Effective stakeholder governance in circular economy: Insights from Italian companies

Notwithstanding a growing scholarly interest in stakeholder governance, the issue of how stakeholder governance can motivate a firm’s stakeholders to cooperate to the transition to circular economy (CE) is still underdeveloped. This study intends to contribute to advance knowledge in this field by investigating the comparative effectiveness of three stakeholder governance forms – hub-and-spoke, lead role, and shared governance – to motivate stakeholders of a focal company (FC) to cooperate to the development and implementation of circular business models. Drawing on three case studies of Italian companies engaged in the transition to CE, we propose a contingent model of CE stakeholder governance. We found that the most effective stakeholder governance form at FC level depends on CE boundaries, the attitude of market forces to incentivise stakeholder cooperation to the CE, and the owners’ identity of the FC. We also found that a FC can adopt different stakeholder governance forms for the diverse CE-enhancing projects it has undertaken, appropriately tailoring the governance arrangements to the nature of activities of each project and to the value, uniqueness, and complementarities of the resources held by the stakeholders involved. This papers makes both theoretical and practical contributions. From a theoretical point of view, it advances knowledge at the intersection of stakeholder theory and governance of the CE in two main ways: first, by pointing out that the transition to the CE requires a shift from a perspective of a company responsibility to its stakeholders to that of stakeholders’ responsibility to a company, a supply chain or a local community they belong to. Second, by proposing some conditions under which shared forms of stakeholder governance are likely to foster this transition. From a pratical perspective, this paper suggests how stakeholder governance can be a tool to achieve CE targets at local community, industry, supply chain or individual firm level.