INOM EXAMENSARBETE INDUSTRIELL EKONOMI,AVANCERAD NIVÅ, 30 HP

, STOCKHOLM SVERIGE 2020

Sustainable Business Model Innovation in PracticeAn exploratory case study of a traditional clothing retail company

LISA KRONDAHL

KTHSKOLAN FÖR INDUSTRIELL TEKNIK OCH MANAGEMENT

Sustainable Business Model Innovation in Practice

An exploratory case study of a traditional clothing retail company

by

Lisa Krondahl

Master of Science TRITA-ITM-EX 2020:213

KTH Industrial Engineering and Management Industrial Management

SE-100 44 STOCKHOLM

Utveckling av hållbara affärsmodeller i praktiken

En utforskande fallstudie av ett traditionellt klädesbolag

av

Lisa Krondahl

Examensarbete TRITA-ITM-EX 2020:213 KTH Industriell teknik och management

Industriell ekonomi och organisation SE-100 44 STOCKHOLM

Master of Science Thesis TRITA-ITM-EX 2020:213

Sustainable Business Model Innovation in Practice An exploratory case study of a traditional clothing retail

company

Author: Lisa Krondahl

Approved

2020-06-09 Examiner

Niklas Arvidsson Supervisor

Milan Jocevski Commissioner

N/A Contactperson

N/A Abstract Our world is rapidly being redefined by digitalization and disruptive innovations such as changing customer preferences, demographical shifts, and by putting tremendous environmental pressure including scarce resources and a contribution to climate change. Change under these circumstances often brings traditional business models to lose their competitive edge and in the end fail. Previous research of the specific term successful models is vague with ambiguous definitions of the conceptualization of a sustainable business model. More alarming is the limited research addressing the sustainable innovation process thus explaining the existing organizational management problems, where today, firms are operating blindfolded without any academic- or empirical guidance. Fashion as a part of the world’s economy is undoubtedly considered as one of the areas that urgently requires the adoption of more sustainable business models, bringing all actors within the fashion retail industry into a challenging position. The thesis aims to contribute with theoretical knowledge and empirical evidence to bridge this gap by addressing following purpose: explore and improve the understanding of how traditional clothing retailers within the fashion retail industry innovate their current sustainable business models. The thesis is anchored in an exploratory case study at a traditional fashion retail company focusing on children apparel, namely Polarn O. Pyret. Finding shows that the case company simultaneously performs sustainability practices within their existing model, suggesting that a comparative approach can be appropriate when innovating already commercialized sustainable business models. Furthermore, empirical findings explicitly show five factors that differentiate the conventional concept with the sustainability concept of a business model. Thenceforth, the innovation process is explored from this context involving both advantages and challenges. Hence, the process occurs simultaneously, it is recommended to perform a variety of sustainability practices, to spread out the level of complexity and thereby optimize the utilization of resources. The thesis highlights an existing Pilot Prototype when implementing sustainability practices into the current model. Thereby, risks and uncertainty factors can be mitigated to ensure the implementation of sustainable competitive advantage. The thesis makes up for three contributions. First, a contribution with practical knowledge on how traditional clothing retailers is innovating their sustainable business model. Second, the study contributes with an increased understanding of the innovation process of launching successfully developed- or refined models. Third, the thesis makes an analytical contribution by the conceptual framework of references, forming a consolidation of the ambiguous conceptualization settled in a specific context.

Keywords: Sustainable Business Model Innovation, Sustainable Business Model, Fashion Retail Industry, Sustainable Competitive Advantage.

Examensarbete TRITA-ITM-EX 2020:213

Utveckling av hållbara affärsmodeller i praktiken En undersökande studie av ett traditionellt klädesbolag

Författare: Lisa Krondahl

Godkänt

2020-06-09

Examinator

Niklas Arvidsson

Handledare

Milan Jocevski Uppdragsgivare

N/A Kontaktperson

N/A Sammanfattning Vår värld omdefinieras drastiskt av digitalisering och innovationer som skapar nya kundpreferenser, demografiska förändringar samt att genom en enorm miljöpress inklusive knappa resurser, bidra till klimatförändringarna. Förändringar under dessa omständigheter får ofta traditionella affärsmodeller att tappa sin konkurrenskraft och i slutändan misslyckas. Tidigare forskning av den specifika termen framgångsrika modeller är vag med tvetydiga definitioner av konceptualiseringen av en hållbar affärsmodell. Mer alarmerande är den begränsade forskningen som studerar den hållbara innovationsprocessen och därmed förklarar de befintliga problem för organisationsledningar, där företag idag arbetar utan någon akademisk- eller empirisk vägledning. Mode som en del av världens ekonomi betraktas utan tvekan som ett av de områden som brådskande kräver mer hållbara affärsmodeller, vilket sätter alla aktörer inom modebranschen i en utmanande position. Examensarbetet syftar till att bidra med teoretisk kunskap och empiriskt bevis för att överbrygga detta gap, genom att ta itu med följande syfte: utforska och förbättra förståelsen för hur traditionella klädförsäljare inom modebranschen utvecklar sina nuvarande hållbara affärsmodeller. Examensarbetet är förankrad i en undersökande fallstudie hos ett traditionellt klädesbolag, nämligen Polarn O. Pyret. Resultat visar att fallföretaget samtidigt utför hållbarhetspraxis inom sin befintliga modell, vilket indikerar att en jämförande strategi kan vara lämplig när man utvecklar redan kommersialiserade hållbara affärsmodeller. Vidare visar empiriska fynd fem faktorer som skiljer det konventionella konceptet med det hållbara för en affärsmodell. Från den här kontexten utforskas innovationsprocessen som involverar både fördelar och utmaningar. Då utvecklingen sker simultant rekommenderas det att utföra olika typer av hållbarhetspraxis för att sprida ut komplexitetsnivån och därmed få jämnfördelade resurser och samtidigt få konkurrenskraft. Examensarbetet belyser en befintlig akademisk pilotprototyp vid implementering av hållbarhetspraxis i den nuvarande modellen, därmed kan risker och osäkerhetsfaktorer mildras/överkommas för att säkerställa hållbara konkurrensfördelar. Examensarbetet bidrar till forskningen på tre sätt. Först och främst bidrar resultatet med kunskap om hur traditionella klädesbolag utvecklar sina befintliga hållbara affärsmodeller. För det andra bidrar studien till en ökad förståelse av innovationsprocessen för att lansera framgångsrika nya- eller förfinade modeller. Slutligen ger examensarbetet ett analytiskt bidrag genom den konceptuella referensramen för att skapa en konsolidering av den tvetydiga konceptualiseringen satt i ett specifikt sammanhang.

Nyckelord: Hållbar affärsmodellsutveckling, Hållbar affärsmodell, Modeindustri, Hållbar konkurrensfördel.

Contents List of Figures ........................................................................................................................... i List of Tables ............................................................................................................................ ii Abbreviations ......................................................................................................................... iii 1 Introduction ..................................................................................................................... 5

1.1 Background ........................................................................................................................... 5 1.2 Problem Statement .............................................................................................................. 7 1.3 Purpose and Research Questions ...................................................................................... 7 1.4 Delimitations ........................................................................................................................ 9 1.5 Outline of the Thesis .......................................................................................................... 10

2 Research Context .......................................................................................................... 13 2.1 Fashion Retail Industry: Sustainable Business Models ............................................... 13 2.2 Fashion Retail Industry: Ambiguous definitions and the complexity ....................... 15

3 Conceptual Framework ............................................................................................... 19 3.1 Business Model as a dynamic system ............................................................................. 19 3.2 Business Model Innovation .............................................................................................. 22 3.3 Sustainable Business Model definition ........................................................................... 23 3.4 Sustainable Business Model Innovation ........................................................................ 24 3.5 Sustainable Business Model Innovation Practices ........................................................ 25

4 Method ............................................................................................................................ 29 4.1 Research Design ................................................................................................................. 29 4.2 Research Process ................................................................................................................ 30 4.3 Data Collection ................................................................................................................... 33

4.3.1 Phase 1: Identification of the current Sustainable Business Model ...................................... 34 4.3.3 Phase 2: Deepening the Understanding of SBMI in Practice ................................................ 37

4.4 Data Analysis ...................................................................................................................... 38 4.5 Discussion of the Research Design .................................................................................. 39

5 Empirical Setting .......................................................................................................... 43 5.1 Business Model Description ............................................................................................. 44

5.1.1 Polarn O. Pyret Business Model Canvas ................................................................................... 44 5.2 Polarn O. Pyret Sustainability Activities year 2020 ...................................................... 46 5.3 Fashion Retail Industry: The Market Change ............................................................... 51

6 Findings & Analysis ...................................................................................................... 55 6.1 The Definition of a Sustainable Business Model ........................................................... 55 6.2 Defining Sustainable Business Model Innovation ........................................................ 57 6.3 Sustainable Business Model in Practice ......................................................................... 58 6.4 Challenges of Sustainable Business Model Innovation ................................................ 61

7 Discussion ...................................................................................................................... 65 7.1 Academic Implications ...................................................................................................... 65

7.1.2 Successful Sustainable Business Model Innovation ............................................................... 69 7.2 Managerial Implications ................................................................................................... 69 7.3 Revisiting the Research Process ...................................................................................... 71

8 Conclusion and Recommendations ............................................................................ 75 8.1 Future Research ................................................................................................................. 76

References .............................................................................................................................. 77 Appendix A: Unstructured Interview Protocol ................................................................... I Appendix B: Workshop Protocol .......................................................................................... II Appendix C: Semi-structured Interview Protocol ........................................................... III Appendix D: Follow up session – email format ............................................................... IV

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List of Figures

Figure 1. Conceptual Framework for Sustainable Business Model Innovation ................. 19 Figure 2. BMC Nine blocks (figure inspired by Osterwalder & Pigneurs BMC) ................ 21 Figure 3. Types of Business Model Innovation (figure inspired by Geissdoerfer, et al., 2018) ...................................................................................................................................... 23 Figure 4. Sustainable Business Model Pilot Canvas (inspired by Baldassarre, et al., (2020). .................................................................................................................................... 27 Figure 5. Schematic illustration of the research process defining the thesis ..................... 29 Figure 6. Schematic illustration of the Empirical Setting .................................................. 43 Figure 7. Sustainability Actions Year 2020 ......................................................................... 46 Figure 8. Process of Product Development .......................................................................... 48 Figure 9. Secondhand Service Process ................................................................................ 50 Figure 10. Schematic illustration of the Thematic Analysis ................................................ 55 Figure 11. Matrix of the Sustainability Activities Challenges .............................................. 61

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List of Tables Table 1. The disposition of the thesis ............................................................................... 10 Table 2. Research Articles of SBM within the Fashion Industry ..................................... 13 Table 3. Three Disruptors within the Fashion Retail Industry ....................................... 14 Table 4. Selected Business Model Definitions ................................................................ 20 Table 5. Three elements of Business Model Value Proposition (Richardsson, 2008; Bocken, et al., 2014) ......................................................................................................... 22 Table 6. Selected Business Model Innovation Definitions ............................................. 22 Table 7. Selected Sustainable Business Model Definitions ............................................. 24 Table 8. Selected Sustainable Business Model Innovation Definitions ......................... 25 Table 9. Checklist of Business Model Risk and Uncertainty Factors ............................. 26 Table 10. Conducted data collection during the partial ‘thesis initiation’ phase ........... 35 Table 11. Nine building blocks of the Business Model Canvas ....................................... 36 Table 12. List of Workshop Attendances ......................................................................... 36 Table 13. Semi-structured interviews for phase 2 of the data collection ......................... 37 Table 14. Eleven areas of Amfori-BSCI Code of Conduct ............................................... 49 Table 15. Challenges and Advantages of Sustainability Activities Performed ................ 51 Table 16. Sustainability Activities characteristics ........................................................... 60 Table 17. Systematically presentation of Key Findings ................................................... 64 Table 18. Managerial Implications of Thesis Result ........................................................ 71

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Abbreviations

BM Business Model

BMI Business Model Innovation

SBM Sustainable Business Model

SBMI Sustainable Business Model Innovation

BMC Business Model Canvas

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Acknowledgement First and foremost, I would like to express my sincerest gratitude to my supervisor at KTH, Ph.D. Milan Jocevski for your great support and enthusiastic engagement throughout the entire research process. You have always shown a unique interest and contributing with vivid discussions, allowing me to strengthen my argumentations and to always trust my work. Furthermore, I would also like to raise my gratitude towards my seminar leader, Professor Cali Nuur together with the great feedback from my peers at KTH. The feedback sessions/seminars have given challenging discussions and valuable insights, which have greatly contributed to this thesis. Thenceforth, I would like to express my appreciation towards Polarn O. Pyret, without the contribution and support from various participants, my thesis would not have been made possible. I would like to especially highlight the great support and interest from my supervisor as well as all informants related to the thesis, thank you. Finally, I would like to thank my beloved family and friends for your engagement, encouragement and support in the execution of this thesis.

Lisa Krondahl Stockholm, 2020-06-09

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1 Introduction In this chapter, the important aspects related to sustainable business model innovation is introduced. Subsequently, these aspects lay the foundation to the background of the thesis, highlighting the ambiguous definitions in the literature related to both sustainable business models, and the innovation process. The purpose and entailing research questions are then derived from this context. The chapter terminates by introducing the discussion on the thesis’s academic contribution and its delimitations, and finally outlining the content. 1.1 Background The recent global-, economic-, and financial crises have raised fundamental questions about the impact of the existing corporate business models on the sustainability of the global environment, economy, and society. The constantly changing customer preferences, demographical shifts, and by putting tremendous environmental pressure including scarce resources and a contribution to climate change, is rapidly redefining our world. There are numerous examples of disruptive innovations causing this phenomenon and some of them changed whole industries e.g. the drastically declined print media, or the expansion of online sharing platforms in the retail sector, compatible digital devices, and services that first revolutionized the music- and now the book industry (Loetscher & Kreis, 2018). The business community is one of the main drivers of our environmental degradation, but they are also the ones that can promote environmental- and societal protection. But, transformational change under these circumstances often brings the traditional business models to lose their competitive edge and in the end fail (Bocken, et al., 2013; Boons & Lüdeke-Freund, 2013; Schaltegger, et al., 2016; Stubbs & Cocklin, 2008; Evans, et al., 2017). What is a business model and business model innovation? An extensive literature review by Geissdoerfer, et al., (2018) presents three main groups of the understanding of the business model (BM) concept: (1) as a model of an organizational system (2) as an abstract characteristic of an organizational unit, and (3) as a reduced scope that equates the term with individual elements of other authors definitions, or by reducing it to achieve certain means. The models are often represented statically (e.g. as canvases) where one of the most used models is developed by Osterwalder and Pigneur (2010) and is called the Business Model Canvas (BMC). Followed by that the literature review present the central role of value in most used definitions, in which roughly follows the categorization of Richardsson (2008): value proposition, value creation & delivery, and value capture. Business model innovation (BMI) is seen as the process of change in developing or modifying a business model. Where the configuration of interrelated activities plays an important role to achieve new insights or by taking entirely new actions due to a market- shift or trend. To achieve competitiveness, the creation of new configurations of a BM requires redesigning and implementing novel and feasible BM, for example, improvement of customer services or by competing on different terms (Boons & Lüdeke-Freund, 2013).

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The Birth of the new concept: Sustainable Business Model Innovation Until recently, the business model literature has focused on market sustainability rather than social- and environmental sustainability, however, this focus has shifted over the past years. In 2016, Pedersen et al., (2016) conducted a study in which indicated that corporate social responsibility is starting to be implemented into the conventional business models. This phenomenon started to form new concepts such as Sustainable Business Model (SBM), with the main purpose to reduce the negative environmental- and societal impact. Likewise, whilst business model innovation is about innovating the concrete value creation, delivery, and to capture mechanisms of firms to entice customers to pay for value and convert this into profits. Bocken and Geradts (2019) emphasis on the equally response of capturing value due to sustainability aspects. With a society faced with increasing sustainability challenges, in parallel with incentives and a growing awareness by consumers, the corporate interest has recently expanded to embed societal issues into the BMI process, this is referred to as sustainable business model innovation (SBMI). The SBMI includes a broader notion of value: a shift towards social and environmental value instead of the economic; and from a consumer and shareholder towards a multi-stakeholder perspective (Bocken, et al., 2013) (Lüdeke-Freund, et al., 2016) (Massa, et al., 2017). Most importantly, it is proven that SBMI can lead to direct benefits such as cost savings or completely new revenue streams, and more amorphous advantages by being ‘prepared’ for future stakeholder concerns or legislation. The new broader notion of value predicts improved organizational resilience, reputation, and employee attractiveness (Bocken & Geradts, 2019). Stated by Dentchev, et al., (2018) the prolific research field of this phenomenon is showing great interest, with the fundamental focus on why and how organizations respond to sustainability issues by changing parts of their current business model or by developing entirely new ones (i.e. sustainable business models). Consequently, there is still a gap in the concept of sustainable business model innovation and the adoption of them, where the previous research of the specific term of successful models is vauge (Todeschini, et al., 2017). The Background of the Fashion Retail Industry Clothing existed long before the industry. Before the creation of the fashion retail industry, people created clothes for themselves but as the world evolved during the industrial revolution, the industry was formulated to manage this process for consumers. The mass production started already in the mid-19th century but was not fully established until the 20th century. In the 1950s the creation of designer names became a big thing in Europe and today, the industry is global for certain and it is intertwined into most countries on earth (Apparel Search Company, 2020). The traditional way of doing business inside a clothing retail company is basic and the fundamental idea was to purchasing goods, put them at a marketplace, and sell them. It is described as the section of business that acts as an intermediary between the manufacturers and the customers (Apparel Search Company, 2020). As for today, it is well documented that the fashion retail industry has had a negative impact on the environment for a long time and there is a constant debate about their lack of social responsibility. This has led to actions to promote this, where large-scale traditional clothing retailers such as H&M, Marks & Spencer, and Zara are changing the business environment for the industry – challenging the conventional business models by adopting disruptive initiatives such as new revenue channels, new resources, recycling programs, and strategic partnerships (Pedersen, et al., 2016). In parallel with that other traditional clothing retailers’ have begun to

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offer sustainable options within their current business models, is making the consumers more aware of their choices, and the business environment is becoming rough and highly competitive for all actors (McNeill & Moore, 2015). 1.2 Problem Statement The conventional business model of the general retail sector is under huge pressure, categorized into three significantly concurrent trends: (1) the sustainability problem, (2) an expanding technological shift enabling new opportunity spaces, and (3) the changing preferences of customers (Jørgensen & Pedersen, 2019). Thus, the empirical focus of this research will be on the traditional fashion retail industry, more specifically on their challenges of how to innovate their sustainable business models to foster sustainable competitive advantage. Recently, consumption cycles have increased rapidly which has led to unsustainable production to keep up with the growing demand and as it is explained by scholars, negative environmental and social impacts may disrupt the current market thus it may be turned into business opportunities adopted by start-ups whom easily take market shares by turning it into positive sources of value (e.g., turning waste into a resource or new revenue streams such as recurrent transactions), this can lead to loss of competitive edge for the traditional clothing retailers if they do not react (Bocken, et al., 2013; Jin & Shin, In press). As mentioned, it is well-recognized and proven that sustainable business models hold great potential to address longstanding sustainability challenges (Bocken & Geradts, 2019; Geissdoerfer, et al., 2018). However, despite such opportunities, there is still a lack of sustainable business models adopted throughout the business community. This, together with limited case studies of specific industries, ambiguous definitions and the current research gap of sustainable business models, makes it challenging for any traditional clothing retailer to understand how to innovate their business models. The problem remains of identification and the designing-, and then select the most adequate one to foster both social-, environmental- and economic sustainability (i.e. the triple bottom line) (Todeschini, et al., 2017; Pal & Gander, 2018; Jin & Shin, In press). When considering business model innovations for sustainability (i.e. SBMI), this leads to higher complexity related to managerial implications of how to preliminarily assess the impact of the sustainability innovations and how to understand their effects on the industry as a whole from the triple bottom line. 1.3 Purpose and Research Questions The fundamental aim of business model innovation from a sustainability perspective is to drastically reduce the resources and material input needed, and to bring sectoral environmental impacts in line with planetary boundaries and the UN’s sustainable development goals (Loetscher & Kreis, 2018). Likewise, the SBMI includes a broader notion of companies value proposition: a shift towards social and environmental value instead of only economic; and from a consumer and shareholder towards a multi-stakeholder perspective, including the long term prosperity (Bocken, et al., 2013; Lüdeke-Freund, et al., 2016; Massa, et al., 2017). A broader sense of purpose may motivate and attract employees, stakeholders, and the public. Whilst, at the same time collaboratively promote environmental- and societal protection.

