Managing Capabilities for Achieving Net Zero via a Circular Economy: A Multilevel Framework

Abstract

Corporate management faces increasing pressure to achieve both net-zero and circular economy (CE) goals. As organizations rarely manage this alone, they must develop novel capabilities within themselves and across their value chains and ecosystems. To explore capability development for achieving net zero via circularity, we adopt a multilevel approach to capabilities theory. We explore an emerging innovation ecosystem and its two key value chains by interviewing 12 organizations pursuing carbon circulation in Finland. The findings are conceptualized into a framework that highlights the need for novel multilevel capabilities to achieve net zero via circularity (i) at organizational level, to improve operations, logistics, and risk management and anticipate policy development; (ii) at value-chain level, to manage risks, sustainability, synergy exploitation and new business logic; and (iii) at ecosystem level, for systemic knowledge development, system optimization, institutional co-creation and regionality. Managing capability development from organizational to value-chain level involves orchestrated or dispersed knowledge-sharing and value chain design, while at the ecosystem level, it requires a hybrid of these approaches involving knowledge-sharing, collaborative sensemaking and institutional co-creation. The findings advance management science and practice with insights into the diversity, allocation and foundational role of organizational-level capabilities in developing chain- and ecosystem-level capabilities.