The impact of Blockchain Technology on the Transformation of the Swedish Furniture Industry towards Circular Economy
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DEGREE PROJECT IN INDUSTRIAL MANAGEMENT, SECOND CYCLE, 15 CREDITS STOCKHOLM, SWEDEN 2021 The impact of Blockchain Technology on the Transformation of the Swedish Furniture Industry towards Circular Economy NIEK BEZUIJEN AND TOBIAS HÖRDEGEN KTH ROYAL INSTITUTE OF TECHNOLOGY SCHOOL OF INDUSTRIAL ENGINEERING AND MANAGEMENT
The impact of Blockchain Technology on the
Transformation of the Swedish Furniture
Industry towards Circular Economy
by
NIEK BEZUIJEN
TOBIAS HÖRDEGEN
Master of Science Thesis TRITA-ITM-EX 2021:147
KTH Industrial Engineering and Management
Industrial Management
SE-100 44 STOCKHOLM
Master of Science Thesis TRITA-ITM-EX 2021:147
The impact of Blockchain Technology on the
Transformation of the Swedish Furniture
Industry towards Circular Economy
Niek Bezuijen
Tobias Hördegen
Approved Examiner Supervisor
2021-06-11 Kristina Nyström Vladimir Koutcherov
Commissioner Contact person
Abstract
Circular Economy has gained a lot of interest by academia as well as companies and policymakers.
Sustainability goals of the European Union has mainly caused this acceleration. However, research
argued that the true impact and scale of CE will only be realized when companies deploy Circular
Business Models (CBMs) and Fourth Industrial Revolution technologies in a holistic manner to
capture new growth opportunities while also strengthening their core business. Especially digital
technologies are seen as one of the key enablers for that transition and have become a central topic
within the CE research agenda. This research looked at the potential role Blockchain technology
can play in the transition towards Circular Economy of the Swedish Furniture Industry based on
the identified challenges it currently faces. Based on the combination of literature - and empirical
research, there can be concluded that the role of Blockchain technology in the transformation
towards CE in the Swedish Furniture Industry is less significant than first anticipated. Based on
the empirical findings, there can be concluded that the key driver of Blockchain technology is an
environment where there is a systemic lack of trust related to transactions and data between
different parties. In such circumstances, Blockchain technology does imply significantly added
value due to its inherent features of decentralization, irreversibility, and transparency without the
need for intermediary third parties.
Circular economy can be seen as an ecosystem that consist of a complex network with different
actors that all need certain information to effectively participate. Based on this research, the
prominent implication for Blockchain technology in the Swedish Furniture Industry has been
found in the current discussed European Union Product Passport in combination with the chemical
regulation. Blockchain technology could play a prominent role in the aftermarket by enabling trust,
transparency, and irreversibility. In this way all actors in the Circular Economy can use and
contribute to the data in a uniform manner.
Key-words
Circular Economy, Blockchain Technology, Ecosystem, Furniture Industry
Examensarbete TRITA-ITM-EX 2021:147
Blockkedjeteknologins inverkan på den svenska
möbelindustrins omvandling till cirkulär
ekonomi
Niek Bezuijen
Tobias Hördegen
Godkänt Examinator Handledare
2021-06-11 Kristina Nyström Vladimir Koutcherov
Uppdragsgivare Kontaktperson
Sammanfattning
Cirkulär ekonomi har rönt stort intresse inom den akademiska världen samt bland företag och
beslutsfattare. Det är främst Europeiska unionens hållbarhetsmål som har orsakat denna
acceleration. Forskningen har dock visat att den verkliga effekten och omfattningen av den
cirkulära ekonomin kommer att förverkligas först när företagen använder cirkulära affärsmodeller
(CBM) och tekniker från den fjärde industriella revolutionen på ett holistiskt sätt för att ta tillvara
nya tillväxtmöjligheter samtidigt som de stärker sin kärnverksamhet. Särskilt den digitala tekniken
ses som en av de viktigaste faktorerna för denna övergång och har blivit en central fråga på
forskningsagendan för CE. I denna forskning undersöktes vilken potentiell roll blockkedjetekniken
kan spela i den svenska möbelindustrins övergång till cirkulär ekonomi utifrån de identifierade
utmaningar som den för närvarande står inför. Baserat på kombinationen av litteratur - och
empirisk forskning kan man dra slutsatsen att blockkedjeteknologins roll i omställningen till CE i
den svenska möbelindustrin är mindre betydande än vad man först trodde. På grundval av de
empiriska resultaten kan man dra slutsatsen att den viktigaste drivkraften för blockkedjetekniken
är en miljö där det finns en systematisk brist på förtroende i samband med transaktioner och data
mellan olika parter. Under sådana omständigheter innebär blockkedjetekniken ett betydande
mervärde på grund av dess inneboende egenskaper i form av decentralisering, irreversibilitet och
öppenhet utan behov av tredje part som mellanhand.
Den cirkulära ekonomin kan ses som ett ekosystem som består av ett komplext nätverk med olika
aktörer som alla behöver viss information för att effektivt kunna delta. Baserat på denna forskning
har den framträdande implikationen för blockkedjetekniken i den svenska möbelindustrin hittats i
det för närvarande diskuterade Europeiska unionens produktpass i kombination med
kemikalieförordningen. Blockkedjetekniken skulle kunna spela en betydande roll för att
möjliggöra förtroende, transparens och oåterkallelighet. På så sätt kan alla aktörer i den cirkulära
ekonomin använda och bidra till data på ett enhetligt sätt.
(Translated with www.DeepL.com/Translator)
Nyckelord
Cirkulär ekonomi, blockkedjeteknik, ekosystem, möbelindustrin
Acknowledgement
We would particularly like to thank our supervisor Vladimir Koutcherov. He supported us
during the entire process of writing the thesis and facilitated our work by constructive advisory
based on his academic research experience. Further, we would like to thank Kristina Nyström
and Terrence Brown for the seminars, the interview partners for the valuable insights and all
the other peer-reviewers that enriched our work.
