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Critical factors for a successful

cradle2cradle strategy

Search for generally applicable success factors

Joost Walterbos 10009493 Bachelor Thesis

Future Planet Studies – Business Administration Mentor Dhr. Drs. E. Dirksen

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Abstract

In this research several critical factors for a successful cradle2cradle design strategy for companies are researched. Using literature research, five factors are identified that are possibly critical for cradle2cradle activities being a success. These factors are subsequently examined using qualitative research. Five key informants involved in companies that use or have used cradle2cradle are interviewed. The term critical success factors is used and adapted to fit the scope of this research, as the goal is to identify critical factors for success of a cradle2cradle strategy. All proposed factors are confirmed and the research provides subsequent factors that are found, and wherefore further research is recommended.

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Table of Contents

1. Introduction ... 4

2. Methodology ... 5

3. Description of definitions ... 7

Cradle2Cradle strategy ... 7

Critical Success Factors ... 9

4. Propositions ... 11

5. Results ... 15

6. Conclusions ... 20

7. Discussion ... 22

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1. Introduction

The awareness of society about the effects of human activities on our planet earth is increasing. This trend is visible on all levels in society; the governmental level is discussing quotas, rules and laws even on global level (e.g. United Nations, 2014). While civilians demonstrate during these climate summits all over the world in so called “climate marches”1 (e.g. Dastagir, 2014), the visible and tangible evidence of the negative effects of the actions of mankind become apparent like unliveable cities due to smog, and increasing rates of melting polar ice (e.g. ANP, 2014; Radford, 2014). The awareness leads to an increase in more sustainable activities. Of the Dutch consumers 60% believes the responsibility for more sustainable production lies at companies and the government, as they have the knowledge and power to act. The consumers note that they have the power to give a push in the right direction, but the real action should occur at business and governmental level (Mulder & Scholtz, 2014). Companies should see opportunities instead of restrictions in their business activities, as sustainable production does result in improved company performance and increased competitiveness of nations (Montalvo & Kemp, 2008). This current drive towards a more sustainable world makes companies seek alternative strategies in production methods. Sustainable production is evolving and new concepts of strategies emerge through the years. Many of these strategies are based on nature, e.g. Bio-mimicry (Biomimicry Institute, 2014), Natural Capitalism (Lovins, 1999) or Cradle2Cradle (Braungart & McDonough, 2007). These design strategies for production have the potential to enable a more sustainable world where in the ideal situation waste does not exist anymore, resources are infinite, pollution is not present etc. However, as well known in the world of business, strategies that change a company’s business-as-usual are not typically desired (Grant, 2010, Chapter 8). This aversion towards change is caused by multiple factors like, among others, uncertainty (Nadler & Tushman, 1994), , limited search, and organizational routines (Grant, 2010, chapter 8). Cradle2cradle is a relatively new concept, and there are not many companies using this concept, and walking into the unknown is not appealing for business managers. However, the opportunities that arise from working with the cradle2cradle concepts are distinctively endless. With the exploration of some factors critical to a success, more managers are hopefully inclined to introduce cradle2cradle, or another sustainable strategy. This research attempts to define some key factors that are critical to successful cradle2cradle activities to diminish uncertainty and give clearness about unknown factors that are important for business leaders when implementing the C2C strategy in their company. The research question is formulated as following:

What are critical succes factors for making a cradle2cradle strategy a success for companies?

1

In the 4th week of September 2014, the United Nations held another earth summit in New York City. In this week all over the world public held massive demonstrations called “people’s climate march”. In New York City alone more than 300.000 protesters joined the march.

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2. Methodology

Two research methods are applied in this paper, first literature research is performed to create a theoretical framework and to identify propositions. Second a qualitative research is conducted where the theoretical framework is used to test the propositions, finding critical factors to success in cradle2cradle strategies.

The literature research creates a theoretical framework about critical success factors and the use of this concept in this research. The definition of critical success factors is slightly adapted to fit the scope and the goal of this research. The scope is narrowed, as most definitions of critical success factors relate to competitive strategies, in contrary to cradle2cradle, which is a design strategy for products and processes. Furthermore, the literature research provides propositions that are presented as possible critical success factors, main literature source is the book written by the founders of the cradle2cradle strategy, Michael Braungart and William McDonough. Based on the literature research qualitative research is conducted and the results from the qualitative research are used to test the proposed critical success factors. The research of companies’ critical success factors is possible by executing qualitative research in the form of interviews with key informants (Rockart, 1979; Grunert & Ellegaart, 1992). The key informants are company leaders or employees that coordinated, or at least contributed to, the implementation and/or execution of the C2C strategy in a company. The goal of the interviews is thus to test the propositions and examine if there exist more critical success factors, Those factors that are not found in the literature research or excluded due to limited scope and where possibly subsequently research is appealing, are discussed in the discussion. All interviews are face-to-face, on the location of the informants. The basic structure of the interviews is the interview guide, as defined by Patton (2002, Chapter 3). A checklist will be used to ensure no aspect is missed while the individual perspectives of the informants are maintained. Afterwards the data gathered from the interviews is analysed and used to compare with the propositions and to present the findings of additional factors in the discussion.

The geographical scope of this bachelor thesis lies within the Netherlands due to convenience of e.g. travelling and restrictions with non face-to-face interviews.

Potential interviewees are searched on the Internet, some of the companies are noticed in the introduction of the Dutch version of the cradle2cradle book, written by Braungart and McDonaugh (p. 24, 2007).

The following people are interviewed:

Bas Gehlen, who is managing director at Van Houtum, located in Swalmen, Limburg. Van Houtum is a company producing toilet paper and sustainable solutions for toilet hygiene. At the moment, they produce the most environmental friendly toilet paper in the world based on the cradle2cradle principles. Circa 200 people are employed by the company with a turnover around 60 million euros annually, producing 42.000 tonnes of paper. The assortment of the company consists of a ‘normal’ product line and the sustainable cradle2cradle product line, which is entirely recyclable. Some examples of the characteristics of the crade2cradle product line are the toilet paper

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that is biologically degradable in the sewer system, the soap for washing hands is degradable as well, while the soap containers are fully recyclable (van Houtum, 2014).