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Based on that, the objective of this research is to explore and improve the understanding of how specific industries, in this case, traditional clothing retailers of children apparel within the fashion retail industry, innovate their current sustainable business models. The exploratory case study addresses the theoretical research gap and the organizational management problems connected to the process. It investigates both the sustainable business model innovation process and the current challenges to successfully develop and launch redefined sustainable business models. Consequently, the study aims to contribute to the vague and ambiguous definitions regarding ‘successful’ sustainable business models. From this objective, the following main research question (MRQ) is derived:

MRQ: How can traditional clothing retail companies successfully innovate their current sustainable business models to foster sustainable competitive advantage?

To understand the embraced variety and the ambiguous conceptualization of both sustainable business models’ and sustainable business model innovation before fully explore the process in practice, the first set of sub-questions (SRQ) needs to be answered:

SRQ1: What is characteristic for the sustainable business model concept in practice? SRQ2: How is the concept of sustainable business model innovation defined within the academic literature?

After answering these two questions, it falls naturally to investigate the main purpose of the thesis – the exploration of a sustainable business model in practice. To operationalize and address the underlying practitioner problem of how to develop, innovate and launch sustainable business models corresponding to the value proposition and the theoretical gap of sustainable business model innovation, following set of sub-questions is addressed to break it down:

SRQ3: What phases does a traditional clothing retail company undergo during the development of commercialized sustainable business models? SRQ4: What are the challenges of sustainable business model innovation in practice?

Furthermore, the academic results aim to contribute to the development of a sustainable business model innovation framework. A framework idea posed by Geissdoerfer, et al., (2018) based on a comprehensive literature review of sustainable business model theories. The framework could initially guide companies through their sustainable business model innovation process by mapping the necessary key activities, potential challenges, and available tools. The larger purpose of the framework will be to guide managers through their challenges related to sustainable business model innovation to yield societal implications.

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1.4 Delimitations To increase the validity and reliability due to time constraints, the research design is formed due to certain delimitations to narrow the scope.

(1) The focus of this exploratory case study is sustainable business model innovation in practice, and more specifically the transformation from a current sustainable business model that is changed into another sustainable business model. The focus is therefore delimited to the business model transformation of planned corporate sustainability activities over a year, in order to strengthen the results of the thesis.

(2) Besides, the thesis is delimited to a single case study at Polarn O. Pyret, with more than 120 stores combined across Europe and the US as well as an online store concept. They also operate on multi-brand digital platforms and is the fastest-growing children's clothing company in Scandinavia and aims to expand further globally. Effectively, limiting the scope of the investigation to the context of only innovations regarding the Nordic market. By that, the empirical findings will lead to results for particularly applied to the Fashion Retail Industry as a part of the whole Retail Industry.

(3) Finally, the singularity of this study makes for some minor limitations that additional research might be able to address. Thus, in the belief that the result will spark the interest of future research to contribute to the current gap of the phenomena.

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1.5 Outline of the Thesis The disposition of the thesis coupled with a brief description of the content of each chapter is outlined in Table 1. Providing a theoretical background setting the scene for the problem statement, leading up to the purpose and research questions. Thenceforth, the conceptual framework is outlined followed by the research methodology defining the thesis. The second half of the thesis then covers the exploration and analysis of the findings and finalizes with the discussion of its implications, both academia and managerial. Table 1. The disposition of the thesis

Chapter Chapter Description

1. Introduction Provides a background to the problem formulation, the initial purpose and research questions. Later on, it describes the aspiration for scientific contribution and the delimitations of the thesis.

2. Research Context

Explored previously conducted research with the purpose of theoretically placing the thesis in its context. It explores the fundamental context of the fashion retail industry and the area of sustainable business model innovation in practice – i.e. what is known.

3. Conceptual Framework

Outlines the conceptual frame of references used for understanding the empirical data and the thematic analysis. The common framework has a central part of the thesis. It describes how concepts are used and applied in order to fulfil the aim of the research.

4. Research Design

Describes the method and data collection used for the gathering of empirical data. It describes how the analysis was conducted and outlines the qualitative research process as a whole. It concludes with a discussion held from a validity-, reliability- and ethical considerations perspective.

5. Empirical Setting

Describes the commercialized sustainable business model of the case company, the current sustainability activities, and challenges connected to the process.

6. Findings & Analysis

Outlines the findings from the collected empirical data using the conceptual framework. Presents the key finding from the analysis drawn on the data.

7. Discussion

Discusses the main implications of the findings from this thesis, both academic- and managerial.

8. Conclusion

Concludes the thesis by outlining the main arguments, ending with presenting proposed future research questions/areas.

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Chapter Summary

In this chapter, a brief introduction to the field of the research is presented. In the background, it has been described that the current business environment is causing a negative impact on both the environment and on society. As our world is rapidly being redefined by digitalization and disruptive innovations such as changing customer preferences, demographical shifts, and by putting tremendous environmental pressure including scarce resources and a contribution to climate change. Change under these circumstances often brings traditional business models to lose their competitive edge and in the end fail. Aligned with that statement, scholars in the field has proven that sustainable business model innovation can lead to direct benefits such as cost savings or completely new revenue streams, and more amorphous advantages by being ‘prepared’ for future stakeholder concerns or legislation and the regulatory aspect, and at the same time collaboratively promote the environmental- and social impact. The new broader notion of value predicts improved organizational resilience, reputation, and employee attractiveness. Thus, the aim of business model innovation from a sustainability perspective is to drastically reduce the resources and material input needed in value chains and to bring sectoral environmental impacts in line with planetary boundaries and the UN’s sustainable development goals – the prolific research field of this phenomena is showing great interest, with the fundamental focus on why and how organizations respond to sustainability issues by changing parts of their current business model or by developing entirely new so-called sustainable business models. Based on this problematic setting, the purpose of this thesis has been directed to explore sustainable business model innovation in practice by conducting an exploratory single case study at a traditional clothing retail company – hence the industry is well-documented for having a significant social and environmental impact as well as facing a disruptive market shift. By that, the conventional business model of the general retail sector is under huge pressure. By addressing the purpose, the thesis aims to make a theoretical contribution delimited to the traditional fashion retail industry level.

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2 Research Context In this chapter, a brief introduction to previous conducted research is presented. It explores the fundamental context of the fashion retail industry within the area of sustainable business model innovation – explicitly what is known. The purpose of putting the industry into the research context is to be able to theoretically place the exploratory case study in a context and make up for the important delimitations of the thesis. Table 2 below shows all articles reviewed, in chronological order to summarize the context. Table 2. Research Articles of SBM within the Fashion Retail Industry

Title Aim Authors Highlights Exploring the Relationship Between Business Model Innovation, Corporate Sustainability, and Organizational Values within the Fashion Industry

“to examine the relationship between business model innovation, corporate sustainability, and the underlying organizational values. “

(Pedersen , et al., 2016)

If innovative BM are implemented, CSR strategy exists as well. If Organizational values includes flexibility and discretion the implementation of innovative BM and CRS exists as well. A positive relationship between the core organizational values and financial performance.

Innovative and sustainable business models in the fashion industry: Entrepreneurial drivers, opportunities, and challenges

“to investigate innovative business models in the fashion industry that have sustainability as their defining characteristic, especially in terms of value proposition. “

(Todeschini, et al., 2017)

Synthesizing framework that discloses trends and drivers of innovative and SBM in the fashion industry. Opportunities and challenges for further researchers and entrepreneur.

Modelling environmental value: An examination of sustainable business models within the fashion industry

This paper uses the sustainable logics of narrowing, slowing and closing the loop of resources used during the production, design, manufacture and distribution of fashion garments to analyze emerging business models that seek to reduce the environmental impact of the fashion system.

Pal, R. and Gander, J. (2018).

Technology innovation in fashion require BMI to be successful. SBM in fashion need to be more scalable than currently. Environmental value cannot substitute customer value in SBM.

Business Model Innovation for Sustainability: Towards a Unified Perspective for Creation of Sustainable Business Models

“to develop a unified theoretical perspective for understanding business model innovations that lead to better organizational economic, environmental and social performance.”

(Evans, et al., 2017)

Existing gaps for addressing challenges of SBM and suggest avenues for future research.

Embracing the variety of sustainable business models: A prolific field of research and future research agenda

“Investigating the benefits of sustainable business models for our societies.”

(Dentchev, et al., 2018)

Four approaches: 1. the generalist approach, 2. the technology-based approach, 3. the entrepreneurship and innovation approach, and 4. The behavioral approach.

Changing the game to compete: Innovations in the fashion retail industry from the disruptive business model

“We analyze the nature of disruptive business-model innovations and the ways they disrupt the fashion retail industry”.

(Jin & Shin, In press)

Three disruptors in the industry All of these models keenly answer fundamental needs unmet by current business models, such as offering quality products at a competitive price, curated services, and sustainable consumption.

2.1 Fashion Retail Industry: Sustainable Business Models Clothing and textile (including footwear) are listed by the European Environmental Agency as number fourth in the list of industries that have the highest impact on the environment. In the fashion supply chain system, it is estimated that only 20 % of clothing is recycled or reused which results in huge amounts of products as waste in landfills or being incinerated. Furthermore, a growing demand is increasing the scale of this problem where a study by McKinsey and Company has estimated global production of fashion items to have reached 1

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billion items annually for the first time already in the year 2014. Their estimation of overall consumption is predicted to increase to approx. 102 million tones by the year 2030. Notable, this estimation is from the year 2016 (Pal & Gander, 2018). The urgent need for sustainable business models in the industry Even though the development of sustainable business models seems quite logical, the current research field of sustainable business models (SBM) is stated as vague. The majority of the relevant literature studied for the fashion retail industry lacks rigor and needs to have further research to strengthen results, which all the reviewed literature scholars stated. For example, according to Todeschini et al., (2017) there is still a gap in the design of innovative and sustainable business models and there seems to be no generalization of the concept in specific contexts. Whereas, previous research of the specific term successful models is vague and with ambiguous definitions of the conceptualization of sustainable business model (Evans, et al., 2017; Dentchev, et al., 2018). Explaining the organizational management problems connected to the process, that today is operating blindfolded without any academic or empirical guidance. This brings all actors within the industry into a challenging position. Thus, fashion as a part of the world’s economy is undoubtedly considered one of the areas that urgently requires the adoption of more sustainable business models (SBM) (Pedersen , et al., 2016; Todeschini, et al., 2017; Pal & Gander, 2018). Fundamental needs unmet by current Business Models The examination of disruptive business model innovation within the fashion retail industry by Jin & Shin (in press) has identified three significant disruptors (1) born-digital brands, (2) AI-enabled demand forecasting and product design, and (3) collaborative consumption, all displayed in Table 3 with a summary and their way of handling demand uncertainty and inventory management. Table 3. Three Disruptors within the Fashion Retail Industry

Disruptor Approach Born Digital Start-ups

• Sells directly to consumers • Offers high-quality products at competitive

prices • Complimentary 1:1 service • Free trials and returns

No brick and mortar business - Not selling like traditional retailers. Minimum necessary inventory- no need for accurate forecasting. No need for carrying inventories in order to mark down unsold items.

AI-enabled design and forecasting • Offer highly personalized styling services based

on machine-enabled algorithms • Creates new design with AI • Accurate demand forecasting with AI

Online subscriptions and personal styling require no development of collections per season nor the need to eliminate/discount unsold seasonal inventories. AI reduces errors and enables real-time analysis of trends in which allows for accurate design and avoidance of “non-trendy seasonal products.

Collaborative Consumption • Flexible and sustainable options (i.e., rental,

swapping, or buying used items) • Provides peer-to-peer platforms for swapping

and reselling used goods

Most CC companies do not own products and therefore have no need for inventory management. Rental companies do not need to get rid of outdated seasonal products.

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Their analysis examines the nature of disruptive business model innovation, how and what effects those identified disruptors have on the industry. The main findings show that these three new models keenly answer fundamental needs unmet by current conventional business models of the traditional clothing retailers, such as offering quality products at a competitive price, curated services, and sustainable consumption. There is no doubt by scholars, that the retail environment is radically evolving, and all actors (both traditional and start-ups) need to continuously monitor whether they are blindly accepting assumptions about their current business model or whether business model innovation can address or exploit their untapped market opportunities (Pal & Gander, 2018; Todeschini, et al., 2017; Jin & Shin, In press). Especially traditional clothing retailers need to compare innovative business models with their own to determine if they need to differentiate, imitate, or adopt new practices to the extent allowed by their assets and motivations. Jin & Shin (In press) encourage further research to help achieve a broader and deeper understanding of how business model innovation can disrupt other industries or if there are different fundamental challenges. Followed by that, Pal and Gander (2018) indicates that technology innovation and scalability are required for success, they also pinpoint that environmental values cannot substitute any other value within sustainable business models when it comes to implementing sustainability in current business models, operating in the fashion industry. 2.2 Fashion Retail Industry: Ambiguous definitions and the complexity To understand the complexity of business models, the study of Dentchev et al., (2018) is carefully studied before the conduction of this thesis. Their study maps the complexity and embracing the variety of sustainable business models within the industry. The researchers address the investigation with four different approaches: 1) the generalist; 2) the technology-based; 3) the entrepreneurship and innovation; and 4) the behavioral approach.

The embraced varieties of sustainable business models explained makes up for the common importance of understanding the concept before conducting a study. Thus, recently there has been a lot of focus on the theoretical clarification of the concept, still it remains somewhat ambiguous, resulting in many different interpretations and applications across different contextual settings. Furthermore, Dentchev, et al., (2018) clarify that this is not surprisingly thus the original concept is classified as relatively young where scholars have debated the conventional business model definition for serveral years.

The extension of the business model conceptualization into the field of sustainable business models remains in its early stages of development. Dentchev, et al.(2018) poses six relevant avenues for future research in the SBM-field – sparking the interest of conducting the exploratory case study for this thesis.

i) A more robust conceptualization of sustainability and SBMs ii) Stronger and more cumulative theoretical development concerning the

antecedents, processes, and outcomes of SBMs (i.e. evaluation) iii) Extended sophisticated and rigorous empirical methods to investigate

SBMs iv) Regularly including and studying the role of government and the related

institutional arrangements for the development, diffusion, and success of SBM across different national and regional contexts

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v) Examining in more depth the interactions between the existing business models and SBMs in one sector or even one company

vi) Creating dialogue and intersection with other research communities, such as “traditional” business model researchers, innovation scholars, or the entrepreneurship community

To conclude, the contextual description of the sustainable business model within the fashion retail industry and by investigating the complexity and ambiguous nature of the current research field. It brings to the fact that the understanding of the concept is of great importance before being able to conduct an appropriate thesis within the field of sustainable business model innovation.

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Chapter Summary

In this chapter, a brief introduction to previous conducted research is presented. It explores the fundamental context of the fashion retail industry within the area of sustainable business model innovation – explicitly what is known. Previous research of the specific term successful models is vague and with ambiguous definitions of the conceptualization of sustainable business model. Explaining the organizational management problems connected to the process, that today firms are operating blindfolded without any academic or empirical guidance. It brings all actors within the industry into a challenging position. Thus, fashion as a part of the world’s economy is undoubtedly considered one of the areas that urgently requires the adoption of more sustainable business models.

There is no doubt by scholars, that the retail environment is radically evolving, and all actors (both traditional and start-ups) need to continuously monitor whether they are blindly accepting assumptions about their current business model or whether business model innovation can address or exploit their untapped market opportunities. Especially traditional clothing retailers need to compare innovative business models with their own to determine if they need to differentiate, imitate, or adopt new practices to the extent allowed by their assets and motivations. They encourage further research to help achieve a broader and deeper understanding of how business model innovation can disrupt other industries or if there are different fundamental challenges.

To conclude, the understanding of the concept is of great importance before being able to conduct an appropriate thesis within the field of sustainable business model innovation.

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3 Conceptual Framework Based on the previous explicit research context, this chapter provides a common conceptual framework for the thesis. It presents selected definitions of the concepts: business model, business model innovation, sustainable business model, and sustainable business model innovation. It discusses their similarities and differences, their complexities and development journey. The chapter finalizes with researched practical implementations of the concept: Sustainable Business Model Innovation. Figure 1 below illustrates the differentiation between the different concepts within the conceptual framework. Thus, the study aims to explore the innovation process of sustainable business models. The conceptual model lays the ground for the delimitations of the process and is drawn from several existing definitions of the phenomenon. The model is thereafter used for the thesis’ thematic analysis of sustainable business model innovation in practice, in an exploratory case study format.

Figure 1. Conceptual Framework for Sustainable Business Model Innovation

3.1 Business Model as a dynamic system The business model concept gained popularity during the dotcom era of 1990. During the e-commerce boom, new innovative revenue streams where introduced. Putting the concept into this context, the business model was originally used to communicate complex business ideas to potential investors within a short time frame (Zott, et al., 2011). As some of the existing definitions in Table 4 shows, there are different perspectives of understanding the term. An extensive literature review by Geissdoerfer, et al., (2018) presents three main groups of the understanding (1) as a model of an organizational system (2) as an abstract characteristic of an organizational unit, and (3) as a reduced scope that equates the term with individual elements of other authors definitions, or by reducing it to achieve certain means. Followed by that they present the central role of value in most definitions in which roughly follows the categorization of Richardsson (2008): value proposition, value creation & delivery, and value capture.

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Table 4. Selected Business Model Definitions

Source Definition (Chesbrough & Rosenbloom, 2002)

“the heuristic logic that connects technical potential with the realization of economic value” (p. 529). “The business model provides a coherent framework that takes technological characteristics and potentials as inputs and converts them through customers and markets into economic outputs” (p. 532).