1
Table of Contents
ACKNOWLEDGEMENT ................................................................................................................................... 1
LIST OF ABBREVIATIONS ................................................................................................................................ 3
LIST OF TABLES .............................................................................................................................................. 3
LIST OF FIGURES ............................................................................................................................................ 3
1 INTRODUCTION .................................................................................................................................... 4
1.1 RESEARCH PURPOSE AND AIM .................................................................................................................... 5
1.2 RESEARCH QUESTION ............................................................................................................................... 5
1.3 DELIMITATIONS ....................................................................................................................................... 5
1.4 CONTRIBUTION........................................................................................................................................ 5
1.5 SUSTAINABILITY ....................................................................................................................................... 6
1.6 DISPOSITION ........................................................................................................................................... 6
2 LITERATURE REVIEW ............................................................................................................................ 7
2.1 CIRCULAR ECONOMY TRANSFORMATION ...................................................................................................... 7
2.1.1 Circular Economy............................................................................................................................ 8
2.1.2 Circular Ecosystem ......................................................................................................................... 9
2.1.3 Circular Business Model Innovation ............................................................................................. 10
2.1.4 Circular Business Model Framework and its challenges ............................................................... 11
2.2 BLOCKCHAIN TECHNOLOGY ...................................................................................................................... 14
2.3 BLOCKCHAIN AND CIRCULAR ECONOMY ..................................................................................................... 16
2.4 LITERATURE SYNTHESIS ........................................................................................................................... 17
2.5 THEORETICAL FRAMEWORK ..................................................................................................................... 17
3 METHODOLOGY ................................................................................................................................. 19
3.1 RESEARCH PARADIGM............................................................................................................................. 19
3.2 RESEARCH METHOD ............................................................................................................................... 19
3.3 DATA COLLECTION & ANALYSIS ................................................................................................................ 20
3.4 LIMITATIONS ......................................................................................................................................... 22
3.5 ETHICS ................................................................................................................................................. 22
4 RESULTS ............................................................................................................................................. 23
4.1 SWEDISH FURNITURE INDUSTRY ................................................................................................................ 23
4.2 CIRCULAR BUSINESS MODEL .................................................................................................................... 24
4.3 CHALLENGES IN THE TRANSITION TO CE ..................................................................................................... 26
4.3.1 Coordinating Circular Value Chains .............................................................................................. 26
4.3.2 Circular Product Design ................................................................................................................ 28
4.3.3 Use, Reuse, Share, and Repair ...................................................................................................... 28
4.3.4 Collection & Reverse Logistics ...................................................................................................... 29
4.3.5 Sorting & Preprocessing ............................................................................................................... 29
4.3.6 Regulations & Policies .................................................................................................................. 30
4.3.7 Financial & Economic ................................................................................................................... 31
4.4 BLOCKCHAIN TECHNOLOGY FOR CE ........................................................................................................... 31
5 DISCUSSION ....................................................................................................................................... 37
6 CONCLUSION ...................................................................................................................................... 40
7 FUTURE RESEARCH AND LIMITATIONS ................................................................................................ 41
REFERENCES ................................................................................................................................................ 42
2List of Abbreviations
BM Business Model
CBM Circular Business Model
CE Circular Economy
EU European Union
FIR Fourth Industrial Revolution
LBM Linear Business Model
LE Linear Economy
SDG Sustainable Development Goal
WCED World Commission on Environment and Development
List of Tables
Table 1: CE challenges related to the Furniture Industry ........................................................ 13
Table 2: Participants in research.............................................................................................. 21
List of Figures
Figure 1: Butterfly diagram by Ellen MacArthur Foundation................................................... 8
Figure 2: CBM presented as an ecosystem.............................................................................. 10
Figure 3: Circular value chain created by Board of Innovation .............................................. 12
Figure 4: Conceptual Blockchain Structure ............................................................................ 14
Figure 5: Theoretical Framework ............................................................................................ 18
Figure 6: Qualitative semi-structured interview areas............................................................. 20
31 Introduction
The Furniture Industry represents an industry with enhanced product consumption due to
fashion- and seasonal trends that lead to a high replacement rate of furniture items (Schoonover,
Mont and Lehner, 2021). Every year, businesses and consumers within the European Union
(EU) discard more than 10 million tons of furniture. Between 80 and 90 percent of this furniture
waste is either brought to a landfill or incinerated after the use phase. In particular,
remanufacturing activities are perceived as sparse, accounting only for two percent of the
revenues of the European Furniture Industry (Forrest et al., 2017). This illustrates that the
current practices within the Furniture Industry are predominantly coined by a Linear Economy
(LE), whereby products are typically produced, used and disposed.
However, linear material flows create deteriorations within the environment as they do not only
claim resources but also release waste and emissions (Kirchherr et al., 2018). Hence, the
historical paradigm of a LE leads to the reduction of the quantity and quality of the global
ecosystem that provides essential functions for the preservation of human life (Kirchherr et al.,
2018). Complex challenges and socioeconomic consequences that stem from altering
ecosystems keep therefore reinforcing the focus on sustainable development (Roy, 2021).
According to the World Commission on Environment and Development (WCED), sustainable
development is about “meeting the needs of the current generation without compromising the
ability of the future generations to meet their own needs” (Brundtland, 1987).
