Stuck in the middle of the value chain The investment company’s role in mitigating its subsidiaries’ circular challenges

Abstract

Sustainability is receiving increasing attention, where the latest trend concerns circular economies and business models. Circular strategies are often dependent on the R-strategies, which are methods to become more circular e.g., repair, remanufacture, and recycle. The R-strategies are themself dependent on ownership of the product, and thus more applicable for companies positioned in the end and beginning of the value chain. Hence, companies positioned in the middle of the value chain (which we will call mid-chain companies) lack theoretical strategies and guidance in their circular transition. A parent company can possess different levels of ownership competence, where a higher one can result in more value creation for its subsidiaries. However, it does not include the aspects of neither circularity nor sustainability. Hence, we have investigated what circular challenges these mid-chain subsidiaries experience as well as what role a parent company can take to mitigate these. We investigated nine subsidiaries which are active in the middle of the value chain and in adjacent markets to the steel industry. The challenges the subsidiaries experience are connected to their position in the value chain and them being a part of a corporate group. Moreover, as there is a lack of academic theories of how to proceed the circular transition for these companies, many experience an insight gap and high uncertainty. In addition, the investigated subsidiaries are SMEs, located in rural areas, and are thus deprioritized by regulating bodies and influential actors. The deprioritization results in a lack of required infrastructure, needed for the circular transition. Consequently, to extend the ownership competence, to also include circularity, we recommend a parent company to possess four roles: Network Mobilizer, Institutional Builder, Information Hub, and Active Influencer. This is a long-term recommendation which is vital to enable long-term competitiveness. However, to even exist in the future, it is also important to focus on short-term actions such as marketing and knowledge exchange.