(Richardsson, 2008)

“a conceptual framework that helps to link the firm's strategy, or theory of how to compete, to its activities, or execution of the strategy. The business model framework can help to think strategically about the details of the way the firm does business.” (p. 135) “The three major components of the framework are the value proposition, the value creation and delivery system, and value capture reflect the logic of strategic thinking about value. The essence of strategy is to create superior value for customers and capture a greater amount of that value than competitors.” (p. 138)

(Osterwalder & Pigneur, 2010)

“describes the rationale of how an organization creates, delivers, and captures value.” (p. 14)

(Massa, et al., 2017)

“a description of an organization and how that organization functions in achieving its goals (e.g., profitability, growth, social impact, ...).” (p. 73)

As of today, the term Business Model (BM) is widely used by both managers and researchers, and extensive research has been made thus business models are proved as essential contributors to firm’s competitiveness, renewal, and growth (Chesbrough & Rosenbloom, 2002; Johnson, 2010; Teece, 2010). The Business Model Canvas The underlying structure of BMs is not necessarily an unchanging phenomenon but in the majority of cases they are represented statically (e.g. as canvases) where one of the most used models developed by Osterwalder and Pigneur (2010) is called the Business Model Canvas (BMC). It is widely adopted, and both scientifically and practically proven to provide an understanding of where the value creation appears and how to interlink it with the business strategy. Nevertheless, there is some criticism regarding its design. Past years, researchers have pinpointed the weaknesses of the current design of the BMC, to grasp the intensified criticism the weaknesses can be grouped into three main concerns (1) failure to measure the economic quantification, (2) vague description of the correlation between the blocks, (3) lack environmental and social aspect (Euchner & Ganguly, 2014; Zolnowski & Böhmann, 2014; Bocken, et al., 2013; Joyce & Paquin, 2016). The Business Model Canvas: an illustration The BMC is made up of nine building blocks, derived from an in-depth literature review of a large number of previous conceptualizations of BMs. The left-hand side holds everything a firm needs to have (business strategies and resources) in order to provide the right-hand side of the BMC, where the right-hand side represents the proposition towards the customer. The BMC is widely used, and it has a large acceptance amongst research communities (Osterwalder & Pigneur, 2010).

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Figure 2 illustrates all nine blocks of the BMC and their correlations by arrows, followed by a description of each building block.

Figure 2. BMC Nine blocks (figure inspired by Osterwalder & Pigneurs BMC)

The lefthand side of the BMC value proposition Partner Network consists of the network of standard suppliers and buying partners, joint ventures, strategic alliances, coopetition, etc. The reasons behind partnerships can be different but, in some sense, are always strategically chosen to gain economic advantages of the scale of each other’s businesses. Partnerships can eliminate and reduce certain risks and can be used to extend both knowledge and capabilities that do not naturally exist internally. According to Osterwalder & Pigneur (2010) very few companies execute all of the activities in-house, instead, they rely on ‘experts in fields’ for the creation and delivery of capturing value. Key resources refer to all company assets related to the value delivered directly to their customers. These assets can be both tangible and intangible for example, buildings or material, intellectual property, or human capital. Key Activities represents the most significant activities performed to deliver its value proposition. Key resources and key activities are closely interlinked and depend on the characteristics of a company. Cost Structure illustrates all major costs related to activities and resources. Osterwalder and Pigneur (2010) differentiate between two cost structures. Firstly, the cost-driven structure where cost control is crucial and the objective is to reduce cost over the entire value chain. Secondly, the value-driven structure where the focus lies on creating value such as luxury hotels or high-end fashion brands. The righthand side of the BMC value proposition Client relationship describes as the type of contracts that the customer will have with the company with various objectives as acquisition, retention, or upselling. Osterwalder and Pigneur (2010) describes the recent phenomenon added, called co-creation, where a client relationship with co-creation will allow customers to co-create the value proposition by for example sharing reviews of products online and by creating own content or to participate in the design of new products. Distribution Channels allows the customers to discover and evaluate products or services that affects the customer experience. A Channel can be stated as direct or indirect whereas the

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direct channels often show higher profit margins but are considered as very costly to set up and operate, while indirect channels have lower margins but usually a wider customer reach rate. Client Segments are known as the intended target group and its segments. It might seem tempting to target as many customers as possible but there has to be a strategic decision in which segment to serve. The segmentation can be done on different levels, with various aspects covered. For example, a company targeting the mass market will put its focus on developing its blocks for a large number of people whilst a niche market value proposition is dependent on micro-managing respective niche segments of the market. Revenue flows represent the cashflow obtained by sales. These flows can have different pricing mechanisms by either one-time payment, or recurring payments via subscriptions or rental services. It is important that the revenue flows are viable in order to cover the total cost of a company. The Centralized Value Proposition The dynamic system of business models, involves activities (e.g. the nine building blocks of the business model canvas) (Morris, et al., 2005; Hedman & Kalling, 2003). These systems of activities (i.e. business model practices) are seen as the essence for firms’ in order to contribute to the creation and delivery of its value while still capturing and turn it into direct profitability. The research pioneer Richardsson (2008) lists three main elements in the definition of a BMs value: (1) value proposition, (2) value creation and delivery, and (3) value capture, Table 5 presents the referred: Table 5. Three elements of Business Model Value Proposition (Richardsson, 2008; Bocken, et al., 2014)

Value Referred to: Proposition Customer Offerings that generates financial profits Creation and Delivery New business areas and markets that generates additional revenues Capture Deals with the Return from selling products, services, or processes to customers

To achieve competitiveness, and increased value, the creation of new configurations requires redesigning and implementing novel and feasible BM activities, for example, improvement of customer service or by competing on different terms (Boons & Lüdeke-Freund, 2013). Thus, adhere to the commonly used notation for describing the outcome of the business model in terms of a value proposition – for this thesis, the value proposition will be used as a central outcome of a business model including all three main elements listed above. 3.2 Business Model Innovation The phenomenon of business model value proposition leads us into the next paragraph of the conceptual framework – business model innovation (BMI). BMI is defined as the process of change in developing or modifying a business model. Where the configuration of interrelated activities plays an important role to achieve new insights or taking entirely new actions due to a market shift or trend. The capability for frequent and successful business model innovation can increase an organizations’ resilience to change in its environment (Chesbrough, 2010). Table 6. Selected Business Model Innovation Definitions

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Source Definition (Osterwalder & Pigneur, 2010)

“Business model innovation is not about looking back, because the past indicates little about what is possible in terms of future business models. Business model innovation is not about looking to competitors, since business model innovation is not about copying or benchmarking, but about creating new mechanisms to create value and derive revenues. Rather, business model innovation is about challenging orthodoxies to design original models that meet unsatisfied, new, or hidden customer needs “(p. 136)

(Chesbrough, 2010)

Business model innovation “[1] Articulates the value proposition (i.e., the value created for users by an offering based on technology); [...] [8] Formulates the competitive strategy by which the innovating firm will gain and hold advantage over rivals.” (p. 355, citing (Chesbrough & Rosenbloom, 2002)

As the selected definitions explain, BMI is seen as a change in the configuration of either the entire business model or elements of it. By that, the transformation can affect the entire business, individual segments, or a combination of its value proposition. As illustrated in Figure 3, the four generic configurations of BMI are presented by Geissdoerfer, et al., (2018). The four generic configurations can tell managers whether to strengthen the current business model or adapt to the disruptive one.

Figure 3. Types of Business Model Innovation (figure inspired by Geissdoerfer, et al., 2018)

Thereby, BMI may force established firms to take several strategic decisions. This is not necessarily an easy choice as the new disruptive business model might threaten the operational performance of their commercialized one (Chesbrough & Rosenbloom, 2002). 3.3 Sustainable Business Model definition As a subset of the fundamental idea of business model innovation – the conventional business model literature has focused on market sustainability rather than the social- and environmental sustainability, however, this focus has shifted over the past years. In 2016 Pedersen, Gwozdz and Hvass conducted a study that indicated that Corporate Social Responsibility is being implemented directly into the conventional BMs, which formed new concepts such as the Sustainable Business Model (SBM). However, when the concept was first conceived, the main purpose of SBMs was to put companies into the service of transformation to a more sustainable economic system and to provide leverage for the sustainability considerations by helping companies to achieve their sustainability ambitions (Stubbs & Cocklin, 2008). Today, SBMs are increasingly adopted by firms hence it is proven that it can lead to direct benefits such as cost savings or completely new revenue streams, and more amorphous

Business Model Innovation

Start-UpThere is no current business model, and a new

business model is created

Business Model TransformationThere is a current business model that is changed

into another business model

Business Model DiversificationThe current business model stays in place, and an

additional business model is created

Business Model Acquisition An additional business model is identified,

acquired, and integrated

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advantages by being ‘prepared’ for future stakeholder concerns or legislation and the regulatory aspect. The new broader notion of value predicts improved organizational resilience, reputation, and employee attractiveness (Bocken & Geradts, 2019). Not to mention, it could be argued that the sustainable business model as a concept can supersede the conventional concept of a business model like sustainable competitive advantage has superseded the competitive advantage (Bocken & Geradts, 2019; Boons & Lüdeke-Freund, 2013; Stubbs & Cocklin, 2008). What the selected definitions, presented in Table 7, in the existing literature have in common is that they see the concept as a modification of the conventional concept of the business model but with certain characteristics and objectives added to it. Table 7. Selected Sustainable Business Model Definitions

Source Definition (Stubbs & Cocklin, 2008)

A sustainable business model is “a model where sustainability concepts shape the driving force of the firm and its decision making [so that] the dominant neoclassical model of the firm is transformed, rather than supplemented, by social and environmental priorities.” (p. 103)

(Bocken, et al., 2013)

“Sustainable business models seek to go beyond delivering economic value and include a consideration of other forms of value for a broader range of stakeholders.” (p. 484)

(Boons & Lüdeke-Freund, 2013)

A sustainable business model is different from a conventional one through four propositions, “1. The value proposition provides measurable ecological and/or social value in concert with economic value [...] 4. The financial model reflects an appropriate distribution of economic costs and benefits among actors involved in the business model and accounts for the company's ecological and social impacts” (p. 13)

(Evans, et al., 2017) Sustainable business models are described with five propositions, “1. Sustainable value incorporates economic, social and environmental benefits conceptualized as value forms. [...] 5. Internalizing externalities through product-service systems enables innovation towards sustainable business models.” (p. 5)

Based on the definitions, Geissdoerfer, et al., (2018) identifies that they either 1) incorporate concepts, principles, or objectives that aims for sustainability; or 2) that they integrate sustainability into their current value proposition. As observed, the identified lack of certain elements in the business model canvas and the adoption of sustainable business models has led to new interpretations of the conceptualization of sustainable business models. Sustainable business model types The literature review by Geissdoerfer, et al. (2018) presents four existing types of sustainable business models (1) Circular Business Models, (2) Social Enterprises, (3) Bottom of the pyramid solutions, and (4) Product-Service systems. For this thesis conceptual framework the circular, and product-service system models types are applied. 3.4 Sustainable Business Model Innovation The relatively recent research in sustainable business model innovation (SBMI), is currently presented as a subset in the sustainable business model field. As the research field is quite new, the conceptualization is vague and there seems to be no comprehensive review of the existing literature (Geissdoerfer, et al., 2018). As some of the selected definitions’ states in Table 8, the SBMI is similar to the conventional BMI, but with sustainability considerations added to it. The process qualifies as business model innovation for sustainability (i.e. sustainable business

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model innovation) when it aims at 1) sustainable development when it comes to environmental and societal impact, and the long-term prosperity of the entire organization and their stakeholders or 2) adopting solutions that foster sustainability directly in its value proposition. Table 8. Selected Sustainable Business Model Innovation Definitions

Source Definition (Boons & Lüdeke-Freund, 2013)

Sustainable business model innovation is understood as the adaption of the business model to overcome barriers within the company and its environment to market sustainable process, product, or service innovations. (p. 13)

(Bocken, et al., 2014)

“Business model innovations for sustainability are defined as: Innovations that create significant positive and/or significantly reduced negative impacts for the environment and/or society, through changes in the way the organization and its value-network create, deliver value and capture value (i.e. create economic value) or change their value propositions.” (p. 44)

(Schaltegger, et al., 2016)

Sustainable business model innovation describes the creation of “modified and completely new business models [that] can help develop integrative and competitive solutions by either radically reducing negative and/or creating positive external effects for the natural environment and society” (p. 3)

Sustainable Business Model Innovation types Similar to the business model innovation process simulated by Geissdoerfer, et al., (2018) presented in Figure 3, p.23., the model can be adjusted to the susatinability process such as (1) sustainability start-ups: a new organization with a sustainable business model; (2) sustainable business model transformation: the current business model is changed and results in a sustainable business model; (3) sustainable business model diversification: without major changes in the existing business model, a sustainable business model is established; or (4) sustainable business model acquisition: the sustainable business model is identified, acquired and integrated into the organization. 3.5 Sustainable Business Model Innovation Practices As it is explained, negative environmental and social impacts may disrupt the current market thus it may be turned into business opportunities adopted by start-ups whom easily take market shares by turning it into positive sources of value (e.g., turning waste into a resource or new revenue streams such as recurrent transactions) (Bocken, et al., 2013). In order to facilitate the development of sustainable business practices (i.e. Sustainable business model innovation) researchers within the field have an emphasis on tools, all based on the Business Model Canvas, for performing SMBI – focusing on how to ideate new sustainability practices. Making this theoretical part of working as a knowledge base for the thesis when studying the phenomena of Sustainable business model innovation. Sustainable Business Model Innovation: Risk and uncertainty factors Previous research of challenges connected to the innovation process towards sustainable business models includes six aspects: the triple bottom line (the challenge of balancing amongst them), the organizational mindset (rules, guidelines, behavioral norms, etc.), resources (reluctance to allocate resources for initiatives), technology innovation (complexity and multidimensional challenges), external relations (interactions with external stakeholders and business environments), and lack of methods and tools specifically developed for

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sustainable business model innovation (Stubbs & Cocklin, 2008; Schaltegger, et al., 2016; Boons & Lüdeke-Freund, 2013; Johnson, 2010; Zott, et al., 2011). A checklist provided by Brillinger, et al., (2020) is developed in order to use it as a first step in an integrative business model risk management process, both for existing and new iterations. Their work is done since the extant literature on the subject was lacking by an extensive study of expert groups, factors groups, and triangulation results. Their comprehensive and detailed set is based on Osterwalder & Pigneurs (2010) BMC and summarized in Table 9. The checklist consists of 28 business model risks and uncertainty factors groups that can be adopted by business model Management practices. Table 9. Checklist of Business Model Risk and Uncertainty Factors

Business Model Areas

Groups of Business Model Risk and Uncertainty factors

Customer Demand Misinterpreting demand; lack of focus on demand; attracting and retain customers; community requirements

Relationship Damage; losing customer interface; opportunistic or adverse behavior; inflexible agreements

Solvency Bad credit rating; default; insolvency Access Missing market; strong intermediary; high market entry barriers; strong competitor(s) Multiple BM The emerge of multiple BMs within one firm; cannibalization of existing customer base;

losing loyalty; offending existing customers by becoming a competitor Offer Quality Gap in performance, durability, and functionality (expected vs. delivered)

Availability and Maintenance

Missing component of the value proposition; poor performance

Data Data security; data ownership; data privacy; data quality Technology Utilization of new tech in premature state; high complexity (user friendly); lack of

internal competence Innovation Innovativeness of the value proposition

Infrastructure Eco-system The value network that constitute multilateral relationships between different parties Bilateral cooperation Impacting the stability of relationships Capabilities and resources

Required capability; special equipment; data; or human resources

Operational Operations connected to errors in human or technical behavior Intellectual property (IP)

The drainage and management knowledge of IP; sensitive data on the firm’s customers and partners

Portfolio Complexity, defocusing and the variety of offerings linked to management Financial Viability

Financial resources Managers capability to finance the BMI Investment Capital tie-up; production plants; inventory costs Monetization Monetizability of value proposition/offer Revenue mechanism Taxation regulations; buying sensitivity; revenue model (model-specific regulations) Pricing Customer price sensitivity and its value perception Lifecycle risk Uncalculated change of costs and revenues in the lifecycle of BM

Market Environment

Political Political, social, or governmental factors Environmental Acts of nature Economic Business Environment (e.g., customs, currency exchange rates, taxation) Legal and regulatory Commitment of regulatory and legal circumstances Competition Existing or Incumbents Technological Change Covers all aspects regarding Technical Change

The risks and uncertainty factors explored can be mitigated when applied directly into the business experimentation, strategic decision making, and the business model innovation process in practice. Prototype driven tool for the implementation of Sustainable Business Models Baldassarre, et al., (2020) has developed a tool based on using a design science research methodology, combining theoretical insights from previous literature, based on the business model canvas by Osterwalder and Pigneur. The normative theory is provided in terms of

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business model innovation in order to integrate environmental and social concerns into the objectives and operations of organizations. Piloting a prototype as a tool for sustainable business model innovation forces organization to simultaneously consider the desirability (i.e., user needs), feasibility (i.e., level of technical capabilities), viability (i.e., what is financially possible), and sustainability (i.e., economically, socially and environmentally acceptance) of a business model.

Figure 4. Sustainable Business Model Pilot Canvas (inspired by Baldassarre, et al., (2020).

As stated by the creators, the SBM Pilot Canvas complements the existing collection of SBMI tools for ideating, implementing, and evaluating new SBMs. Notably, their analysis of the collection shows that no existing tool places a specific focus on the design-implementation gap. The two most significant challenges observed is described by the authors from a financial and sustainability standpoint, where the SBMI needs proper solutions in order to deliver tangible sustainability impacts. Thus, SMBI plays the most crucial role in the successful integration of sustainability into organizations’ visions and operations. Nevertheless, to implement them successfully in markets (Baldassarre, et al., 2020).

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Chapter Summary In this chapter, the conceptual framework applied to the thesis is presented. Four elements are deduced from the current literature: Business Model, Business Model Innovation, Sustainable Business Model, and Sustainable Business Model Innovation. These elements are implemented into a common framework forming the foundation of the conceptualization. The conceptual model lays the ground for the delimitations of the innovation process and is drawn from several existing definitions of the phenomenon. The model is thereafter used for the thesis thematic analysis of sustainable business model innovation in practice, in an exploratory case study format. Therefore, the chapter presents a selection of definitions of the concepts and discusses their similarities and differences, their complexities, and their development journey. To further grasp the organizational activities for innovating sustainable business models, theoretical concepts from the practicalities on the sustainable business model will be used. Such as using the Business Model Canvas for the identification of the case company’s Business Model and using their nine-blocks to identify where sustainability practices takes place. Finally, to comprehend the complexity of the phenomenon – the chapter outlines the existing theories regarding practical implications such as risks and uncertainties and a piloting prototype tool connected to the sustainable business model innovation process.

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4 Method This chapter outlines the model of how to make the thesis problematization researchable. It outlines the method of the research process used when conducting the thesis in approximately five months. The limited research on the sustainable business model innovation - specifically for the fashion retail industry – alongside with ambiguous and vague definitions of the concept and the current managerial challenges to successfully develop and launch redefined sustainable business models, made up for the initial case study approach. The exploratory case study was the most appropriate method as it provided rich empirical evidence for the scientifically usefulness of the results – at the same time supported with several theoretical frameworks developed by research methodologists to avoid biases and increase the validity and reliability of the thesis. Figure 5 below highlights how the research process was accompanied by a thorough data collection, followed by an in-depth analysis based on a conceptual framework developed by the author to identify the innovation process in practice for sustainable business model of traditional clothing retailers (All phases are presented, described and argued for in this Chapter).

