Sustainability Initiatives and Practices in the Smartphone Industry

Submitted by

Markus Hemetsberger, BSc.

Submitted at

Institute of Strategic Management

Supervisor MMag.a Dr.in Melanie

Wiener MBA

November 2020 Sustainability initiatives and practices in the Smartphone industry

Master Thesis to confer the academic degree of Master of Science in the Master’s Program Management

Sworn Declaration

I hereby declare under oath that the submitted Master’s Thesis has been written solely by me without any third-party assistance, information other than provided sources or aids have not been used and those used have been fully documented. Sources for literal, paraphrased and cited quotes have been accurately credited.

The submitted document here present is identical to the electronically submitted text document.

______Markus Hemetsberger, BSc. Date

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Executive Summary

Sustainability which consists of environmental, social and economic aspects (triple bottom line) and the Circular Economy approach, which closes the loop of take-make-dispose by applying reduce, reuse, recycle and recover as well as increases production efficiency by using less materials and energy, had gained a worldwide awareness within the last years. This awareness raised through alarming global sustainability issues, and the pressure from different stakeholders to tackle these issues increased. As a consequence, a trend to sustainability initiatives and practices within the smartphone industry is visible which are related to the Cir- cular Economy approach, with the focus on environmental sustainability. Consequently, this thesis gives an overview of the theoretical basics of “Sustainability” and “Circular Economy”, the best practise initiatives in the social and environmental area of sustainability, a critical review on practices and principles which are against the sustainability approach and shows which actions can be established to improve sustainability. In order to gain clarity, this thesis is based on a systematic literature review and gives a comprehensive overview on the previously mentioned topics.

The term “Sustainability” has developed through the United Nations and researchers to a broad term which includes environmental, social and economic aspects which are intertwined and not separate, meet the needs of the present without compromising the ability of future generations by carrying capacity of the ecosystem through development of renewable natural resources which implies respecting limits of the site’s natural land, water and energy resources and by improving the quality of the human life through rising of real income, increasing educational standards and improvement of the health of the nation to advance the general quality of life. The thesis describes the researched sustainability models “Triple Bottom Line”, “Circles of Sustainability”, “Three-nested dependencies Model” and “Prism Model of Sustainability”. The outcome is that all four models are focusing on addressing different stakeholders and addressing the economic, environmental and social dimension although the “Prism Model of Sustain- ability” adds the institutional perspectives and the “Circles of Sustainability” politics. The “Triple Bottom Line” is more an accounting model which tries to measure sustainability in each area, the “Tree-nested dependencies Model” is mainly an environmental measurement toll and the remaining two other Models show how companies or politicians are performing in the different areas of sustainability. Some of the researched benefits which are created through sustainability are: higher brand value, increased financial performance, better reputation, higher customer satisfaction, better brand image and positive effects on customer loyalty. The challenges of sustainability are strategic integration, trustworthy sustainability reporting and communication, not becoming a greenwashing company as well as environmental sustainability through forces from governments and institutions.

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The concept of the “Circular Economy” was getting more relevant especially within the last twenty years. It is a regenerative system in which the demand of resources is minimised by slowing, closing, and narrowing material and energy loops, in which waste would be used as a resource to reduce primary resource consumption which leads to a sustainable, resource- efficient and a competitive economy. Products could be repaired, reused, maintained, refurbished or upgraded instead of thrown away with the focus on recycling, use of renewable energy and eliminating the use of toxic chemicals, which should keep the resources in use for as long as possible, which increases the value of products as well as maximize the ecosystem functioning and the human well-being. The thesis describes the researched Circular Economy models “R Frameworks”, “ReSOLVE Framework” and the “System Diagram”. The results are that the different R frameworks serve as core principles behind the circular economy and are sharing the dimensions: Reduce, Reuse, Recycle as well as Recover. The System Diagram serves as basis for a better understanding of the Circular Economy and is translated into the six business actions of the ReSOLVE Framework which are applied from global leaders. Some researched benefits of the circular economy are: reduction in negative environmental externalities, minimising of imports dependency, economic growth, better financial performance through savings and fostering innovation. Some challenges of the circular economy are: rebound effects, difficulties in implementing, design and quality challenges as well as technological limits of recycling.

The best practise initiatives within the smartphone lifecycle phases are, in the raw materials extraction and production phase, in the environmental and social area of sustainability, to convince suppliers to use fair and sustainable raw materials, the usage of certificated raw materials as well as a transparent supply chain. Within the other phases are some examples in the environmental area: carbon reduction, use of renewably energy, reduction of water, waste and toxic materials, use of recycled raw materials, no loss of guarantee by self-repairs or installing other software, long product life and using time, device deposits as well as buyback programs. The social aspect in the production consist of fair wages, increased employee satisfaction, occupational health, safety and hazard prevention.

Practices which are against the principles of sustainability are found in every aspect of the smartphone lifecycle phases. Some examples in the environmental area are pollution, toxic risks, high material consumption, short average operating life, expensive and difficult repairs, planned obsolescence, recycling issues and in the social area are visible: lack of labour rights, work around laws, child labour, overtimes, not adhered code of conducts, dehumanisation, low wages as well as health issues.

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The actions which can be established to improve sustainability in general are: include social / environmental sustainability in the whole lifecycle, effective legislation as basis for further actions and investing profits in environmental and social sustainability. Some examples for environmental actions are: integration of the Circular Economy within all lifecycle phases: “Raw materials extraction” (refuse), “Production” (reduce / reuse), “Use” (repair) “End of life” (reuse, remanufacturing, refurbish, recycling, recover) which are all described in detail within this thesis. Examples of the social actions are: introduce a strict code of conduct with an enhanced monitoring system, increase employee satisfaction and offer high safety standards.

Limitations within this master thesis are on the number of the analysed companies, therefore further research, should be on analysing all smartphone manufacturing companies. Further- more, it would be interesting how sustainability is affecting the financial performance as well how different stakeholders influence the social, environmental and financial dimension of sustainability.