Chris Reutelingsperger is manager and co-founder of Niaga, which entered a joint venture with DSM. Reutelingsperger and his colleagues invented an alternative production process to produce carpet consisting of mono-material. Because the carpet consists of a mono-material, sustainable carpet recycling based on cradle2cradle is possible, as the material stays ‘pure’, hence not mixed with other materials. The production process is available on industrial scale and Niaga sells this production technique to carpet manufacturers enabling the carpet industry to close their materials loop. DSM-Niaga has a demo facility in Zwolle, with an annual capacity of 3 million m2 (DSM-Niaga, 2014). The production technique Niaga created is based on cradle2cradle, however Niaga has no certification.

Jeroen Hoogveld is project advisor for Koninklijke Mosa, a tile manufacturing company. Mosa employs circa 560 people producing nearly 7 million m2 tiles per year with an annual turnover of around 110 million euros. Mosa has an assortment partly consisting of cradle2cradle-based tiles. They have plans for building a new factory that is totally cradle2cradle, and moving towards totally recyclable tiles is an on-going process. Mosa is bearer of the cradle2cradle silver certificate (Hoogveld, 2014; Koninklijke Mosa, 2014).

Piet Looijen is product line manager linoleum and service for Forbo Flooring Systems located in Assendelft. Forbo obtained a cradle2cradle certification, however they let it expire in 2013 due to the fact it did not add value to the company and its production processes. Forbo flooring uses marmoleum that is typically a sustainable material, furthermore they use the life cycle assessment method in their company for years. This path dependency created a company culture of measuring and improving making a cradle2cradle certification pointless. However, the production process of marmoleum for the product linoleum is comparable with the cradle2cradle philosophy. Forbo flooring has production sites in 6 countries employing 3.030 people, with annual net sales of circa 730 million euros in 2013 (Looijen, 2014; Forbo Group, 2014; Forbo Flooring NL, 2014).

Eric Logtens is managing director for W-Solve who provides operational lease for office furniture. W-solve provides customers with the service a product delivers, in contrast to selling the product itself. This cradle2cradle based service model provides circular product flows. HME import agency, manufacturer of cradle2cradle certified office chairs, enrolled in cooperation with C2C Community Limburg for the public tender to supply the interior for the C2C ExpoLAB. This C2C ExpoLAB led to the establishment of W-solve (W-Solve, 2014). Annual turnover and amount of employees are unknown.

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3. Description of definitions

In this section the concept of cradle2cradle is explained firstly. The explanation is mainly according to the book written by the founders of the cradle2cradle concept, Michael Braungart and William McDonaugh. Secondly, the definition of critical success factors is discussed, and slightly redefined to fit the scope of this research. The redefined term of critical success factors forms the theoretical framework of this research.

Cradle2Cradle strategy

Cradle2Cradle (hereinafter C2C) is a sustainable strategy for the design of products and processes for companies formed by Braungart and McDonaugh (2007), based on circular material flows. It is a practical expression of the eco-effectiveness theory, which is a revised concept based on efficiency. The distinction between eco-efficiency and eco-effectiveness is of great importance. Eco- eco-efficiency is achieved by the continuous reduction of negative consequences of a company’s activities, wherein the reduction of waste, pollution, and raw materials are the main aspects. So, with eco-efficiency companies attempt to achieve zero waste, zero physical resources and zero impact, which is known as the triple bottom line strategy (Braungart, McDonough, & Bollinger, 2007). As a result of this continuous reduction, eco-efficiency reduces costs of pollution, waste, and raw materials and diminishes the negative effects on the environment. Further, the reduction of costs is the main driver for companies to use eco-efficiency. In short, with eco-efficiency it is possible to produce more from less, leading to lower costs (DeSimone & Popoff, 2000). The concept of eco-efficiency assumes that material flows are linear, starting with the extraction of a raw material towards the disposal of the material as waste after it is consumed, in other words from cradle to grave. The search for zero waste, zero resources and zero impact is therefore doomed to failure if the cradle-to-grave view is maintained. It is impossible to reach a goal of zero physical resources, simply because of the need of resources for production and it is impossible to reach zero waste when the design of the product is based on cradle-to-grave material flows, where the materials in the product are disposed of after consumption. So, eventually zero waste and zero resources are impossible when using the cradle-to-grave view (Braungart & McDonough, 2007).

In the concept of eco-effectiveness, strategies are used to create healthy, cradle-to-cradle flow material metabolisms. The term metabolism refers to the metabolism of living organisms (Braungart, McDonough, & Bollinger, 2007). C2C strategy is a practical expression of eco-effectiveness and results in the prevention of materials ending up as waste because waste is seen as food. After every user cycle, a material is recycled, however this is defined as ‘upcycling’ where the quality of the material is maintained or enhanced. In the current form of recycling related to the eco-efficiency viewpoint, by Braungart and McDonough (2007) defined as ‘downcycling’, material quality after a life cycle is typically downgraded. This leads to the inevitable end of

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disposing the material when the remaining ‘quality’ is so low it makes the material useless. In contrary to the triple bottom line in eco-efficiency, the term triple top line is introduced for eco-effectiveness. Triple top line is defined as recognizing the business value of environmental and social capital, promoting potential synergies between economic, social and environmental business aims (Braungart, McDonough, & Bollinger, 2007).