Figure 5. Schematic illustration of the research process defining the thesis

4.1 Research Design In the introduction chapter, it is outlined how the thesis aims to explore and improve the understanding of how specific industries, in this case, traditional clothing retailers within the fashion retail industry, innovate their current sustainable business models. In the context of social science, research on practical phenomenon’s such as sustainable business model innovation has specific demands to fully exploit it. According to previous researchers within the field of management social sciences, there is a need to strategically ‘attack’ the present theories or concepts thus stated by Blomqvist & Hallin (2015):

- “Explanans can never fully reflect the explanadum”. p.63 By adopting the explorative perspective, it gave the research process a high level on flexibility even though the limited time of five months had its influences of the delimitations. Maintaining a high level of flexibility means that the results guided the process as the research progressed, as explained by the pioneer (Eisenhardt, 1989). Followed by that, many of the different phases were therefore performed iteratively rather than in a linear timeline. The freedom of making adjustments, when new insights emerged is considered as one of the key attributes for the thesis when building on theories from a case study design. Drawing on this

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reasoning, in accordance with both Blomqvist & Hallin (2015) and Yin (2009), a qualitative research design was suggested as it was classified as the most suitable for addressing an explanandum that has been scarcely researched by past scholars. Furthermore, this exploratory case study has some influences of the Grounded Theory approach, hence, Bell (2015), describes the approach such as definitions and structures are determined after the researcher detects a pattern, and then continues the fieldwork while the data is still available. The theories were developed during the course of the research. Using this combined approach allowed this study to be aware of the influences and to involve a great level of sensibility. All in all, exploratory qualitative research was considered thus its approach had the highest potential to develop new, reliable empirical evidence, for this previously limited research phenomenon (Yin, 1994). 4.2 Research Process The research has been conducted during a time period of five months. The process has been introduced at the beginning of the Chapter, in Figure 5, p.29. The three different phases of the process: (i) Thesis initiation, (ii) Exploratory Case Study, and (iii) Conceptual framework are explained more in detail below. However, the iteratively performance of the phases means, aligned with Eisenhardt (1989), that the results guided the process as the research progressed.

i) Thesis Initiation During the initial state of the thesis, an initiation phase was conducted with the purpose of exploring the current field of sustainable business models within the fashion retail industry and identifying existing research gaps. The initiation consisted of pre-studied literature presented in Chapter 2: Research Context. The review is presented as a summarized result of a Strategic Literature Review conducted during Fall Semester of the year 2019 as a part of a Research Proposal within course ME2003 Research Methods in Industrial Engineering and Management 7.5 ESCT at KTH Royal Institute of Technology. Thereafter, the initiation process proceeded with an unstructured interview (explained in Data Collection section) with a senior management member at the case company that formed the preliminary foundation for the intended Case Study, and to better understand the current context of the market. In parallel, participative observations were conducted to better understand how to operationalize and address the underlying practitioner problem from the identified trending research stream. When a suitable research topic was identified, the first draft of research questions was conducted. Thereafter, the selection of an appropriate research approach together with necessary delimitations for the realization of the aim for the thesis was discussed with involved participants - company representatives, and the thesis supervisor appointed by KTH.

ii) Exploratory Case Study The strategic literature review as an initial step within the previous phase: ‘Thesis initiation’ showed that this research stream applied to the fashion retail industry is quite new and trending. Therefore, the importance of being sensitive and critical between theory and empirical data became of great importance. The limited number of previous research and contemporary nature forced the author to take an exploratory perspective. More specifically,

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based on the problem description and the aim of this study, it was concluded that this phenomenon required an Exploratory Case Study Design hence it was considered as the most beneficial for a valid, reliable outcome. As Yin (2009) states, an exploratory case study can offer the opportunity to address a particular set of questions that are of crucial importance in order to understand the wide range of social processes, and simultaneously generates rich empirical material, where the complexity of the reality is captured better than other designs. He suggests that a qualitative case study shall be considered when:

i) “how” and “why” questions occur (as the thesis aspires to); ii) manipulation of the behavior within the research object is impossible; iii) discovering contextual conditions because the phenomenon might be

relevant to them; iv) the phenomenon and context do not have a clear connection.

As the studied phenomenon was defined as complex, involving several actors including different fields of research, a single case study suited the delimitations and was argued as beneficial for the applicability of the results. Furthermore, it has been suggested by Blomqvist & Hallin (2015) than an abductive research approach is suitable when a phenomenon is heavily impacted by empirical data. Thus, in addition to these arguments, the researcher acted as an insider (defined by Louis & Bartunek, 1992) at an employee level at the case company. This particular view allowed for extensive access to empirical data, both formal and informal. It made it able to collect various sources of data simultaneously, and the amount of detailed information was carefully studied and validated by representatives throughout the study to increase the validity of the empirical results – one of the core strength of conducting a case study (Blomqvist & Hallin, 2015; Yin, 2009; Flyvbjerg, 2006). The structure of the exploratory case study was designed to answer the main research question stated in the thesis introduction (Chapter 1), it can be divided into three steps:

- Step 1: Describing the Current Business Model of Polarn O. Pyret by using the BMC as the main tool

- Step 2: Investigate current Sustainability Activities and placing them into the BMC to identify the current innovation process related to sustainability within the business model

- Step 3: Analyze the challenges and key activities using the results from Step 2 Knowing about the case study pitfalls Yin (2009) states that most of the case studies fail to develop sufficient operational measures and that the data collection can hold the risk to be based on subjective judgment. In his foundational work regarding case studies from 1994, he poses four guidelines that helped the thesis to keep those to a minimum and to increase the validity: (1) usage of multiple sources of evidence during the data collection; (2) establishment of a chain of evidence; (3) to let the participants overlook a draft of the empirical material, and (4) always include research protocols in reports/in this case thesis. In order to diminish concerns regarding the difficulties to maintain the reliability of a case study (Yin, 2009). Additional actions have been considered throughout the research: (1) introducing the objectives, scope and delimitations together with representatives at the case

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company; (2) double controlling and external validation to avoid own interpretation of the empirical data collected; (3) following a logical consistency via interview protocols and case study material. By constantly discuss and reconsider the knowledge about previously outlined pitfalls, and by exploring conflicting research streams, deeper insights of the emergent theories have been gained throughout the process. This has resulted in aligned with Yin’s (1994) theory of a stronger validity and increased generalizability of findings. The case selection Drawing on these arguments the exploratory case study made it possible to address the theoretical research gap and the organizational management problems connected to the transition of the process. Notable, when investigating both the sustainable business model innovation process and the challenges to successfully develop and launch redefined sustainable business models, the case selection was of great sensitivity – thus according to Flyvbjerg (2006) if an appropriate case is selected it can contribute within its given field of research with reliable and valid accumulated knowledge and general conclusions. The selected case for the thesis was represented by a traditional clothing retail company - Polarn O. Pyret, hereby after called PO.P. The selection of case company is based on the Research Context presented in Chapter 2. Thus, it explored the fundamental context of the fashion retail industry within the area of sustainable business model innovation in practice – explicitly what was known. The purpose of putting the industry into the research context was to be able to theoretically place the thesis in the context and make up for the delimitations of the thesis. Showing that the reason behind the industry is manifold:

1. Their current environmental impact along with their social responsibilities is well-documented and proven as far from sustainable, fashion as a part of the world’s economy is undoubtedly considered one of the areas that urgently requires the adoption of more sustainable business models.

2. Simultaneously the industry is facing a significant market shift where customers and corporate incentives are growing regarding the concerns of it (often the reason behind innovating the business model at all)

3. The traditional companies of the industry are currently facing a fast pace shift and ‘business as usual’ is losing competitive edge, forcing both large- and small-scale companies to reshape their value propositions to keep their market shares (a delimitation of the study and basis of case selection)

PO.P has a history of sustainability actions and continues to reshape its value proposition regardless of the challenges it comes with, it lies within their company culture to take a clear standpoint regarding their responsibility towards contributing to the society. PO.P has more than 120 stores combined across Europe and the US as well as an online store concept. They also operate on multi-brand digital platforms such as Boozt.com. It is the fastest-growing children's clothing company in Scandinavia and aims to expand further globally. The Polarn O. Pyret concept is owned by their parent company RNB Retail and Brands AB, listed on NASDAQ OMX Stockholm MidCap.

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iii) Conceptual Framework To understand the process of sustainable business model innovation, it was of great importance to understand why and how the business model concept is founded and used. Making a compelling case for it to be utilized in order to explore the addressed phenomenon in the thesis. It was essential that the phenomenon observed were compared based on a common conceptual framework and that spatial combination of cross-sectional and longitudinal design was implemented to understand the practical processes and to considering different context. To fully explore the sustainable business model innovation process. The framework was developed iteratively and has been changed several times throughout the research process. It visualizes the differentiation between the different concepts using a conceptual framework. Hence, the study aims to explore the innovation process of sustainable business model transformation. The conceptual model below (repetitively displayed from Chapter 3 – Figure 1, p.19., laid the ground for the delimitations of the thesis and is derived from scholars’ definitions of the phenomenon. The model is thereafter used for the thesis analysis of sustainable business model innovation in practice through an exploratory case study format – explained further down in the paragraph of Data Analysis.

Throughout the study, it became important to understand that models are always simplifications of reality as they would not be useful and generalizable if they were as complex as reality – described in the conceptual framework of the study.

4.3 Data Collection The data collection process comprises two phases: 1 & 2. Both phases are named to maintain logical consistency throughout the methodology, namely: 1. Identification of Current Sustainable Business Model, and 2. Deepening the understanding of Sustainable Business Model Innovation in Practice. As outlined within the previous description of the research design process, accurate and reliable results of a study based on a single case study is dependent on collecting data from various sources. For each of the two phases, multiple data sources were used: (1) participative observations and practical experience; (2) semi-structured conversational interviews; (3) workshop-based data collection, and (4) internal documentations/archival data.

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The qualitative nature of the case study followed abductive reasoning, combining multiple theories, methods, and empirical material to overcome the potential intrinsic biases. All data sources are presented and strategically evaluated in this subsection. Overall Interview setup For each interview, a time slot of one hour was scheduled. The long unstructured interview was held face-to-face in meeting rooms at the case company headquarter, performed in the local language (Swedish). Accordingly, as Eisenhardt (1989) suggests when formulating interviews in order to keep the ambiguity in the research, the un-/semi-structured design allowed the thesis to make adjustments as the findings emerge – especially suitable when a study aims at contributing to theory. With that said, the nature of the exploratory purpose of the thesis, argued to use unstructured-, conversational-, or semi-structured interviews as building blocks for the initial data collection. The unstructured interview is the most open-ended interview technique and is more flexible about what direction the interview might take (Gray, 2006). These interview formats allowed respondents to speak freely around prepared themes and thereafter the analysis of collected data to be consistent and narrowed down into relevant research streams as they appeared, recommended by (Blomqvist & Hallin, 2015). The disadvantage of this method is that the interviewer may steer the interview in a wanted direction and the data collected is very hard to analyze (Gray, 2016). This is avoided by using multiple sources of data collection and triangulation during the analysis of data. As well as using an allocated company representative person as a ‘validator’, followed by the second round of interviews (e.g. a follow-up session). All representatives at the case company were introduced to the research field and the preliminary purpose of the thesis. All respondents were informed about why the particular interview was requested and conducted. They were also assured about confidentiality and informed about the anonymously throughout the empirical data collection. An extra validation in the end-phase of the thesis was performed by the assigned supervisor at the company in order to strengthen non-biases by the researcher and the accuracy of the analysis. 4.3.1 Phase 1: Identification of the current Sustainable Business Model The research commenced by identifying the explanandum previously described in section 1 of this chapter. Refer back to the schematic illustration of the research process presented in Figure 5, p.29., it is noted that Phase 1 of the data collection stretch over two main processes of the research method namely: ‘Thesis Initiation’ (duration: approximately one month), and ‘First part of the Case Study’ (duration: approximately one month). Therefore, the data collected for this phase is described within two subsections named by the main research processes phases in section above. Research Process i) Thesis Initiation The data for the ‘thesis initiation’ was collected from various sources based on the pre-studied literature presented in Chapter 2 (Research Context). There was one long interview conducted within this partial phase, based on previously participative observations and supported by internal/archival documents gathered.

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Participative Observation As stated previously, the researcher’s practical experiences (as a former employee within the company) – taking on the role as an insider – gave the study indirect discussions topics during the initial observations. The deeper understanding of the industry dynamics gave the participative observations steeper learning and understanding of the internal processes. Thus, conduction of similar studies requires an additional interview-session and/or additional and more general observations of the industry with employees from several business units, which are recommended before the initial data collection phase. The main purpose of the participative observations was to bring a deeper perspective to the case study and to get an insight into how internal operations were affected by sustainable activities of the business model. Thus fundamentally, these systems of activities are seen as the essence for firms’ in order to contribute to the creation and delivery of value while still capturing and turn it into direct profitability for some of the created value. Participant observation is not the most used data collection for similar studies, and it is more used in the field of sociology or anthropology. However, in combination with other methods, Saunders et al. (2009) states that it has great potential and gives valuable results. Hence, being a part of the organization during the thesis helped to understand the context of the phenomenon, and increased access to internal company data. The participative observations gave valuable input regarding the understanding of sustainable business model innovation in practice. The observations were done mainly within or before the thesis initiation to identify the manifold reasons regarding how the sustainable business model concept delivers a stronger value proposition aligned with the sustainability promise by the research object. Unstructured long interview The first interview was conducted as a long qualitative conversational interview with an open-ended nature, consisting of broad content, regarding the subject and delimitations of the thesis. Under conversational interviewing procedures, the interviewer is allowed to ask respondents if there is any unclarity or can simultaneously provide unscripted feedback. The respondent for this interview was recommended by the top-management level, the E-Commerce and Marketing Director. The respondent was encouraged to speak freely about the current sustainable business model and the process of innovation (i.e. sustainable business model innovation) the interview protocol can be found in Appendix A. Based on the responses, the interviewer was able to ask follow-up questions with the main purpose of supplementing data from the participative observations and the official company documents. Table 10. Conducted data collection during the partial ‘thesis initiation’ phase

Source of Data Duration Key Topic Participative Observations

4 weeks Company Presentation of Sustainable Actions year 2020; Historical Company Presentation of Sustainability Actions; Monthly Meeting; Annual Business Plan Presentation; CSR Presentation.

Internal Documents

N/A Internal strategic documents, Sustainability Report 2018-2019; webpage; CSR-report.

Conversational Interview

2 h Sustainable Business Model; Sustainability Actions; Process of SBM Innovation

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Research Process ii) Case Study (step 1) After the research questions and the explanandum had been determined and the case selection was preliminary planned at the case company, the initial data collection was started. Assigned to Step 1 of the Case Study Process: Describing the Current Business Model of Polarn O. Pyret by using the Business Model Canvas as the main tool. BMC Workshop for mapping the existing sustainable business model In order to understand the current sustainability actions from a business model perspective, the data collection for mapping of the current sustainability model was needed. From the first interview held, the Business Model Canvas by Osterwalder & Pigneur was introduced and selected as the most appropriate tool to use in order to map the current sustainable business model. The company supervisor allocated all participants needed to conduct a workshop, based on the nine building blocks, presented below in Table 11. Using a workshop for data collection was suitable thus it made it possible to identify and explore relevant factors that was not obvious to either the participants or the researcher prior to commencing it (Workshop Protocol can be found in Appendix B). Respondents were selected due to different criteria: such as length of experience within the company where more senior positions were able to give more accurate inputs due to many years and different roles within the company. Other criteria were depending of the level of involvement within each of the nine blocks of the Business Model Canvas, all presented further down in Table 12. Table 11. Nine building blocks of the Business Model Canvas

Lefthand side of the BMC Righthand side of the BMC Key Activities Client Relationship Partner Network Client Segments Key Resources Distribution Channels Cost Structure Revenue Flow

The duration of the workshop was scheduled as a full day with all participants (some present whole day, some for particular time slots) and the preparation of material took approximately two days to prepare. Time Management, and scheduled activities was crucial in order to collect all data necessary. Thereafter the collected data was analyzed, evaluated and validated together with the company supervisor for accurate interpretation of the results. Table 12. List of Workshop Attendances

Role Seniority Logistic Coordinator <5years Outbound Logistic Manager >5 years Inbound Logistic Manager >5 years Assortment Controller <5years E-Commerce and Marketing Director >5 years Accountant <5 years Supply Chain Planner <5 years

The first phase of the data collection terminated with the identification of the current sustainable business model of the case company, their sustainability activities, and challenges

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connected to each of them as well as contributed to the conceptual framework that was being used for the final analysis of the thesis. 4.3.3 Phase 2: Deepening the Understanding of SBMI in Practice Important notice: This part of the data collection was impacted by the Covid-19 situation, affecting the open access to data and the collection approach had to be moved into a digital environment causing some minor changes varying from the traditional way of conducting a scientific data collection. The last part of the case study and its data collection was mainly based on semi-structured interviews with some of the workshop attendances together with summarized material of internal documentation. The second phase of the data collection was assigned to the Case Study’s Step 2: Investigate current Sustainability Activities and placing them into the BMC in order to identify the current innovation process related to sustainability within the business model, and Step 3: Analyze the challenges and key activities using the results from Step 2. Semi-structured interviews The four semi-structured interviews presented below in Table 13 were held by phone or were indirectly communicated by the company supervisor, with a duration between 30 and 60 minutes conducted in total. Notes were taken during the interviews and summarized afterward. Based on the analysis of the data collected in Phase 1, key topics was discussed, supplemented and validated as a follow-up from the result of the workshop. With the main focus on challenges related to each of the sustainability activities identified.

Interview Role Duration Elements 1 Outbound Logistic Manager 30-60 min Partner Network, Key Resources, Key

Activities 2 E-Commerce and

Marketing Director 30-60 min Partner Network, Key Activities,

Distribution Channels, Client Relationship, Client Segments

3 Logistic Coordinator 30-60 min Key Resources, Cost Structure, Revenue Flows, Key Resources

4 Supply Chain Planner 30-60 min Key Activities, Key Resources, Partner Network

Table 13. Semi-structured interviews for phase 2 of the data collection

All central open-ended questions are presented in Appendix C. The respondents were selected from the criteria based on the involvement of each building block and per sustainability activity. Follow-ups via email Due to the special circumstances caused by Covid-19, the intended follow-up sessions were canceled. The follow-up was instead communicated via email conversation. The initial plan was to conduct the last set of unstructured interviews in order to get a deeper insight of challenges connected to each of the sustainability activities and the ‘future market environment’. All responses from interview/email topics (presented in Appendix D) was instead provided by the supervisor, covering as much as possible. Notable, this last data collection was possible due to the fast that the researcher (me) had practical experiences (as a former employee within the company). It made it possible to understand and elaborate on

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briefly described responses and the possibility to develop an analysis with the help from literature. Summarized material from internal documentation During the research period, open access was granted to numerous internal documents, presentations, action plans, and documents published on webpages and were used in both phases of the data collection. Significantly, for Phase 2, the data collection from documents regarding commercial- policies and sustainability activities were used to build a stronger understanding of customer relationships, customer segments, and distribution channels. All information was summarized and used as a basis for the semi-structured interviews in order to be able to gain an in-depth understanding of the sustainability activities, connected to the mapped business model using the BMC as a tool. 4.4 Data Analysis All the collected data from interviews, observations, and secondary sources were placed in proximity and analyzed in parallel throughout the whole data collection process. The abductive approach enabled consistency by going back and forth between the data collection and the iteratively developed conceptual framework. The flexibility of the approach provided the opportunity to discover prosperous findings. Blomqvist & Hallin (2015) presents a common way of analyzing qualitative empirics, namely a thematic analysis. It entails the use of categories into which the researcher/author can sort the empirical material to then, based on the categories, answer the researchable questions posed. The categories for this thesis thematic analysis conducted is the following:

(i) Definition of Sustainable Business Model (ii) Defining Sustainable Business Model Innovation (iii) Sustainable Business Model Innovation in Practice (iv) Challenges of Sustainable Business Model innovation

This thematic categorization of the collected data was done to identify commonalities and potential conflicting discourses. Using the common conceptual framework together with the research context made it able to reduce the complexity of the whole data set. The utilization of a common conceptual framework whilst conducting the analysis increased the reliability of the thesis. Putting the data set into a categorization made it able to ensure a structural way of sorting the data and enhanced a systematical exploration. Process identification analysis By using a spatial combination of the cross-sectional and longitudinal design of the analysis; by putting the conceptual framework in the context of the empirical setting, made the identification of process-based research possible. Thenceforth, with the purpose to identify additional nuances in the collected data, this analysis approach was easily compared to past research within the field. In which, key findings within each of the thematic categorizations lead to the discussion of its implications. In the final phase of the empirical data, the primarily collected data was scrutinized to look for additional empirical evidence, with the objective to add additional granularity to the key findings.