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Table of Contents

1 Introduction ...... 1

1.1 Problem Statement ...... 1 1.2 Objective...... 4 1.3 Research Design ...... 4 1.4 Structure of the Thesis ...... 9 2 Sustainability ...... 10

2.1 Historical development of “Sustainability”...... 10 2.2 Definition/s of “Sustainability” ...... 14 2.3 Dimensions of Sustainability ...... 18 2.3.1 Environmental aspect ...... 19

2.3.2 Social aspect ...... 20

2.3.3 Economic aspect ...... 21

2.4 Further relevant aspects ...... 21 2.4.1 Stakeholder aspect ...... 22

2.4.2 Philanthropic aspect ...... 23

2.5 Sustainability models ...... 24 2.5.1 Triple Bottom Line ...... 24

2.5.2 Circles of sustainability ...... 28

2.5.3 Three-nested dependencies Model ...... 37

2.5.4 Prism Model of Sustainability ...... 39

2.5.5 Comparison of different frameworks ...... 41

2.6 Benefits and challenges of “Sustainability” ...... 43 2.6.1 Benefits of “Sustainability” ...... 43

2.6.2 Challenges of “Sustainability” ...... 50

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3 Circular Economy ...... 53

3.1 Importance and historical development of “Circular Economy” ...... 53 3.2 Definition/s of the “Circular Economy” ...... 60 3.3 Circular Economy Models ...... 64 3.3.1 R Frameworks ...... 65

3.3.1.1 Reduce ...... 65

3.3.1.2 Reuse ...... 67

3.3.1.3 Recycle ...... 70

3.3.1.4 Recover...... 71

3.3.1.5 Application of the R frameworks ...... 71

3.3.2 ReSOLVE framework ...... 73

3.3.3 Comparison of the frameworks ...... 76

3.4 Benefits and challenges of the “Circular Economy” ...... 78 3.4.1 Benefits of the “Circular Economy” ...... 78

3.4.2 Challenges of the “Circular Economy” ...... 82

4 Sustainability initiatives and practices in the smartphone industry ...... 86

4.1 Initiatives and best practises of sustainability ...... 86 4.1.1 Shift GmbH ...... 86

4.1.2 Fairphone ...... 89

4.1.3 Apple ...... 91

4.1.4 Google ...... 93

4.1.5 Samsung: ...... 94

4.1.6 Huawei ...... 95

4.1.7 Best practice initiatives ...... 96

4.1.7.1 Raw materials extraction and Production ...... 96

4.1.7.2 Production ...... 96

4.1.7.3 Use ...... 97

4.1.7.4 End of life ...... 97

4.1.7.5 Other initiatives ...... 98

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4.2 Issues within the Smartphone Industry and their solutions ...... 99 4.2.1 Raw material extraction ...... 99

4.2.2 Production ...... 100

4.2.3 Modular Smartphones ...... 102

4.2.4 Smartphone usage time ...... 104

4.2.5 Repair ...... 105

4.2.6 Recycling / Disposal ...... 106

4.3 Actions to improve sustainability ...... 111 4.3.1 General / other actions ...... 111

4.3.2 Actions for “Raw materials extraction” Phase ...... 112

4.3.3 Actions for “Production” Phase ...... 113

4.3.4 Actions for “Use” Phase ...... 115

4.3.5 Actions for “End of life” Phase ...... 115

5 Conclusion ...... 119

5.1 Limitations and Further Research ...... 127 6 References ...... 128

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List of Figures

Figure 1: Six steps of systematic literature review ...... 8 Figure 2: Triple Bottom Line ...... 25 Figure 3: Circles of sustainability ...... 28 Figure 4: UN Global Compact Model: Process Circles...... 35 Figure 5: Three-nested dependencies Model ...... 38 Figure 6: The prism of Sustainability with additional description ...... 40 Figure 7: 9R Model ...... 72 Figure 8: Circular Economy System Diagram "Butterfly" ...... 73 Figure 9: ReSolve Framework ...... 75

List of Tables

Table 1: Key words and phrases during the research process ...... 7 Table 2: Overview of the historical development of “Sustainability”...... 14 Table 3: Definition/s of "Sustainability" ...... 16 Table 4: Perspectives and Aspects of Ecology ...... 30 Table 5: Perspectives and Aspects of Economics ...... 31 Table 6: Perspectives and Aspects of Politics ...... 33 Table 7: Perspectives and Aspects of Culture ...... 34 Table 8: Comparison of theoretical sustainability frameworks ...... 42 Table 9: Overview of benefits created through Sustainability ...... 50 Table 10: Overview of challenges created through Sustainability ...... 53 Table 11: Overview of the historical development of “Circular Economy”...... 60 Table 12: Definition/s of "Circular Economy" ...... 62 Table 13: Comparison of theoretical Circular Economy frameworks ...... 77 Table 14: Overview of the benefits created through the Circular Economy ...... 82 Table 15: Overview of the challenges created through the Circular Economy ...... 85 Table 16: Overview of the best practice initiatives and practices ...... 99 Table 17: Sustainability issues and their solutions within the Smartphone industry ...... 110 Table 18: Overview of actions to improve sustainability ...... 118

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1 Introduction The goal of this chapter is to give an overview of the problem and objectives of this thesis. Additionally, the objectives, the research design and the structure of the thesis will be explained.

1.1 Problem Statement Previously, the most important aspect for the consumer was the price and not sustainability, however, this opinion changed in the past few years1 and the importance of sustainability is undisputable because within our world more and more countries exceed the planet’s natural borders and are consuming more nature than available in their country2. To counteract, leading scholars suggest the three dimensions of sustainability (environment, society and economy) have to be balanced since a successful economy needs an intact environment and social issues must be considered as well3. Therefore, there is the need for smartphone manufacturing companies to change the past behaviour through pressure of the increased customer demand as well as other measurements like several political regulations4 5.

Although, the smartphone manufactures started measures to give the customers the feeling of buying sustainable devices as the websites of Apple6 and Samsung7 show, to just mention a few as example. Even if electronic markets would only offer sustainable devices, a high number of items would have to be removed because they are against the principles of sustainability in the environmental area e.g. high power consumption, lack of recyclability and in the social area e.g. the production in Asian low-wage countries under socially incompatible conditions, also Appel’s iPhone is falling under this lack8. Nevertheless, through a worldwide movement Apple is already trying to follow a more sustainable approach for example through the measures of using recycled aluminium and reducing power consumption9.

1 Kim and Lee, 2018, 5 2 Kropp, 2019, 2 3 Kropp, 2019, 5 4 Amend et al., 2020, 1f 5 James, 2015, 53 6 Apple Environment, 2020 7 Samsung Eco-management, 2020 8 Knoppe, 2015b, 98 9 Apple Environment, 2020

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Currently most of the profit is generating by Apple, Samsung and Huawei and only a small piece of the pie is earned by other competitors10. Also, the market is getting more and more saturated and the growth decreases, but there are some small firms like Fairphone11 or Shift GmbH12 who claim that they are based on the thinking of being sustainable. In order to be sustainable as a company, it is simpler to offer sustainability from the Inside-Out and Outside- In, which means that a company has integrated sustainability in their entire supply chain13. That is less challenging for companies which started from the beginning with this approach like Fairphone. Their products and supply chains try to create positive and fair social impact with the aim to influence systematic change in the smartphone-industry14.