The C2C material flow is typically cyclical, in a never-ending flow where waste is always used as new input. Braungart and McDonough (2007) illustrate the closed loop material flows as two cycles, wherein materials are divided into a technical cycle and a biological cycle. In the technical cycle, materials exist of non-natural, human produced resources and stay in the closed technical loop retaining their quality and therefore retaining valuable nutrients for the industry. So ‘waste’ from the technical cycle remains food for the industry. An important aspect in retaining the quality of a material is the prevention of mixing materials, which makes the use of mono-material required. When materials are mixed, quality decreases and the process of separation is in most cases too difficult. Typically, in the technical cycle materials have to return to the manufacturer and therefore are not consumed, but instead the service of the material is rendered to the customer. After the service is delivered the material returns and is up-cycled in a new product. In the biological loop materials typically are biologically degradable. In this cycle the consumption of a material is existent as consumers can dispose the materials in the biological environment. In this case, ‘waste’ is used as food for the biological environment. To preserve both cycles, it is mandatory that the cycles do not contaminate each other. Especially technical nutrients that end up in the biological cycle can result in environmental and ecological problems. Some critics debate the simplicity of this model and the separation of the two cycles in a world economy. Some state the spatially separation of consumption and production locations over the world can result in unforeseen environmental consequences (e.g. Goodstein & Arnold, 1985). Others (e.g. Reay, McCool and Withell, 2011) see difficulties in determining whether or not biodegradable material should be considered as waste due to the complexity, interrelatedness, time lags and uncertainty between ecosystems. Further research is necessary to find out about the effects on the environment, and a paradigm shift to more locally production-consumption possibly prevents many problems, and is likely to be necessary.

So, eco-effectiveness moves beyond reduction of materials, waste and pollution and seeks product and process designs that maintain, or enhance the quality of materials through multiple user cycles (Braungart, McDonough, & Bollinger, 2007). C2C is a design strategy for product and process design which takes the concept of eco-effectiveness as main pillar. In their paper and their book, Braungart and McDonough (2007) illustrate a five-step model how a C2C strategy is implemented. This model starts with the elimination of undesirable substances followed by the search for potential alternatives and ultimately results in the reinvention of products and processes. Important in the C2C design is that the product optimally fulfils the needs

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it originally had, and simultaneously supports ecological and social systems (Braungart, McDonough, & Bollinger, 2007). Additionally to the 5-step plan, the authors present five leading principles that support a successful implementation of a C2C strategy in companies.

Another important aspect in C2C is the toxicity of materials. However many materials are known to contribute to a wide range of health problems and many more materials are suspected to be toxic, these materials are used in every day products. The application of toxic materials is allowed under the conditions that the material does not have impact on the consumer and it is retained in the closed technical loop. If it is impossible to use the toxic material safely and sustainable, C2C strategy attempts to eliminate the toxic materials in the products and the production processes. The elimination of these materials is a difficult task, as replacements have to be identified and analysed. Total reconfiguration of the entire product or process may be necessary to eliminate toxicities and for this process knowledge and creativity are necessary. About many materials health consequences are unknown, however, existing knowledge and common sense have already proven to be able to create healthy C2C products (Braungart, McDonough, & Bollinger, 2007).

Concluding, C2C is a design strategy that uses circular material flow to enable production processes and products that have a positive influence on the environment, ecology and society.

Critical Success Factors

Daniel (1961) is the first who described the concept of success factors to draw attention to the information managers actually need to support their functions. He states that managers have to be selective in the information they receive, and focus solely on success factors. Main reason for this concept is the cognitive limitation of managers in relation to the enormous amount of information they have to process in running an organization. One example of such limitation, as described by Mintzberg, Ahlstrand, & Lampel (2003), is the subjection of the input of information to multiple biases of managers of all levels, before it is piled up and presented to the general manager. They conclude that general managers become captives of their information processing organizations, due to the fact that the maximum information they can process individually is exceeded.

Rockart (1979) expands this concept to the critical success factor method (hereinafter CSF), which focuses on individual managers and their current information needs. He states that CSFs are the limited number of areas in which satisfying results are necessary to lead to successful competitive performance for the company. These are the areas where things must go right, and if performance in these areas is inadequate the organization efforts will be less than desired. Therefore CSFs should receive constant and careful attention of the managers.

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Rockart (1979) further notes that CSFs support the attainment of organizational goals, which represent the end points an organization hopes to reach. Subsequently, a company uses a strategy as an alignment to achieve its goals and therefore the strategy forms the background for a company’s CSFs (Grunert & Ellegaart, 1992).

CSFs generally are not similar between companies, not even between companies in the same industry. As Rockart (1979) states: “CSFs differ from company to company and from manager to manager” (p. 86). Antony, Dearden and Vancil (as cited in Rockart, 1972) isolated four prime sources of CSFs besides ones managerial function. Firstly the structure of the industry, every industry has some general set of CSFs that should be taken into account. Secondly, the competitive strategy, industry position and the geographic location are a prime source for CSFs. A company’s current and historical strategy, whether it is an industry leader or follower and the geographic location can result in different CSFs between companies within the same industry. Thirdly, environmental factors like Gross Domestic Product (GDP), economic growth, political change and population growth are a prime source for CSFs. And finally temporal factors, which are factors that are significantly important for a particular period of time, however normally these factors are in good shape. Furthermore Rockart (1979) notes that besides differing between companies, CSFs differ between managers within a company as well.

So, CSFs differ between managers, companies and industries, however general CSFs are likely to exist between companies that adapt a C2C strategy. Most of the CSFs of a particular company as a whole will differ from another company within the same industry, yet it is likely that the CSFs specifically for the C2C design strategy of companies contain similarities. Firstly, the implementation of C2C needs change management, no matter what company. So all companies implementing C2C have the same temporal condition of change. Second, C2C is typically a design strategy, and only a part of a company’s overall business strategy. It contributes to the business strategy of different companies in more or less the same way, particularly in the design of products and processes and therefore it is likely that especially the first and the second aforementioned prime sources of CSF are inapplicable for C2C activities as these sources are for entire companies. Thirdly, the implementation of C2C has the same goal within different companies and specific guidelines and the five-step model for implementing C2C results in generally the same process of implementation. According to these general observations broadly defined CSFs are possible to exist between different companies applying C2C activities in their business. Due to the fact that these CSFs are broadly defined the implementation between different companies needs to be specified to the business environment the company is positioned in.