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Reduction of data As a big amount of qualitative data was obtained during the single case study – as predicted, it was important to organize the data in a structured way. Consequently, data reduction does not mean to ignore data but rather to find the relationship between data collected and to discard data unusable (i.e. scientifically useless) compared to the aim of the thesis. Using the thematical analysis with categorization, the empirical data set was able to be reduced and it became increasingly useful for its intended purpose. This process of reduction may sometimes entail having to reformulate some of the researchable questions, stated by Blomqvist & Hallin (2015), this is more usual than unusual. Business Model Canvas As a final remark, both for the workshop and analysis of the thesis the business model canvas has an initial role. The canvas model was used as the common framework/template to map out the sustainable innovation inside of the case company’s business model, and as a matrix to evaluate and summarize the key findings. In contrast to the criticism, there was no other tool identified in literature with this high recognizable rate and the selection is based on mainfold reasons, derived from scholars opinion: Firstly, it is one of the most popular and accepted tools to analyze a company’s business model (Massa, et al., 2017). Which made it easier to proceed with the workshop thus it has been used before and is widely known of by top managers. Secondly, it has the advantage that it is represented as a simple model which makes it easy to show the different changes during the transitions or reshaping from one business model to another. Lastly, it is a tool that can be used across all industries independently of organizational structures (Osterwalder & Pigneur, 2010). 4.5 Discussion of the Research Design Throughout the chapter, the validity and reliability are presented and argued for with an emphasis on how it is conducted to achieve high quality results of the thesis. As stated by the pioneer of Case Study Design, Yin (1994), the quality of an exploratory case study is mainly measured based on all action taken with the purpose of achieving validity (i.e. investigating the right phenomena), and reliability (i.e. replication logic). Therefore, this subsection contains of a brief but yet important discussion for this research, where several general aspects are presented to increase the quality of the study. The subsection finalizes with a discussion where the main focus is on the ethical considerations of human involvement. Reliability and Validity The fundamental question when working with collected data shall include the validity and reliability aspect, thus there is no point including empirical material that are not scientifically useful to fulfil the purpose of the study. All empirical data collected during research must include source evaluation and criticism in order to be scientifically useful. There are several methods to this, Blomkvist and Hallin (2015) provides a checklist including authenticity, proximity and dependence, tendency, and representativity. This list has been taken into consideration for all data collected for this thesis. Followed by that, awareness of some critical aspects was of great importance for this thesis. First of all, when measuring what actually ‘is to be measured’, it requires some experience. The participatory observations needed awareness of skewness and biases, thus by being objective, it provided a better outcome and gave the thesis even higher valuable data. A structured

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approach that shapes the type of data was applied to identify relevant events for this investigation. This type of data collection can be seen as a combination of observational/structuring observation due to the time limitation of the study. Furthermore, to respect the principle that “Engineers ought to both publicly and privately, in writing and rhetoric, strive for factual presentations and avoid erroneous, misleading or exaggerated statements” by (Sveriges Ingenjörer, 2019). By this, keeping a holistic and impartial role increased the reliability and gave the ability to be logically consistent, trying to constructively criticize own paragraphs, with the support by continuously supervisor sessions. Being supervised by a Ph.D. in the same research field made the author able to determine and reflect upon whether secondary sources as journals and printed literature used had high validity and if the usage of them was appropriate for the study. Ethical consideration It is the duty of the researcher to ensure that research is conducted in an ethical and responsible manner, from planning all the way to publication. Therefore, it is of great importance to become familiar with all principles before conducting a study and to avoid ethical issues. There are several guidelines and reports to access as a researcher to handle those ethical issues related to research designs and different investigations (Swedish Research Council, 2017). For this thesis, some of them were carefully studied and taken into consideration already in the planning phase. By applying the four-step process developed by Lennerfors (2019) when implementing ethics within processes or products to the study design in combination with the well-known four principles: Reliability, Honesty, Respect, and Responsibility that can be found in a report conducted by ALLEA called ‘The European Code for the integrity of the research’ it made it possible to avoid ethical issues. The four principles were initiated with the informative and honest approach when interviewing the respondents, where the double control of data was a simple way of evaluating if there was any inaccurate interpretation of the empirical findings. Respect and responsibility for all respondents was carefully considered throughout the case study and participation was never considered mandatory and the option to step out of the study was open until publication, followed up with a final control by the assigned supervisor and one selected respondent. Ethical considerations of human involvement When observing or interviewing selected groups or participants, confidential information and anonymity must be taken into consideration. This also applies when presenting/publishing the study. According to Bell (2015) it is a researchers’ responsibility to find out what legal requirements and restrictions there are for a particular project or research object. To transfer all ethical issues that could arise to own research design, responsibility has to be built from the ground. For this study, the biggest issue to tackle was the ‘insider’ role and the avoidance of biases during company data collected. This was done by following the Swedish Councils four principal requirements: Information requirement, Consent requirement, Confidentiality requirement, and the Good use requirement (Swedish Research Council, 2017). As a part of honesty as a researcher ‘openness, justice, and objectiveness’, securing that this thesis data can be published was to let the interviewee read the results. This was done throughout the study and with a good time margin for restructuring the results if necessary.

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Chapter Summary In this chapter, the methodology used throughout the research process is outlined. It is argued that the exploratory purpose addressed in the thesis, based on limited research in the past, the selection of abductive reasoning is suitable for the initial research design. Aligned with this view, an exploratory single case study at a traditional clothing retail company – limited to the Nordic market – has been suggested to be an appropriate object to study. Thus, the limited research on the sustainable business model innovation and current market shift - specifically for this industry – alongside with ambiguous and vague definitions of the concept with the current managerial challenges to successfully develop and launch redefined sustainable business models made up for the initial case study approach. Furthermore, the chapter describes the data collection process whereas the researcher acted as an insider at the case company that gave increased access to empirical data. The main data sources were semi-structured interviews, a workshop conducted by the researcher together with the case company supervisor, internal documentation, and participative observations. The data collection was carried out in two phases and analyzed using a thematic approach with a cross-sectional design. The identified categories from the thematic approach together with the conceptual frame of reference made it possible to narrow down the data. The chapter is outlined with arguments based on a suggestion from prominent scholars and actions have been directed towards increasing the quality of the thesis. It finalized with an important discussion for this research with the main focus and emphasis on the ethical considerations.

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5 Empirical Setting This chapter reports the empirical findings of the data collection from a case study. Particularly, the chapter outlines the sustainable business model of Polarn O. Pyret, its sustainability activities, and presenting the challenges related to the sustainable business model innovation process in practice. The chapter also outlines the experienced common pressure operating in the fashion retail industry. Notable, in this context, the sincerity of the empirical setting is of great importance thus it is outlined in accordance with the description provided by respondents across the organizations. Furthermore, it does not include any interpretations in order to provide the accuracy of all empirical data presented. The empirical setting is built on a three-step model: (1) Sustainable Business Model Description, (2) Sustainability Activities and their challenges and advantages, and (3) Market Change in the Fashion Retail Industry, illustrated in Figure 6. The empirical setting provides the foundation for mapping the process in practice of business model innovation towards sustainable business models.

Figure 6. Schematic illustration of the Empirical Setting

Subsequently, in the following discussion chapter, these empirical shreds of evidence are used to extrapolate a description of the innovation process related to sustainable business models in practice, by using a common conceptual framework. Company Description Polarn O. Pyret is a premium children’s wear brand from Sweden, always identifiable by its iconic stripes. Since its start in the year 1976, Polarn O. Pyret has always aimed to combine high-quality products with consideration for the environment under the same philosophy: ‘Children need clothes that they can play in and freely wear wherever they are and in whatever weather’. The company has more than 120 stores combined across Europe and the US as well as an online store concept. They also operate on multi-brand digital platforms such as Boozt.com, Zalando, and Amazon. It is the fastest-growing children's clothing company in Scandinavia and aims to expand further globally. The Polarn O. Pyret concept is currently owned by their parent company RNB Retail and Brands AB, listed on NASDAQ OMX Stockholm MidCap.

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5.1 Business Model Description The first phase of the data collection investigated the current sustainable business model of Polarn O. Pyret (hereby after named as PO.P). This current description is developed by two main practices, started with a long unstructured interview with a stakeholder to form and set up a workshop based on allocated participants. The initial phase of the workshop was to present the common theories connected to the study, and the differentiation between the concepts. Thereafter, the workshop made it possible to identify the current business model description from various perspectives spread throughout the organization, to grasp the dynamic setting of it. Furthermore, it led to important findings and derivations related to the sustainable business model concept, by using Osterwalder & Pigneurs (2010) Business Model Canvas nine blocks (presented in Chapter 3, p.19). 5.1.1 Polarn O. Pyret Business Model Canvas PO.P has been rewarded multiple times for their sustainability promise, and as stated in their vision, it is one of their main focus areas. They have a history of disruptive, and innovative ideas of sustainable clothes for children. The result of the workshop (Appendix B) is summarized below using the BMC two sides, starting with the central value proposition:

[CHOOSE QUALITY – MAKE IT LAST – PASS IT FORWARD]

‘Ever since the start of year 1976 strive to design and produce clothes of

highest quality, that can be loved, washed and worn. Durable clothes where functions and fit sustains, and in the end, be passed on to the next child, and the next after that. So that you, as a customer does not have to buy more clothes than necessary, and therefore do not waste the already

pressured and limited resources from our earth.’ Lefthand side of the BMC value proposition PO.Ps Partner Network consists of various stakeholders. For their strategic alliances they have one third-party logistic solution (3PL-solution) handling all of their operational logistics warehouse activities – making them able to focus on their main business activities and instead investing in outsourced activities. Their 3PL company provides a highly automated and innovative solution that delivers all products, every day with a quick respond to changes. Another alliance connected to the logistic activities, specifically transportation, is their partnership with distribution companies, those varies from different countries dependent on the availability and flexibility. Hence, PO.P takes a significant responsibility for the increasing environmental and social impact from the industry they have several partnerships with charities, for example, they provide clothes to the company Human Bridge, and donate their profit from bags in store to Rädda Barnen, a Swedish charity. For the more standard suppliers and buying partners, all their suppliers is transparently listed on their website. PO.P is active members of the Amfori-BSCI, an international initiative where thousands of participants from approximately 40

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countries collaboratively work towards continuous improvements throughout the entire global supply chain. External brands are also considered as a part of the PO.Ps partner network as they allow some external brands (aligned with their core values and supplier policies) to complement their assortment with additional products. A Swedish shoemaker is partnering with PO.P and sells its product in its stores in order to complement sustainable shoes for children. Additionally, there is a collaboration with an external partner to actively increase the life cycle of products. Including provided washing instructions (both online and on the label) due to the fact that laundry stands for 3 % of the items total impact, this collaboration with a reusable washing bag company can help to increase the life cycle of their products. PO.Ps Key Resources is their brick and mortar business (including their stores, office space, human capital, etc.), as well as their own E-commerce platform. Another key resource as a product organization is all of its products both in stock as well as available in the stores. All their design patterns, specifically their striped fabric is significant brand recognition as is it owned by them and protected by copyright law.

PO.Ps Key Activities is closely interlinked to their key resources presented in the paragraph above. It consists of their sales both from stores but also from their e-commerce, and all the activities related to making this possible. (1) Purchasing function - design, product development, pattern making, purchasing, CSR control, selection of suppliers, assortment controlling, pricing, product information, external brands, etc., (2) Logistic Function – product flow management, procurement and contract negotiation, warehouse management, stock optimization, distribution and transportation, product planning and forecasting, (3) Marketing Function – distribution channels, platforms, collaboration, campaign planning, store layout, photo and marketing, e-commerce store, customer service and (4) Accounting Function – administration, rent, invoices, track of revenue streams, cost optimization, cash flow activities, accounting, etc. and lastly (5) IT Function – optimization of workflow and data, integration of systems, checkout systems, it project management. PO.Ps Cost Structure is based on the cost-driven structure where cost control is crucial and where the initial objective is to reduce cost over the entire value chain without compromising on the value proposition. The main revenues are one-time transactions (sold item). Righthand side of the BMC value proposition PO.Ps Client Relationship is a mix of different approaches. The main approach is their membership program named PO.P+ (a two-level bonus based membership) where the customer gets exclusive offers and based on their purchases they can reach the second level (VIP) and get increased benefits. The POP+ membership is based on a bonus system where the customer gets points per purchase and those bonus points transfer into digital coupons once a year. As a PO.P+ member, there are several services included such as a repair service, free deliveries and returns online, and priority to annual sales. PO.P allows customers to co-create the value proposition by sharing reviews of products online. The POP+ memberships perks across all countries have a common base and share the same bonus system based on points. Even though some services offered vary in different countries, e.g. the Upcycling program partnered with ThyredUP in the US.

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PO.Ps Distribution Channels is divided into two main groups (1) sales and (2) marketing. Whereas the sales channels consist of traditional branded retail stores, e-commerce platforms, and also strategically letting multi-brand platforms selling their clothes. The second group, marketing consists of online marketing via an e-commerce platform, social media channels, and newsletters. Group 1 (direct channels) is considered as very costly to set up and operate but shows high-profit margin whilst the Group 2 (indirect channels) make lower profit margins but results in a wider customer reach rate. PO.Ps Client Segments is considered as somewhat niche market value proposition focusing significantly on targeting a segment group of people aware of sustainability and quality throughout the whole value chain. The specific demographics when providing children clothes are the facts regarding creating products for the end-user but balancing with the buyer (i.e. the parents or caretakers). Therefore, the segment group is varying from the traditional marketing/business strategies for product intense retailers whereas the consumer usually equals the prosumer. PO.Ps Revenue flows is based on the traditional retail one-time payment with one transaction per sold item. Thus, with profit margins, it is viable to cover and balance the total cost of operations. Significantly, children’s apparel measures its life cycle in the numbers of the user instead of the traditional numbers of times used, and the price-setting of products is based on that fact. 5.2 Polarn O. Pyret Sustainability Activities year 2020 This section is based on the data from participative observations, internal documentation, the unstructured long interview, complemented with the second round of semi-structured interviews (Appendix A, C). The sustainability activities identified are investigated in order to identify how sustainable business model innovation is performed in practice as well as differentiate them in phases depending on their level of complexity and challenges connected to them. It finalizes with summarized main challenges and advantages related to each activity listed in a table to be used for the thematic analysis. PO.Ps vision regarding their environmental impact is clear, they aim to be climate neutral in the year 2045 and a decrease of 30 % of their current footprint by the year 2030. The Year of 2020 is considered their turn-around year where they will innovate their current business model into a completely sustainable business model that is compatible with future innovations towards their vision. Their activities of the year 2020 are presented in Figure 7, followed by an explanation involving both stakeholder involvement, level of complexity and challenges:

Figure 7. Sustainability Actions Year 2020

A1: Zero tolerance of Air Freights

A2: Decrease Internal travel by 50

% A3: No plasticbags

in Stores A4: 100%

Renewable Energy in Stores

A5: Resource effective production

processes

A6: E-Commerce bags in recyclable

material A7: Second hand service in Store

A8: Decreased production volume

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A1: Zero tolerance of Air Freights Today, air freights by PO.P is only used when production is delayed, meaning that the responsible purchaser, with close collaboration with outbound logistics manager and coordinators for the selected category, has the power of decision to select air freight as an option, if needed. The benefits of eliminating air freight by a company policy are clear due to the environmental impact it causes, and the decision of the policy was without hesitation. The challenges though, when the zero-tolerance will be implemented, is that if the production is running late, campaigns may need to be rescheduled, and the seasonal aspects (e.g. school start products) can have a negative impact on sales numbers. Hence, analyses have showed that the customer goes to the nearest competitor if not available at that time. All in all, the factor of flexibility poses the biggest challenge for PO.P, more precisely their dependency on providing products aligns with the accurate season to increase their sales. A2: Decrease Internal Travel by 50 % Internal travel is only necessary if something has to be personally communicated, visiting important conferences regarding trends/materials/sustainability-innovations, etc., observations of a production unit, or meeting a potential supplier. Substitutional means of conveyance and digital communication tools will initially be the solution to reach this sustainability target. Challenges come to the dependency of digital tools or capabilities present at the concerned partners. Digital events are not that common regarding children’s wear exhibitions/trend galleries/fashion shows, but the industry is moving towards it and will be the first option then – referring to the canceled Stockholm Fashion Week year 2020 and more sustainability start-ups disrupting and reshaping the industry. A3: No Plastic bag in Stores The elimination of plastic bags is classified as a follow-up activity of the year 2017 action where PO.P started to charge their customers for plastic bags and where the profit was directly given to charity. Since 2017 there has been a 75 % decrease in the number of plastic bags. The action year 2017 internally affected store salespeople that had to inform each customer about their action, the reaction by customers back then was varying – some irritation, some understanding. Today, they do not longer express the irritation thus almost all retail stores joined this action and the customer preferences regarding sustainable options are growing. The initiative ‘No plastic bags’ are a contribution to a decreased consumption of non-renewable material. Notably, the elimination of plastic bags poses challenges when it comes to a replacement of another more environmentally friendly and recyclable bag. The procurement process has started and is handled by the marketing department. Secondly, there is an ongoing debate about the pricing of the new bags due to the decision and reason behind the charge of plastic bags. Still, the profit will be donated to charity in order to let customers contribute to a sustainable world. A4: 100 % Renewable Energy in Nordic Stores This is a project initiated some years ago where the mapping of all Nordic stored and their energy supplier has been identified in order to select a provider of certified renewable energy resources for all PO.P stores in the Nordic Market. This is evaluated annually by the property owners and presented in the annual Sustainability Report.

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A5: Resource effective production processes Sustainability activities related to production is considered as one of the most challenging and complex areas. Hence, it involves several stakeholders and is dependent on a lot of factors in order to succeed. To display the complexity, the process of product development for PO.P is visualized in Figure 8 and each step of the process is explained further.

