Social entrepreneurship and circular business models : creating a triple bottom line value

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Social Entrepreneurship and Circular Business Models:

creating a triple bottom line value

Written by

Eva Laláková

University of Amsterdam

Master of Business Administration

Entrepreneurship & Innovation Track

Author: Eva Laláková

Student number: 11811641

Supervisor: Dhr. Balazs Szatmari

Second reader: dhr. Dr. Tsvi Vinig

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Statement of originality

This document is written by Student Eva Laláková who declares to take full responsibility for the contents of this document.

I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.

The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.

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Abstract

This research examined a research question of how do social enterprises create a triple bottom line value by incorporating circular economy principles into their business models. While the triple bottom line value creation was measured by three sub-constructs of environmental, social and economic performances, circular economy business model components concerned circular economy related offerings, circular economy related revenue models and circular economy related partnerships. The study utilised cross-sectional survey design, by collecting data from 121 organisations in the Netherlands including both social enterprises and regular for-profit businesses.

The findings suggested that social enterprises create a triple bottom line value. This indicates that social enterprises as an organisational form can be considered as sustainable enterprises adopting sustainable business models. This allows businesses aiming for a positive triple bottom line

performance to adjust their business operations accordingly. It can also stimulate investments into social enterprises and inspire policy makers to create more favourable regulatory environment for this type of organisations. Other important finding shows that Circular Economy related Revenue Models and Partnerships mediate the relationship between social entrepreneurship and triple bottom line value creation, while Circular Economy related Offerings have a positive mediating effect on environmental and social aspects of the triple bottom line. Though when the mediating effect is tested

simultaneously, Circular Economy related Offerings become the most important business model component for explaining positive environmental performance of companies, while Circular Economy related Revenue Models is the only business model component leading to positive economic

performance. This shows the value of Circular Economy principles in promoting sustainable value creation of companies, while drawing managerial attention upon the specific business model components that have the capacity to do so.

Key words: business model innovation, circular economy, circular business models, entrepreneurship, social entrepreneurship, sustainability, sustainable business models, triple bottom line value

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1. Introduction

Nowadays, there is a wide agreement in the scientific community that business activities are one of the most significant contributors to many social and environmental problems, such as growing inequalities or climate change (Cohen & Winn, 2007). The urgent need to find solutions to such problems has allowed for the rise of the concept of sustainable development, which calls for initiatives that would "meet the needs of the present without compromising the ability of future generations to meet their own needs" (WCED, 1987). The practise of sustainability is often referred to as triple bottom line (TBL), which urges businesses to generate social, environmental and economic value simultaneously (Aguinis & Glavas, 2012).

Traditionally, sustainable development has been mostly tackled by non-profit, governmental or corporate social responsibility initiatives of for profit businesses (Hockerts & Wüstenhagen, 2010). However, such approaches are insufficient to achieve the necessary radical change of organisations to allow for substantive progress towards sustainable development, since companies tend to put financial matters above the societal interest. Instead, the core of businesses, and thus their underlying business models (BM), needs to be transformed to become more sustainable (Schaltegger et al., 2015).

In the past decade, social entrepreneurship (SE) has emerged as a novel form of doing business. In contrast to conventional companies, SEs are primarily driven by a social mission, and generate an economic value as means of sustaining themselves (Mair & Marti, 2006). SEs often produce goods or services which allow them to contribute to the society, while adopting innovative BMs enabling them to tackle diverse social problems (Zahra et al., 2009). However, in terms of the sustainability

perspective, it is unclear whether and how could SEs create an environmental value to contribute to TBL simultaneously. In addition, scholars suggest that the social entrepreneurial research would benefit from a more quantitative approach (Wilson and Post, 2013), since existing SE literature is largely contextual and case study based.

One particular phenomenon closely associated with environmental value creation is called ‘Circular Economy’ (CE). It represents an alternative to the dominant linear economy defined by ‘make-take-waste’ patterns of consumption and production (Lucy & Rutquist, 2015), which focuses

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primarily on economic objectives, while neglecting the negative environmental externalities resulting from resource consumption and waste disposal (Jonker, 2012), such as extensive virgin resource extraction, generation of waste and pollution along the extraction, production, and post-consumption processes (Sauve et al., 2016; Banaite, 2016). It also disregards its negative impact for the wide society, such as causing greater inequalities and stimulating the need for competition over scarce resources (Greyson, 2007). Among others, Haas et al. (2015, p. 765) defines CE as a “strategy, which aims at reducing both input of virgin materials and output of wastes by closing economic and

ecological loops of resource ﬂows”, such as through reusing or recycling materials. The concept has been increasingly promoted by firms and different governments around the world, with China adopting it as a top down approach since 2002 (Zhijun & Nailing, 2007), and European Union following a CE action plan since the 2015 (European Commission, 2015). While CE has the potential to innovate BMs (Bocken et al., 2014; Ghisselini et al., 2016), and several authors suggested potential CE related BM components (Bocken et al., 2016; Lucy & Rutquist, 2015), this topic has been

empirically under-researched (Murray et al., 2015). Moreover, if CE is to represent a viable framework for sustainable development, scholars call for future researchers to re-examine the CE concept to show how CE can lead to greater social equality or equality of social opportunity and thus recognize and incorporate the societal value dimension in its conceptual framework to reflect the TPB value creation (Geissdoerfer et al., 2017; Murray et al., 2015).

Hence on one hand, social enterprises are a new organisational form directed towards social and economic value creation. On the other hand, CE is a strategy suggested to create an environmental value through closing material loops. Thus, it is unclear whether either of the concepts can fully contribute to sustainable development by creating a TBL value simultaneously. At the same time, both concepts are likely to be linked with innovative business models, which have been empirically under- researched.

BM literature suggests that value creation can be explained by BMs (Zott et al., 2011). While the concept of BMs has proved to be a useful unit of analysis, the research on the design of sustainable business models and how it translates to value creation is yet insufficiently researched (Boons et al., 2013; Wirtz et al., 2016). Since the business model of SEs focuses on creating both social and

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economic value, how will it be transformed?

Furthermore, Bocken et al. (2014) argue that approaches to embedding sustainability into BMs can be used either separately, or combined. Such approaches include social entrepreneurship and organisational and technological innovation associated with strategies for environmental sustainability, such as using closed-loop systems. Since the latter is directly related to the principles of CE (Bocken et al., 2016), it can be argued that SEs business model can be complemented by CE principles, which would then facilitate TBL value creation.

Thus, this research aims to answer the following research question:

How do social enterprises create a triple bottom line value by incorporating Circular Economy principles into their business model?