Johnson, Scholes & Whittington (2008) define CSFs as “those product features that are particularly valued by a group of customers and, therefore where the organization must excel to outperform competition” (p. 79). In this research the goal is to explore what success factors of C2C design strategy are, so the “product features” in the

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mentioned definition are translated into features that support the achievement of a successful C2C strategy. Because these features must ensure a successful C2C strategy, they are “valued to ensure a successful C2C strategy”. The goal of implementing a C2C strategy is to achieve the triple top line, which begins with recognition of the inherent business value of natural and social capital, and promotes a celebration of the potential synergies amongst economic, environmental and social business aims (Braungart, McDonough, & Bollinger, 2007). So, the adjusted definition of CSFs for this research is as following:

Those features that are particularly valued in creating and maintaining a successful C2C design strategy, therefore where the organization must excel to achieve the triple top line.

4. Propositions

In this part the five-step action plan provided by Braungart and McDonough (2007) is shortly explained and based on this action plan, five leading principles, and other literature the propositions are presented.

Braungart and McDonough regard the fact that it is almost impossible and undesirable to abolish long used manners of production, design and decision-making. The transformation from a traditional system to completely new methods of production is likely to be confusing for all employees, from design to manufacturing. However, when the company as a whole is committed to implement eco-effective principles, radical changes are possible as Braungart & McDonough (2007) witnessed multiple times.

Teoh (as cited in: Bakker, Wever, Teoh, & De Clerq, 2010) notices positive effects on the behaviour of people in the C2C case, as the visionary message of C2C seems to work well on designers and they start to challenge assumptions by questioning the sustainability of the existing business model.

Commitment of the entire company, internal or external, seems to be needed in order to implement a successful C2C strategy. As described later, the complexity of materials and other relevant aspects of C2C require absolute commitment as a CSF in implementing this strategy. Creating commitment requires strong leadership, and especially the communication of a vision plays a vital role in creating commitment (Nadler & Tushman, 1994; Podsakoff, MacKenzie, & Bommer, 1996). In their book, Braungart and McDonough (2007) note the necessity of leadership several times: “Employees on the floor need such a clear vision from the top management, especially when they encounter resistance within the company.” (e.g. p. 223). Furthermore, as noted by Bakker et al. (2010) every single person in the company has to be committed to the C2C vision to ensure common alignment. For example, designers can decide to use certain materials and the material purchasers will select other materials because these are cheaper or more easily available. This will result in

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unsuccessful C2C activities, and is prevented by the creation of commitment to the same C2C goal throughout the entire company.

So, the first proposition is:

Proposition 1: Strong leadership is critical in creating commitment for a

successful implementation of C2C, particularly communication skills play a vital role.

The five-step plan defined by Braungart and McDonough is a stepwise strategy to realize the transition to eco-effectiveness at production level:

Step 1: Free of…

The first step is to exclude the most dangerous substances from the process and product. These are substances of which is known that they have harmful effects on people and/or the environment, some examples are mercury, cadmium and lead (Braungart, McDonough, & Bollinger, 2007). However, many products, for example an automobile, contain thousands of different materials of which only a few is known what effects they have. So, in this first step only the most undesirable substances are excluded and it appears that knowledge about every material in the product is needed, note that this fact will reappear later.

Step 2: Personal preferences

The next step is to make educated choices about which substances should be included. The necessity of knowledge of materials and their effects reappears. Braungart & McDonough advocate making decisions about what chemicals and materials to include in the product should be based on personal preferences with the best available information. They acknowledge the enormous amount of information a designer does not have, but advocate to focus on the information the designer does have. They conclude that the first step to bigger eco-effectiveness is the fact that someone thinks about the facts and gives a preference.

Step 3: The passive positive list

The third step includes the systematic assessment of every ingredient to classify it according to its toxicological and eco-toxicological characteristics. The prime capability is the flow of an ingredient through the biological or technical metabolism. The criteria for the examination of products for consumption, those ingredients in the biological cycle are different to the other cycle. Toxicity, for example, is more important in the biological metabolism. For the service products in the technical cycle the same process of assessment is applied, however the criteria are slightly different.

Step 4: The active positive list

In this fourth step the transition from “less bad” to “good” is visible. It includes the optimization of the passive positive list to the point until each ingredient is positively defined as a biological or technical nutrient. Whereas step 3 establishes knowledge of the degree to which each component in a product needs to be optimized, step 4 implements this optimization to the fullest degree. This step is achieved whenever a product’s materials all have been defined as biological or technical nutrients.

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In these first four of the five steps to eco-effectiveness it becomes apparent that knowledge is necessary about the materials used in the old products and the potential alternatives from step 2, 3 and 4. The next proposition does not account for every company; only companies that have suppliers for resources or parts, as they will need reliable information about the ingredient in these supplied goods. Note that all interviewed companies are companies with suppliers. If their supplier is not willing to hand over this information, then a company will need to search for a solution before enabling a reliable C2C product. So, the second proposition is:

Proposition 2: Influential relationship with suppliers is a CSF for successful

C2C.

Step 5: Reinvention

The last step involves the reinvention of the relationship of the product with the customer. There is no absolute end point in this step as innovation can also continue and the results can yield a totally new product. This reinvention addresses the interconnected nature of ecological, social and economic systems by pushing the idea of the biological and technical metabolisms beyond the boundaries of the current form of products and services. In this concept the perspective on products shifts to the service they provide and the needs they fulfil for customers, and social and ecological systems.

So, the customer does not buy the product, only the service the product delivers before returning the product itself to the manufacturer when the service is delivered. For this paradigm shift reverse logistics are necessary. So, when a product is used and the consumer does not need it anymore, three situations can occur. First, a simple product within the biological cycle can be discarded and will assimilate in the biological cycle. Second, simple technical products with only technical ingredients need reverse logistics in order to stay within the technical cycle. This reverse logistics has to make sure the ingredient is transported to a location where it is re-used as a resource. Finally, a third category of product exists that is more complex. These products consist of multiple ingredients from both cycles and need to be disassembled before the ingredients can return in the cycles. For the latter two of the products, reverse logistics are necessary to ensure the technical nutrients return from consumer to manufacturer enabling the technical loop to be closed. Therefore, the third proposition is the necessity of reverse logistics to create a successful C2C activity:

Proposition 3: Proper regulation of reverse logistics is a CSF for a

successful C2C.