Figure 8. Process of Product Development

Step 1: Seasonal Planning Seasonal planning is an on-going process throughout the year, which involves several stakeholders. It is a balance of costs, potential revenue, market trend, time, and production capabilities. Design of product is a parallel step with seasonal planning and is made in assortment teams consisting of a designer, assortment business controller, purchaser, and pattern maker. Step 2: Selection of Raw Material and Supplier Selection Today, PO.Ps’ collection of apparels has a rate of 70 % sustainability. Those items are marked with selected material and respectively certifications. There is always a consideration of quality compared to some materials since higher quality products have a history of the higher lifecycle (measured in numbers of users per apparel). Current materials used are recycled polyester, recycled polyamide, and organic cotton. Certifications used for materials are:

- Global Organic Textile Standard (GOTS) A world leading standard and certification of textiles in organic material. The requirements for a certified product are high and shall be handled by all production units certified with GOTS throughout the entire value chain. All basic items (non-seasonal products) in Company A’s assortment is GOTS-certified.

- Recycled Polyester and Polyamide These two materials come from non-renewable resources, by using recycled materials the usage of new fibers decreases and, in the end, saves our planet resources. Most of PO.P’s fleece items are made of recycled polyester from old PET-bottles, and their swim-apparels is made out of recycled polyamide fibers from old fish nets.

PO.P is active members of the Amfori-BSCI, an international initiative where thousands of participants from approximately 40 countries collaboratively work towards continuous improvements throughout the entire global supply chain. Amfori-BSCI Code of Conduct is a set of principles and values that reflects the beliefs of all participants and the expectations they have towards their business partners and suppliers. It refers to international conventions such as the Universal Declaration of Human Rights, the Children’s Rights and Business Principles, UN Guiding Principles for Business and Human Rights, OECD

1 Seasonal Planning• Costs, revenues• Market Trend• Production lead time• Design of Product

2 Selection of Raw Material and Supplier • GOTS• Recycled Polyester and

Polyamide• Supplier Selection and

Amfori-BSCI• Supplier Control• SA8000 Certification

3 Sample Controls• Fabric (color, pattern)• Quality• Measurements/pattern

4 Final Approval• Drop SS/AW • Quantity• Marketing Material

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Guidelines, UN Global Compact and International Labor Organization (ILO) Conventions and Recommendations relevant to improve working conditions in the supply chain. The code of conduct is divided into eleven areas where both minimum obligation and best practice is defined, those are: Table 14. Eleven areas of Amfori-BSCI Code of Conduct

Areas: 1 Fair Remuneration 7 Decent Working Hours 2 Occupational Health and Safety 8 No Child Labour 3 Special Protection for Young Workers 9 No Precarious Employment 4 No Bounded Labour 10 Protection of the Environment 5 Etichal Business Behaviour 11 No Discrimination 6 The rights of Freedom of Association and Collective Bargaining

By an annual control via a third party, PO.P ensures that all its suppliers get the education and training they need in order to meet the obligations and guidelines provided by Amfori-BSCI. The control displays all parts of the chain, from that an action plan is developed in order to improve nor discontinue the supplier relationship. An updated list of suppliers and their evaluation grades is provided twice a year. The supplier list reports both third party inspections and certificates made on respectively production unit. Each supplier is ranked in the eleven areas of the BSCIs code of conduct with a score from A (Very Good) to E (Unacceptable). The control also displays the total percentage of excellent scores. If a production unit fulfills the Amfori-BSCI code of conduct the production unit is recommended to become certified by the highest standard there is today, namely SA8000.

“SA8000 measures social performance in eight areas important to social accountability in workplaces, anchored by a management system element that drives continuous improvement in all areas of the Standard. It is appreciated by brands and industry leaders for its rigorous approach to ensuring the highest quality of social compliance in their supply chains, all the while without sacrificing business interests. The Standard reflects labor provisions contained within the Universal Declaration of Human Rights and International Labour Organization (ILO) conventions. It also respects, complements and supports national labor laws around the world, and currently helps secure ethical working conditions for two million workers.”

- Social Accountability International (2019).

Step 3: Sample Control The sample control process is done after the supplier and raw material selection fulfills the standard requirements. When a fabric is to be selected, sample controls are made in order to distinguish the final selection of fabric, quality level, colors, measurements. Sample controls are made collaboratively by the patternmakers, purchasers, designers, and CSR managers. Step 4: Final Approval The final approval by the Assortment Director together with the Assortment team is when the whole process (above steps) is completed. The final product is categorized into a specific season, Spring/Summer (SS) or Autumn/Winter (AW), depending on the planning process as well as an economic order quantity based on a forecast done by supply planners and assortment controllers.

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Based on this process, the initiative by PO.P is to decrease the total resources used in production by optimizing the whole process of product development. This year 2020, the focus and start of this activity will be on functional outerwear, thus it is one of the largest and most important revenue streams for PO.P. This is a combined action of resource optimization and traceability of water-, energy-, and chemical consumption, where the goal is to have 100 % traceability for this group of products for the fall season of the year 2021. In addition to that, this year 2020, 100 % of all production units (tier 1) shall be controlled by a third party. Earlier this target was only applied to production units in countries with a high risk of crime and violence of human rights – which only covers 76 % controlled production units. Every year, from now on, at least 15 % of the production units shall improve their evaluation grades after their control.

A6: E-commerce bags in recycled material This initiative is driven by the e-commerce/marketing department and will be procured aligned with the 3PL solution where e-commerce orders are handled today. The material/bags will be procured internally by PO.P and provided to the warehouse, the process is started and no more non-recyclable e-commerce bags are procured anymore, but the last ones will be used and to avoid waste.

A7: Secondhand Service in Stores Already in the year of 2010, PO.P launched a secondhand service on its e-commerce platform. It was mainly used for members of the POP+ to resell their used clothes in a membership forum, this turned out to be a great complement to keep track of the sales of reusable items (aligned with the value proposition). In past years, the customers’ preferences have changed aligned with the digitalization and increased awareness of sustainability aspects, where online activity, environmental impact concerns, and omnichannel initiatives trends have increased drastically. Therefore, this year (2020) PO.P has started the second option by providing a secondhand service in stores. The process is described in Figure 9:

Figure 9. Secondhand Service Process

The aim of this activity is to increase the numbers of transactions per item – which before followed the traditional one-time transaction per item, and thereby decrease the total environmental impact per item. A8: Decrease production volume In the year 2019, P.OPs production quantity strategically decreased by 26 % as a result of an analysis regarding the percentage amount of seasonal products that ended up on seasonal sales (such as mid-season, summer- and winter sale, etc.). During this year (2020) PO.P has a targeted additional 12 % in decreased production quantity. This process is based on an in-depth analysis of sales data per product categories over several years, customer preferences and reviews, and product self-competition. The biggest challenge by decreasing production quantity in order to avoid unnecessary waste or obsolete products is to optimize the supply

Drop off Apparel in store• Subscribers• Nordic Stores

Evaluation of Apparel• Assessment guide

available online

Payment• Voucher• 1 year valid

Sold on Events• In Stores• Keep track on

information

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flow for physical and online stores, this can be done with big investments of technology such as AI, or other data driven tools. Summarized challenges and advantages related to each activity are listed in Table 15. It highlights the identified main challenges and briefly describes its advantages from a sustainable perspective. Table 15. Challenges and Advantages of Sustainability Activities Performed

Activity Main Challenge Advantage A1 Flexibility in providing

products timely Significant decreased Co2 emissions, cost efficient

A2 Technology capacities Decreased Co2 emissions, cost efficient A3 Replacement of Supplier Decreased environmental footprint, tax benefits, customer

contribution to charity (i.e. customer involvement in social impact)

A4 Reliable Energy Provider, Infrastructure of buildings

Circular, maintenance is lower, cost efficient, financial incentives (green loans, tax benefits, etc.), health and environmental benefits

A5 High level of stakeholder and a complex value chain dependent on several factors

Increase competitiveness, stimulate innovation, create fair jobs, taking responsibility for the whole supply chain, recycling and resource recovery, enables circular business models to be implemented, cost efficient with optimized quantities

A6 Replacement of Supplier Decreased environmental footprint, tax benefits, customer contribution to charity (i.e. customer involvement in social impact)

A7 Logistic activities such as redesigning of stores, or hosting events

Reused products - decrease the environmental footprint per product, financial benefits with more transactions per item, reaching a broader client segment

A8 Optimize the product flow for products, technology investments

Decreased environmental impact, cost efficient, avoid unnecessary waste, avoid obsolete products, better margin per item

Thenceforth, the empirical setting is logically followed by a section focusing on the challenges and advantages related to the predicted market environment and presents the main changes identified throughout the data collection. 5.3 Fashion Retail Industry: The Market Change The previous section covered the specific challenges and advantages related to each sustainability activity performed at PO.P, summarized in Table 15. This section is mainly focused on presenting empirical evidence to understand the current changes within the fashion retail industry. It is based on the data from the follow up session (Appendix D) and the participative observations. All interviewees regarding the discussion of ‘the future’ almost always resulted aligned with the fundamental needs unmet by the current business model, identified during the conduction of the research context: quality products at a competitive price, curated services, and sustainable consumption. It is stated by the respondents that in order to stay competitive – sustainability activities are not a choice rather a demand from the whole client segment. All competitors including PO.P are having to adapt their business models in order to survive and gain competitive advantage. From the data collected there are two main significant changes identified repetitively occurring throughout the answers: (1) Green Consumer Behavior; and

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(2) Movement towards tailored servitization Both described below with summarized empirical findings. The first significant change identified at PO.P is based on several responses throughout the data collection. The sustainable consumption and the sustainability awareness from the customers are growing aligned with other sustainable incentives in the society such as ecological food stores, tax benefits, financial incentives, smart energy, and other green reputations. The Nordic PO.P customer is increasingly demanding sustainable products and social responsibility. PO.P has a good brand reputation, but respondents emphasize the importance of maintaining a reputation to meet this new behavior. Being sustainable for PO.P is based on the idea of being transparent and by taking responsibility for their growing partner network. All sustainability activities initiated by PO.P is contributing to their value proposition and strengthen its environmental-friendly brand and to become even more recognized for its social value. Another strategic initiation aligned with the transparency will be to innovate their business models client relationships. The second significant change observed is that the customer is demanding more tailored solutions/services when it comes to accessibility, delivery, product-related services, and traceability. This is challenging the traditional products as customers are starting to demand supplemented services to them. Customers want to have access to products in different channels and be able to choose when or where the product should be delivered and with a specific mode of transport, this is something PO.P has already implemented in their sustainable business model. The current ratings by PO.P customers are showing that the services demanded are highly associated with sustainability such as increased customer support, traceability of goods, and services as recycling options, repair, second hand, or charity contribution. This is especially observed when the marketing material (i.e. campaign) of the product is centralized with sustainable quality – an indication stated by the respondents is that: higher quality products with transparent traceability from raw material to end user correlates to an increased company presence for customers. This movement towards tailored servitization is also an effect of the digitalization that has moved the traditional customer behavior, where the customer traditionally purchases their products in physical store towards an increased online purchasing pattern. This is putting the brick and mortar business into a challenging situation where new strategically innovative ideas have to be implemented in order to still maintain a physical presence in the Nordic Market. Both of these challenges are disrupting the current sustainable business model, but it also comes with great opportunities. A Green consumer behavior together with a demand for tailored services is proving that PO.Ps dedicated sustainability work comes with benefits. There are reaps of the plentiful financial reward in implementing sustainable practices. A company can benefit from tax breaks, government subsidies, saving from sustainable practices, and increased sales through brand recognition popularity. Sustainable business practices are cost-effective, smart, and responsible business goals.

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Chapter Summary In this chapter, the empirical data provided by the conducted interviews, workshop, observations, and internal documentation is outlined. Particularly, the chapter outlines the sustainable business model of Polarn O. Pyret, its sustainability activities, and presenting the challenges related to the sustainable business model innovation process in practice. The chapter also outlines the experienced common pressure operating in the clothing fashion retail market. The empirical setting is built on a three-step model: (1) Sustainable Business Model Description, (2) Sustainable Activities and their challenges and advantages, and (3) The Market Change. The empirical setting provides the foundation for mapping the transformation in the practice of business model innovation towards sustainable business models. Subsequently, in the following discussion chapter, these findings are used to extrapolate a description of the innovation process related sustainable business models in practice using a common conceptual framework.

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6 Findings & Analysis In this chapter, the thematic analysis of the collected empirical data is presented. Each section follows the logical consistency similar to the empirical setting: (1) Business Model Description, (2) Sustainable Activities and their challenges and advantages, and (3) Market Change. Thus, in the context of using these empirical shreds of evidence to extrapolate a description of the innovation process related to sustainable business models in practice, by using a common conceptual framework. More specifically, the thematic analysis has the following categorization – introducing summarized key findings based on the analysis with supporting evidence:

Figure 10. Schematic illustration of the Thematic Analysis

Furthermore, the canvas model by Osterwalder & Pigneur (2010) is used as the template to map out where and how sustainable innovation occurs inside of PO.Ps’ sustainable business model. 6.1 The Definition of a Sustainable Business Model Revisiting the conceptual framework developed throughout the study from Chapter 3, p.19., is used for comparing the empirical findings with the current conceptualization of sustainable business models.

The existing theories regarding the conceptualization of business models, specifically the sustainable business models are growing (Bocken & Geradts, 2019). The phenomenon is based

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on the recent global-, economic-, and financial crises caused by the existing corporate business models on the sustainability of the global economy and society. Thus, the business community is one of the drivers of our environmental degradation, but they are also the ones that can promote environmental protection (Loetscher & Kreis, 2018). The adoption of sustainable business models is increasing thus scholars have proven that implementation of sustainable business models under the current transformational change can lead to direct benefits such as cost savings or completely new revenue streams (Stubbs & Cocklin, 2008; Boons & Lüdeke-Freund, 2013). Nevertheless, it can enhance more amorphous advantages such as being prepared for future change, or legislations. Compared to the fundamental value proposition of the conventional business model conceptualization, a new broader notion of value can improve organizational- resilience (i.e. adapt to changes), its reputation, and enhance employee attractiveness (Bocken & Geradts, 2019). As identified during the initiation of the thesis, the embraced varieties of sustainable business models make up for the common importance of understanding the concept before conducting a case study. Mentioned above there has been a lot of focus on the theoretical clarification of the concept, but it remains somewhat ambiguous. The fast pace practical adoption has resulted in many different interpretations and applications across different contextual settings (Dentchev, et al., 2018). Comparing and analyzing the empirical results – using the BMC to map the current Sustainable Business Model of PO.P, it is shown that the new broader notion of value, explained above, is correlated thus the explored sustainable business models’ value proposition in practice is based on a centralized sustainable value delivery to their customers:

‘Ever since the start of the year 1976 strive to design and produce clothes of the highest quality, that can be loved, washed and worn. Durable clothes where functions and fit sustain, and in the end, be passed on to the next child, and the next after that. So that you, as a customer does not have to buy more clothes than necessary and therefore do not waste the already pressured and limited resources from our earth’. – Polarn O. Pyret

As can be observed in the conceptual framework above, the concept of a sustainable business model is a modification of the conventional concept of the business model but with certain characteristics and objectives added to it. The initiation of sustainable business models either 1) incorporate concepts, principles, or objectives that aims for sustainability; or 2) that they integrate sustainability into their current value proposition. Aligned with those statements the sustainable business model of PO.P is not only integrated within the value proposition – it is based on it. Whilst concepts, principles, and objectives are continuously being implemented and improved iteratively. By putting the empirical evidence in the conceptual framework it is possible to identify significant factors that both differentiate the conventional business model concept with the sustainable business model concept, and give practical examples to separate the embraced varieties of sustainable business models:

Key Finding 1: (1) the value proposition is based on a sustainability promise; (2) the modification of the business model concept is true for traditional clothing retail companies providing children apparel; (3) sustainability activities are being implemented as a result of changing customer preferences (4) when the whole market prioritizes decreased environmental impact and social responsibility, the business

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model becomes sustainable by nature, and lastly (5) the partner network is strategically chosen from a sustainable business model perspective (i.e. how compatible the partners sustainable business models are), making up for a practical example of how sustainable business models supersedes the conventional business model.

6.2 Defining Sustainable Business Model Innovation The conventional business model innovation concept derived from the conceptual framework for this study (see the repetitive Figure 1 in the above section) generally assume that the main goal of a firm, innovating their business models, is to maximize profit and use the term ‘value’ as profit-related (Teece, 2010; Osterwalder & Pigneur, 2010; Zott, et al., 2011). As the concept of sustainable business model innovation is defined as a subset of the conventional concept, there are several processes added that qualifies business model innovation for sustainability: 1) sustainable development when it comes to environmental and societal impact, and the long-term prosperity of the entire organization and their stakeholders or 2) adopting solutions that foster sustainability directly in its value proposition (Bocken, et al., 2014; Boons & Lüdeke-Freund, 2013; Schaltegger, et al., 2016). This research field is vague and as stated by Geissdoerfer, et al., (2018) there seems to be no comprehensive review of the existing literature, making this case study necessary to conduct thus it can foster valuable academic- as well as managerial implications. Hence today, companies are operating blindfolded without any particular researched evidence to apply. The existing definitions selected for the conceptual framework is the following:

- “Sustainable business model innovation is understood as the adaption of the business model to overcome barriers within the company and its environment to market sustainable process, product, or service innovations. - Boons & Lüdeke-Freund, 2013, p. 13

- “Business model innovations for sustainability are defined as: Innovations that create significant positive and/or significantly reduced negative impacts for the environment and/or society, through changes in the way the organization and its value-network create, deliver value and capture value (i.e. create economic value) or change their value propositions.” Bocken, et al., 2014, p. 44

- Sustainable business model innovation describes the creation of “modified and completely new business models [that] can help develop integrative and competitive solutions by either radically reducing negative and/or creating positive external effects for the natural environment and society” Schaltegger, et al., 2016, p. 3

What can be observed is that all scholars’ definitions underline corporate environmental impact and social responsibility, but in contrast, empirical evidence from the sustainability activities performed in practice, shows an equal focus on the economic aspects and market shifts. This may indicate that the current definitions, in theory, need to be adjusted nor reformulated aligned with the description of the concept as a subset of the conventional business model innovation where both the economic value and the market shift has been neglected. The research on both the differentiation and the different ‘types’ of sustainable innovation processes is limited. The simulated innovation process for conventional business models by

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Geissdoerfer, et al., (2018) illustrated in Chapter 3, Figure 3, p. 23., can be adjusted to the sustainability process where the process can be explained with terms as sustainability start-ups, sustainable business model transformation, sustainable business model diversification, and sustainable business model acquisition. Showing that PO.P has adopted a process similar to the term: sustainable business model transformation where the explanation is as follows: the current business model is changed and results in a sustainable business model. Significantly, there seems to be no academic process described when companies are operating within an existing commerzialized sustainable business model.

Key finding 2: First and foremost, referring to the conceptual framework, it indicates that the theoretical concept of sustainable business model innovation is mainly focused on the environmental and social aspects. Whereas, the empirical evidence for the fashion retail industry is showing the equal focus on the economic aspect thus balancing the triple bottom line (i.e. social-, economic-, and environmental aspects) is critical when operating (e.g. innovation) inside of a sustainable business model as a traditional fashion retailer. Furthermore, there seems to be no innovation process defined in theory when established companies (such as PO.P) with an already launched sustainable business model are innovating their models.