One of the central topics within the agenda of sustainable development is the concept of
Circular Economy (CE), an alternative economic system that is based on the idea of a cyclic
material flow model (Korhonen, Honkasalo and Seppälä, 2018). It aims to ensure the alignment
of economic and environmental development by reducing the need for primary materials and
waste production while stimulating new business opportunities (Korhonen, Honkasalo and
Seppälä, 2018). The systemic transition to a CE requires significant changes at different levels,
incorporating business model (BM) innovations in organizations, the restructuring of value
chains, and the introduction of supporting policies (Furn360, 2017). However, many companies
face significant challenges in the transition to implementing circularity into their business
(Oghazi and Mostaghel, 2018). It is argued that the true impact and scale of CE will only be
realized when companies deploy Circular Business Models (CBMs) and technologies of the
Fourth Industrial Revolution (4IR) in a holistic manner to capture new growth opportunities
while also strengthening their core business (Lacy, Long and Spindler, 2020). Especially digital
technologies are seen as one of the key enablers for that transition and have become a central
topic within the CE research agenda (Ranta, Aarikka-Stenroos and Väisänen, 2021). One of
those technologies is Blockchain, which constitutes a revolutionary way of sharing and
managing data in a decentralized, open and peer-to-peer manner. After its breakthrough with
the introduction of the cryptocurrency “Bitcoin” in the year 2008, the associated research on
its potential applications is rapidly evolving (Upadhyay et al., 2021). Recent publications argue
that the unique capabilities of Blockchain could have the potential to effectively encourage CE
initiatives in various ways (Kouhizadeh, Zhu and Sarkis, 2020).
41.1 Research Purpose and Aim
The purpose of this research is to elaborate on the implications of Blockchain technology in
the context of CE. As existing publications on Blockchain technology in relation to CE are
mostly kept on a high level with the outline of general possibilities, this research delves deeper
and critically evaluates the practical implications of the technology for a specific industry. This
research aims to provide specific implications for the Swedish Furniture Industry whether and
to which extend Blockchain technology could help to accelerate the transition towards the CE.
The first part of the research aims to identify and validate the challenges of the Swedish
Furniture Industry in the transition to a CE. Based on these challenges, the research analyzes
the potential impact of Blockchain technology. This with the ambition to contribute to the
accomplishment of the sustainability goals and bring the industry closer to a true CE.
1.2 Research Question
To concretize the research purpose, the following research question has been formulated, to
which the research should give answer:
What could be the potential role of Blockchain technology in the transformation towards a
Circular Economy in the Swedish Furniture Industry based on the perceived challenges?
1.3 Delimitations
Even though Blockchain technology and the research on its impact on CE is still in an infancy
phase, this study focuses on the implications for the Swedish Furniture Industry. Further, the
technology of Blockchain is described only on a conceptual level without delving into the
details and requirements of the technology itself. As the research is mainly based on empirical
data that is derived from a limited set of experts and organizations in the Swedish Furniture
Industry, it is to consider that the conclusions might be distorted and not generalizable. This
since experts have individual opinions, and the Swedish Furniture Industry represents a very
fragmented market consisting of companies of different sizes, customer segments, and
products.
1.4 Contribution
The contribution of this thesis is twofold and can be divided into theoretical and practical
dimensions. Regarding the theoretical dimension, this research adds to the literature dealing
with the role of digital technologies, respectively Blockchain, for circular business
transformation. Lacy, Long, and Spindler (2020) emphasize that the disruptive technologies of
the 4IR enable CBMs by increasing efficiency, innovation, information transparency, and
reducing reliance on resource-intensive materials. In their book, they elaborate on multiple
technologies including Blockchain technology, but do not provide any specific implications.
In addition to the statement of Lacy, Long, and Spindler (2020) on the importance of disruptive
technologies for enabling CE, the paper of Kouhizadeh, Zhu and Sarkis (2020) investigates
how Blockchain technology can advance the realization of CE by critical reflections from
multiple case studies of Blockchain applications in different sectors. However, based on these
two publications, it can be concluded that there is still a need for further research on the
fundamental role of Blockchain technology for the CE transformation in different industries.
5To the best knowledge of the authors, there is no previous research done in regard to the
Swedish Furniture Industry. In particular, this research adds to the research of Kouhizadeh,
Zhu and Sarkis (2020) and provides hands-on implications for the Swedish Furniture Industry
by looking at the fundamentals of Blockchain and the challenges the industry faces by the
transition towards CE. Consequently, it contributes to close the overall research gap on the
implications of Blockchain technology for specific industry practices.
1.5 Sustainability
The members of the United Nations have agreed upon the 2030 agenda for sustainable
development that incorporates 17 Sustainable Development Goals (SDGs) at its heart. Those
goals aim to find strategies to reduce inequality, improve health and education as well as
economic growth while preserving the ecosystem and encounter climate change (United
Nations, 20201). The research addresses the role of Blockchain technology in the transition
towards a CE within the Swedish Furniture Industry. Hence, it aims to contribute knowledge
to the field of CE and the facilitation of its diffusion. In the perception of the authors, CE mainly
covers the environmental and economic pillars of the SDGs with only a minor focus on social
goals. In particular, the main SDG goals that are addressed by CE, and hence indirectly
addressed by this research, are Responsible Production & Consumption, Climate Action as
well as Industry, Innovation & Infrastructure.
1.6 Disposition
After the introduction to the research topic, a literature review in chapter two follows in which
the key variables and theoretical concepts addressed within this research are explained. This
includes information about CE, CBMs as well as Blockchain technology. At the end of the
literature review, a synthesized framework is presented that served as the basic construct for
the subsequent analysis. Chapter three explains the methodology and design of the study the
approaches for data collection and analysis. In chapter four, the empirical findings of the study
are presented and connected to the synthesized framework in the literature review. The findings
of the study are then discussed in the following chapter five. In the last section, chapter six, the
results of the study are summarized and implications as well as suggestions for further research
are presented.
62 Literature Review
The following section includes a review of relevant theories and fields that were considered as
relevant to the research. At the end of the literature review, there is given a summary that
elaborates on the essential findings and the empirical research approach.
2.1 Circular Economy Transformation
First, transformation can be described as a complete change in the appearance or character of
something. The process of industrial transformation has been studied by an increasing number
of researchers. The current model of a linear economy (LE) which has been applied for many
decades on a global scale is considered unsustainable by many researchers, economists, and
ecologists (Sillanpää, 2019). The LE can be briefly summarized by the process of “take-make-
use-dispose” and revealed serious conceptual and structural limitations (Sillanpää, 2019). This
has led to a pressing need for more sustainable socio-technical systems (Geissdoerfer et al.,
2017).