The three biggest smartphone manufactures concerning their shipments in Q4 201915 are focusing on particular areas of sustainability especially on the environmental issues because of higher costumer awareness through politics and extensive media coverage as March et al. mentioned16. The areas of sustainability are mentioned in the triple bottom line model which consists of economic, social and environmental factors. In average Apple, Samsung and Huawei focus most on the environmental area. They scored in average 48 % in the environmental dimension (max 100 %), in social 33 % (max 100 %) and economical 31 % (max 100 %).17 This scores are related to a proven method by Morhardt, Baird & Freeman, which are based on the Global Sustainability Guidelines which consist of 91 aspects divided into the three dimensions of the triple bottom line model18 19.

The social sustainability aspect in the smartphone industry is controversy discussed. Apple for example developed a code of conduct for their suppliers, which prescribe a maximum of 60 working hours and one day off during a week. Through real-time tracking and weekly reports Apple tracks the working hours of 1.3 million workers. In 2015 Apple mentioned that 97 % of the employees are within their code of conduct20. However, during an investigation by Apple’s supplier Pagetron “China Labor” found out, that just 1.1 % of workers do not do more than 36 hours of overtime per month21.

10 Canalys, 2019 11 Fairphone, 2020a 12 Shiftphones, 2020 13 Wernink and Strahl, 2015, 123 14 Wernink and Strahl, 2015, 123–139 15 Canalys, 2019 16 Mach et al., 2017, 8f 17 Mach et al., 2017, 5 18 Morhardt et al., 2002, 215ff 19 Mach et al., 2017, 4 20 apple.com, 2016 21 Hagemann, 2017, 45

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By contrast, Fairphone is producing smartphones which focus on social and ecological aspects in their supply chain. The company is committed to human rights in the field of mining and manufacturing22. They are publishing a list of their suppliers and of all their costs of their phones on their website to be as transparent as possible23.

Environmental sustainability goes hand in hand with circular economy. This approach is per definition a combination of reduce, reuse and recycle activities24. Modular devices enable the prolonging of the use-time and reducing environmental effects as Proske and Jaeger-Erben mentioned, but only if the business model of the company suits the circular economy ap- proach25. Modularity strategies change technological principles and the human-object relationship between users and their smartphones. Maintaining continuous functionality and reinforcing attachment to devices can belong together, but there may also be drawbacks and rebound effects26.

Modularity can change the habits of the customers and has economic, social and ecological sustainability potential but only if developers are convinced to develop hardware and if there are enough external partners through network management to realize this approach, for example Googles modular project Ara has failed due to this lack. Hankammer et al. mentioned in their study, that only Fairphone is offering modular devices but they are very limited in indi- vidualization and are only suitable for a very specific target group of sustainable thinking cus- tomers27.

By now, some examples of smartphone manufactures have been mentioned and associated with environmental and social sustainability. Despite information about sustainability in general and circular economy, there are important questions that should be analysed in order to enable a better understanding of the topic. Those relevant questions consist of the best practise initiatives in the social an environmental area of sustainability. Furthermore, initiatives and practices which are against the principles of sustainability are answered and last but not least actions which can be established to improve the sustainability of the smartphone manufactures.

22 Hagemann, 2017, 67 23 Fairphone-Suppliers-Smelters-and-Refiners, 2018 24 Kirchherr et al., 2017, 221 25 Proske and Jaeger-Erben, 2019, 65 26 Proske and Jaeger-Erben, 2019, 57 27 Hankammer et al., 2018, 153

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1.2 Objective The objectives of this thesis are to perform a comprehensive literature review to gain insight in sustainability models and initiatives. This will be achieved in the form of a main research question with additional sub-questions which are described profounder. In general, the focus will be on the environmental and social area of sustainability initiatives and practices in the smartphone industry. Furthermore, importance will be set on initiatives and practises which are against the principles of sustainability. The thesis will also give prospects which actions can be carried out to improve environmental and social sustainability within a company. These objectives of the thesis are illustrated through a main research question with three additional sub-questions:

• What are sustainability initiatives and practices in the smartphone industry? o What are best practise initiatives in the social and environmental area of sustainability? o What are initiatives and practises in the smartphone industry that are against the principles of sustainability?

o Which actions can be established to improve sustainability within the smartphone industry?

To provide answers to the research questions this thesis is based on a comprehensive theoretical overview of the different areas of sustainability and circular economy to have a better understanding for answering the research questions. With the answering of the research questions an overview of current sustainability initiatives and practices in the smartphone industry is given to show, customers, companies and researchers an overview and to develop further, more specialized research or ideas for applying sustainability.

1.3 Research Design The research design is a systematic literature review based on a six-step model from Machi and McEvoy with an additional internet research of the sustainability initiatives of several smartphone manufactures. Fayolle and Wright quoted that a literature review is a kind of “knowledge map” which analyses and prioritizes literature28. To achieve a high-quality literature review, it is important to have an in-dept understanding of the required processes and skills to answer the research question29.

28 Fayolle and Wright, 2014, 94 29 Fisch and Block, 2018, 103f

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For the systematic literature review the six-step model from Machi and McEvoy is relevant as shown in Figure 1. According to the authors, the first step is to select the topic and the research question. Significant for a literature review is a clear motivation and being aware why the topic is chosen. At the beginning of a scientific work there should be a well-defined research question which guides as a remainder of the literature review.30 For the selection of the topic, journals are helpful to simplify ideas and for planning and reviewing work.31 In this master thesis, the focus of step one was on the development of the problem statement and the research questions. This was conducted mainly within the development and evaluation of the concept of the thesis and with the support of my supervisor MMag.a Dr.in Melanie Wiener MBA. The motivation for this topic was based on my interest in technology especially in the smartphone industry because of several group projects at university. The relevance of this topic is also seen in the increased awareness of sustainability, where more and more people stand up for sustainability with initiatives like “Fridays for Future” and the transformation of several companies to be more sustainable as written in the “Problem Statement”.