6.3 Sustainable Business Model in Practice Based on the analysis of sustainable business model innovation as a concept, the definitions may vary from one case to another – making the conceptualization even more scattered. To generalize and to avoid an ambiguous conceptualization, the process is studied from the current literature field of Sustainable Business Model Innovation within the fashion retail industry, and comparing those to the empirical results, making the findings stronger and either validated or disapproved – dependent on the results. Sustainable Business Model Practices The eight identified sustainability activities (A1-A8) from the empirical data collection are placed into the Business Model Canvas nine building blocks to identify where the current transformation occurs. The activities are repetitively presented below from Chapter 5, Figure 7, p.46., to get an overview:

The sustainability activities are analysed and thereafter placed into the building blocks of the BMC. Table 16 below the analysis presents the summarized results.

A1: Zero tolerance of Air Freights

A2: Decrease Internal travel by 50

% A3: No plasticbags

in Stores A4: 100%

Renewable Energy in Stores

A5: Resource effective production

processes

A6: E-Commerce bags in recyclable

material A7: Second hand service in Store

A8: Decreased production volume

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A1: Zero tolerance of Air Freights takes place within the PO.Ps’ partner network hence all freights are dependent on the capacity of third parties (forwarders, and shipping company) and it will also be reported by them. This requires PO.P to strengthen their internal key activities regarding seasonal planning, marketing, and supply chain optimization thus air freight from a strategic perspective is very time efficient and can work as a complement for late or postponed production and can have a huge impact on their key resources – their assortment. This activity is classified as a recurrent continuous action. A2: Decrease Internal Travel by 50 % takes place within PO.Ps’ key activities thus this will change PO.Ps’ company policy when it comes to traveling for business purposes such as fairs/conferences/stakeholder meetings, etc. The initial solution of substitutional means of conveyance and digital communication tools is taking place whereas digital communication can have the highest impact on whether the PO.Ps’ partner network can adapt/or have the digital compatibleness to new ways of communication. This activity is currently a one-time action by its character but tends to become a continuous process with an additional decrease of the internal travel percentage rate. A3: No plastic bags in Stores takes place within the PO.Ps’ partner network as the supply of shopping bags is outsourced to a supplier who delivers them directly to the stores. The procurement process of new substitutional recyclable bags for all stores will be a new supplier if the current supplier is not able to meet the sustainability requirements. This action has an impact on PO.Ps’ key activities hence this action is communicated by sales staff in stores and procured by the marketing department. By its character, this is a onetime activity. A4: 100 % Renewable Energy in Stores takes place within the PO.Ps’ partner network. The energy is distributed and supplied by an energy agency. The only direct impact will be on the cost structure, hence it will be an activity varying from the traditional cost structure, where cost control is crucial. This action will be initiated even though other options can be more beneficial from a cost-saving perspective. This action has been a continuously recurrent action with the main target of a 100 % rate. A5: Resource effective production processes are stated as the most complex sustainability activity and it is a continuously improved process to meet intended targets. The activity strongly dependent on the PO.Ps’ whole partner network, key activities, key resources, cost structure, and the client relationship. By using global standards, open- and similar-minded partnerships, an organizational culture where sustainability is built from the core throughout all decision making, balancing the cost structure without disrupting the client relationship, this can be achieved. By its character and high complexity, this activity constantly recurring and improved. A6: E-Commerce bags in recyclable material takes place within PO.Ps’ key activities, similar to A3, the new procurement process is started where suppliers are evaluated from different criteria. This will impact the PO.Ps’ partner network, specifically their 3PL partner who is handling the packaging process for e-commerce orders. By its character (similar A3) this activity is a onetime activity.

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A7: Second hand service in Store takes within PO.Ps’ key activities, it is an initiative based on their customer-to-customer service on their e-commerce platform. It is creating a completely new distribution channel and will also result in increased revenue streams for recurrent transactions per item sold. It is stated as a onetime activity but will be continuously improved over time based on customer preferences. A8: Decreased production volume takes place within PO.Ps key activities thus a decreased production volume is highly dependent on accurate planning and forecasting processes, and optimized product flow. To optimize sales and overproduction quantities, this will affect multiple PO.Ps’ key activities. It will directly impact PO.Ps key resources and the cost structure with quantities and an economic order quantity. Indirectly this will have an impact on their partner network and client relationship with elimination or new suppliers and/or changes within the current assortment for the customers. It is a recurrent activity, where the production volume will continuously be optimized. Table 16. Sustainability Activities characteristics

Activity Where in the BMC? Left Right Recurrent Onetime A1 Partner Network; Key Activities; Key

Resources x x

A2 Key Activities; Partner Network x x x A3 Partner Network; Key Activities x x A4 Partner Network; Cost Structure x x A5 Partner Network; Key Activities; Key

Resources; Cost Structure; Client Relationship

x x x

A6 Key Activities; Partner Network x x A7 Key Activities; Distribution Channels;

Revenue Streams x x x

A8 Key Activities; Key Resources; Cost Structure

x x x

The empirical analysis shows that the majority of the current sustainability activities performed are taking place within the lefthand side of the BMC, more specifically they take place within PO.Ps’ key activities and their partner network. From the conceptual framework, it is described that sustainable business model innovation involves delivering a sustainable value proposition, with a long-term perspective together with a multi-stakeholder management approach. Therefore, the occurrence of activities within the lefthand side of the canvas makes sense, hence, it is correlated to all business strategies needed to deliver its value proposition. The empirical evidence with a majority of iterative activities such as A1, A3, A4, A5, A7, and A8 aligns with the fundamental aim of sustainable business model innovation for long term prosperity, both internally and externally (i.e. stakeholders) and adopting solutions that foster sustainability directly in its value proposition. As identified by Jin & Shin (In press) the selection of practices (i.e. sustainable business model innovation in practice) by traditional clothing retailers is based on the extent allowed by their own assets and motivations. Similar to the empirical findings there is a variety of activities performed and always a balance between assets and costs – aligned with the cost structure (key finding 2). What can be observed is that A3 and A6 have a significantly lower outcome in both complexity and stakeholder involvement, notably, these two sustainability activities are of the ‘onetime character’. Nevertheless, the empirical result indicates that activities are spread

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throughout the levels of complexity and stakeholder involvement thus it can be indicated that sustainable business model innovation practices are complex by nature (affecting a firm’s key activities), usually involving multiple stakeholders (affecting the partner network of a firm). Jin & Shin (In press) suggests a comparative approach for the traditional clothing retailer’s sustainable innovation process, this is also appearing within PO.P where sustainability practices are based on the market environment (i.e. current market shifts), customer preferences, and internal resources.

Key Finding 3: Sustainable business model innovation practices for traditional clothing retailers within the fashion retail industry is taking place simultaneously. Based on the empirical evidence, operating within an existing sustainable business model (key finding 2), it can be suggested that traditional clothing retailers need to compare other innovative business models with their own in order to determine if they need to differentiate, imitate, or adopt new practices to the extent allowed by their assets and motivations. This comparative approach suggested by Jin & Shin (In press) can be suitable when innovating established sustainable business models, together with the empirical findings it is indicating that comparation practices is suggested to be conducted as different scenarios based on the market environment, customer preferences, and internal resources.

6.4 Challenges of Sustainable Business Model Innovation Researchers regarding the challenges related to sustainable business model innovation point out that negative environmental- and social impact may disrupt the current market hence it can be turned into business opportunities adopted by start-ups (e.g. turning waste into a resource, reselling online services, or new revenue stream). To facilitate the development of sustainable business practices, scholars emphasize on tools for performing SBMI – with the main focus on the ideation of a future sustainable business model (Bocken, et al., 2013; Brillinger, et al., 2020; Baldassarre, et al., 2020), similar to the suggested comparative approach by (Jin & Shin, In press) presented in key finding 3 above. Identified challenges related to the innovation process towards sustainable business models includes six aspects: (1) the triple bottom line, (2) the organizational mind-set, (3) resources, (4) technology innovation, (5) external relations, and (6) the lack of methods and tools (Stubbs & Cocklin, 2008; Schaltegger, et al., 2016; Boons & Lüdeke-Freund, 2013; Johnson, 2010; Zott, et al., 2011). The challenges identified within the empirical data Chapter 5, Table 15, p.51., all aligns with these aspects, presented in Figure 11.

Six Aspects Activity 1 2 3 4 5 6 A1 x x A2 x A3 x A4 x x A5 x x x x x x A6 x x A7 x x A8 x x x x x x

Figure 11. Matrix of the Sustainability Activities Challenges

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Using the result from previous section, in Table 16: Sustainability Activities Characteristics, it shows that sustainable practices performed iteratively with long-term prosperity (A1, A3, A4, A5, A7, A8) have significant challenges when it comes to resources and external relations hence those activities are dependent on key activities, and key resources together with a strategic partner network. Whereas, the activities performed onetime (e.g. bags in recyclable material) is indicating a challenge of the triple bottom line (i.e. balancing between economic-, environmental-, and social aspects), this can be explained whereas the cost structure is affected immediately and there is no particular economic return on this investment, therefore, there has to be a balance when performing the procurement of supplier. Notably, the most complex practices at PO.P, A5: Resource Effective Processes, and A8: Decreased Production Volume is facing challenges within all aspects. Validating the complexity of performing long-term prosperity sustainable business model practices. All in all, it is stated by Baldassarre, et al., (2020) when performing sustainability practices there will always be an initial corporate decision made from a financial- and a sustainability standpoint. Thus, sustainable business model innovation needs proper solutions to deliver tangible sustainability impacts, nevertheless, to implement them successfully in the market. Mitigate risks and uncertainty factors Sustainable business model innovation plays the most crucial role in the successful integration of sustainability into organizations’ visions and operations. It is showed from the empirical data that there can be a strategic advantage of having key activities and build a partner network incorporated with the fundamental idea of sustainability practices (i.e. to bring sectoral environmental impacts in line with planetary boundaries and UN’s Sustainable Development Goals). The current market changes identified for PO.P: (1) Green Consumer Behavior; and (2) Movement towards tailored servitization needs to properly be taken into consideration when performing sustainable practices within the current sustainable business model. Using a tool such as the SBM Pilot prototyping process by Baldassarre, et al., (2020) illustrated in Chapter 3, Figure 4, p.27., it is possible to simultaneously consider the desirability (i.e., user needs), feasibility (i.e., level of technical capabilities), viability (i.e., what is financially possible), and sustainability (i.e., economically, socially and environmentally acceptance) of a business model. Thereby, the tool can mitigate and evaluate all risks and uncertainty factors listed by Brillinger, et al., (2020), presented in Chapter 3, Table 9, p.26., and it can provide proper solutions to overcome the challenges related to both current and future sustainability activities.

Key finding 4: The challenges related to Sustainable Business Model Innovation is varying dependent on (1) the characteristic of the sustainability practice (e.g. onetime or iteratively performed), and (2) the time horizon of the practice (e.g. long- or short-term prosperity). Empirical evidence indicates that the balance between the financial- and sustainability standpoint, together with the complexity of sustainable practice performed needs to be the basis for evaluating the activity. This can enable proper solutions to deliver tangible sustainability impacts. Followed by that, to implement the solutions successfully, the market changes need to be taken into consideration when initiating sustainability practices. Using existing tools such as the SBM Pilot Prototyping can evaluate all risks and

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uncertainty factors. It is also identified that there is a strategic advantage of having key activities and build a partner network incorporated with the fundamental idea of sustainability practices.

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Chapter Summary In this chapter, the key findings and analysis of the collected data is outlined. Each section follows the logical thematic setting: (1) The Definition of a Sustainable Business Model (2) Defining Sustainable Business Model Innovation, (3) Sustainable Business Model Innovation in Practice, and (4) Challenges of Sustainable Business Model Innovation. Thus, the empirical shreds of evidence are used to extrapolate a description of the innovation process related to sustainable business models in practice, by using a common conceptual framework. Table 17 systematically presents the aforementioned key findings related to each category, based on the conceptual framework with a brief description.

Table 17. Systematically presentation of Key Findings

Key Finding Thematic Category Description 1 Sustainable Business

Model Definition Five factors that both differentiate the conventional business model concept with the sustainable business model concept, and give practical examples to separate the embraced varieties of sustainable business model.

2 Sustainable Business Model Innovation Definition

Identified gaps of current definitions of SBMI.

3 Sustainable Business Model Innovation in Practice

Explanation of the phenomenon placed in a specific context (based on Key Finding 1&2).

4 Challenges of Sustainable Business Model Innovation

Significant Challenges Affecting the Innovation Process for Sustainable Business Models, why and how those challenges can be mitigated or rejected.

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7 Discussion In this chapter, the answers of the research question and sub-research questions are reviewed and followed by a discussion of its implication on academia. The discussion is based on the key findings from the thesis thematic analysis, repetitively presented below as an overview:

Key Finding Thematic Category Description 1 Sustainable Business Model

Definition Five factors that both differentiate the conventional business model concept with the sustainable business model concept, and give practical examples to separate the embraced varieties of sustainable business model.

2 Sustainable Business Model Innovation Definition

Identified gaps of current definitions of SBMI.

3 Sustainable Business Model Innovation in Practice

Explanation of the phenomenon placed in a specific context (based on Key Finding 1&2).

4 Challenges of Sustainable Business Model Innovation

Significant Challenges Affecting the Innovation Process for Sustainable Business Models, why and how those challenges can be mitigated or rejected.

Each sub-question is reviewed sequentially, thereafter by collectively answering and elaborating on the aforementioned sub-questions, it allows for addressing the main research question of the thesis. Furthermore, discussion of the managerial/practical implications of the findings is presented. 7.1 Academic Implications Throughout the research process defining the thesis, all actions have been directed towards addressing the purpose.

Purpose: The objective of this research is to explore and improve the understanding of how specific industries, in this case, traditional clothing retailers within the fashion retail industry, innovate their current sustainable business models. The exploratory case study addresses the theoretical research gap and the organizational management problems connected to the process. It investigates both the sustainable business model innovation process and the challenges to successfully develop and launch redefined sustainable business models. Consequently, the sub-aim of the study is to contribute to the vague and ambiguous definitions regarding ‘successful’ sustainable business models.

Subsequently, as the thesis aspires to bring new empirical evidence to the discussion on the concept of sustainable business model innovation in practice, the research questions together with posed sub-questions are fully designed to address the initial purpose. This is done to the extent that answering these questions will simultaneously realize the outlined purpose.

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Sustainable Business Model Definition Identified during the research process, there is an embraced variety of sustainable business model definitions, this became of great importance to understand before conducting the study. To operationalize the purpose, it was appropriate to first explore the current design of the case company’s business model in order to fully exploit sustainable business model innovation in practice. The field of sustainable business models for the fashion retail industry lacks rigor and need further research to strengthen results thus there is still a gap about the sustainable business model design with no empirical evidence for the definition of the concept. Thus, investigating the following question to understand the concept within a specific context:

SRQ1: What is characteristic for the sustainable business model concept in practice?

As the empirical evidence show, based on the analysis, the sustainable business model of the case company is a modification of the conventional business model concept, but with certain characteristics and objectives added to it – aligned with the scholars’ explanation of the concept. Significant, is that PO.P implemented a sustainable value proposition long before the ‘birth of the concept’ where sustainable business practices was already implemented in the year 2010. This early adoption of sustainability practices has resulted in amorphous advantages such as brand recognition associated with sustainability, organizational resilience and different rewards for their sustainability promise. Validating the broader notion of value adoption of a sustainable business model can bring, described by Bocken & Geradts (2019). The selected definitions for sustainable business models are presented in the conceptual framework for the thesis, by comparing the defined concept from year 2008 and 2017 (below), it explicitly shows the significant development of the concept over time.

A sustainable business model is “a model where sustainability concepts shape the driving force of the firm and its decision making [so that] the dominant neoclassical model of the firm is transformed, rather than supplemented, by social and environmental priorities.” (p. 103) - (Stubbs & Cocklin, 2008) Sustainable business models are described with five propositions, “1. Sustainable value incorporates economic, social and environmental benefits conceptualized as value forms. 2. Sustainable business models require a system of sustainable value flows among multiple stakeholders including the natural environment and society as primary stakeholders. 3. Sustainable business models require a value network with a new purpose, design and governance. 4. Sustainable business models require a systemic consideration of stakeholder interests and responsibilities for mutual value creation. 5.Internalizing externalities through product-service systems enables innovation towards sustainable business models.” (p. 5) - (Evans, et al., 2017)

The identified factors presented in Key Finding 1, are the academic implication for the ambiguous definition of sustainable business models – suggesting general definitions per industry characteristics: (1) the value proposition is based on a sustainability promise; (2) the modification of the business model concept is true for traditional clothing retailers; (3) sustainability activities are being implemented as a result of changing customer preferences (4) when the whole market prioritizes decreased environmental impact and social responsibility, the business model becomes sustainable by nature, and lastly (5) the partner

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network is strategically chosen from a sustainable business model perspective (i.e. how compatible the partners sustainable business models are), making up for a practical example of how sustainable business models supersedes the conventional business model. The factors contribute to the conceptualization of sustainable business model as a concept changing over time – the factors can be applied to or redefine initial scholars’ interpretation of the concept. Defining Sustainable Business Model Innovation Understanding the embraced variety of sustainable business models, after exploring the current sustainable business model of the case company, it became necessarily to investigate the current sustainability practices to understand the concept of business model innovation in the same context. Thus, investigating the following question to understand the concept of sustainable business model innovation before exploring the process in practice:

SRQ2: How is the concept of sustainable business model innovation defined within the academic literature?

Similar to the concept of sustainable business models, sustainable business model innovation is stated as a subset of the conventional business model innovation concept. According to Geissdoerfer, et al., (2018) no comprehensive review of the literature is conducted, thereby the research field is considered vague with limited existing description of the innovation process. The empirical evidence from the thesis analysis of sustainable business model has identified some key findings to be implied for the academics: The theoretical concept of sustainable business model innovation studied is mainly focused on the environmental and social aspects. Whereas, the empirical evidence is showing the equal focus on the economic aspect thus balancing the triple bottom line (i.e. social-, economic-, and environmental aspects) is critical when operating (e.g. innovating) inside of a traditional fashion retail sustainable business model. Furthermore, there seems to be no innovation process defined in theory when established companies (such as PO.P) with an already launched sustainable business model are innovating their models. The identified gaps of the current definitions can be used for new or redefined conceptualizations’, with additional empirical evidence, the theories can be developed. Sustainable Business Model Innovation in Practice After answering the question above, clarify the context of the phenomenon it falls naturally to investigate the main purpose of the thesis – the exploration of sustainable business model innovation in practice. The process of sustainable business model innovation To operationalize and address the underlying practitioner problem of how to innovate and launch sustainable business models corresponding to the value proposition and the theoretical gap of sustainable business model innovation, sub-questions is addressed in order to break it down, the first one follows:

SRQ3: What phases does a traditional clothing retail company undergo during the development of commercialized sustainable business models?