In response to a more sustainable economy, the “circular” economy offers a powerful way
forward (Lacy, Long and Spindler, 2020). Circular Economy (CE) requires a massive
transformation from the legacy linear economy towards new ways of doing business (Lacy,
Long and Spindler, 2020). This fundamentally decouples economic growth from resource
usage and recouples economic growth with societal progress (Lacy, Long and Spindler, 2020).
The concept of CE has gained increasing attention throughout the last years (Wiesmeth, 2021).
It is broadly agreed that CE contributes to sustainable development by the creation of economic
benefits, environmental quality, and social equity (Kirchherr et al., 2018). However, the
concept of CE is not completely new as it has historically evolved even before the
industrialization in hand with the emergence of activities such as recycling, remanufacturing,
and reuse (Lieder and Rashid, 2016). Nevertheless, it is a research field that is subject to further
exploration, which is expressed by the fact that various interpretations and definitions of the
term CE can be found in the theoretical literature (Korhonen, Honkasalo and Seppälä, 2018).
Kirchherr et al. (2018) conclude that the concept of CE is an economic system that replaces the
end-of-life concept with reducing, alternatively reusing, recycling, and recovering materials in
production, distribution, and consumption processes. In contrast to the traditional concept of
linear material flows, the concept of CE aims to create a system where resources flow (Bocken
et al., 2016). Particularly, this system is based on two fundamental principles which are the
slowing of the resource loops as well as their closing. On the one hand, the slowing of the
resource loops aims to ensure a long product life and the extension of it by actions like
repairing, remanufacturing, and reusing. This results in a slowdown of the resource flow due
to the extended utilization time of the products. Closing the resource loop, in turn, means that
the material resources of the products undergo a circular flow and are used for the production
of new products by recycling processes (Bocken et al., 2016).
72.1.1 Circular Economy
Kirchherr et al. (2017) elaborate on the distinction between two core principles of CE: The R-
imperatives and the systems perspective. The R-imperatives are well-established and provide
a how-to approach for CE illustrated in cycles (Ghisellini, Cialani and Ulgiati, 2016), whereas
the system perspective emphasizes that the transition towards CE is fundamental and needs to
occur at the macro, meso, and micro level of the system (Kirchherr, Reike and Hekkert, 2017).
Regarding the nature of this thesis, the R-imperatives principle fits best to the practical and
detailed approach chosen for the research.
The R-imperatives are sometimes also referred to as R-hierarchies or strategies. Various
sequences of R's are mentioned in the literature, which differs in their level of detail. However,
these different R-imperatives share the same principle in that they outline a series of value
preservation options that can be initiated to derive added value at an operational level. (Reike,
Vermeulen and Witjes, 2018; Campbell-Johnston et al., 2020). The hierarchy aspect of these
imperatives is that every R represents a form of value retention whereby the highest R-number
yields the highest potential of value retention (Campbell-Johnston et al., 2020). In this way, it
is favorable to try to maintain the value of products at the lowest R-level. The sequence of Rs
is ranging from 3 to 10, whereby Reike, Vermeulen and Witjes (2018) state that an analysis of
69 academic articles shows that there is no clear trend visible which sequence is most used in
the last 5 to 10 years. For this research, there was decided to use the 4R typology since it is not
too complex for the initiation of CE in the furniture industry and embraces sufficient cycles to
look at the effect of Blockchain technology. The amount of Rs can always be expanded after
successfully implementing a simplified R-sequence.
Within the literature there is no consistent definition of the 4R typology (Reike, Vermeulen
and Witjes, 2018). Also, in the furniture industry, there is not yet defined a specific CE model.
In this regard, there is chosen the most famous and widespread CE system diagram (illustrated
in), also known as the Butterfly diagram (Ellen MacArthur Foundation, SUN and McKinsey
Center for Business and Environment, 2015; Bianchini, Rossi and Pellegrini, 2019).
Figure 1: Butterfly diagram by Ellen MacArthur Foundation (2021)
8This diagram is made by the Ellen MacArthur Foundation in collaboration with businesses,
policymakers, and academia. The Butterfly diagram illustrates the classic relationship between
natural and technological systems and what activities enable industrial systems to close
resource loops (Ellen MacArthur Foundation, SUN and McKinsey Center for Business and
Environment, 2015; Bianchini, Rossi and Pellegrini, 2019). Because of the nature of this
research, the finite materials side has been further examined which contains the following
cycles:
• Maintain/Prolong: this strategy aims to keep products and materials in use by
prolonging their lifespan as long as possible. This by designing products in a way they
can be repaired a maintained. Prolonging product lifetime includes sharing among users
which leads to removing the need to create new products.
• Reuse/Redistribute: this strategy aims to reuse products and materials multiple times
by redistributing to new users. The product or materials themselves are kept in their
original form or subject to little enhancements.
• Refurbish/Remanufacture: this strategy aims to restore value to a product. By
remanufacturing the product is disassembled and rebuilt to as-new condition with the
same warranty as a new product. Refurbishing a product is an approach whereby
products are repaired as much as possible without disassembling and replacing
components.
• Recycle: this is the process of reducing a product back to its basic material level.
Recycling makes it possible to remake new products with raw materials.
As mentioned, each cycle of the model decreases the value of the initial product or material
and is subject to losses in labor and energy. Besides the losses, there is also new labor, and
energy required to repurpose the product or materials. Meaning that it is favorable to keep the
products and materials circulate in the smallest cycle of the model as possible (Ellen MacArthur
Foundation, 2021).