Step two is about the development of tools for the argumentation through the creation of a process for solving the problem. Therefore, an understanding of the existing state of knowledge is necessary. It is not about collection of information and showing the own opinion of a topic, it is about producing conclusions which result from a logical presentation of supporting evidence. For a literature review two types of arguments are necessary. First building the findings of the case and second is to form the case’s conclusions, this enables a well-argued thesis.32 Within this thesis first the research and understanding of the existing literature was conducted to gain general information about the topics “Sustainability” and “Circular Economy”. Second within the creation of the concept an illustration on how I want to proceed, and the structure of the thesis was realised. Subsequently, it was sent to my supervisor from university, discussed and improved in detail to generate a logical presentation which supports evidence.

The third step consists of the search of the literature and collecting and organizing the information. The review process should be transparent and reproducible through pointing out the search strategy in order to identify the relevant literature in a systematic way. This includes a description of the databases in which the search was performed, demonstration of the search terms and keywords as well as a description of the practical and methodological screening. The focus should only be on high-ranked journals to guarantee a high-quality of the thesis33.

30 Fisch and Block, 2018, 104 31 Machi and McEvoy, 2012, 6 32 Machi and McEvoy, 2012, 6f 33 Fisch and Block, 2018, 104

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Following it is relevant to organize the data by skimming, scanning and mapping. Subsequent, the investigator catalogues and documents the relevant data34.

For the scientific literature research, a comparison of different, mainly online sources and databases like books and academic journals as Science Direct, EZB, Google Scholar and digital databases like EBSCO, EconLit, WISO, SpringerLink and Emerald Insight, is conducted. Also, the quality of the journals is important, therefore the focus is mainly on top ranked journals (A+, A, B) which are rated by the VHB-Jourqual institute. For example, leading scientific journals (A) in the Strategic Management area are the “Strategic Management Journal”, “Journal of Economics & Management Strategy”, “Strategic Entrepreneurship Journal”35 and in the Sus- tainability area (A) “Journal of Industrial ecology” (B), “Journal of cleaner production” and “Jour- nal of World Business”, to just mention a few.36 Books are only used for definitions and concepts to enable a theoretical basis within the master thesis.

In addition, extensive Internet research is important, as various websites provide the basic ideas for further literature searches. This data is particularly promising for the screening of the examples of different companies in relation to their sustainability activities. Furthermore, there is an Internet research for the various sustainability reports of the smartphone manufactures. It is necessary to list and carry out a comparison with other websites and literature to recognize sustainable business practices. Because of the lack of current literature in some cases it is necessary to combine internet sources and scientific literature to gain current results.

The selection of the examples of the smartphone manufacturing companies follows according their market shares37 and sustainability initiatives. Therefore, the main focus is on the companies: Apple, Samsung, Google, Huawei, Fairphone, Shift GmbH. Apple is chosen because of their market share and they are the only company who offers a different ecosystem as every other company has as main operating system Android. Fairphone and Shift GmbH are selected because of their sustainability initiatives e.g. modularity.

Moreover, the initiatives which are found in the sustainability reports are reviewed with scientific literature to investigate if the activities are based on the principles of sustainability or only greenwashing.

34 Machi and McEvoy, 2012, 7 35 VHB-Jourqual, 2020b 36 VHB-Jourqual, 2020a 37 Canalys, 2019

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The time period in which the research was done started in December 2019 and ended in Oc- tober 2020. The keywords are searched in the languages English and German to gain a higher amount of data through bilingual searches. Within the research process a combination of different keywords are used to receive a high amount of data. The use of the plural and singular of English and German key words and phrases are shown in “Table 1”.

Language Key Words and Phrases English “sustainability”; “sustainable”; “sustainable thinking”; “sustainable development”; “principles of sustainability”; “Dimensions of Sustainability”; “environmental”; “environment”; “social”; “ecology”; “ecological”; “stakeholder”; “philanthropy”; “culture”; “politics”; “institutional”; “Sustainability Models”; “Sustainability Frameworks”; “Triple Bottom Line”; “Circles of Sustainability”; “Three-nested dependencies Model”; “Prism Model of Sustainability”; “Circular Economy”; “3 R Model”; “4 R Model”; “6 R Model”; “9 R Model”; “ReSolve framework”; “System Diagram”; “Butterfly”; “challenges”; “benefits”; “problems”; “sustainability report”; “child labour”; “recycling”; “social issues”; “environmental issues”; “health issues”; “Greenwashing”; “smartphone”; “mobile phone”; “mobile device”; “Apple”; “Samsung”; “Huawei”; “Google”; “Fairphone”; “Shift”; “circular economy”; “replacement”; “repair”; “reuse”; “modular”; “customizable”; “obsolescence”; “literature review”; “definition”, “origin”, “history”; “relevance”; “need”; German "Nachhaltigkeit"; "nachhaltig"; "nachhaltiges Denken"; "nachhaltige Entwicklung"; „Prinzipien der Nachhaltigkeit“; „Dimensionen der Nachhaltigkeit“; „Nachhaltigkeitsmodelle“; „Drei Säulen Model“; "Umwelt"; "sozial"; "soziale"; "Ökologie"; "ökologisch"; „Philanthropie“; „Kultur“; „Politik“; „Kreislaufwirtschaft“; "Herausforderungen"; "Vorteile"; "Probleme"; "Mobiltelefon"; "Kreislaufwirtschaft"; "Ersatz"; "Reparatur"; "Wiederverwen- dung"; "Anpassbar"; "Veralterung"; „Definition“, „Begriffserklärung“, „Ursprung“, „Geschichte“; „Relevanz“; „Notwendigkeit“;

Table 1: Key words and phrases during the research process Source: own table

An example of a conceivable searching query in the online library EBSCO could be in the following form: “Sustainability” AND “Smartphone” AND “Environmental” OR “Social”. This query is customized to the logic which the database EBSCO can process. All literature has been carefully selected through performing an in-depth research and a critical investigation of the chosen source through exploring the rating of the article by the researcher.

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Step four is to survey the literature and discover the evidence and build findings. The literature survey helps to organize and analyse the data concerning the existing state of the art literature about the topic38. Therefore, a systematic literature review should be built on logical and conceptual thinking39. In this thesis, the analysis of the encountered literature, including discover- ing the evidence and building the arguments, was conducted. Thereby, the focus was on a comparison of articles and the behaviours of different companies to gain valid results how “Sustainability” and “Circular Economy” is implemented in theory and practice.

