Background of the study

In the global combat against climate change, resource depletion and biodiversity loss, one of the main focus areas nowadays are environmentally sound economic systems and sustainable logics of business. Spanning global (UN 2021), regional (EC 2021a;

Restuccia et al. 2021) and industry-specific policymaking, as well as ambitions of both academics and practitioners (Geissdoerfer et al. 2017), the sustainability megatrend im-plies significant changes for businesses’ value creation processes and customer require-ments. As the global economy undergoes this sustainability transition, it is critical for companies to understand how their customers perceive value in the renewing environ-ment to be able to create symbiotic links between environenviron-mental consciousness and profitable business. This study aims to fill an existing gap in understanding by taking customer value research to the modern sustainability-focused era of business, more spe-cifically that of circular economy (CE).

Circular economy is a commonly used roof concept encompassing approaches to tran-sition from an environmentally destructive ‘take-make-dispose’ linear economy to one that emphasizes mechanisms to close, slow, and narrow resource loops, thus enabling sustainable patterns of production and consumption (EMF 2013; Bocken et al. 2016;

Merli et al. 2018). CE has become a central concept in environmental policymaking (Ghisellini 2016; EC 2021b) and is frequently cited by companies to aid the communica-tion of their environmental responsibility strategies.

Even though CE research has become abundant in recent years and customer-per-ceived value (or shortly customer value) has been a hot topic in research for decades (Eggert et al. 2018; Zeithaml et al. 2020), the characteristics and formation of customer-perceived value from the perspective of CE research, considering circular business mod-els (CBMs) has still not been systematically tackled. Generally, only a few publications focusing on customer value perceptions in CE context can be found (such as Antikainen et al. 2018; Aarikka-Stenroos et al. 2021; van Boerdonk et al. 2021), but even these have limitations regarding methodology or the CBMs or markets investigated. In particular, the existing research on CE customer value in industrial B2B markets is closely nonexistent.

Importantly, there has not been any attempt to construct a new classification for cus-tomer-perceived value for the CE taking into account the features of circular business.

There is currently no comprehensive understanding of the customer value characteristics typical to CBMs, nor has there been sufficient research on the big-picture changes to the value formation that the transformation from a linear to a circular economy might set in motion. Some papers have studied consumer acceptance or certain drivers in specific CBMs (e.g. Hazen et al. 2017a; Camacho-Otero et al. 2019; Kuah & Wang 2020), but a holistic understanding of the value formation is missing, especially so regarding the in-dustrial scale B2B market. Aarikka-Stenroos et al. (2021) have recently made a first ex-ploration into the topic, however with a mixed B2B/B2C focus and by articulating the value through a model originally developed in linear business settings.

In general, there is a clear shortage of research from the customer or consumer perspec-tive in the context of CE. The research is currently heavily focused on the point of view of the supplier or provider. Regarding value, this shows as a research emphasis on how the providers configure value propositions (e.g. Kristensen & Remmen 2019; Ranta et al. 2020), instead of studying how those propositions are received by customers. A gap also remains in comparing the customer perspectives and value formation of distinct major CBM types with each other. Neither has there been dyadic research conducted on provider companies’ understanding of their customers’ value perceptions in the CE con-text. For companies to understand what elements of the business and their offering are deemed crucial by their customers in circular business environments, more research fo-cusing on the customer’s perspective is urgently needed.

As it has been shown that environmental impact alone is not a sufficient pillar for a prof-itable CBM (Antikainen et al. 2018), industrial companies need to gain deeper under-standing into how value manifests for their customers. This is crucial to obtain actionable insights, embed these into their CBMs and enhance their value capture potential. In a bigger scale, this would enable a deeper integration of economic and sustainability value, create incentives to bring sustainability in a strategically central role in industrial compa-nies and therefore accelerate the transition into a greener economy.

This study’s central purpose is to start building a systematic understanding of customer-perceived value in industrial scale CBMs with a focused empirical cross-industry case study. The aim is to address and compare most widely used approaches to carry out circular business, employing a strong customer perspective while also enabling compar-ison of perspectives with dyadic (providers + customers) data collection. The rest of this subchapter reviews principles and terminology of CE to build a strong base for the con-struction of the research design.