This study expects to contribute to the BM literature, CE literature and SE literature in different ways. First of all, this paper aims to extend the existing BM and sustainable BM literature by

incorporating the TBL value creation within the acknowledged value creation concept. By combining the concepts of SE and CE, this research aims to show whether such combination jointly allows for achieving sustainable organisational outcomes, which has been proposed by Bocken et al. (2014) in his discussion of potential innovative organisational approaches to embedding sustainability into BMs. This paper also aims to contribute to CE scholarly knowledge, which is currently an emerging research area. By examining the link between CE and TBL value creation, in particular the social value, this research aims to fill a research gap proposed by Geissdoerfer et al. (2017) and Murray et al. (2015) concerning lack of knowledge about whether the Circular Economy concept can be linked to societal value creation, in addition to environmental or economic. This will also inform practitioners of the relevance of CE principles in enhancing sustainable development. Moreover, Bocken et al. (2016) and Lacy & Rutquist (2015) have proposed a conceptual framework of the potential circular business model strategies likely to be adopted by organisations. This research aims to contribute to such framework by investigating the link between such strategies and organisational TBL performance. It also aims to show which particular circular business model components can explain such TBL value creation. Lastly, this paper will advance current understanding of SEs. While previous qualitative research suggests the relationship between SE and the creation of social and environmental value

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(Boons & Ludeke-Freund, 2016; Stevens et al., 2015; Wilson & Post, 2013), this research aims to corroborate such relationship quantitatively. Previous research also shows discrepancy in terms of whether SEs have the capacity to create TBL value simultaneously and hence adopt truly sustainable business models (Boons & Ludeke-Freund, 2013; Yunus, 2010). This research aims to contribute to resolving this issue.

Empirical evidence is provided by the means of data derived from an online questionnaire that was distributed to 720 Dutch companies, from which half were social enterprises and half were regular for profit businesses. The final dataset consists of 121 completed questionnaires, which allowed this research to employ a deductive approach to data analysis.

The paper is structured as follows. Chapter two presents an overview of the existing theory on the constructs of business model innovation and triple bottom line value creation, social

entrepreneurship and circular economy. These constructs form the bases of the conceptual model, which is also presented in chapter two, along with several proposed hypotheses. Chapter three will describe the design of this research, including the sample and the measurement scales. Subsequently, the data will be analysed and hypotheses will be discussed in chapter four. The paper finishes with a critical discussion of the results in chapter five, and an answer to the research question provided in the conclusion in chapter six. Furthermore, practical recommendations for both managers and policy makers, limitations of the study and future research suggestions will be discussed.

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2. Literature review

This chapter shows an overview of the literature associated with business models, social

entrepreneurship and Circular Economy. These concepts are of a principal importance for the research question to be answered and frame the hypotheses of this study presented in the conceptual model.

2.1. Business model literature

Since this paper considers BMs as a vehicle for TBL value creation within SEs, it is necessary to identify what business models are, what are its components, and how it is theoretically linked with innovation and sustainability.

2. 1.1. The concept of business models

Over the past decades, business model literature has been gaining a broad attention from both scholars and practitioners (Zott et al., 2011). Yet, despite the increased attention of the concept, Wirtz et al. (2016) concludes his extensive BM literature review by arguing that the BM field of research is still at a very early stage, and the concept has been depicted by a highly fragmented literature. Similarly, Zott et al. (2011) reviewed BM literature to suggest that it is theoretically underdeveloped.

While a general consensus over the BM definition does not exist, it is often referred to as a framework, design, architecture, or a conceptual logic of the mechanisms inherent to value creation, delivery and capture (Björkdahl, 2009; George & Bock, 2011; Teece, 2010; Zott et al., 2011). At the same time, there is a widespread scholarly consensus over few aspects of BM: (1) BMs can be used as a unique unit of analysis distinct from the product, firm, or industry, which focuses on the focal firm but can extend its boundaries (2) BMs reflect many interdependent activities needed to realize firm’s intended strategy (3) BMs can explain firms value creation, not just value capture (George & Bock, 2011; Zott et al., 2011; Seelos & Mair, 2005).

This paper adopts two definitions proposed by the same authors, who initially defined BM with an explicit emphasis on its value creation function: it is “the content, structure, and governance of transactions designed so as to create value through the exploitation of business opportunities” (Amit & Zott, 2001, p. 511). Such definition, however, does not specify the kind of value to be created, and is likely to be associated with Porter’s (1985) notion of economic value measured by total revenues. The

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creation of social or environmental value, beyond financial profits, requires a definition that transcends organisational boundaries. Such definition was provided by the same authors ten years after: it is “a system of interdependent activities that transcends the focal firm and spans its boundaries” (Zott & Amit 2010, p. 216).

To create a clearer understanding of the concept of BMs, its definition needs to be

complemented by an understanding of its components. While most authors differ on what components they focus on, the analysis of existing literature reveals that the strongest scholarly consensus exists around three components: (1) the product/service directed to customers, (2) the way the firm creates and delivers the product/service to its customers through own value chain and through an external network of suppliers and partners, and (3) revenue model showing how economic value is captured from the former (Wirtz et al., 2016; Yunus, 2010).

2.1.2. Business model innovation

In recent years, there has been a growing scholarly and managerial interest in innovative BMs, which reflect recent advances in information technology and subsequent rise in e-commerce, the rise of knowledge economy, and increasing societal concern over the sustainability of mainstream business practises (Teece, 2010; Bocken et al., 2014). As a result, many firms need to modify their value proposition presented to customers, or the mechanisms of creation and capture of value from new products and services (Björkdahl, 2009; Teece, 2010). Business model innovation can be distinguished in terms of intensity. While BMs can represent a form of innovation themselves, such as when

technology is the enabler of novel BM forms, they can also support the marketing of other innovative products, services or processes (Teece 2010; Boons & Ludeke-Freund, 2013).

Sustainable entrepreneurs are individuals who use businesses to facilitate environmental and societal progress through innovative solutions concerning sustainable products or services (Hall et al., 2010; York & Venkataraman, 2010). Such solutions are often triggered by market failures leading to social or environmental degradation, such as organisational inefficiencies, negative externalities, flawed pricing mechanisms, or information asymmetries (Dean & McMullen, 2007; Cohen & Winn, 2007). Based on such market imperfections, new opportunities for the creation of radical technologies

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or adoption of innovative business models emerge. In this respect, business model innovation can be seen as an essential instrument to facilitate sustainability-orientated businesses (Boons & Lüdeke- Freund, 2013).

2.1.3. The triple bottom line

Before further discussing sustainable business models (SBMs), it is necessary to describe the concept of Triple Bottom Line (TBL), which is associated with the practise of sustainability, driving businesses to simultaneously generate social, environmental and economic value, with respect to people, planet and profits (Elkington, 1994). It is also considered as a tool for measuring sustainable organisational performance across a range of aspects, adding the social and environmental measures to the traditionally assessed economic performance (Hahn et al., 2015). The economic dimension refers to different measures of economic performance at a firm level, such as profitability and shareholder value. The financial performance of companies can then contribute to the creation of welfare in the country where it operates (Porter & Kramer, 2006; Prahalad & Hammond, 2002). The environmental dimension focuses on protecting the natural environment and reducing corporate footprint, by the means of pollution reduction, or the (efficient) use of resources. Lastly, the social dimension captures the (positive) impact of corporations on people and society (Bansal, 2005), by the means of social value creation.