As Braungart and McDonough note in their book (2007): “The path of transformation to an eco-effective vision is not without bumps. In a variety of directions a lot of time, effort, money and creativity are necessary.” (p. 221). They present five leading principles from which they believe to increase chances of successful C2C for a company:

1. Make your intentions clear. This principle is to create commitment under the

employees and customers, and therefore the responsibility of a leader that is accounted for under proposition 1.

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2. Recover. Goal of this principle is to create products and processes that contribute to

the recovery of an environment, which is achieved by creating innovative ways of the design.

3. Be prepared to innovate. Optimizing a current product is not always the best

solution and therefore total reconfiguration of a product may be necessary.

4. Understand the process of learning and prepare for it. Change is difficult and

confusing, and openness to learning is important in this process.

5. Carry intergenerational responsibility. Everyone should take the effects of their

actions in account, because every generation has the right to live under the same circumstances.

To enable the second principle, products and processes need radical innovation to enable the negative side effects transformed in positive effects, hence recovering the environment. The third principle says to prepare for innovation, so it seems that innovation of products and processes are an important activity within C2C. Innovation is required in the five-step plan as described earlier, in particular in the final step after reinvention, where there is no absolute end goal. Concluding from this, innovation is seen as a critical activity in C2C. People, facilities, information and time are required resources for innovation (Grant, 2010, Chapter 9). The interpretation of these resources for C2C is as following: first people, the employees throughout the company and the knowledge they posses. Second, facilities are the tangible resources of a company. Third, information about the materials and processes of supplying companies. And finally, time is represented in resources, as time is a critical aspect required for innovation. Besides these resources as presented by Grant (2010), in addition capital is a primary need for companies to be able to run activities. However, this resource is not included in the proposition due to the fact that all companies need capital to run activities, and however it is critical to be successful, it is so in general and not specifically for companies that adopt a C2C strategy. So, the fourth proposition is:

Proposition 4: People, facilities, information, and time are required

resources for innovation and have to be available to enable successful C2C activities.

Grant (2010) further states that these resources are required, however there is no predetermined relationship between R&D input and innovation output. The productivity of R&D depends critically on the organizational conditions that foster innovation. Furthermore, he describes a critical distinction between innovation and invention, which are both important in the final step of the five-step plan presented by Braungart and McDonough. Step 5 begins with the reinvention of a product or a process, wherefore invention is typically a necessity. After reinvention there is no ending point, and innovation ensure the continuous improvement of the products and/or processes.

Grant (2010, Chapter 9) defines the organizational characteristics for innovating organizations as flat, non-hierarchical structures, with task oriented teams and fuzzy

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organizational boundaries. The key to successful innovation is in integrating creativity and technological expertise with capabilities in production, marketing, finance, distribution, and customer supply. Tension between the operating and the innovating part of a company is inevitable, as the operating part prefers to retain well-known routines. Numerous initiatives are possible in enabling innovation, and strong management is necessary to ensure the right decisions and elaboration of these decisions (Grant, 2010, Chapter 9). Therefore, innovation depends on strong leadership, which is already presented under proposition one.

Secondly, invention depends on creativity according to Grant (2010). Creativity requires knowledge and imagination and is typically an individual act. However, it can be stimulated by human interaction and therefore partly managed with strong leadership. So besides strong leadership, the innovation process requires a certain human capital that is characterized by individuals with a high level of creativity. So, the final proposition is:

Proposition 5: The presence of creativity in the human capital is a CSF for

the creation of C2C products or processes.

5. Results

In this part the results of the qualitative research are presented and the propositions are accepted or rejected. Subsequently, relevant complementary results are presented.

All interviewees agreed on the fact that strong leadership was essential in a C2C strategy. This is a rather logically reaction as every company will need strong leadership, however the fact that C2C is not a very common strategy, some particular leadership skills came forward. Despite that C2C is uncommon, the clear description of the concept, strengthened with the guidelines and a 5-step plan helps in translating it to business activities (Gehlen, 2014). Furthermore, there is a substantial difference in the style of managing the businesses between the interviewees, which was expected. First, every interviewee notes the use of goals and objectives in his company. The interpretation and the use of the goals differed. Some note the condition of flexibility in the goals in order to adapt to changes (Logtens, 2014; Reutelingsperger, 2014), others applied more static goals to retain to (Gehlen, 2014; Hoogveld, 2014) or the use of specific goals for different parts of the organization (Looijen, 2014). Logtens (2014) specifically noted the use of some key concepts which guided the company, with a flexibility of the interpretation of these concepts and therefore flexibility in the business plan. The translation of the C2C strategy requires the ability to tell a comprehensible story to the employees (Reutelingsperger, 2014; Hoogveld, 2014), and, if necessary, adapted to the level understanding of the employee (Gehlen, 2014; Looijen, 2014). As Hoogveld (2014) states: “To everyone in the company a certain vision is explained about C2C and for one it is a simpler version than for the other, so you can ensure the commitment of everybody”. Hence, managers will not receive the same story as employees on the work floor. Another returning aspect was the enthusiasm of a manager in its work, which resulted in

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committed employees (Hoogveld, 2014; Looijen, 2014). Looijen (2014) states that the commitment to C2C in his company lacked because it created ambiguity as they use Life Cycle Analysis since a long time and the C2C certificate did not add anything to their production processes and products. This lack of commitment contributed to the decision of expiring the C2C certificate. These results conclude that the communication skills of managers in particular are a CSF. So, proposition 1 is accepted.

Subsequently, other factors are noted that strengthen the commitment of the employees after some time, including previous success (Looijen, 2014) and positive publicity (Gehlen, 2014).

