Company X provide inceptives towards cost reduction of the
resources through the recycling of the waste materials.
From an environmental point of view, the case company reduced the negative consequence of
the business activity as it focused on the ecological design of its production process with less
impact on the environment. In terms of the social objective of the business, it had created more
opportunities for employment on national and international level, because, its main operation
is in India, thus contributing to the economic growth and wellbeing of people.
The bottom line is, dominant drivers of eco innovation and their role significantly reduced the
negative environmental impact helping to create more business opportunities, increase
productivity efficiency and diversity growth such as opening of new niche market and new
product(new fashionable ecofriendly cloths) and competitive advantage for Company X. That’s
why eco innovation drivers and their impact on the case company has been the byproduct of
systematic and critical thinking that acted as an enabler of circular economy. According to
Vence & Pereira (2018), this kind of transition to circular economy requires systemic change,
new knowledge, new technologies, new regulation, new instructions and new business model,
new financial rules and new consumption behavior. Although chairman of Company X stated
that they could not actualize 100% circular economy business. However, it achieved the
objective of circular economy to a certain extent in that it reduced resource consumption and
waste, maintain and to share the value of the waste materials over long period of time to end
life of waste. Eco innovation drivers such as recycling technology/new production process
played an important role as an enabler of circular economy. Of course, it has been largely
possible due to the favorable Finnish and common circular economy regulation in place.
Another enabler of circular economy has been possible due to the networking and
collaboration. Networking and collaboration as eco innovation driver facilitated the
collaborative and systemic thinking, co-operation, interaction among different actors and
synergies that are deeply rooted in the concept of circular economy. Another enabler is research
and development through which Company X developed its technological competencies such
65
as recycling technology and created clothing line that uses noble fiber. Through these kind of
eco innovations, Company X gained both economic and environmental benefits with
productive efficiency, increased production and diffusion plus creating new products
(fashionable recycled garments) and services.
All three factors such as technological competencies, R&D and technological competencies
acted as enabler of circular economy, resulting in the creation of shared value for Company X.
The company’s desire to make technological breakthrough such as 100% recycling technique
is facilitated through the principle of circular economy concept. Company X has been
successful in new systemic thinking in terms of bringing new solution to their business.
According to Becker (2017), circular economy concept carries with it the potential for creating
shared value, but requires radical and systemic changes in the current thinking model and
system.
Company X has been successful to a certain extent in circular economy business and it did that
through collaboration with stakeholders throughout the entire value chain. Consequently it
achieved resource efficiency (better utilization of textile waste), higher level of knowledge,
research and development and reduction of cost, productivity, innovations, competitiveness of
local businesses, and the reduction of the usage of the virgin material, elimination of the waste,
creation of new opportunities for more employment and business. New technological
breakthrough such as 100% recycling technology coupled with new circular economy insights,
Company X achieved economical sustainability as well as ecological sustainability. This
intertwined relationship between technology and circular economy aspect triggers a new
discourse which is techno-economic paradigm. A hypothetical conceptual model, which is the
representation of the relationship between eco innovation enablers and circular economy, has
been presented based on the empirical result of the case study.
66
Figure 9: The conceptual model of the relationship between eco innovation and circular economy
at Company X
67
6.2. Limitation
The research was conducted on single organization Company X. The study addressed the
concept of eco innovation drivers from circular economy perspective. Therefore, it was a sound
justification to find a company that has environmental concern. Company X is environmentally
focused company that has environmental awareness and activities. The study focused only on
one company in one industrial sector in one country. More research should be conducted on
more companies within textile industry to prove the hypothesis of the result derived from the
study. The result of the study and its research findings might not be applicable to other
industries. Hypothesis or conceptual model derived from the result need to be tested over and
over again to apply its generalization to other companies on international level.
6.3. Future research
The study emphasized on finding eco innovation drivers from circular economy perspective
and attempted to show potential relationship between eco innovation drivers and circular
economy which also opens up new areas of future research surrounding this topic. The study
was unique in that almost no was study was done on the drivers of eco innovation from circular
economy perspective. Therefore, the study opened up new possibilities for businesses to look
at the environmental sustainability in new light. My recommendation for future research would
be to further study the eco innovation drivers in various context across different industries and
how those relate to the circular economy. Also, more research should be done on the potential
relationship between eco innovation and circular economy that might contribute further for
companies to practice environmental sustainability. Also, more research can be carried out on
country specific drivers of eco innovation from circular economy perspective and finding out
necessary connection between eco innovation and circular economy. Few of these future
recommendation would be helpful in solving the current limitation of the study.
68
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8. APPENDIX
8.1. Interview questionnaire for respondents at Company X
Interview details:
• The name of the respondent:
• Gender:
• Job/position:
• Education:
• Interview place:
• The type of the interview: Open ended
Interview questionnaire:
1. What is your concept of eco innovation? Please tell a little bit of eco innovation
2. Could you please tell about eco innovation in your company? For instance why it is
important?
3. Why Company X starts to practice eco innovation?
4. What are the main drivers of eco innovation in your company?
5. What is circular economy?
6. Why do you think the companies should follow circular economy concept?
7. Could you please tell about how your implemented circular economy concept in your
business?
8. What is the relationship between eco innovation and circular economy in your
company?
81
9. What specific drivers of eco innovation can you relate to circular economy?
That’s all I have for my questions. Do you have more things to say?
➢ Interviewer: Md Aminul Islam 0456937115
➢ Thesis topic: The drivers of eco innovation. A circular economy perspective
➢ Thesis type: Master’s thesis of 30 ECTs credits
➢ Program: Innovation Management (Master of Science, Economics and Business
Administration)
➢ University: University of Eastern Finland
9. FIGURES
Figure 1 The closed-loop production system ........................... Error! Bookmark not defined.
Figure 2 the conceptual model of drivers of eco-innovation ... Error! Bookmark not defined.
Figure 3 Difference between linear and circular economy (RPS Ltd 2014)Error! Bookmark
not defined.
Figure 4 European Union’s waste hierarchy (Recyctec Holding AB 2016)Error! Bookmark
not defined.
Figure 5 Recovery & recycling closed loop (Lacy et al. 2015, 1338)Error! Bookmark not
defined.
Figure 6 Industrial symbiosis (United Nations Development Programme 2010)............. Error!
Bookmark not defined.
Figure 7 Four (technical) value cycles of a circular economy (Ellen MacArthur Foundation,
2017a). ..................................................................................... Error! Bookmark not defined.
Figure 8 Modified concept of drivers of eco innovation in relation to circular economy Error!
Bookmark not defined.
82
Figure 9 The conceptual model of the relationship of eco innovation and circular economy at
Company X .............................................................................. Error! Bookmark not defined.
10. TABLE
Table 1: General information of Company X .......................... Error! Bookmark not defined.