2.1.4. Towards sustainable business models

Existing literature does not provide a wide conceptual definition of SBMs (Boons & Lüdeke- Freund, 2013). Despite, SBMs are often referred to as being driven by sustainability concerns with the goal of social and environmental value creation, which shape the overall business strategy and all subsequent decision making (Stubbs & Cocklin, 2008). Here the economic value creation is seen as a by-product, or a facilitator (Cohen & Winn, 2007; Seelos & Mair, 2005). This can be contrasted with conventional BMs, which provide social benefits, such as access to products or employment, as an add-on of prioritized economic value creation (Stormer, 2003).

To compensate for the lack of SBM definitions, Boons & Lüdeke-Freund (2013) introduced four normative requirements under which SBM should operate: (1) Value proposition: product or service have an embedded social or environmental value, (2) Supply chain: suppliers are actively involved

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with the focal firm to promote sustainability, such as through jointly closing material cycles that reuse or avoid waste, and are held responsible towards wider stakeholder groups, (3) Customer Interface: customers have close relationships with the firm to allow them to take responsibility for own consumption, such as through take-back policies and value co-creation, and (4) Financial/revenue model: fair distribution of economic value among actors involved. Similarly, a case study research on sustainable business models suggests that firms can aim to achieve its sustainability objectives through particular BM components, including firms’ offerings (i.e. sustainable products or services, such as those produced by closed loop systems), revenue model (i.e. means of capturing financial value to ensure operational sustainability), and stakeholder collaboration (i.e. being proactively supported by not only internal, but also external stakeholders, by the means of collaborative partnerships, while considering needs of all stakeholders) (Stubbs & Cocklin, 2008). While the above mentioned SBM attributes are rather broadly defined and have not been empirically tested (Boons & Lüdeke-Freund, 2013), it appears that stakeholder collaboration/partnerships, revenue model, and company offerings can be seen as key potential BM components which could shape the TBL value creation by SEs through circular economy principles, which are closely associated with closing material loops (Murray et al., 2015).

The concept of sustainable entrepreneurship also includes social enterprises, which use market mechanisms as means of achieving the primary goal of social value creation (Schaltegger & Wagner, 2011). The BM of social enterprises have been empirically under-researched, with the exception of Yunus (2010) who proposed a theoretical framework of BMs of social businesses, which depicts as a subset of social enterprises. As compared to conventional BM components reviewed in section 2.1.1., a social or environmental value creation component has been added, while economic value creation through revenue models is viewed as necessary for a full cost recovery.

Furthermore, the social BM depicted by Yunus (2010) bears similarities with the previously discussed SBM attributes. First of all, both concepts include value proposition associated with a product or service. However, while SBM require social and environmental value creation to be embedded within the value proposition, the social BM does not specify how the social or environmental value is derived from the value proposition. This implies that such link could be

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indirect, such as through the employment of disadvantaged individuals in the manufacturing process. Secondly, both concepts include an economic value creation component, depicted as a revenue model, or an economic profit equation. Lastly, both concepts include a notion of stakeholder involvement. However, while Boons & Lüdeke-Freund (2013) only discuss the role of suppliers and customers in the value chain, Yunus (2010) and Stubbs & Cocklin (2008) include a broader notion of stakeholders. In this respect, Yunus (2010) argues that setting up collaborative partnerships is a key component of social BMs, whereby complementary resources and expertise can be leveraged by the parties involved to serve the customers and all relevant stakeholders. Nevertheless, it remains unclear how can

individual components of SE BMs jointly contribute to multiple value creation.

Where Yunus (2010) suggests that social ventures tend to focus on either environmental or social value creation, other authors suggest that such phenomena may be interconnected and mutually reinforcing (Bocken et al., 2014; Boons & Lüdeke-Freund, 2013). Case study research by Wilson & Post (2013) suggests that SEs social mission can be multi-faceted and hence can incorporate

environmental concerns alongside the social mission. Furthermore, extensive literature review by Boons & Lüdeke-Freund (2013) showed that SBMs are mostly associated with technological, social, and organisational innovation. Same categories have been used by Bocken et al. (2014) in his discussion of potential innovative organisational approaches to embedding sustainability into BMs. Here social innovation is used interchangeably with social entrepreneurship, and organisational and technological innovation captures approaches to reducing environmental footprint, such as closed-loop systems, using renewable energy sources, delivering functionality rather than ownership and creating value from waste. Since the latter is directly related to the principles of Circular Economy (Murray et al., 2015), and the authors argue that such various approaches to embedding sustainability into BMs may be used in combination (Bocken et al., 2014), it can be argued that SEs business model can be complemented by CE principles, which could then facilitate TBL value creation.

Overall, it has been discussed that business models can be utilised as vehicles for value creation of businesses. When such value creation is to reflect the triple bottom line, organisations need to adopt sustainable business models. Since existing literature indicates that collaborative partnerships, revenue models and company offerings are among the key components of any business models, the following

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chapters will focus on these, as well as on the concepts of social entrepreneurship and circular economy which are likely to jointly facilitate environmental, social and economic value creation.

2.2. The concept of social entrepreneurship

Even though SE has become an increasingly prominent area of research in a range of disciplines (Dacin et al., 2010; Di Domenico et al., 2010) scholarly literature does not have a clear consensus of its definition. Hence much of the literature has been focusing on defining the concept (eg. Mair & Marti 2006; Peredo & McLean 2006; Zahra et al. 2009).

Definitions of social entrepreneurship range from social responsible activities of the for-profit sector firms (Sagawa & Segal, 2000; Waddock, 1988) to the government or non-profit sector

organisations employing market principles (Austin et al. 2006; Dees, 1998). Dacin et al. (2010, p. 38) examined an extensive body of research into SE definitions and concluded that consensus exists in social entrepreneurships’ ‘ability to leverage resources that address social problems’. Zahra et al. (2009, p. 522) proposed a SE definition based on existing literature: “Social entrepreneurship encompasses the activities and processes undertaken to discover, define, and exploit opportunities in order to enhance social wealth by creating new ventures or managing existing organizations in an innovative manner". Similarly, other leading scholars consent over such essential characteristics of SEs, irrespective of the terminology, legal or organisational form (Stevens et al., 2015) - they refer to a market based activity concerned with social value creation and revenue generation, and in which a relative priority and explicit focus is given to the former over maximising economic returns (Mair & Marti, 2006; Peredo & McLean 2006; Zahra et al. 2009).