The fifth step is to draw conclusions and critique of the literature. The generated knowledge from step four need to be synthesized and interpreted and should show what can be learned from the summarized data collection. The critique shows how the present knowledge answers the research question. This contains evaluating and deriving of implications, pointing out gaps within the literature and showing future research possibilities as shown in the “Conclusion” of this thesis.40

The last step deals with the writing of the review and the communication and evaluation of the conclusions. At the end, the master thesis communicates the outcome of the project. To achieve a high-quality, writing, auditing and polishing the final work is required. Finally, the outcome is accurate, complete and understandable.41

Figure 1: Six steps of systematic literature review42

38 Machi and McEvoy, 2012, 7 39 Fisch and Block, 2018, 105 40 Fisch and Block, 2018, 105 41 Machi and McEvoy, 2012, 7 42 Machi and McEvoy, 2012, 6

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1.4 Structure of the Thesis This master thesis is structured into five major chapters. The first chapter contains the “Prob- lem statement”, the “Objectives / Research Questions”, the “Research Design” and the “Struc- ture and content”. Within the “Problem Statement” a concise description of the issue and an identification between the current state and the desired goal is given. The “Objectives / Re- search Questions” section contains a main research question with additionally three sub-questions. Based on that, the “Research Design” in form of the systematic literature review is illustrated with theory and it is shown how the practical application within this master thesis works. The “Structure and content” part within this section is necessary to give a profound overview of the structure of this master thesis.

The second and third chapter is about definitions and conceptual basics. The focal point of this two chapters is on the theory of “Sustainability” and “Circular Economy” because these topics are the theoretical basis for this thesis. Circular Economy is relevant because it will be combined with the environmental sustainability to answer the research question, therefore a fundamental understanding of the theory of Circular Economy is necessary.

At the beginning, the origin and historical development are shown, followed by the presentation of the definitions of both topics. Additionally, the current research developments are analysed and displayed as well as the relevance of these two concepts. Next are the different models and frameworks which are important in order to understand both topics. At the end, the main benefits but also the critical aspects of these two topics will be illustrated.

Within chapter four the research question and the sub-questions will be answered through a comprehensive literature review including some practical examples of smartphone manufactures. The selection and focus of the companies are based on their sustainability practises and initiatives. In the first two sub-chapters of this section the best practise initiatives in the social and environmental area of sustainability within the smartphone industry will be discussed. The next sub-chapter is a research of the initiatives and practises which are against the principles of sustainability and last there are suggestions which actions companies can implement to improve sustainability.

The final chapter is a conclusion of the master thesis. It will consist of a brief summary of all the content of the thesis. Additionally, the research question is answered summarized within this part. Furthermore, this section provides a critical review of the thesis and its topic.

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2 Sustainability The first chapter was an introduction of the master thesis and the content, the second and third chapter are explaining and analysing the theoretical foundation of the thesis, “Sustainability” and “Circular Economy”. In order to achieve a better understanding for answering the research question, a deep analysis of these two topics is necessary. Within this section “Sustainability” is researched in detail including the historical development, definitions, dimensions, different models and last benefits and challenges.

2.1 Historical development of “Sustainability” The roots of “Sustainability” are found in the forestry industry by the Saxon mining director Hans Carl von Carlowitz. In 1713, he published the book “Sylvicultura oeconomica” where Carlowitz recommends a form of forestry where only as much wood should be cut as can grow back. In this content he wrote about “sustainable use of forest” for “forest management that allows for a continuous perpetual use of timber”43. This sustainable use of forest was relevant to be able to mine the non-renewable mineral ores44. The focus of Carlowitz was on the economy as well because he figured out that the whole economy is necessary to save the forestry and not only the forestry industry45.

In 1804, Georg Ludwig Hartig from Gladenbach mentioned in his “Instructions for the Taxation of Forests” that there will be “no sustainable forest industry if lumbering in the forests is not based on sustainability”46. Sustainability in the forest industry was based on different components which are illustrated by Schulze. The components are durability (secure resources and functions in a long term), responsibilities to society (interest of the society may result in re- strictions regarding to rights of use), economics (be economical with systematic protection of natural resources to realise economic benefits) and responsibility (be responsible to preserve the forest for future generations)47.

43 Schulze, 2006, 68 44 Kropp, 2019, 7 45 Grober, 2010, 94 46 Jenkins and Schröder, 2013, 11 47 Schulze, 2006, 69

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Within the next few decades this concept of sustainability has been used for different environmental issues and has become a fundamental basis in nearly every filed of economy and so- ciety48. Between 1960 and 1970 more and more people recognized that the technological progress had consequences for the environment. There was an increase in energy consumption, rising pollutant emission and growing mountains of garbage49. In 1962, Rachel Carlson shows the negative effects on the life in soil, water and air of the pesticide Dichlorodiphenyltrichloro- ethane within her Book “Silent Spring” 50. In 1968, the picture “Earthrise” of the NASA shows the people around the world how the planet looks from the outside. This picture raised awareness that we must protect our planet51. In 1969, through this environmental awareness the US adopted their National Environmental Policy Act. This law, beginning with January 1, 1970, required a comprehensive “Environmental Impact Assessment” for large projects with public participation, subsequently this idea was implemented all over the world52.

In 1972, the book “The Limits of Growth” in charge of the Club of Rome, which is a group of renowned economists and scientists was published53. The conclusion of this study was that in case actual growth within the world (population, industrialization, pollution, food production and resource depletion) continues at the same speed, the limits to growth of our planet will be reached within the next one hundred years. As a result, there will be an uncontrollable decline in population and industrial capacity54. This report received great public attention because in 1973 the first oil crisis showed how dependent the world is on fossil fuels55.

The first major United Nations environmental conference also took place in 1972 in Stockholm. 113 countries and also the US supported and participated in this conference. The results of the conference were the adoption of an instrumental declaration including fundamentals for dealing with the global environment and an action plan with 26 principles and 109 recommendations, dealing with the cooperation on environmental protection. Furthermore, for the improvement of the environmental action and coordination within the United Nation they created the institution United Nations Environmental Programme (UNEP).56

48 Jenkins and Schröder, 2013, 12 49 Renn et al., 1999, 17ff 50 Kroll, 2001, 403 51 Grober, 2013, 23f 52 Jenkins and Schröder, 2013, 13 53 Du Pisani, 2006, 90 54 Meadows, 1972, 23 55 Schrott, 2015, 6 56 Newman, 2011, 410f