Besides commitment of the employees, commitment of customers is argued as an important aspect for some of the interviewees. This persuasion of customers appears to be more difficult than with the employees. Gehlen (2014) and Reutelingsperger (2014) use final consumers in their process of creating commitment with customers, mainly through creating awareness and schooling. They see government responsible for creating awareness of final consumers, however government has lacks in doing so. Even, the government has a policy that should motivate their own employees to buy sustainable products, however in practice this is not noticeable. As Looijen (2014) experienced:

“Actually, and this determines a lot, the government has to purchase sustainable. This is a really good goal, however the civil servant responsible for this tells me he is not being assessed on this subject so he does not take it into account.”

Creating awareness in final consumers results in their demand for honest C2C products, hence no abuse of C2C certificates. All but one interviewee noted abuse of C2C certificates by other companies, mainly competitors, e.g. the use of a C2C certificate for a specific product for promoting the whole company as C2C (Logtens, 2014; Looijen, 2014). Besides creating awareness, analysing the willingness for sustainability under potential customers in the B2B environment in order to create a strategy of whom to approach first can contribute to success. Reutelingsperger (2014) applies this in his business, resulting in the persuasion of more and more companies to obtain the C2C process due to the snowball effect it creates as companies tempt to imitate each other.

Commitment from the suppliers of a company to the C2C strategy is argued to be a CSF by all interviewees, resulting in the acceptance of proposition 2. The regulation of this commitment differs between the interviewees. Gehlen (2014) remarks the fact that the relation with the suppliers was rather natural if they were willing to cooperate with the C2C strategy, and over time the collaboration improves:

“I think we did this really decent, we invited the existent suppliers and explained what we wanted and why we think there are opportunities for them [the suppliers] as well. And then develop together with them, and if

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subsequently they do not want or are not able to cooperate, which are real exceptions, searching for replacements.”

Their suppliers are motivated by the willing of the company to be a C2C organization. Others have more formalized relations, e.g. contracts (Hoogveld, 2014) or screening of potential suppliers (Looijen, 2014). The willingness to cooperate differs between supplier companies, and therefore companies adapt the relationship to their relevant situation. The relationship with the supplier is not only critical for the information about materials and cooperation to innovate towards C2C; it can offer an opportunity for reverse logistics as well (Gehlen, 2014).

All interviewees noticed the necessity of reverse logistics as a CSF, and therefore proposition 3 is accepted. A regularly returning aspect that is important for the success of reverse logistics is the fact that the volume has to be large enough. Whenever the volume is too small, reverse logistics are not efficient enough to sustain, resulting in the inability to return the ‘waste’. Subsequently this will result in an unsuccessful C2C strategy. The key to manage this volume is in creating business models. Some of the companies outsource these logistics where typically the volume was large enough (Gehlen, 2014; Hoogveld, 2014; Looijen, 2014). However they do encounter problems from time to time with the partner company, especially in the beginning. Reutelingsperger (2014) regarded the use of a deposit on a product, which is returned to the customer when the ‘waste’ is returned. This ensures a more reliable reverse logistics model where the customer has an incentive to return the material. A more sophisticated model is used by Logtens (2014), who uses a service model similar to the one that Braungart & McDonough (2007) describe in their book. Rather than selling the product, the service that the product delivers is leased to a user. Hence, the user only buys the service, so the product is still owned by the company. Which in the case of Logtens (2014) resulted in a winning situation for his company and the users. Briefly, the company retains the valuable resources, while increasing company performance and the consumers save money while enjoying the same product. Logtens (2014) notices that relationships with the customer changes due to this business model and that it brought opportunities that are exploited. For example, they supported a relationship between a company searching for engineers and an university by supplying office chairs for a low price, for a monthly payment:

“So the student is on a comfortable chair, making a lot of hours, which is different than an Ikea stool, qua ergonomics etcetera, it is a product that does not contain any chemicals, you create a connection between an entrepreneur and potential employers. Who is not a winner here? That is were economical value is present.” Logtens (2014)

Typically, these opportunities did not appear before the introduction of this service model. Logtens (2014) and Reutelingsperger (2014) both note a diminishing trade in terms of money, and an increasing trade with resources. So apparently, interchange with raw materials between companies is increasing and C2C is a perfect business model to exploit this trend.

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The findings about the influence of the particular resources people, facilities, information, and time for the innovation process are described as following.

First, people are an important resource for innovation and the management of this resource within C2C innovation appears to be quite effortless. Whenever C2C is explained with enthusiasm, clear goals, and the opportunity for all employees, regardless of their function, to contribute to the innovation process e.g. by seriously listening to their ideas, this resources is exploited efficiently (Gehlen, 2014; Hoogveld, 2014; Logtens, 2014). As stated before, Looijen (2014) mentions the fact that in his company the C2C activities were unsuccessful, as they were unable to adopt it in the company culture. They simply use other tools in being sustainable, the main activity being LCAs that created a culture of measuring and improving. This path dependency conflicted with the use of C2C, and therefore they decided to drop the C2C certification.

Reutelingsperger (2014) mentions the abundance in facilities of a company as a limiting factor in the process of innovation towards C2C. Typically, C2C requires radical changes in production processes. The company he runs started with nothing, only an idea about a new process for carpet production. They did not have facilities, and therefore did not have to take physical assets into account in their process of innovation, in contrast to other companies, who cannot ignore these valuable facilities and are therefore limited in their possibilities. He notes that whenever an employee of a company possessing valuable machines for its production process. And this employee appears with an idea that would radically change the production process, making all machines useless, this idea is most likely to be rejected. For many people the costs of these kinds of radical changes weigh more than the benefits and opportunities of the change. However, there is a moderate way that is used regularly. The manufacturing companies that did have facilities introduced a C2C product line parallel to ‘normal’ product lines (Gehlen, 2014; Hoogveld, 2014). In this way their valuable facilities are still exploited during the production within the ‘normal’ product line.