2.1.2 Circular Ecosystem
Antikainen and Valkokari (2016) state that CE systems are by nature networked and require
collaboration, communication, and coordination between different actors. These complex
networks can be seen as business ecosystems that need to be beneficial to every actor (Aminoff
and Kettunen, 2016; Antikainen and Valkokari, 2016; Ellen MacArthur Foundation, 2021).
Changes in BMs and value creation become therefore vital for each actor of the ecosystem
(Aminoff and Kettunen, 2016).
Figure 2 is a representation of how different actors in the system work together in a well-
established CE ecosystem. It can be concluded that individual BMs are dependent on different
actors in the ecosystem that needs to be aligned. The illustrated ecosystem shows different
actors in green, but actors may virtually (or in this matter circularly) integrated multiple steps
of resource flows. The ecosystem does not operate individually but is subject to collaboration
with other ecosystems as well as environmental stakeholders such as regulators, investors, and
communities (Aminoff and Kettunen, 2016; Lacy, Long and Spindler, 2020). Spring & Araujo
(2017) argue that from the perspective of the CE, products can be seen in the context of a
distributed network with various entrepreneurial opportunities of transforming materials as
9well as components to objects and the other way around. On the other side, it is emphasized
that collaborative and interdependent CE networks need to preserve the possibility of
competition between different stakeholders for the best ideas. Processes, therefore, have to be
implemented that align both aspects in order to guarantee a successful transformation from a
business level perspective (Narayan and Tidström, 2020).
Figure 2: CBM presented as an ecosystem (Antikainen and Valkokari, 2016 adapted from Aminoff et al., 2016)
2.1.3 Circular Business Model Innovation
From a traditional perspective, the term BM refers to how a company creates economic value
(Björkdahl, 2009; Osterwalder and Pigneur, 2010). In that regard, economic value is created
by a solution to a problem of a customer whereby the cost of providing the value is less than
the value of solving the problem. BMs generally reflect the value proposition of a company
and the way how value is created, delivered as well as captured (Richardson, 2008; Bocken,
2015; Ranta, Aarikka-Stenroos and Mäkinen, 2018). The main strategy of it is to create the
desired value for customers and capture a greater amount of that value than competitors in the
market (Richardson, 2008).
As said, the traditional “linear” BM is grounded on the principle of generating profits from the
sale of artifacts, which stands in contrast with the CE approach of generating profits from the
flow of materials and products over time (Bocken et al., 2016). Further, it is mainly focused on
the “single bottom line” recognized as economic profit, instead of balancing economic profit
with positive value to society and the environment, which is also known as the triple bottom
line (Bocken, 2015; Aminoff and Kettunen, 2016). Hence, the traditional BM concept faces
continuous pressure for more sustainable sociotechnical systems as it is closely related to the
previously mentioned principle of take-make-use-dispose (Geissdoerfer et al., 2017). To
accomplish this, the CBM concept comes into play, which eventually could make the
traditional linear BM obsolete. CBMs are designed for the purpose of preserving products,
components, and materials in circulation (Oghazi and Mostaghel, 2018). They aim to create a
significant positive impact for the environment and society but require changes in the way
organizations and their value network create, deliver, and capture value (Bocken et al., 2014).
According to Oghazi and Mostaghel (2018), in a CBM the value proposition incorporates the
providing of services or products that lower the impact on the environment while increasing
social and economic impacts. Regarding value creation and delivery, relationships with
10external stakeholders like suppliers, customers, and partners become of utmost importance in
CBMs and need to be highly integrated. This is also referred to as value co-creation, which
means that value creation in the context of CBMs takes place by collaboration between
different stakeholders rather than by a single organization itself (Aminoff et al., 2017). In terms
of value capturing, new revenue and cost models have to be implemented that are tied to value
circles and allow for a fair distribution of economic revenues and costs among the stakeholders
of the value circles (Aminoff et al., 2017; Oghazi and Mostaghel, 2018). Moving towards a
CBM is not only a necessity for a sustainable future, but also opens new possibilities for
businesses to enter new markets with innovative products and services, and secure long-term
growth (Lacy, Long and Spindler, 2020). It also gives companies the opportunity to rethink the
use of resources for their operations and supply chain which may have a positive effect on the
cost base (Lacy, Long and Spindler, 2020). The Ellen MacArthur Foundation (2013) highlights
that novel BMs play a major role in enabling the transition towards CE. The elaborated
Butterfly diagram, illustrated in chapter 2.1.1, gives four strategies for companies or industries
to pragmatically implement CE. However, these strategies do not provide a detailed BM that
can be utilized.
Since 2015 there is a high increase in academic journals regarding CBM (Geissdoerfer et al.,
2020). This increasing number of articles in journals also give multiple definitions for the
CBM. Regarding the research of Geissdoerfer et al. (2020, p. 7), there can be agreed upon that
CBMs are BMs that are cycling, extending, intensifying, and/or dematerializing material and
energy loops to reduce the resource inputs into and the waste and emission leakage out of an
organizational system. This definition is in line with the elaborated Butterfly diagram. Thus, as
CE and CBM are focused on the resource flow within a system, companies have to refocus
from the product itself towards systems around products by reinventing the way of generating
revenue by creating and maintaining value over time (Bakker et al., 2014; Aminoff and
Kettunen, 2016; Bocken, Schuit and Kraaijenhagen, 2018).