2.2.1. Social entrepreneurship and multiple value creation

The fundamental reason for the existence of social enterprises is to create a social value to serve societal needs, which can be captured by organisational social mission (Austin et al., 2006; Stevens et al., 2015). The social needs addressed tend to be the neglected problems in the society such as responding to the basic human needs in developing countries by providing access to products and services, (Santos, 2012; Certo & Miller, 2008), providing employment (Karnani, 2007), enabling social participation and promoting equality, or reducing poverty (Murphy & Coombes, 2009). To

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further distinguish the characteristics of social value within the SE context, Dacin et al. (2010) argues that a subjective assignment of the normative connotation of ‘social’ is needed. For instance, whereby providing services to low-income people is SE, doing so for high-income people is not. Similarly, a consensus exists within the SE literature that social value creation within SE is directed towards specific groups of beneficiaries, i.e. disadvantaged segments of populations in unfavourable

circumstances (Murphy & Coombes, 2009; Seelos & Mair, 2005), such as the socially excluded, racial minorities, disabled, poor, or long-term unemployed. Such groups are also less powerful, with little resources and low ability for collective action (Santos, 2012). However, it is important to acknowledge that SEs can also aim to address environmental issues, such as climate change (Murphy & Coombes, 2009; Wilson & Post, 2013; Yunus, 2010), and less radical social issues, such as enhancing

cooperation and community development (Lumpkin et al., 2013).

Apart from creating a social value, SEs also need to become financially sustainable, through generating an economic value by trading (Mart and Marti, 2006; Zahra et al., 2009). This can be contrasted with commercial enterprises which are primarily concerned with maximising profits for shareholder wealth, and with non-for profit organisations, which mainly rely on grants or donations, rather than employing market mechanisms to sustain themselves (Chell, 2007). Nevertheless, some authors suggest that SEs may differ in their ambition for economic value creation (Stevens et al., 2015) and may also rely on external financial support to some extend (Austin et al., 2006).

2.2.2. Social enterprises and sustainable business model components

Similarly to regular ventures, SEs pursue profit generating activities through producing and selling products and/or services to generate an economic value (Stevens et al., 2015). When such products and services reflect the needs of the community, they can be also directly linked to generating social value (Weerewardena & Mort, 2006). This also ensures that the social outcomes of SEs are integral to their economic performance and vice versa (Peredo & Chrisman, 2006). Alternatively, it appears that the trading activities can be linked to a social value creation indirectly, for instance when it is used as means of financing social purpose (Di Domenico et al, 2010). Nevertheless, revenue generation activities have been argued to increase the autonomy and flexibility of SEs to adjust to and respond to

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the needs of the beneficiaries they serve (Di Domenico et al., 2010). This implies that both products and services and revenue models implemented by SEs are integral to economic value creation, and can be directly or indirectly linked to social value creation. However, could these business model

components also create an environmental value, which would allow SEs to create a TBL value? Austin et al. (2006) suggests that SEs apply not only innovative BMs, but also novel BM strategies to provide solutions to global problems. We argue that such strategies could be linked to the principles of CE, which will be discussed in the next chapter.

Furthermore, SEs create their offerings in line with the interests of diverse stakeholder groups, and are likely to incorporate collaborative partnerships with different stakeholders into their BMs, as suggested by the SBM literature (Stubbs & Cocklin, 2008; Yunus, 2010). Stakeholders refer to any individuals or groups that either affect or are affected by the ventures’ activities (Freeman, 1984). This implies that a broad range of possible stakeholders exists and that such stakeholders differ from company to company. At the same time, partnerships are characterised by relationships formed between two separate entities to realize specific benefits and objectives through the means of cooperation, such as increasing operational performance of the members (Maloni & Benton, 1997; Utting & Zammit, 2009). Such partnerships can be set up within the same sector, or increasingly across sectors (Selsky, 2005), with the latter commonly aiming to address social or sustainability orientated business goals (Parmigiani et al., 2011).

There is a lack of empirical studies which would clearly explain the role of SE stakeholders in value creation. Earlier case studies undertaken by Di Domenico et al. (2010) suggest that SEs actively involve stakeholders including employees, volunteers, local communities and policy makers in their creation, governance structures, decision making, or strategy implementation. Furthermore, such social networking strategy allows them to generate new contacts with external actors and access expertise and valuable resources. Similarly, Santos (2012) argues that collaborative partners of SEs are likely to be empowered to become an integral part of the solution to social problems.

In his qualitative study on SBMs, Jonker (2012) found that sustainable enterprises produce value jointly with their entire value creating network consisting of various stakeholder groups, through the means of cooperative partnerships. This opposes traditional ventures which organise their

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stakeholders, i.e. suppliers and customers, as a vertical value chain consisting of upstream and downstream stakeholders. Hence even though the notion of sustainable enterprises is somewhat broader than that of SE due to its inherent focus on TBL, it can be argued that when SEs aim for TBL impact, such as through employing CE strategies, they may employ a similar mechanism of integrating external stakeholders within their BMs.

To summarise, based on the literature presented in chapter 2.2 social entrepreneurship concerns a market based activity associated with social value creation and revenue generation, in which priority is given to the former over maximising economic performance. While social enterprises adopt revenue models, produce products or services and incorporate collaborative partnerships with different

stakeholder groups integral to social and economic value creation, it is unclear whether they can create a triple bottom line value simultaneously. In addition, social enterprises are argued to apply novel business model strategies to provide solutions to global problems. Hence the next chapter will investigate whether such innovative business models could concern circular economy principles.

2.3. The concept of Circular Economy

The traditional model of linear economy which has dominated the society for many decades is based on the take-make-waste pattern of consumption, in which natural materials are extracted, used in the product manufacturing processes and finally sold to customers who dispose of it (Ellen McArthur, 2014). While the primacy is given to economic objectives, it neglects the negative environmental externalities resulting from resource consumption and waste disposal (Jonker, 2012). In contrast, CE recognizes the need for reducing the effect of economy on the environment through its focus on minimizing resource depletion. In his extensive analysis of the origins of the term CE, Murray et al. (2015) suggests that while different authors link the concept with different meanings and associations, general agreement exists that CE refers to a cyclical closed material loop system, i.e. the circulation of products and materials.

Geng & Doberstein (2008, p.232) propose a rather broad definition of CE: "It advocates that economic systems could and should operate according to the materials and energy cycling principles that drive natural systems". This suggests that CE should avoid the use of new (raw) materials and

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should pursue cycling of resources similar to the cycling process inherent to the nature (Murray et al., 2015), leading to creation of a value cycle. Geissdoerfer et al. (2017, p. 759) formulated a different definition based on his analysis of previous conceptualisations: it is " a regenerative system in which resource input and waste, emission, and energy leakage are minimised by slowing, closing, and narrowing material and energy loops. This can be achieved through long-lasting design, maintenance, repair, reuse, remanufacturing, refurbishing, and recycling". This definition appears to be fairly all- encompassing, as it includes both the value cycle aspect needed for closing raw material loops, the aim for value preservation to protect materials and products, as well as instructions on how to become circular. Overall, it appears that CE has two main objectives: value creation through preserving the value of existing products and/or materials to avoid the use of new ones, and keeping away from waste, i.e. value destruction, to protect the environment (Murray et al., 2015).