The circular economy can be implemented in various ways, each of which have their unique consequences for the customers’ processes and experiences, thus affecting how value is perceived. There have been various classifications of the principles of circular economy (Kirchherr et al. 2017; Prieto-Sandoval et al. 2018), going into different degrees of detail. The most commonly used, simple definition is to distinguish between reducing, reusing, and recycling, dubbed 3R principles (employed by e.g. Su et al. 2013; Ghisellini et al. 2016; Ranta et al. 2018).

According to the review by Ghisellini et al. (2016), reducing refers to minimizing use of resources and creation of waste through e.g. energy and material efficiency, dematerial-ization and design practices for minimum material usage. Reusing implies recurrent us-age of materials in product or component level for their original use purpose, which ac-cording to EMF & McKinsey (2015) can be achieved for example via repairs, upgrades, sharing, or service configurations. Recycling represents the recovery of materials in raw material level through various reprocessing techniques, which allows for utilization of waste streams and innovation regarding recycled and renewable products. (Ghisellini et al. 2016)

The 3R framework has been modified and expanded for some authors, up to a 9R frame-work by Potting et al. (2017). Also, a 4R terminology accommodating ‘recover’ as the fourth dimension is frequently cited by policies, but the threefold classification is signifi-cantly more popular (Kirchherr et al. 2017). Many studies, such as Bocken et al. (2016) use the terminology of narrowing, slowing, and closing resource loops in place of the 3R principles, essentially addressing the same concepts, respectively.

The reviewed classifications also act as a basis for the categorization of circular business models (CBMs). Business model describes the way a company generates value for its customers while ensuring profitability (Teece 2010), containing the elements of the busi-ness logic and their relationships (Osterwalder et al. 2005). The circular economy prin-ciples for preserving resources mean a transformation on these ways in which compa-nies propose, create & deliver, and capture value. In recent years, CBMs have become a popular research topic and various literature reviews addressing CBMs from a spec-trum of perspectives have emerged (e.g. Lewandowski 2016; Urbinati et al. 2017; Cen-tobelli et al. 2020). Some of the most well-known typologies of CBM types are illustrated in Table 1, mapping their rough placements in the 3R framework.

Table 1 CBM types and 3R framework

It is rather easy to see that CBM innovation is highly focused around reuse and recycle principles. There are a couple of potential explanations to the absence of identified CBMs for the reduce-principle. Firstly, the reducing principle, dealing with material and energy efficiency, can be successfully implemented in a linear economy as well (Bocken et al.

2016). The issues relevant to the reducing principle are largely tackled in other literature streams, such as that of lean production, even though the principle can powerfully con-tribute to the targets of CE when supported by a holistic approach. Secondly, there might be a lack of ideas for concrete business models utilizing this principle because many of its applications, such as lowered total production, are not economically attractive for for-profit companies (Zink & Geyer 2017).

Inside the reuse-based realm of CBMs, there is an important CBM group that has started gaining significant attention. That group refers to those CBMs in which the ownership of a product is no more sold to customer. What is sold is rather the right to use and to obtain the service the product provides, or in a more advanced sense, the performance or end result desired by the customer (Lewandowski 2016). These CBMs in which ownership is maintained by the service provider, dubbed access and performance model by Bocken et al. (2016), are deemed crucial for a successful CE transformation by many authors (e.g. Tukker 2015; Urbinati et al. 2017; da Costa Fernandez et al. 2020). These CBMs are sometimes called product-service-systems (PSSs), but PSS more commonly refers in general to combinations of tangible products and intangible services (Tukker &

Tischner 2006; Martinsuo et al. 2020). Thus, in this study they are referred to as reuse-based CBMs in which ownership is retained (by the provider).

All of the CBM types in Table 1 entail different ways to managing value. Companies must decide how to propose, create, and deliver customer-perceived value, whose amount then dictates the potential of value capture for the company itself. Teece (2010) states that business model essentially represents management’s hypothesis on customer needs, what customers value and how to best organize to meet those needs in a profit-able way. To support the CE transformation, research-based evidence of customer per-ceptions is much needed to improve the quality of those management hypotheses.