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In 1987, the United Nations World Commission on Environment and Development published the Brundtland-report “Our Common Future” which contains the general classifications of sustainable development which is common practice today57. Within the Brundtland report in chapter two the conclusion declares that “sustainable development is development that meet the needs of the present without compromising the ability of future generations to meet their own needs”. It contains two key concepts. First the concept of “needs” of the world’s poor essential needs and second the limitations through the state of technology and social organization on the environment’s ability to meet present and future needs. Therefore, social and economic goals should be defined regarding sustainability in all countries58. Within “Our Common Future” are three elements of life: economic, environmental and individual human well-being, which is the triple bottom line of sustainability. It means to improve the social and economic quality of life while trying to keep the environmental impact as low as possible to the carrying capacity of the nature.59

In 1992, the United Nations Conference on Environment and Development, based on the Brundlandt-report, in Rio with 178 governments took place60. Von Weizsaecker mentioned that this conference laid the groundwork for global governance in “Earth Politics”61. The conference adopts six declarations which are first the Agenda 21 which is a plan to foster sustainable development, second a Declaration on Environment and Development which consists of a series of principles which are regulating the rights and responsibilities of states, third are Forest Principles including ethics to support sustainable management of forests worldwide. The fourth, fifth and sixth are legally binding instruments (United Nations Framework Convention on Climate Change, the Convention on Biological Diversity and the Convention to combat des- ertification).62 Through the Rio Declaration and the Brundtland report, sustainability was brought into the mainstream policy discourse63.Nevertheless, it was criticized that all documents are only based on voluntary undertakings and there are no verifiable obligations for the contracting states64.

57 Kropp, 2019, 8 58 Brundtland, 1987, 41 59 Amos O. et al., 2016, 92 60 Kropp, 2019, 8 61 Weizsäcker, 1992, 9 62 United Nations, 1992 63 Purvis et al., 2018 64 Kropp, 2019, 9

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In 1997, the Kyoto Protocol was agreed which consists of targets in reduction of the collective annual emissions of greenhouse gases of the different countries. Different industrialized countries had different targets to reach65. However, the Kyoto-Protocol inured in 2005 without the USA and China. In 2000, the United Nations published their eight Millennium Goals which should be reached until 2015. The most relevant term for “Sustainability” is goal 7 “Ensure environmental sustainability”. This contains saving of forest, protection and maintaining of biological diversity, energy efficiency through improvement of the GDP per unit of energy use, reducing of the carbon dioxide emissions, enable more countries sustainable access to water, sanitation and secure tenure66. Within this goal only the environmental area of sustainability is addressed, this changed in 2002 during the “World Summit for Sustainable Development in Johannesburg”, which was held ten years after the conference in Rio. Within this declaration the United Nations prescribes the relevance “to promote the integration of the three components of sustainable development – economic development, social development and environmental protection – as interdependent and mutually reinforcing pillars”67.

In 2012, the United Nations Conference on Sustainable Development in Rio took place. The result was a political outcome document containing practical measures for implementing sustainable development and again the focus on the Agenda 21 from 199268. Most of the past major problems remain unsolved and they continue to adhere to the old goals69.

In 2015, the 2030 agenda from the United Nations was adopted in New York. It consists of 17 sustainable development goals and 169 sub-goals and should be a global and universally ap- plicable target system for all countries in regard to development and sustainability issues70. This sustainable development goals are: no poverty, zero hunger, good health and well-being, quality education, gender equality, clean water and sanitation, affordable and clean energy, decent work and economic growth, industry, innovation and Infrastructure, reduced inequality, sustainable cities and communities, responsible consumption and production, climate action, life below water, life on land, peace and justice strong institutions and last partnerships to achieve the goal71. If the many efforts of sustainable development to protect and save our planet will be successful depends to what extent the countries will implement the measures72. The table below gives a short overview of the just described historical developments of sustainability.

65 Dresner, 2008, 54 66 United Nations, 2001, 57 67 United Nations, 2002, 8 68 United Nations, 2012 69 Kropp, 2019, 10 70 Kropp, 2019, 9 71 United Nations, 2015 72 Schrott, 2015, 7

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Year Milestone 1713 Hans Carl von Carlowitz’s: “Sylvicultura oeconomica” 1804 Georg Ludwig Hartig: “Instructions for the Taxation of Forests” 1962 Rachel Carlson: “Silent Spring” 1968 NASA: “Earthrise” 1970 Environmental Impact Assessment Law 1972 The Club of Rome declares "The Limits to Growth" 1972 First United Nations environmental conference: establishment of an environmental program 1987 Brundtland report: "Our common future" 1992 United Nations Conference on Environment and Development in Rio de Janeiro: Agenda 21, a development and environmental policy action program 1997 Approval of the Kyoto Protocol (quantitative targets for the emission of Greenhouse gases) 2000 United Nations: eight Millennium Development Goals 2002 United Nations: World Summit for Sustainable Development in Johannes- burg: Adoption of an action program 2012 United Nations: Conference on Sustainable Development: Green economy and non-binding confirmation of old goals 2015 - United Nations World Action Program starts - Replacement of the Millennium Development Goals

Table 2: Overview of the historical development of “Sustainability” Source: own graphical presentation based on Kropp73 with included stages of Jenkins and Schröder74 2.2 Definition/s of “Sustainability” For “Sustainability” numerous definitions can be found in literature, therefore the focus must be on a meaningful definition as Mensah and Ricart Casadevell mentioned75. Furthermore, there are different terms: “Sustainability”, “Sustainable development”, “Sustainable growth”, “Sustainable use”. The difference between “Sustainability” and “Sustainable development is described by the United Nations Educational, Scientific and Cultural Organization (UNESCO) as follows: “Sustainability is often thought of as a long-term goal (i.e. a more sustainable world), while sustainable development refers to the many processes and pathways to achieve it (e.g. sustainable agriculture and forestry, sustainable production and consumption, good government, research and technology transfer, education and training, etc.).76”

73 Kropp, 2019, 10 74 Jenkins and Schröder, 2013, 13 75 Mensah and Ricart Casadevall, 2019, 5 76 UNESCO, 2015

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Due to the fact that sustainability requires sustainable development in order to achieve the goals, both terms occur within the examined definitions. It is also relevant that sustainable growth can only be applied to renewable resources because nothing physical can grow indef- initely77. The table below gives an overview of the most important definitions.