Most of the CE literature focuses on strategies for the use of materials. Two principal strategies for the cycling of resources are distinguished: (1) Slowing resource loops and (2) Closing resource loops (Bocken et al., 2016; Stahel, 1999). The former contributes to slowing down the flow of

materials from manufacturing to recycling by extending and/or intensifying the use period of products through strategies to prolong an existing product’s life (eg. reuse, repair), or designing durable

products. The latter aims to close the loop between post-use and production period and results in circular resource flow through the means of recycling.

Such strategies can be realised by the implementation of the core 3R principles of CE: (1) reduce; (2) reuse; (3) recycle (Ghisellini et al., 2016; Hu et al., 2011; Zhijun & Nailing, 2007). However, the reduce principle focuses on a reduced consumption of resources through the increased production and delivery efficiencies, rather than addressing the cycling of materials and goods inherent to CE (Lieder & Rashid, 2016; McDonough & Braungart, 2002) and thus will not be further considered in this paper. The Reuse principle is a process whereby products in good condition, or its components, are directly or indirectly, such as through repair, reused for the same purpose for which they were formulated, and is aligned with the ‘slowing resource loop’ CE strategy (Bocken et al., 2016). It can be linked with other re-strategies essential for extending a product life-cycle: (1) Repair is the maintenance and adjustment of products so they can be used again, (2) Refurbish refers to

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restoring older product to their original or modern state, (3) Remanufacture depicts the use of components of rejected products in new products with the same function, and lastly, (4) Repurpose refers to the use of rejected products or its components in new products with a different function (Bocken et al., 2016; Ghisellini et al., 2016). The Recycle principle refers to a mechanism whereby waste materials are re-processed to obtain products, materials or substances for original or other purposes (Ghisellini et al., 2016), and corresponds to the ‘closing resource loop’ CE strategy depicted by Bocken et al. (2016). The recycle principles encompasses two types: upcycling which transfers waste components into materials of improved value, and downcycling which leads to the creation of materials of lower value (Andresen, 2007; McDonough & Braungard, 2002). Furthermore, Ellen McArthur (2015) suggests that shift to renewable energy is another key principle of CE.

2.3.1. Circular Economy and sustainable business models

The previously discussed re-strategies are mainly concerned with material use, with the goal of preserving the highest possible value from products and materials. Hence it can be argued that the concept of CE is inherently linked with the creation of an environmental value, by the means of different strategies, such as creating value from waste. However, if CE principles are to create other forms of value, they need to be embedded into organisations through innovative forms of BMs (Ellen MacArthur, 2014). Here circular business models (CBMs) can overlap with other concepts, such as closed-loop supply chains, and exemplify a SBM subcategory (Linder & Williander, 2017), despite the fact that thus far the CE literature fails to explicitly recognize the social implications of CBMs

(Geissdoerfer et al., 2017; Murray et al., 2015), which is among the goals of this study.

Current literature focuses on CBM development, leaving a literature gap about assessing it in terms of value creation. Based on existing SBM literature, Bocken et al. (2016) proposed a conceptual overview of the potential business model strategies for CE, distinguishing between those for slowing resource loops (Access and Performance Model, Extending product value, Classic long-life model) and those for closing resource loops (Extending Resource Value, Industrial Symbiosis). His framework resembles the five potential circular BMs identified by Lacy & Rutquist (2015): (1) Circular Supply Chain, (2) Recovery and Recyling, (3) Product Life Extension, (4) Sharing Platform, (5) Product as a service.

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2.3.1.1 Circular Economy related Offerings, Revenue Models and Partnerships

The work of Bocken et al. (2016) and Lacy & Rutquist (2015) have been analysed and merged, and will be briefly discussed below, with particular focus on BM components including circular offerings, circular revenue models, and circular partnerships with a diverse set of stakeholders. Such components are linked with SBMs (Bocken et al., 2014; Stubbs & Cocklin, 2008) and hence have the potential to create TBL value when implemented by SEs. These three components will be explained within the review of the various circular business models types, and will be illustrated with examples. This leads to the development of their respective conceptual definitions, which are presented in the end of the chapter.

First of all, the access and performance model, also referred to as product service systems (Bocken et al., 2014), allows for a value proposition concerned with delivering product as a service, i.e. providing the capability of products to serve customer needs without the need for ownership. Here the link between production volume and profit is broken, and companies instead aim to maximise consumer use of products. Since manufacturers retain ownership of the assets, they have economic incentives for slowing resource loops, for instance by increasing profits from designing durable, upgradable, reusable or reparable products, while reducing production throughput of materials (Bocken et al., 2014; Bocken et al., 2016).

The access and performance model is closely associated with the sharing platform model, which provides an online platform connecting product owners and users. Here under-utilised assets can be considered as a form of wasted value, which can be recaptured through sharing and collaborative consumption (Bocken et al., 2014). In such BMs, the revenue model can take several forms, such as paying per use or renting, leasing or charging a fee per transaction (Bocken et al., 2016; Lacy & Rutquist, 2015). The viability of such BM is strongly dependent upon active involvement of various stakeholders, from the focal firm developing relations with new partners such as insurance companies to collaborating with product owners to jointly allow for the sharing platform value proposition.

The classic long-life model has a value proposition linked with providing a high-quality, durable products, which can be complemented by services such as repairs or upgrades. The revenue model can take various forms. While products can be sold at a single point of time, often at a premium price,

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alternative revenue models are also possible, such as freemiums (free products, revenues generated from add-ons), or pay per use (Bocken et al., 2016; Lacy & Rutquist, 2015). Furthermore, new forms of collaborative partnerships for circular economy are likely to be needed, for instance to handle customer inquiries or to undertake maintenance services.

The extending product and resource value models have a value proposition based on utilising the residual value of products and waste materials. In particular, waste materials can be collected and re-sold as a service, end-of-life products can be reused or repaired to be re-sold and new products can be created from discarded materials through recycling. Similarly, the industrial symbiosis model refers to exchanging by-product materials between industries to be used in novel production processes. Such BMs are ownership based, and allow for one time transaction revenue models when businesses simply sell their products, while additional economic value is captured through reduced material cost. To allow for such BM, companies need to implement take-back systems to collect pre-owned products or waste materials (Bocken et al., 2014; Lacy & Rutquist, 2015). Hence companies are likely to directly depend on collaborative partnerships with different stakeholder groups, for instance with customers, but also with intermediaries such as retailers, collections points, or logistic companies. Here the relationships can vary from very close, with high amount of trust and commitment, to rather weak, for instance when remanufacturers simply buy the used products from some constituencies, such as customers (Östlin et al., 2008). Such tight circular partnerships can mitigate potential challenges associated with return flows, such as predictability and reliability, which create capacity planning difficulties (Östlin et al., 2008).