2.1.4 Circular Business Model Framework and its challenges
Due to the fundamental shift for companies towards CBMs, several attempts have been made
to design a CBM framework. CE strategies need to be embedded in this framework, for
example, those from the butterfly diagram. However, in the current literature, there is no
consensus on whether the general BM elements of the CBM framework differ from those of
the LBM (Nußholz, 2017; Ranta, Aarikka-Stenroos and Mäkinen, 2018; Geissdoerfer et al.,
2020). In journals, the most prominent CBM characteristics mentioned are increased
collaboration, pay for performance instead of ownership, and operating reverse logistics
(Nußholz, 2017). Due to the lack of knowledge whether the fundamental value proposition,
value creation, and delivery of the LBM are subject to change, Richardson (2008) and Ranta,
Aarikka-Stenroos and Mäkinen (2018) state that CE strategies need to reflect how all of the
company’s activities should be organized and conducted and are not tight to one specific BM
framework. Thus, the strategies of the Butterfly diagram, Maintain/Prolong,
Reuse/Redistribute, Refurbish/Remanufacture, and Recycle can be used against the existing
BMs of companies for implementing CE strategies. Böckin et al. (2016) researched 13 generic
product offerings and concluded, that depending on the offering, different BM innovations and
CBM strategies are required to enable CE. Thus, a company is not able to embed every CBM
strategy but may focus on the one that has the highest impact on resource efficiency (Böckin
et al., 2016; Nußholz, 2017). As CE requires some sort of interrelationship with different actors
in the ecosystem (see chapter 2.1.2) CBM strategies may go beyond individual companies by
setting strategies for the whole industry (Geissdoerfer et al., 2020). Hence, industry-wide
11strategies require collaboration within the entire ecosystem. In this collaborative ecosystem,
the value proposition around the product is dynamic and changes throughout the product’s life
cycle. Nußholz (2017) criticizes the established BM framework from Osterwalder and Pigneur
(2010) and other recently designed CBM frameworks as they do not include the perspective of
value management over the product lifecycle. Hence, they do not acknowledge the entirety of
additional value creation and capturing opportunities at different stages of the cycling
resources. For this research, it is not plausible to look through one specific CBM because
Blockchain technology’s nature is not tight to one specific BM or company. It is more related
to the facilitation of a network of different actors in an ecosystem, that may cover different BM
strategies. More on Blockchain technology and its relation to CE can be found in chapter 2.2.
Furthermore, this research will elaborate on general CBM strategies and their associated
challenges in the furniture industry. This because it will limit the analysis and it is still not clear
if the current BM frameworks that focus on value proposition, value creation and delivery, and
value capture are subject to change. As previously mentioned, the CBM decouples economic
growth from resource usage. In the literature review, there is a general understanding how an
industrial value chain in a CE looks like. The general steps are defined as design, sourcing,
manufacturing, logistics, marketing & sales, product use, end-of-use recycling, and reverse
logistics (Aminoff and Kettunen, 2016; Antikainen and Valkokari, 2016; Aminoff et al., 2017;
EFIC, 2020; Lacy, Long and Spindler, 2020). Rasmussen (2007) and Fisken and Rutherford
(2002) state that companies have to integrate their value chain within those of other firms in a
value network, also referred to as the ecosystem.
Based on these general steps of value network in an industry, several frameworks visualize
this. The visualization of the Board of Innovation (2021) is designed based on research of Ellen
MacArthur Foundation and World Economic Forum and illustrated in figure 3, gives a clear
overview of the general steps of the value chain, and includes five CBM examples.
Figure 3: Circular value chain created by Board of Innovation (2021) adapted from World Economy Forum and
Accenture)
12These CBMs can be translated to challenges that may occur by the implementation of CE for
any given industry with products. While looking at the CBMs as challenges, there is a strong
correlation with the ones mentioned by Lacy, Long, and Spindler (2020), Forrest et al.’s (2017)
-research on specific challenges for the furniture industry commissioned by European
Environmental Bureau- as well as the barriers identified by Schoonover, Mont, and Lehner
(2021). The only prominent missing challenges are the over-arching policies/regulations and
financial & economic as described by Forrest et al.’s (2017) and Schoonover, Mont, and Lehner
(2021). The challenges of figure 3 and missing challenges are further elaborated table 1.
Besides the correlation between challenges as defined in Table 1, the framework also embeds
the principles of the previously elaborated (Chapter 2.1.1) Butterfly diagram from Ellen
MacArthur Foundation (2015). Whereby the first loops, maintain/prolong, Reuse/Redistribute,
and Refurbish/Remanufacture of the Butterfly diagram are embedded in the use, re-use, share
and repair step of the value chain framework. Whereas the recycling cycle of the butterfly
diagram is the last step of the value chain framework. As the Butterfly diagram mainly gives
strategies for CE, these may apply to the value chain framework as well but are not represented.
The framework of Board of Innovation (2021) is used as inspiration for the developed
framework in chapter 2.5
Challenge Description Reference
(1) Collaboration between different value chain actors within the Lacy, Long, and Spindler
Coordinating complex circular value chain (ecosystem). In addition to the (2020); Forrest et al.
circular value collaboration there is lack of data, information, and (2017); Schoonover et al.
chains infrastructures between the actors in the ecosystem. (2021); Pheifer (2017);
Mont et al. (2017)
(2) Circular Designing products in a way not only focused on end of use, Lacy et al. (2020);
product but the efficient use of products and recovery of materials at Schoonover et al. (2021);
design high quality. Wilts (2017); Pheifer
(2017); Mont et al. (2017)
(3) Use, re- Lack of consumer information/willingness, and availably to Lacy et al. (2020); Forrest
use, share spare parts. et al. (2017); Schoonover
and repair High cost of repair and refurbishment. et al. (2021); Pheifer
Second-hand products’ price different with new products is not (2017); Mont et al. (2017)
significant enough.
(4) Collection The current underinvestment in the collection and logistics for Forrest et al. (2017); Lacy
& reverse products and high transport and labor costs associated with it. et al. (2020); Pheifer
logistics (2017); Mont et al. (2017)
(5) Sorting & Strong depended to the circular product design challenge, the Forrest et al. (2017); Lacy
preprocessing sorting and preprocessing of end-of-use product is et al. (2020); Pheifer
underdeveloped. (2017); Mont et al. (2017)
(6) Over-acting regulations and policies are not designed for Forrest et al. (2017); Lacy
Regulations embracing CE. et al. (2020); Schoonover
& policies et al. (2021); Pheifer
(2017); Mont et al. (2017)
(7) Financial Economy incentive for participating in extending lifetime for Schoonover et al. (2021);
& economic actors in CE which may lead to sales cannibalization of new Forrest et al. (2017); Mont
sold items. Complex revenue models that could lead to et al. (2017)
administrative burden.