Time is seen mostly as a scarce resource where innovation towards C2C consumes a lot of, this is mainly a result of the unfamiliarity with circular processes and the materials capable of including in these processes (Gehlen, 2014; Hoogveld, 2014). Gehlen (2014) for example, mentions that it took 2-3 years to find one of the chemical mixes they use in their C2C product. However, apparently time can have some positive results as well. Reutelingsperger (2014) noticed this positive side of time as, during the years, speaking to numerous stakeholders throughout the entire industry he gains a lot of knowledge. This knowledge as a result of sharing ideas with other people helped him to improve it. According to these results, time has both positive and negative influence on the process of innovation depending on the situation and/or perspective towards C2C and it eventually affects whether C2C will be successful or not, and is therefore accepted as a CSF for successful C2C strategy.

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As noted previously, one of the ways to collect information is to share ideas with others. This gaining of information is exploited in different ways. EPEA2 is an organization that is used by multiple companies; it supports them with the implementation of C2C through collaborating and training. However this collaboration is overall experienced not very well. They lack some critical capabilities for running business and willingness to be of excellent support (Gehlen, 2014; Logtens, 2014; Reutelingsperger, 2014). Alliances and cooperation with suppliers and buyers to gain information appears to be more successful and creates opportunities for new business relationships (Gehlen, 2014; Logtens, 2014). The exchange of information is, especially from suppliers, experienced to be crucial for innovation towards C2C as they have the knowledge about the provided materials.

Capital is not defined as a CSF for C2C, due to the fact it is a critical factor for business in general. However it did generate a noteworthy result. The shortage of capital in the process towards fully C2C is a problem for companies (Hoogveld, 2014; Logtens, 2014), mainly due to the financial crisis. However, in all cases shortage of capital only leads to a delay in the process until the investments continue. To stimulate sustainable business activities the Dutch government and the European Union supply companies with subsidies. Noticeably are the negative reactions on the use of subsidies, of which is mentioned it does not work (Logtens, 2014), or have no significant effect (Gehlen, 2014) and can even counteract innovation (Reutelingsperger, 2014). This counteraction of subsidies can emerge when during the innovation process the goal or the path towards the goal changes:

“During your search [innovation process] it is very likely you do not want to go to your original goal anymore, but you want to go to an alternative goal. And if you are in a subsidy trajectory, this is not possible… You can not explain that the alternative goal is better.” (Reutelingsperger, 2014)

Hence, the rules around the assignment of subsidies lead to a limitation of the scope in the innovation process. However these changes occur, because in the innovation process the information and the knowledge improve, leading to adjustments that are likely to have a more positive outcome. Hence, it is impossible to have a fixed route in the innovation process and for the subsidies these fixed routes are required.

All resources for innovation as described in proposition 4 were found as CSFs to enable innovation for C2C implementation and therefore proposition 4 is accepted.

Finally, the presence of creativity in the human capital of a company is confirmed to be a CSF for C2C, so proposition 5 is accepted. Most creativity emerged, as stated before, as a result of cooperation and sharing of ideas and knowledge that enables the

2 The international team of scientists, engineers and advisors of EPEA help their

customers with the application of the C2C concept in their company products, processes and services.

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evolution of an idea. Another driver in creativity is the persistence to continue, running into problems that force the use of creativity towards finding solutions (Gehlen, 2014; Reutelingsperger, 2014), as Logtens (2014) stated: “Cradle2Cradle forces you to be creative”. All interviewees state that the creativity is present in the company, and the exploitation of it appears to be not that difficult. The designers in companies are enthusiastic about new ideas by themselves, and therefore they exploit their creativity without real need for stimulation (Gehlen, 2014; Hoogveld, 2014). The only need for the creativity to be exploited is freedom of all employees to come with ideas, and a well-managed system of communication and cooperation to exploit these ideas (Gehlen, 2014; Looijen, 2014; Reutelingsperger, 2014). Logtens (2014) mentions the use of creative abrasion in his company, where only employees from other industries are hired to stimulate creativity resulting from the different personalities and perspectives of the employees.

6. Conclusions

Concluding from the results all propositions are accepted. However the exact interpretation of the propositions should differ between managers, companies, and industries, this paper does offer a general overview of CSFs when practicing a C2C strategy. In this section, the results are concluded and generalized.

One requirement for a successful C2C strategy is the commitment of different stakeholders to this strategy, specifically the employees, suppliers and the customers. All employees have to be committed to ensure pure C2C activities. This can be established by telling a persuasive and comprehensible story, sharing the vision, set challenging goals, and create enthusiasm in order to implement C2C in the company culture. Commitment of suppliers is critical, as the support of them is necessary for information transfer and collaboration to innovate towards C2C production. Establishing commitment under suppliers takes more effort than with employees. Whenever the relationship with suppliers is good, dedication of them and collaboration with them leads to more successful C2C activities. Customers between companies typically differ, depending on the position of the company. The major distinction is between business to consumer and business-to-business companies. In the business-to-business environment, the awareness of final consumers helps in the process of creating commitment due to the fact that if final consumers demand C2C products then customers of manufacturing companies are forced to supply this demand. Main reason of unwillingness of customer companies towards C2C is the need to alter their business activities to C2C. To create commitment under these different stakeholders strong leadership is required, especially in the communication skills. Whenever the vision of C2C strategy is explained clearly and with enthusiasm, commitment is established. Furthermore, if a company leader is able to create attractive business plans not only for the company but for the customer and the supplier as well, persuasion towards commitment is superfluous. The revolutionary nature of C2C contributes to the relatively ease of establishing commitment. A key

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point here is the match between the receiver of the story and the translation of the information. When a leader is in possession of good communication skills, he can establish commitment to C2C quite easily, which is a CSF to ensure success. In short, whenever a company leader is strong in his communication towards the stakeholders, commitment is established relatively easy.

The proper regulation of reverse logistics is a CSF to the C2C strategy, failure in the reverse logistics leads to contamination of the materials or the absence of the return of materials. Regulation of reverse logistics is dependent on the capabilities of a company. Key drivers behind reverse logistics are a positive business model and enough volume of the materials. Volume needs planning and business models need to be created, e.g. the use of deposit on material or the creation of a service model where products are leased instead of bought. The service model appears to be successful in practice. Besides the fact that products are never sold and therefore the resources remain in the company’s ownership and consumers only pay for user-ship, it alters the relationship between buyers, suppliers and consumers. This results in new opportunities to exploit within the business environment.