Overall, all of these potential circular BMs share three fundamental components: Circular Economy related Offerings, Circular Economy related Revenue Models and Circular Economy related Partnerships (Bocken et al., 2014; Bocken et al., 2016; Lacy & Rutquist, 2015), which are likely to play a key role in explaining multiple value creation of organisations. To summarise, Circular Economy related Offerings define what the firm offers to solve the problems of their

customers/beneficiaries or satisfy their needs in novel or enhanced ways, by the means of utilising circular economy principles. Therefore, it includes novel circular products (i.e. Durable, reused, repaired, made from recycled materials) or services (i.e. Product service systems; product sharing

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platforms; collection and reselling of wasted products/materials). Similarly, the construct of Circular Economy related Revenue Models concerns encouraging customers to pay for offerings, in which revenues are not generated through one-time transactions, to allow for more sustainable streams in which revenues are generated indirectly or over time. Hence circular revenue models concern novel ways of transactions (i.e. leasing, renting, pay-per-use, transaction fee charges), and new revenue opportunities through circular economy related activities (eg. selling waste materials; maintenance services to accompany durable circular products). Lastly, Circular Economy related Partnerships refer to a collaboration of the focal firm and any external stakeholder group(s), which is vital for the focal firm in enabling the successful implementation of circular economy principles into its business model, by the means of proactive support and/or key resource provision and/or undertaking key activities.

In summary, the concept of Circular Economy has two main objectives: (1) preserving value of existing products and/or materials, and (2) avoiding the use of new materials, while keeping away from waste. The concept is formed by the principles of reuse, recycle, repair, refurbish, remanufacture and repurpose, which can be also embedded into organisations through multiple types of circular business models. These share three fundamental components: (1) Circular Economy related Offerings, (2) Circular Economy related Revenue Models and (3) Circular Economy related Partnerships. Such components have the potential to explain multiple value creation of organisations, including social enterprises, and will form the basis of the conceptual model of this paper.

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2.4. Conceptual Model

This research aims to advance the understanding of the relationship between social entrepreneurship and triple bottom line value creation. Circular Economy related Offerings, Revenue Models and Partnerships are considered as mediators of such relationship. Hence the research question proposes:

How do Social Enterprises create a triple bottom line value by incorporating Circular Economy principles into their business model? The following section presents the theoretical framework leading

to the multiple hypotheses proposed. These hypotheses are visually represented in Figure 1. Figure 1: Conceptual Model

2.4.1. Hypothesis 1

As suggested by the SE literature reviewed in section 2.2.2, the primary goals of social enterprises is to create a social value to serve various social needs, which can be captured by the ventures’ social mission (Austin et al., 2006; Stevens et al., 2015). At the same time, most authors consent that SEs also strive to create an economic value as means of financially sustaining themselves through employing entrepreneurial market mechanisms (eg. Mair & Marti, 2006; Austin et al., 2006).

To consider SEs as sustainable enterprises which have the capacity to create a triple bottom line value, an environmental concern also needs to be addressed. Earlier case studies by Wilson and Post (2013) show that the social mission of SEs can be multi-faceted and can incorporate an environmental dimension. Similarly, other authors acknowledge that SEs can also aim to address environmental

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issues (Murphy & Coombes, 2009; Wilson & Post, 2013; Yunus, 2010). In the sustainable

entrepreneurship context, it has also been suggested that social and environmental performance may be interconnected and mutually reinforcing (Bocken et al., 2014; Boons & Lüdeke-Freund, 2013). Therefore, this research proposes:

H1: There is a positive relationship between Social Entrepreneurship and Triple Bottom Line value creation

2.4.2.1. Hypothesis 2a

As discussed in section 2.2.3., SEs undertake trading activities and produce and implement products and services which allow them to become financially sustainable and to address deeply rooted social issues (Mart & Marti, 2006; Zahra et al., 2009). It has been argued that SEs adopt innovative and creative business models (Wilson & Post, 2013) and approaches to address multiple and complex social problems, satisfy multiple stakeholders, and actively maximise the value they create (Lumpkin et al., 2013). Since it has been shown that SEs often consider the environment as their stakeholder (Wilson & Post, 2013), it can be argued that the principles of CE could be utilised by SEs as an innovative approach to value maximisation and tackling the environmental issues associated with resource depletion and disposing of waste. Indeed, the link between SEs’ products and CE principles, including reuse, remanufacture and recycling has been indicated in a case study research by Wilson & Post (2013).

At the same time, environmental sustainability of social entrepreneurial products and activities is often perceived to be a necessary condition for SE (Lumpkin et al., 2013), hence their solutions to social problems (i.e. products and services) should not produce a negative environmental effect (Dean & McMullen, 2007). This further implies that SEs may incorporate CE principles into their products or services, since linear economy thinking neglects the negative environmental externalities which result from resource consumption and waste disposal (Jonker, 2012), and SEs often actively aim for a positive environmental impact (Wilson & Post, 2013) or utilise product stewardship strategies (Hlady- Rispal et al., 2018). This is in line with Bocken et al. (2014), who argue that ventures aiming for

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embedding sustainability into their BMs often use a combination of innovative approaches, which include, among others, social innovation and various circular strategies (eg. closed-loop systems or delivering functionality rather than ownership).

Another reason for why SEs might incorporate the principles of CE into their offerings refers to the notion of legitimacy and institutional theory. It has been argued that institutional theory can

explain why entrepreneurs choose to set up a particular form of venture, since it can be linked to socio- cultural processes from which particular ideas and organisational forms gain legitimacy to emerge (Suchman, 1995; Tolbert et al., 2010). In turn, legitimacy, which refers to the compatibility of actions, ideas or organisational forms with social values, beliefs, or laws (Suchman, 1995), shapes the decision to adopt a specific organisational form or business model, such as that of CE. In this respect, there has been an increasing demand of both the public, as well as powerful resource providers, such as social sector consultants or venture capitalists not only for greater accountability for pro-social activities of companies (eg. social value creation), but also for greater embeddedness of environmentally

sustainable practises in their operations (Grimes, 2010; Nicholls, 2009). Further, CE is currently stimulated in different ways at both macro and meso levels. Europe utilises a bottom-up approach, providing initiatives for circularity from NGOs and civil societies (Ghisellini et al., 2015). The European Commission has formulated the European Union action plan for transitioning to CE in 2015 (European Commission, 2015). Recently, the Dutch government has introduced a program "The Netherlands circular in 2050", stressing out the urgency of the move towards CE for businesses, while highlighting its many benefits, such as opportunities for innovative offerings or for efficiency

improvements (Rijksoverheid, n.d.a.). In turn, greater pressure from powerful stakeholders for environmental sustainability and the active promotion of CE at the macro level renders the pursuit of CE legitimate, likely heightening attention of corporations to CE related offerings and its resulting implementation. In particular, this paper argues that this may be the case for social ventures, since they often act as first movers of innovation and change for the transformation of whole industries towards more sustainable ones (Hockers & Wüstenhagen, 2010; Zahra et al, 2009) and are argued to be highly susceptible to the adoption of innovative practises in response to environmental degradation (Haugh, 2007). Hence it is proposed:

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H2a: There is a positive relationship between Social Entrepreneurship and CE enabled offerings

2.4.2.2. Hypothesis 2b

The existing literature on SBMs suggests that the value proposition of sustainable enterprises has an embedded social or environmental value creating component (Stubbs & Cocklin, 2008; Boons & Ludeke-Frend, 2013). Within the social business model context, the way social or environmental value is derived from value proposition is not specified (Yunus, 2010). However, when CE principles drive the creation of products or services, the environmental value is indeed embedded within it (Bocken et al., 2016). As discussed in section 2.3.2., the CE principles can be utilised within various CBMs, enabling the creation of novel products (i.e. Durable, reused, repaired, made from recycled materials) or services (i.e. Product service systems, product sharing platforms, collection and reselling of waste materials) (Bocken et al., 2014; Lacy & Rutquist, 2015; Lewandowski, 2016), in which environmental value is created by, for instance, the efficient use of resources or an increased use of physical assets, implying reduction of natural resource consumption (Ellen McArthur, 2015). In turn, such environmental benefits indicate social gains of more opportunities for future generations, which is in line with TBL value creation. Indeed, it has been argued that environmental and social aspects of sustainable development are inextricably linked (Hockerts & Wüstenhagen, 2010).

Furthermore, when SEs’ offering reflects the needs of the intended beneficiaries, it can create a social value directly (Weerewardena & Mort, 2006), through the delivery of the core product or service (Wilson and Post, 2013). Since the product or service can also be used to generate revenues to finance social goals (Di Domenico et al., 2010), it can be argued that it can also contribute to social value creation indirectly, such as when circular products are produced by disadvantaged workers, leading to their greater integration through increased employment prospects.

Moreover, the offerings of SEs are traded (Mair & Marti, 2006), ultimately leading to an economic value for the venture through the means of profit generation. At the same time, empirical evidence suggests that environmental product innovation can lead to cost reductions (eg. reduced cost of material or resources) and ultimately to an enhanced economic value (Stefan & Paul, 2008). We

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propose that this can be realised by CE principles, for instance through enhanced resource productivity (Murray et al., 2015) or lower material or energy input costs per product (Ellen McArthur, 2015). Hence building upon the existing literature, it is proposed:

H2b: There is a positive relationship between CE enabled offerings and Triple Bottom Line value creation

H2: The positive relationship between Social Entrepreneurship and Triple Bottom Line value creation is mediated by CE enabled offerings

Another BM component that can help to explain value creation is the firms’ revenue model (Stubbs & Cocklin, 2008; Wirtz et al., 2016), which captures the specific ways in which firms generate revenues (Amit & Zott, 2012). It can be argued that since SEs undertake trading activities, they are likely to adopt a revenue model which allows them to appropriate resulting economic value (Santos, 2012), in order to generate profits to maintain its operations, reinvest in expansion, and to achieve its social mission (Dacin et al., 2010). In particular, since the specific revenue model adopted depends on the venture’s value proposition (Lewandowski, 2016) and in the previous section, it has been hypothesised that SEs are likely to produce circular offerings, it can be argued that SEs will adopt revenue models which are also related to CE thinking. As outlined in section 2.3.1, when the principles of CE are incorporated in firms’ BM, such revenue model can take alternative forms, in addition to the more conventional, one transaction revenue models, linked to selling circular products or services. Specifically, circular offerings which involve product service systems or sharing platforms and in which customers become users, rather than owners, are associated with novel ways of transactions such as leasing, renting, paying per use, or charging transaction fees (Bocken et al., 2016; Ellen McArthur, 2015; Lacy & Rutquist, 2015; Lewandowski, 2016).

Furthermore, it has been argued that the adoption of innovative organisational forms and

associated alternative revenue models can be influenced by institutional pressures (Tolbert et al., 2010) or performance benefits to be realised (Stefan & Paul, 2008). As stated in the previous section, there

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has been an increased promotion of CE by various coercive institutions, including the European Commission or the Dutch government (The European Commission, 2015; Rijksoverheid, n.d.a.). Among the key areas emphasised by such institutions to be focused on at the organisational level are the CE related revenue models, which may both facilitate the broader transition towards CE at the system level, and help companies improve their economic performance (Rli Council, 2015). Hence it is likely that SEs will adopt such revenue models, since they often act as first movers of innovation and change when particular practises allow them to maximise pro-social gains, while enabling them to remain financially sustainable (Zahra et al., 2009).

Furthermore, since SEs produce social wealth by not only providing innovative products or services, but often also by reconfiguring the processes enacted to deliver them (Zahra et al., 2009) to jointly maximise multiple value creation (Miller et al., 2012), it can be argued that SEs are likely to adopt the CE related revenue models. This is due to its potential for enabling organisations to realise both economic gains, but also social gains, such as enabling the less affluent segments of population to afford to use a particular product through pay per use, or renting (Bocken et al., 2016; Lacy &

Rutquist, 2015). Therefore, it appears that:

H3a: There is a positive relationship between Social Entrepreneurship and CE enabled revenue model

While a revenue model can be directly linked with producing an economic value for a company in the form of profit generation (George & Bock, 2011; Zott et al., 2011), it can also indirectly

contribute to other forms of value. Indeed, Nichols (2009) argues that firms’ financial performance can be intrinsically linked with its social and environmental outcomes. Furthermore, qualitative findings on sustainable BMs show that sustainable enterprises align their revenue models with its sustainability purpose (Jonker, 2012).

The SE literature suggests that for SEs, revenue generation is essential for sustaining its operations (Zahra et al., 2009), and hence is a facilitator of its main mission, i.e. social value creation (Mair & Marti, 2006). Hence the financial resources obtained from SE’s revenue model can be further

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employed to achieve the ventures social mission (Dacin et al., 2010) and ultimately generate a social value. This is also supported by the qualitative findings of Di Domenico et al. (2010) which suggest that revenue generating activities can enhance the autonomy and flexibility of SEs to respond to the needs of the beneficiaries they serve.

Furthermore, revenue model is a key BM component which defines whether the business and hence its products or services will be successful (Prahalad & Bettis, 1995). Since an environmental value is embedded within circular products or services (Murray et al., 2015), it can be argued that SEs revenue model indirectly contributes to the environmental value creation. Without the successful consumer adoption of SE’ products or services and subsequent revenue streams generated, the positive environmental impact of circular offerings would not be realised. Therefore:

H3b: There is a positive relationship between CE enabled revenue model and Triple Bottom Line value creation

H3: The positive relationship between Social Entrepreneurship and Triple Bottom Line value creation is mediated by CE enabled revenue model

The general BM literature suggests that BMs can extend the focal firm boundaries to explain the value creation (George & Bock, 2011; Zott et al., 2011). At the same time, collaborative partnerships with stakeholders have been argued to be a BM component which can contribute to the sustainability objectives of sustainable enterprises (Stubbs & Cocklin, 2008; Boons & Ludeke-Frend, 2013).