Table 1: CE challenges related to the Furniture Industry
132.2 Blockchain Technology
The origin of Blockchain technology lies in the year 2008 when the concept of the
cryptocurrency "Bitcoin" was first introduced by a person under the pseudonym Satoshi
Nakamoto. Bitcoin represented a completely novel form of electronic cash that enables direct
online payments between parties without relying on central financial intermediaries
(Morkunas, Paschen and Boon, 2019). This new idea of transferring funds in the context of a
peer-to-peer (P2P) network mainly resulted from the attempt to solve the existing uncertainty
in financial transactions during that time (Komalavalli, Saxena and Laroiya, 2020).
Blockchain constitutes the underlying technological concept of Bitcoin and refers to a specific
way for the organization and storage of information. In the broader sense, Blockchain is a
Distributed Ledger Technology (DLT), the umbrella term used for technological concepts that
are based on distributed data recording and sharing in P2P networks. Within DLTs, data records
are collectively updated and maintained by a network of different computer servers (nodes) in
a decentralized manner whereby all nodes possess a continuously synchronized copy of the
ledger (World Bank, 2017). Characteristically for Blockchain technology is its growing and
append-only data structure. It is an increasing chain of data blocks that are created and verified
by using cryptographic and algorithmic methods (World Bank, 2017). The blocks include
records of multiple transactions that have been completed over a specific time period (Shen,
Zhu and Xu, 2020). Hereby, the most recent executed transactions are always added to a newly
generated block. Consequently, the Blockchain depicts the entire ledger of historical
transactions (Nofer et al., 2017).
Figure 4: Conceptual Blockchain Structure (Prashanth Joshi, Han and Wang, 2018)
As figure 4 shows, the blocks are chronologically ordered and interrelated as each block
contains a timestamp and a hash that refers to the previous block (Shen, Zhu and Xu, 2020).
To add a block to the Blockchain, the network has to agree upon the validity of the encrypted
transactions by using a pre-defined algorithmic method (Nofer et al., 2017). Once
authenticated, information is added to the Blockchain and simultaneously updated on all nodes
(World Bank, 2017). The data becomes then irreversible and cannot be modified by a single
participant of the network. This makes Blockchain a very secure distributed ledger in where
participants have real-time access to correct and entire records (Upadhyay et al., 2021).
However, there are different types of Blockchains based on the permission rights of the
participants to access and add information. Those rights determine the degree of transparency
and centrality of the Blockchain and are essential for the contextual application of the
14technology (Böckel, Nuzum and Weissbrod, 2021). Shrivas (2019) provides a conceptual
classification of different Blockchain types based on the two criteria of data accessibility and
the need for authorization. Regarding data accessibility, he distinguishes public, private,
consortium and hybrid blockchain types, whereas based on the need for authorization he differs
between permissionless, permission and hybrid Blockchain types. Other authors renounce such
a detailed differentiation regarding the two criteria and classify different Blockchain types on
an overarching, respectively synthesized level. Lin and Liao (2017), Laurence (2019) and
Joshi, Han, and Wang (2018) agree on the general categorization of public, private and
consortium Blockchain types.
• Public Blockchain: Blockchain that is open to every node to submit transactions as
well as participate in the process of validating and attaining consensus (Lin and Liao,
2017; Prashanth Joshi, Han and Wang, 2018).
• Private Blockchain: Blockchain in which only pre-validated nodes can participate and
data access underlies stringent authority management through an organizational entity
(Lin and Liao, 2017; Prashanth Joshi, Han and Wang, 2018). By default, no node of the
network has the right to verify and validate transactions besides the network
administrator (Prashanth Joshi, Han and Wang, 2018).
• Consortium Blockchain: Blockchains in which nodes or a set of nodes have authority
that can be chosen in advance. Within Consortium Blockchain networks, transaction
details can both be private or open-source, which can be chosen in advance by the
respective nodes. This Blockchain type constitutes a combination of public and private
Blockchains (Lin and Liao, 2017; Prashanth Joshi, Han and Wang, 2018).
Public Blockchains tend to have the highest level of transparency and security, but on the other
side are complex and require high computational power to maintain the distributed ledger on
the large scale. Typical examples of public Blockchains are the applications of cryptocurrencies
as for instance Bitcoin. Unlike public Blockchains, private Blockchains provide an enhanced
level of privacy that is essential for sensitive data in specific networks, are more cost-effective,
and better to scale up. At this point, it is to mention that many people do not consider private
Blockchains as true Blockchains (Morkunas, Paschen and Boon, 2019). However, a Blockchain
platform can also consist of different Blockchain types (Shrivas, 2019). Those offer the
advantage of configuring the intended level of security, auditability, scalability, and data
storage for the applications that are built on top (Laurence, 2019).
As indicated before with the cryptocurrencies, it is to emphasize that Blockchain does not only
represent a novel technology of data recording and storage but also a programmable platform
that enables various other applications, all in front the Smart Contracts (Fries and Paas, 2019;
Kouhizadeh, Zhu and Sarkis, 2020; López Vivar, Sandoval Orozco and García Villalba, 2021).
Salmerón-Manzano and Manzano-Agugliaro (2019), define Smart Contracts as “self-executing
digital transactions that use decentralized cryptographic mechanisms”. In other words, they are
program codes that run on the Blockchain and entail contract conditions set by parties. If those
conditions are met under certain if-then relationships, the underlying transactions of those
contracts are executed automatically on a decentralized basis. Those can refer to physical
objects, digital assets, or other forms of data (Fries and Paas, 2019). In that regard, Blockchain
technology facilitates the automatization of transaction processes in a secure, cost-effective,
and transparent way without the need for third parties to establish trust (Nofer et al., 2017).