Author Definition Brundtland “Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” 78 Pearce et al. “Sustainable development involves devising a social and economic system, which ensures that these goals are sustained, i.e. that real incomes rise, that educational standards increase, that the health of the nation improves, that the general quality of life is advanced.” 79 IUCN et al. “Sustainable development, sustainable growth, and sustainable use have been used interchangeably, as if their meanings were the same. They are not. Sustainable growth is a contradiction in terms: nothing physical can grow indefinitely. Sustainable use, is only ap- plicable to renewable resources. Sustainable development is used in this strategy to mean: improving the quality of human life whilst living within the carrying capacity of the ecosystems.” 80 Holdgate “Sustainable Development is about realising resource potential, Sustainable development of renewable natural resources implies respecting limits to the development process, even though these limits are adjustable by technology. The sustainability of technology may be judged by whether it increases production, but retains it other environmental and other limits.” 81 Rosenbaum “Sustainable means using methods, systems and materials that won't deplete resources or harm natural cycles.” 82 Vieira “Sustainability “identifies a concept and attitude in development that looks at a site’s natural land, water, and energy resources as inte- gral aspects of the development.” 83

77 IUCN et al., 1991, 10 78 Brundtland, 1987, 41 79 Pearce et al., 1989, 1 80 IUCN et al., 1991, 10 81 Holdgate, 1993, 481 82 Rosenbaum, 1993, n.p. 83 Vieira RK., 1993, 10

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The President's “Our challenge is to create a life-sustaining earth, a future in which Council on Sustaina- prosperity and opportunity increase while life flourishes and pres- ble Development sures on the oceans, earth and atmosphere diminish”. 84 McKeown “Sustainable development is often thought to have three components: environment, society, and economy. The well-being of these three areas is intertwined, not separate.” 85 Morelli “Meeting the resource and services needs of current and future generations without compromising the health of the ecosystems that provide them. In specific, sustainability is a condition of balance, resilience, and interconnectedness that allows human society to satisfy its needs while neither exceeding the capacity of its supporting ecosystems to continue to regenerate the eservices necessary to meet those needs nor by our actions diminishing biological diversity.”86 Epa.gov “To pursue sustainability is to create and maintain the conditions under which humans and nature can exist in productive harmony to support present and future generations.” 87 Parker “Sustainability can be defined as a socio-ecological process characterized by the pursuit of a common ideal.” 88 Forum for the future “Sustainability is a dynamic process which enables all people to realise their potential and to improve their quality of life in ways that simultaneously protect and enhance the Earth’s life support system. Sustainable development means being able to fulfil the needs of those living today without compromising the ability of future generations to fulfil their own needs.” 89

Table 3: Definition/s of "Sustainability" Source: own table

84 The President's Council on Sustainable Development, 1999, n.p. 85 McKeown, 2002, 8 86 Morelli, 2011, 5 87 EPA Sustainability, 2014 88 Parker, 2017, 77 89 forumforthefuture.org, 2020

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The first definition from Brundtland within the chronological table above contains: “sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” 90. This part of the definition is shared in the explanations from “Morelli91”, “Epa.gov92” and the “Forum for the Future93”. Within the social dimension IUCN et al. 94 and the Forum for the future95 are both focusing on “improving the quality of the human life”, while the other sources are only referring to “meeting needs”

According to McKeown sustainability is based on three components: environment, society and economy and that the well-being of them is intertwined and not separate96. Every definition within the table except one contains the environmental area of sustainability. Pearce et al. focus only on the social and economic dimension as they mentioned as examples: “that real incomes rise, that educational standards increase, that the health of the nation improves, that the general quality of life is advanced” 97.

Moreover, within the environmental dimension the focus is on different areas. IUCN et al. focus on “carrying capacity of the ecosystem” 98, while Holdgate is going more in detail with the “development of renewable natural resources which implies respecting limits” 99. Viera is focusing on the “development that looks at site’s natural land, water, and energy resources100” and also The President’s Council on Sustainable Development focuses on the “oceans, earth and atmosphere” 101.

The variety of different sustainability definitions should be a strength and not a weakness because sustainability addresses a globally shared paradigm102. Therefore, sustainability can have different definitions depending on which user (organization, company, politician) and in what situation it is being used103.If the validity of the sustainability definitions can be discovered, then the issues of sustainability are addressed, the alternative would be blind acceptance without questioning the definitions which risks a wrong usage of sustainability104.

90 Brundtland, 1987, 41 91 Morelli, 2011, 5 92 EPA Sustainability, 2014 93 forumforthefuture.org, 2020 94 IUCN et al., 1991, 10 95 forumforthefuture.org, 2020 96 McKeown, 2002, 8 97 Pearce et al., 1989, 1 98 IUCN et al., 1991, 10 99 Holdgate, 1993, 481 100 Vieira RK., 1993, 10 101 The President's Council on Sustainable Development, 1999, n.p. 102 Cairns, 1997, 1164 103 Yanarella and Bartilow, 2000, 371 104 Lélé, 1991, 609

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Subsequently after analysing all the above mentioned twelve definitions one summarized could try to explain “Sustainability” as development which:

• contains three components: environmental, society and economy which are intertwined and not separate105, • meets the needs of the present without compromising the ability of future generations106 107 108 109” • by carrying capacity of the ecosystem110 through development of renewable natural resources which implies respecting limits111 • of the site’s natural land, water and energy resources112 (oceans, earth and atmos- phere113) • and by improving the quality of the human life 114 115 through • rising of real income, increasing educational standards and improvement of the health of the nation to advance the general quality of life116.

2.3 Dimensions of Sustainability According to researchers who analysed the concept of sustainability, there are three main aspects incorporated in sustainability which should interact together, and these are: environmental, social and economic aspects117 118. These aspects include numerous concerns regarding their respective goals and how they respond to each other in terms of integration, communication and relation with the objectives achieved. Furthermore, two additional aspects have evolved in the evolution of sustainability and those are the stakeholder aspect, and the philanthropic aspect.119 All mentioned aspects will be further elaborated in the following sub-chapters.