Qualitative findings on SBMs show that cooperative collaboration of focal firms and new types of partners within its value network is the key element of such models, in which long-term

commitment and trust exists (Jonker, 2012) and in which both tangible and intangible resources, such as people, ideas, knowledge, networks, equipment, data, or key activities are shared or exchanged. Similarly, Bocken (2014) emphasises the role of two way loyalty, trust and equity, if sustainability orientated collaborations are to be effective.

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their creation, governance, decision making or strategy implementation (Di Domenico et al., 2010), can utilise same-sector and cross-sector partnerships to help them achieve their mission (Sakarya et al., 2012) and use them to gain access to talent, know-how and resources (eg. Di Domenico et al., 2010; Zahra et al., 2009), create favourable policies, justify need for their products or services and generate community support (Lumpkin et al., 2013).

While the exact stakeholders to be engaged in the SEs are unique to each venture (Lumpkin et al., 2013), qualitative findings on SE success factors show that the long-term cooperation with a range of public, private, and non-profit sector companies is among the key variables contributing to the success of social ventures in terms of achieving their declared goals and financial sustainability (Sharir and Lerner, 2006), which can be linked to TBL value creation. The formation of such collaborations requires a significant emotional as well as managerial effort from both parties involved, and is

characterised by synergetic sharing of resources, risk, work, responsibilities and information (Sharir & Lekner, 2006), inherent to the notion of partnerships (Jonker, 2012).

Furthermore, the findings by Sharir & Lerner (2006) suggest that another key variable associated with the success of SEs is that of the funding teams’ ability to proactively utilise and expand its social network, by the means of investing time and effort in its formation. According to Baron & Markman (2000), the social capital embedded in entrepreneur’s social network functions is in itself as one of the firms’ most valuable resources and can supplement the venture’s human capital, for instance by enabling firms to gain access to external partners.

Hence, despite the qualitative nature of the various findings discussed, it can be proposed that if SEs are to achieve TBL value creation, they are likely to actively form partnerships with different stakeholders. With the integration of CE into their BMs, such partnerships become circular, meaning that when companies adopt CE principles into their BMs, new forms of collaborations need to be formed (Bocken et al., 2014; Lacy & Rutquist, 2015). This is due to the fact that the shift from liner to circular BMs cannot be effectively done by a single company (Kortmann & Piller, 2016). Slowing and closing material loops inherent to CE requires reverse logistics or prior collecting back of products or resources through take-back management systems. To do so, literature suggests that companies need to build trusted, long term relationships with suppliers and customers (Govindan et al., 2014) and

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diverse partners for CE along the production value chain and supply chains (Lewandowski, 2016). Similarly, as discussed in section 2.3.1, new circular partnerships are necessary for other CBMs, such as sharing platform models (Bocken et al., 2014). Therefore, this paper argues that:

H4a: There is a positive relationship between Social Entrepreneurship and CE related partnerships

The collaborative partnerships for circularity between companies, customers, suppliers and other stakeholders enable the focal firm to obtain support and resources and to perform certain key

activities. This suggests co-creation of value (Ellen McArthur, 2015; Govindan et al., 2014),

collaborative production (Lewandowski, 2016) and the existence of value networks (Tyl et al., 2015). Qualitative research on SBMs suggests that such value networks differ from the traditional value chains in a way that a high level of equality exists among the focal company and its stakeholders (Jonker, 2012). Hence value is produced jointly between the focal firm and its value creating network - network of relations with external partners (Hlady-Rispal et al., 2018; Zott et al., 2011), which can be that of TBL value. Such partnerships can exist across sectors and industries or between corporations and policy makers (eg. suppliers, customers, institutions, regulators) (Bocken et al., 2014; Ellen McArthur, 2015).

Nevertheless, it can be argued that stakeholder involvement realized through collaborative partnerships is essential for the implementation of CE into social enterprises’ business models, in particular into circular offerings and associated revenue models. This allows for slowing and closing material loops, utilising under-used capacity of products and eliminating life-cycle waste (Ellen McArthur, 2015). This can be directly linked to environmental value generation. Studies have also ascertained an association between the close integration of operations between manufacturers,

customers and suppliers and an enhanced economic performance in terms of profitability, market share or return on investment (Frohlich & Westbrook, 2001). At the same time, establishing new

partnerships is considered as a major success factor for pro-active corporate social responsibility strategies of ventures (Brugmann & Prahalad, 2007), which can be conceptually linked to TBL value creation.

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Overall, the findings above suggest that when SEs aim for TBL value creation through

employing CE principles into their BMs, they need to establish partnerships for circular economy with various stakeholders. This is then likely to be directly or indirectly linked with the TBL value creation. Hence additional hypotheses are proposed:

H4b: There is a positive relationship between CE related partnerships and Triple Bottom Line value creation

H4: The positive relationship between Social Entrepreneurship and Triple Bottom Line value creation is mediated by CE related partnerships

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3. Methodology

This study will be explanatory in nature, aiming to explain relationships between variables identified within the conceptual model. The research will follow the research philosophy of positivism, as it will aim to use a structured research method based on statistical analysis to facilitate replication and to ensure that the results can be generalised. A deductive approach to data analysis is employed to test the previously specified theoretical hypotheses in terms of assessing a causal link between SE and TBL value creation, and whether the link can be explained by the mediating factors of CE related business model components. A cross-sectional survey design was utilised for employing statistical analyses to test hypotheses while aiming for generalizable findings. The data was collected through an online questionnaire administered in English.

3.1. Sample

The unit of analysis of this study is at the organisational level. The population of interest is Dutch SMEs which include both traditional enterprises and social enterprises, to allow for a variance in the independent variable of this study. To maximise the chances of an equal representation of both traditional and social ventures, the sample was selected from two company lists: a database of 360 Dutch social enterprises (socialenterprise.nl) and a database of 1303 Dutch start-up SMEs with less than 200 employees (startupmap.iamsterdam.com). A sample of 720 was derived by selecting all 360 social enterprises and 360 SMEs on random basis. Of those, 121 respondents filled in the survey, resulting in a response rate of 17%. The non-probability sampling technique was utilised, since the sampling lists employed are not exhaustive in terms of the wider population.

3.2. Measures

All constructs were measured using five point Likert scales, ranging from 1 = “firmly disagree” to 5 “firmly agree”. Wherever possible, standardised measures of constructs validated by other researchers were applied. However, since the circular economy related constructs used in this study have been only defined conceptually in the existing literature, there is an absence of existing scales to measure

Social entrepreneurship and circular business models : creating a triple bottom line value