Even though Blockchain technology is still primarily associated with the applications of
15cryptocurrencies and the financial sector it implies possibilities for various other business
applications based on its key features of transparency, immutability, decentralization, and
security (Angelis and Ribeiro da Silva, 2019), and the fact that transactions can refer to any
kind of metadata, not only the transfer of money (McBee and Wilcox, 2020). In particular,
Blockchain technology offers valuable implications for processes where multiple parties are
involved (Kaji, Nakatsuma and Fukuhara, 2021). Many see in it a disruptive technology with
the potential to revolutionize various industries, comparable with the introduction of the
internet (Shrivas, 2019).
2.3 Blockchain and Circular Economy
Digital technologies related to the concept of Industry 4.0 are named as one of the key enablers
to facilitate the implementation of CE (Ranta, Aarikka-Stenroos and Väisänen, 2021).
Blockchain technology as one of them, can contribute to the transition as it provides the
capabilities to facilitate the management of complex networks by establishing a transparent,
decentralized, simultaneously updated, and irreversible database among the stakeholders of
networks (Upadhyay et al., 2021). It enables direct and secure transactions, whether it is related
to value or information, without the need for an intermediary third party. Hence, the speed of
the data transfer within a network is increased by processing and updating information close to
real-time (Böckel, Nuzum and Weissbrod, 2021).
Regarding CE, these characteristics of Blockchain technology are often related to supply chain
management (Kouhizadeh, Zhu and Sarkis, 2020). Blockchain technology for example allows
assigning cryptographic digital identities to physical products that are immutable and
transparent (Lacy, Long and Spindler, 2020). By that, it can depict the provenance of a product,
in regard to the origin as well as the entirety of undertaken activities (Kouhizadeh, Zhu and
Sarkis, 2020). The complete transparency of transactions enables the stakeholders to gain
enhanced monitoring and control capabilities as all products and materials can be traced back
to the origin. This facilitates especially reverse logistic activities which currently constitutes a
difficulty regarding the availability of data about the products, their location, condition and
quality (Lim et al., 2021). As Blockchain Technology can provide access to information about
the current state of every material and component, it facilitates predictions and a proactive
planning of subsequent activities (Shojaei et al., 2021). This incorporates activities that refer
to the return of products and components for reusing, refurbishing, or recycling (Lim et al.,
2021). Additionally, digital product biographies can contain information about the contributed
value and costs of the different actors, which allows for a fair distribution of the created value
within the CE (Narayan and Tidström, 2020). Another implication of Blockchain technology
mentioned in the context of CE is the financial incentivization based on tokens and
cryptocurrencies. It is stated, that Blockchain technology can include programs that reward
participants for the verification of information, performance improvement and the adaption of
behaviours that are compliant with the principles of CE. By employing established
cryptocurrencies, e. g. Bitcoin, those rewards can be easily traded and cashed among
participants (Kouhizadeh, Zhu and Sarkis, 2020).
162.4 Literature Synthesis
After the performed literature review on the main topics of this research, there has been
established a clear understanding of CE and Blockchain technology. The main findings are
elaborated in this chapter as well as the developed theoretical framework.
Based on the literature review it can be concluded that the implementation of a CE is complex
and requires a certain degree of collaboration between various actors of the circular value chain.
Meaning, that to transform the furniture industry towards CE all actors engaged in the circular
value chain, from product design to recycling, have to align their BMs. These complex
networks and collaborations are referred to be an ecosystem, whereby every actor has a certain
dependency on other actors for successfully implementing and coordinating the concept of a
CE. BMs of these companies have to be in conjunction with the other actors and need
overarching strategies for the whole ecosystem. The transformation from LBMs towards
circular CBMs requires a fundamental change in the perspective of value creation, whereby
companies have to refocus from the product itself towards systems around the product.
Revenue generation have to be reinvented through creating and maintaining value over the
product lifecycle. CBMs require significant changes in the three main pillars of the BM theory,
value proposition, value creation & delivery, and value capture. The current linear BM
paradigm is mainly focused on the “single bottom line” that is economic profit, instead of
balancing economic profit with positive value to society and the environment, known as the
triple bottom line. The transformation of the whole ecosystem faces seven main challenges: (1)
Coordinating circular value chains, (2) Circular product design, (3) Use, re-use, share and
repair, (4) Collection & reverse logistics, (5) Sorting & preprocessing, (6) Regulations &
policies, and (7) Financial & economic.
The digital technologies of the concept of Industry 4.0 are named as one of the key enablers
for CE. One of these technologies is Blockchain, which is the focus of this research. Originally
Blockchain technology emerged in a completely different context but is now also subject to
discussions to what extent it may impacts the transformation towards a CE. The literature
mainly elaborates on the fact that Blockchain technology has the capability to facilitate the
management of complex networks by establishing a decentralized, transparent, simultaneously
updated, and irreversible database among the stakeholders of a network. Accordingly, this
enables stakeholders to gain enhanced monitoring and control capabilities as all products and
materials can be traced, which is especially beneficial for reverse logistics. As Blockchain
technology can provide access to information about the current state of every material and
component, it also facilitates predictions and the proactive planning of subsequent activities.
2.5 Theoretical Framework
Based on the literature review on CE and Blockchain Technology, there is chosen to use the
Circular Value Chain framework inspired by the Board of Innovation (2021). The framework
is modified due to the scope of this research and missing challenges. As described in chapter
2.1.4, the Circular Value Chain framework lacks the overall over-acting law & regulations and
financial & economic challenges. These challenges are included in the framework that resulted
in adjusting the framework to figure 5. As mentioned in chapter 2.3, the Industry 4.0 that is
heavily focused on digitalization. The Circular Value Chain framework embeds the data flow
within the value chain/ecosystem. The data is represented as a collective action of different
actors in the ecosystem. This collective data gathering, and utilization provide opportunities
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