The proposed critical resources for innovation are: people, facilities, time, information and money. Time is a CSF for C2C, as it appears to be a factor that can provide evolution of ideas and therefore can result in a better C2C strategy. People as a resource are a CSF as they provide creativity, knowledge, ideas, labour etc. Facilities have a negative relation with C2C innovation, meaning that when fewer facilities are present the C2C innovation is less bounded to these facilities. Hence, C2C innovation can involve radical changes possibly making current facilities useless. As these facilities are likely to be valuable, it results in constraints of C2C innovations satisfactory for the company. Resource of information enables the innovation towards C2C, and is therefore a CSF as well. Information about materials and potential substitutes is important in particular and is accessed through different sources e.g. employees, suppliers, knowledge institutes. Involvement helps exploiting information from employees, transparency through good relationship helps exploiting suppliers’ information. Knowledge institutes need to be hired, however the experiences with these institutes, as for example with EPEA, are not positive, mainly due to the fact they lack knowledge about running businesses. Capital, as discussed in the proposition is not a CSF specifically for C2C, but for innovation and other business activities in general. However this resource is discussed shortly, as the result is worth noticing. When capital is less available for companies, for example due to the financial crisis, it is mostly at the expense of C2C. This leads to delays in the C2C innovation process, or even to a total stop when there are no new investments. Remarkably, however, is the failure of government subsidies for these activities, which have the goal to stimulate sustainable innovation. Quite similar to facilities, subsidies create boundaries in the C2C innovation process, as they are assigned to specific plans. However, the C2C innovation process is impossible to plan precisely as it is filled with uncertainty and knowledge gaps due to the novelty of the concept

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and the typical characteristic of not knowing the end-result when starting on an innovation.

Creativity is the final CSF for C2C innovation discussed in this research. It is mostly present in the employees of the company, and the exploitation of it requires an appropriate environment. Similar to information, the most successful source is internal, or with partner companies. Exploiting creativity involves not that much effort within C2C strategy, as C2C challenges the company to radical changes. C2C is characterized with creating an environment of innovation, and therefore stimulates the employees of a company to be creative. However, as with all CSFs, it depends on the situation of a particular company. If a company does not posses the necessary creativity, it should manage for creativity. One proposed method for managing creativity that can be successful is the use of creative abrasion, which means creating an internal environment with individuals who have very different backgrounds and perspectives. Managing this is more difficult because of the presence of conflicts, however these conflicts result in creative solutions. Creativity potentially contributes to creating commitment of customers as well, whenever a company leader is able to create attractive business models for his company and for customer companies, the customers will accept the C2C strategy.

7. Discussion

This research proposed five CSFs for a successful C2C strategy for companies. The fixed amount of five factors is due to time constraints and scope. During the research other factors have come apparent that are potential CSFs as well. The appearance of these potential subsequent CSFs may not be ignored and further research is suggested to explore these CSFs, and perhaps even more. During this research, especially during the interviews, some of these factors are already mentioned. The mentioned factors include marketing, complementary products, transparency, and certifications, and these are shortly discussed in this section.

Firstly, the opinions on marketing as a tool for promoting the C2C activities within a company are very diverse. Some of the interviewees see it as a necessary tool to inform the customers and consumers about these activities, while others see it as unethical due to the fact that everyone should act in favour of the environment. Some research is performed on ethical dilemmas (e.g. White, MacDonnell, & Ellard, 2012), however further research with an increased scope on C2C, especially more on B2B is potentially of interest to find out whether or not, and in what way marketing could increase C2C success and how customer companies can be persuaded more easily to cooperate in the cyclical flow of materials.

Secondly, research on the use of complementary products for C2C is recommended. Creativity appears to take companies pretty far on complementary products, e.g. Hoogveld (2014) mentioned the use of financial products such as tax benefits on C2C products in cooperation with the government. The effect of financial complements or

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other complementary products could improve the success of C2C for companies and therefore needs further research.

Thirdly, transparency is linked to the relationships with suppliers, customers and employees in this research. Further research is recommended, especially with the scope on suppliers and customers. Finding out how transparency from these stakeholders could be improved, can lead to better innovation, more reliable information, better sales, more honesty, etc. Transparency nowadays is an increasing aspect of the economy, however the rise of this key aspect should be accelerated and a specific research with the scope on C2C can significantly improve C2C activities. Finally, during the interviews, as shortly mentioned in the research, many interviewees note the fact that certification is useless and only costs money. Too many certificates exist within countries and between countries. Certification can potentially improve the clarity and honesty of C2C, however not in the current use. Therefore further research to improve the effectiveness of certificates is necessary to support companies for their C2C activities and distinct them from companies that are less honest.

Furthermore, research is recommended in the form of case studies to identify and present the opportunities C2C can cause. Many people only see the boundaries of changing their business, however it is experienced that C2C can result in totally different business relationships providing many opportunities. Whenever examples of this kind of opportunities are presented, and the relationship between C2C and these opportunities is confirmed more companies will implement C2C. Subsequently, the more companies adopt cyclical material flow, the more opportunities for exchange of the materials are possible.

The presented CSFs in this research are broad, and every company should implement these factors regarding the characteristics of the business environment where they are positioned in. Besides, the resources and capabilities of a specific company need to be regarded as well. So, however this research provides CSFs, these are broadly defined and need implementation regarding the aforementioned characteristics. Furthermore, it is important to note that the ideal C2C activities, as described by Braungart & McDonaugh, are not common yet. The C2C certification does not require a company to perform the activities as described in the C2C concept, partly adoption of these activities or the tendency to do so are enough to obtain such a certificate. An increasing number of companies performing C2C activities would result in more opportunities for the trade of the ‘waste’, which will result in less difficulty of operating under the C2C principles.

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