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By examining the empirical data, it became important to realize that the case company is simultaneously innovating different parts of their sustainable business model. Therefore, no particular phases were identified during the studying of the development of already commercialized sustainable business models. However, it is important to recognize that sustainability practices are centralized with a focus of strengthen their value proposition, based on their sustainability promise. Key findings from the empirical analysis indicate that established traditional clothing retailers are recommended to adopt a comparative approach when developing sustainability practices within their sustainable business model. As the market is disrupted by three identified disruptors: (1) born-digital brands, (2) AI-enabled demand forecasting and product design, and (3) collaborative consumption. Traditional clothing retailers are suggested to compare disruptors or other innovative sustainable business models with their own in order to determine if they need to differentiate, imitate or adopt new practices to the extent allowed by their own assets and motivations – based on the: the market environment, customer preferences and internal resources shown from the empirical data. Simultaneously with the conduction of the thesis, exploring the sustainable business model innovation, a new tool was developed and published by Baldassarre, et al., (2020) based on using a design science research methodology by combining theoretical insights from previous literature, derived from the business model canvas by (Osterwalder & Pigneur, 2010). The tool can be adopted by both researchers and practitioners to mitigate and evaluate all risks and uncertainty factors listed by Brillinger, et al., (2020) chapter 3, p.25., connected to the sustainable business model innovation. Challenges of Sustainable Business Model Innovation in practice When investigating the process of sustainable business model innovation, it became increasingly interesting to explore the challenges for innovations towards sustainable business models to bring sectoral environmental impacts in line with planetary boundaries and the UN’s sustainable development goals. Researchers within the stream of sustainability often argues for the critical understanding from a managerial perspective of challenges connected to innovations occurred from a sustainability perspective – directing towards the following sub research question in order to fully exploit sustainable business model innovation in practice:

SRQ4: What are the challenges in sustainable business model innovation in practice? Previous research of challenges connected to the innovation process towards sustainable business models includes six aspects: the triple bottom line (the challenge of balancing amongst them), the organizational mindset (rules, guidelines, behavioral norms, etc.), resources (reluctance to allocate resources for initiatives), technology innovation (complexity and multidimensional challenges), external relations (interactions with external stakeholders and business environments), and lack of methods and tools specifically developed for sustainable business model innovation (Stubbs & Cocklin, 2008; Schaltegger, et al., 2016; Boons & Lüdeke-Freund, 2013; Johnson, 2010; Zott, et al., 2011). In the glace of the general theories regarding the challenges identified from several studies, this case study contributes with empirical evidence indicating a correlation of these challenges but also a more non-generalized challenge for the studied industry. The retail environment is radically evolving, and all actors need to continuously monitor whether they are blindly accepting assumptions about their current business model or whether business model

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innovation has the possibility to address or exploit their untapped market opportunities. What was identified from the empirical findings is that challenges related to sustainable business model innovation for traditional clothing retailers is varying dependent on (1) the characteristic of the sustainability practice (e.g. onetime or iteratively performed), and (2) the time horizon of the practice (e.g. long- or short-term prosperity). Empirical evidence indicates that the balance between the financial- and sustainability standpoint, together with the complexity of sustainable practice performed is suggested to be the basis for evaluating the activity. This can hopefully enable proper solutions to deliver tangible sustainability impacts. 7.1.2 Successful Sustainable Business Model Innovation By collectively answering and elaborating on the aforementioned sub-questions, it allows to address the main research question of the thesis:

MRQ: How can traditional clothing retail companies successfully innovate their current sustainable business models in practice to foster sustainable competitive advantage?

After exploring the phenomenon via a single exploratory case study approach in parallel to develop a conceptual framework based on previous literature of sustainable business model innovation. The term successful is referred to all the main challenges of sustainable business model innovation, where there is a constant balance of the cost and sustainability standpoint. Therefore, there is a strong need for additional academical knowledge thus sustainable business model innovation will have the most crucial role of successful integration of sustainability into organizations’ visions and operations and nevertheless, the challenge of implementing them successfully in markets. Findings from this thesis recommends that in order for traditional clothing retail companies to successfully innovate their current sustainable business model several aspects can be considered: (1) Knowledge of the current model in order to evaluate their compatibleness with market shifts (i.e. organizational resilience), (2) Using a comparative approach to determine if they need to differentiate, imitate or adopt new sustainability practices to the extent allowed by their own assets and motivations – based on the market environment, customer preferences and internal resources; and (3) Identify and mitigate risks and uncertainty factors by using tools as the Pilot Prototype by Baldassarre, et al., (2020) in order ensure sustainable competitive advantage. Drawing on the empirical evidence, it can be indicated that it is a strategic advantage of having key activities and build a partner network incorporated with the fundamental idea of sustainability practices. Collaborative stakeholder involvement can result in high sustainability value – making sense from a sustainability perspective thus negative environmental- and social impact is classified as an industry problem rather than individual companies. 7.2 Managerial Implications A partial objective of this research is to explore the organizational management problems connected to sustainable business model innovation. Therefore, the result of the thesis becomes highly relevant for the traditional clothing retail practitioners. Thus, when an

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industry is faced with a potentially disruptive shift, firms across the industry may be required to address this shift by adapting their operations (e.g. sustainable business innovation) and strategies accordingly. This section highlights the implications related to the strategic direction taken by the case company. By exploring the current sustainable business model innovation through the lens of the existing sustainable business model literature it enables practitioners and researchers to interpret and understand the value system of a specific industry. First of all, it is important to be aware that the conventional business model literature is a diverse and contested domain, where there is a clear and general acceptance in both academia and by practitioners, that a business model is defined as a dynamic system where fundamentally these systems of activities are seen as essence for firms’ in order to contribute to the creation and delivery of value while still capturing and turn it into direct profitability for some of the created value (Morris, et al., 2005; Hedman & Kalling, 2003; Teece, 2010). To achieve a competitiveness edge, the creation of new configurations of a business models requires redesigning and implementations of novel and feasible business model, for example, improvement of customer service or by competing on different terms (Boons & Lüdeke-Freund, 2013). Enable organizational capabilities and practices for sustainable business model innovation can increase an organizations resilience to change in its environment and constitute a sustainable competitive advantage (Bocken & Geradts, 2019). Sustainable Competitive Advantage Drawing on the empirical findings, it is scientifically proven that companies using sustainability within their business model (i.e. adopting a sustainable business model or innovating existing models) can lead to direct benefits such as cost savings or completely new revenue streams, and a more amorphous advantages by being ‘prepared’ for future stakeholder concerns nor legislations and the regulatory aspect. The new broader notion of value predicts improved organizational resilience, reputation, and employee attractiveness (Bocken & Geradts, 2019) is identified and validated in this case study. Not to mention, it is argued that the sustainable business model as a concept can supersede the conventional concept of business model like sustainable competitive advantage has supersede the competitive advantage (Bocken & Geradts, 2019; Boons & Lüdeke-Freund, 2013; Stubbs & Cocklin, 2008).

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The Table 18 describes how the key findings from the analysis can be applied to practitioners in the fashion retail industry: Table 18. Managerial Implications of Thesis Result

Key Finding Description How? 1 Five factors that both differentiate the

conventional business model concept with the sustainable business model concept, and give practical examples to separate the embraced varieties of sustainable business model.

For top management to map their whole model and initiate the approach and direction for sustainable business model innovation

2 Identified gaps of current definitions of SBMI.

Increased Knowledge

3 Explanation of the phenomenon placed in a specific context (based on Key Finding 1&2).

Inspiration of how to initiate sustainability practices within the business model

4 Challenges of Sustainable Business Model Innovation

Researchers within the stream of sustainability often argues for the critical understanding from a managerial perspective of challenges connected to innovations occurred from a sustainability perspective

7.3 Revisiting the Research Process Throughout the method chapter (chapter 4) the justification of the thesis research design is argued for aligned with scholar such as Yin (2009), Flyvbjerg (2006), and Blomqvist & Hallin (2015). By adhering to previous literature together with research institutions such as Sveriges Ingenjörer (2019) and the Swedish Research Council (2017) recommendations, the results of the thesis aims to achieve high validity and reliability. However, similar to previous studies on how firms nor scholars explores sustainable business model innovation, the exploratory case study does not come without limitations. To improve the quality of new conducted studies, these limitations can be adressed and used to provide opportunities and recommendations for further research. The limited time frame of the conducted exploratory case study provides only a momentaneous glimpse of the process of sustainable business model innovation, rather than outlining every single strategic decision initiated by the case company. Together with the singularity of the case study it diminishes some of the external validity (often referred to as generalizability) of the findings, thus provides new streams for researchers to expand on. For instance, by use a multiple case study design to open up for the ability to analyze the data within each situation and across situation and then compare the results. By contrasting results for expected reasons or either augur similar results the researcher can clarify whether the findings are valuable or not (Eisenhardt, 1989). In accordance to Eisenhardt (1989) a single case study only provides the basis for analytical reasoning of the findings with defined limits of the validity. Therefore, case studies at other companies within the same industry or in another context, such as start-ups or incumbents, would provide an increased understanding for the research society to enhance and further improve the understanding of sustainable business model innovation in practice, thus increase the validity. Additionally, for further research I would highlight the importance of the ethical aspects outlined in chapter 4, p.40., when exploring the innovation process of sustainable business models in practice.

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Finally, in the thesis, the business model canvas is utilized to statically represent a sustainable business model. This, even though its criticism throughout the research community when it comes to the sustainability point of view. However, in contrast to the criticism, there was no other tool to be used identified in literature with this high recognizable rate and the selection of it is based on manifold reasons: Firstly, it is one of the most popular and accepted tools to analyze a company’s business model (Massa, et al., 2017). Secondly, it has the advantage that it is represented as a simple model that makes it easy to show the different changes during the transitions or reshaping from one business model to another. Lastly, it is a tool that can be used across all industries independently of organizational structures (Osterwalder & Pigneur, 2010). Despite these limitations, the thesis provides an indication and rich empirical data of how traditional clothing retailers are innovating their existing models and thereby contributing with additional insights into a limited researched area. Subsequently, to the ambiguous definitions of the concept.

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Chapter Summary In this chapter, the implications of findings are discussed with the objective to fulfill the purpose of the thesis. All answers to sub-questions has been presented and related to previous literature, including discussions on how the findings stands in contrast as well as contributing to the literature field of the concept sustainable business model and its innovation. Findings from this thesis indicate that for traditional clothing retail companies to successfully innovate their current sustainable business model several aspects needs to be considered: (1) Knowledge of the current model in order to evaluate their compatibleness with market shifts (i.e. organizational resilience), (2) Adopting a comparative approach to be able to determine if they need to differentiate, imitate or adopt new sustainability practices to the extent allowed by their assets and motivations – based on the market environment, customer preferences and internal resources; and (3) Identify and mitigate risks and uncertainty factors by using tools as the Pilot Prototype by Baldassarre, et al., (2020) in order ensure sustainable competitive advantage. Drawing on the empirical evidence, it can be indicated that it is a strategic advantage of having key activities and build a partner network incorporated with the fundamental idea of sustainability practices. Collaborative stakeholder involvement can result in high sustainability value – making sense from a sustainability perspective thus environmental and social impact is classified as an industry problem rather than individual companies. Thenceforth, implications for management have been presented with recommendation of how to address the key findings for creation of sustainable competitive advantage.

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8 Conclusion and Recommendations Throughout the thesis, actions have been directed towards understanding the process of sustainable business model innovation. As limited research has explored the phenomenon with vague and ambiguous definitions, scholars as well as practitioners, have been forced to act blindfolded without any empirical guidance when moving from one sustainable business model to another or when developing completely new ones. This exploratory case study of a traditional clothing retailer addresses the theoretical research gap and the organizational management problems connected to the process. It investigates both the sustainable business model innovation process and the current challenges to successfully develop and launch redefined sustainable business models. Based on the empirical setting, the entailed findings, and the discussion, it allows concluding that to succeed with the process of sustainable business model innovation the thesis makes up for three significant insights, improving the understanding of the process.

1) To enhance sustainable business model innovation, it requires knowledge and an analysis of the current design of the model. Empirical evidence highlights that this knowledge can evaluate the compatibleness with market shifts (i.e. organizational resilience). The compatibleness of a model can measure the potential of implementing sustainability practices, to enhance a broader notion of value, and create more amorphous advantages by being ‘prepared’ for future stakeholder concerns or compliance to legislations and the regulatory aspect.

2) When traditional clothing retailers innovate their current sustainable business model

towards a refined sustainable business model, the activities occur simultaneously. Empirical evidence shows that the process is taking place inside of the organization and is strongly correlated to business strategy activities, indicating that a comparative approach can be appropriate when innovating already commercialized sustainable business models. This suggested approach allows a comparison of the existing model with either disruptors or other innovative sustainable business models to determine if they need to differentiate, imitate or adopt new practices to the extent allowed by their assets and motivations – based on the market environment, customer preferences and internal resources (captured from the evaluated sustainable business model compatibleness).

3) The challenges related to sustainable business model innovation is varying depending

on the characteristic of the sustainability practice, and the time horizon (e.g. long- or short-term prosperity). Hence, the process occurs simultaneously, it is recommended to perform a variety of sustainability practices, to spread out the level of complexity and thereby optimize the utilization of own resources. The thesis highlights the Pilot Prototype by Baldassarre, et al., (2020) when implementing sustainability practices into the current sustainable business model. Thereby, risks and uncertainty factors can be mitigated to ensure the implementation of sustainable competitive advantage. Drawing on the empirical evidence, it can be indicated that it is a strategic advantage of having key activities and build a partner network incorporated with the fundamental idea of sustainability practices. Hence, collaborative stakeholder involvement can result in high sustainability value – making sense from a sustainability perspective thus environmental and social impact is classified as an industry problem rather than individual companies.

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By fulfilling the purpose, the thesis aims to make a theoretical contribution to the development of a sustainable business model innovation framework. A framework idea posed by Geissdoerfer, et al., (2018) based on a comprehensive literature review of sustainable business model theories. The framework could initially guide companies through their sustainable business model innovation process by mapping the necessary key activities, potential challenges, and available tools. The larger purpose of the framework will be to guide managers through their challenges related to sustainable business model innovation to yield societal implications. Consequenlty, the thesis adds to the acamdemic discussion regarding the normative sustainable business model innovation theory provided in terms of business model innovation to integrate environmental and social concerns into the objectives and operations of organizations. Even though these findings share many similarities of already explored definitions and practical examples, it contributes to the clarity and the significantly differences of the existing definitions. Thus, changing the facts of generalizations inaccurate when in the context of whole industries is shifting towards collaboratively decreasing environmental impact, taking social responsibility without harming the economic sustainability whereas customer preferences align with the industries planetary boundaries. 8.1 Future Research In the belief that the findings of this thesis have sparked the interest for future research to continue explore the research field of sustainable business model innovation and its early stage of development. The singularity of the study makes for some minor limitations that additional research can address to fully exploit sustainable business model innovation. Firstly, further attention needs to be directed towards the regularly including the role of government and the related institutional arrangements for the development of sustainable business model innovation.

Future RQ1: How can regulatory aspects and legislations hinder/foster the diffusion of sustainable business models?

Secondly, as indicated by Pal and Gander (2018), technology innovation and scalable are required for successful business model innovation of the fashion retail industry. It was identified throughout the thesis and illustrated within Chapter 6, Figure 11, p.61., Matrix of the Sustainability Activities Challenges that the most complex sustainability practices are facing challenges due to technical innovation.

Future RQ2: How can technical innovation enhance the sustainable value proposition for individual firms or industries?

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I

Appendix A: Unstructured Interview Protocol This appendix outlines the different topics covered during the first long interview conducted. As it is supplemented by both participative observations and internal documentation, the topics in the interview shifted correspondingly. The questions are categorized by themes. Introduction

1. You were recommended by the steering group as the initial person of contact when the thesis topic (Sustainable Business Model) were presented: - Could you please tell us a bit about yourself and your role within the company?

Current Sustainable Business Model

2. How would you describe Polarn O. Pyrets current sustainable business model?

3. Can you briefly describe how the business model (as a concept) is communicated throughout the organization?

4. Do you consider the current sustainable business model as competitive from a customer’s perspective? Following question lead into the forming of the first step of the case study, and it developed the idea of using BMC and a workshop as a suitable setup for data collection:

5. What is an ideal way of mapping the current model? And what resources is needed for that?

Sustainability Activities of Year 2020

6. As observed, Polarn O. Pyret is one of the market leaders regarding their sustainability work. Based on the internal documentation shared during my participative observation I was able to identify some main activities this year: - Could you please tell me more about those activities and if there is more to include within this study? - What are the main challenges of those activities – when balancing (triple bottom line)?

Process of Sustainable Business Model Innovation

7. What is the main driver of innovating the business model from a Sustainable Perspective?

8. Can you briefly describe how you use the concept of a business model in order to enhance or initiate profitable sustainability actions?

II

Appendix B: Workshop Protocol This appendix outlines the initial setup for the workshop. It shows the participants directed to each of the nine building blocks and if additional sources were used during the process. The ‘Map out’ process includes both the state of the art as well as challenges connected to each block – following the same structure as the data is presented in the empirical setting. Workshop Setup:

Stages Participants/Respondents Additional Source Introduction of Business Model Canvas and the nine building blocks

All Based on: (Osterwalder & Pigneur, 2010)

Map out the Value Proposition All Website; Internal Documentations

Map out Key Activities E-Commerce and Marketing Director; Inbound Logistic Manager

Participative Observations; Practical Experience

Map out Partner Network E-Commerce and Marketing Director; Inbound Logistic Manager; Outbound Logistic Manager

Practical Experience

Map out Key Resources E-Commerce and Marketing Director; Inbound Logistic Manager

Map out Cost Structure Supply Chain Planner; Assortment Controller Practical Experience Map out Client Relationship E-Commerce and Marketing Director Internal Documentations;

Website Map out Client Segments E-Commerce and Marketing Director Participative Observations

(monthly meeting; annual presentation)

Map out Distribution Channels E-Commerce and Marketing Director; Supply Chain Planner; Inbound Logistic Manager

Practical Experience

Map out Revenue Flow Accountant; Logistic Coordinator Practical Experience

III

Appendix C: Semi-structured Interview Protocol This appendix outlines the different topics covered during the four semi-structured interviews conducted. As it is based on the first part of the Analysis, the Sustainability Activities identified is a central part of the protocol. All activities are presented in the empirical setting and named as A1-A8. The Sustainable Activities were first introduced and briefly described, thereafter, three central questions were posed and discussed simultaneously. Central Questions

1. For each of the activities, please elaborate on both challenges and opportunities? 2. Would you consider the level of complexity as high or low for each one of them? 3. From a supply chain perspective, how many stakeholders are involved?

IV

Appendix D: Follow up session – email format This appendix outlines the different topics covered during the follow up session (by email) conducted. The topics where selected from the analysis based on both the empirical data collection as well as the research context – explicitly what is known about the market. Future Stakeholder Involvement

1. Does this increased level of stakeholder involvement and growing partner network affect the procurement process (e.g. selection of suppliers etc.)?

2. Do you experience any ‘Sustainability Requirements’ from them in order to have a strategic partnership?

3. How does this affect the supply chain over time – such as new services being implemented?

Future Customer Preferences

4. How much can a customer “choose” their environmental impact as a prosumer of goods (e.g. selection of ecommerce bag, transport mode etc.,)

5. Do they demand services before or after you implement them? 6. Have you identified a significant change (from a sustainable perspective) from the

customer preferences? Future Market Shifts

7. What is the significant market shifting the near future? 8. What will happen with the brick and mortar business ones the whole industry is

disrupted by digitalization and omni-channels?

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