105 McKeown, 2002, 8 106 Brundtland, 1987, 41 107 Morelli, 2011, 5 108 EPA Sustainability, 2014 109 forumforthefuture.org, 2020 110 IUCN et al., 1991, 10 111 Holdgate, 1993, 481 112 Vieira RK., 1993, 10 113 The President's Council on Sustainable Development, 1999, n.p. 114 IUCN et al., 1991, 10 115 forumforthefuture.org, 2020 116 Pearce et al., 1989, 1 117 Cohen et al., 2008, 107ff 118 Belz and Binder, 2017, 1ff 119 Arsić et al., 2016, 249

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2.3.1 Environmental aspect Environmental sustainability is described as “condition of balance, resilience, and interconnectedness that allows human society to satisfy its needs while neither exceeding the capacity of its supporting ecosystems to continue to regenerate the services necessary to meet those needs nor by our actions diminishing biological diversity”120. Therefore, the environmental aspect of CSR relates to the effects, that a company has on its environment. It includes the environmental effects of a company's goods, services and facilities. Therefore, it requires to manage companies' operations in such a manner that natural resources are not affected neg- atively. According to this, companies should reduce the usage of natural and non-renewable energy resources, reduce waste, carbon dioxide emissions and pollution.121

It is evident that the decisions and activities of firms have a direct and substantial effect on the planet, no matter where the company is located or in which area it operates. Companies that adjust their perceptions of environmental challenges and incorporate sustainability concerns into their corporate strategies can have a competitive advantage over their rivals and profit from the advantages which sustainability provides them.122

Furthermore, elements that affect the efficacy of actions related to environmental aspects are first of all, the adoption of environmental policies in the organization of strategic reports and everyday operations. Secondly, the increase of awareness among employees, thirdly the improvement in numbers and capacity of environmental responsibilities and finally the integration of environmental responsibility into the core values of the company. As many companies have become more aware of the issues these days, they apply environmental responsibility to their businesses.123

In addition, in the governmental policies the environmental aspect covers methods taken by businesses to reduce pollution, including regulatory processes such as climate change policy, consumer knowledge transparency systems, toxic waste inventories and cooperative business initiatives such as sustainable energy savings programs.124

120 Morelli, 2011, 5 121 Chuang and Huang, 2018, 995 122 Švermová, 2018, 2 123 Jabłoński, 328 124 Chuang and Huang, 2018, 997

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2.3.2 Social aspect The United Nations describes Social sustainability as “identifying and managing business impacts, both positive and negative, on people – directly or indirectly, companies affect what happens to employees, workers in the value chain, customers and local communities, and it is important to manage impacts proactively”125. The social dimension of sustainability is ne- glected in theory and practice as Cuthill126 and Eizenberg & Jabareen127 mentioned, also it is undertheorized and oversimplified128. But social sustainability is not an attempt to do only a minimum amount of social measures, it should support to examine social structures and processes, which try to influence the exchange between the society and the nature129.

Social sustainability entails the quality of societies which describes the nature to society relationships which is facilitated by work and their relationships in the society. Therefore, it is necessary to fulfil a certain amount of human needs, social justice and human dignity.130 Further- more, social sustainability refers to the relationship between business and society and thus implies interactions with employees, customers and the social environment. A company’s social impact and corporate responsibility includes the welfare of people through providing jobs, employment stability, job satisfaction or education / training and complying with health and safety standards.131 Moreover, the social aspect is characterized by protecting and preserving human rights, supporting developing countries and developing the standard of life in all places where the firm operates. Additionally, it includes that companies are not to discriminating against ethnicity, status or gender as well as cooperating with schools, organizations and universities. Moreover, the social aspect seeks to support, promote and participate in social and cultural activities, as well as working with NGOs, charities and increase the quality and safety of their products.132 Furthermore, the reduction of future risk and supporting local and global efforts is necessary and named by Eizenberg & Jabareen133.

In addition, the social aspect requires economic growth to be regulated by standards of social equity. Therefore, companies must enable an environment which optimizes resource utilization and promotes equal distribution of resources. Hence, the focus of the social aspect of sustainability is prioritizing the public policy which is based on social justice and equity and a social framework that is committed to governmental and social resources.134

125 United Nations, 2020 126 Cuthill, 2010, 363 127 Eizenberg and Jabareen, 2017, 1 128 Colantonio, 2008, 3f 129 Fischer‐Kowalski and Haberl, 1993, 415ff 130 Littig and Griessler, 2005, 72 131 Q. Jiang et al., 2018, 629 132 González-Rodríguez et al., 2015, 841 133 Eizenberg and Jabareen, 2017, 12 134 Galdeano-Gómez, 2015, 350

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2.3.3 Economic aspect The economic aspect of sustainability is defined as “generating income and stability for society members without the erosion of capital and resources”135. Meadows et al. figured out that economic sustainability is linked to environmental and social sustainability and therefore, economies can only be sustainable if the borders of natural resources are kept136. This leads to the economic obligations of managing a company, which are to produce products and services of interest to the society, so that the corporation can pay its creditors and increase the income of its owners.137

It also consists issues such as achieving maximal profits, fulfilling the demands of shareholders, becoming a market leader, maintaining consumer value and loyalty and promoting products or services. It can be seen as companies having an economic obligation to society and in turn, also society wants companies to be able to develop and sustain themselves. The company’s best way to achieve this is by successfully becoming ready to attract owners to invest and provide sufficient capital for further activities. Companies generate income as they add value and thereby benefit all their business stakeholders.138 Furthermore, economic welfare, economic stability and job satisfaction are relevant aspects which should be considered as influence factors of economic sustainability139.

Most of the economic aspect is created at the level of the current and future projected demand and assessing the costs of economic growth that lag behind with greater attention to the environment. It is important to consider the economic impact and to make a balance between becoming a good corporate citizen and making a profit.140

2.4 Further relevant aspects There are further important aspects of sustainability like the stakeholder's aspect and philanthropic aspects.

135 Mofidi Chelan et al., 2018, 113 136 Meadows, 1972, 21 137 Wheelen et al., 2015, 105 138 Carroll, 2016, 3 139 Mofidi Chelan et al., 2018, 116 140 Redclift, 1991, 41

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2.4.1 Stakeholder aspect Freeman, described the term “Stakeholder” as “any group or individual who can affect or is affected by the achievement of the organization’s objectives”141. Stakeholders can be classified into internal and external stakeholders to give a first rough overview. Internals are stakeholders who are very close to the company and have a direct relationship to the organizational resources. Within the group of the internals are owners and structure owner-entrepreneurs. They make money and capital available to the company and receive for example a dividend, interest and an increase in the value of the invested capital as an incentive. Internals are also managers who bring their skills and expertise into the organization. In return, they receive salaries, bonus payments, status, power and can develop their own ideas and skills. Furthermore, workers belong to this group as they support the company with their skills and expertise. The incentives for them are wages, bonus payments, stable relationships, career opportunities, in- terpersonal contacts and prestige.142 143

Compared to internal stakeholders are externals not directly related to the company, they influence a firm from the outside. To the external stakeholders belong external investors who invest money in the organization for continued existence or expansion and this capital providers receive interest and an increase in assets. Customers who buy the products of the company generate income for the firm by purchasing products and services and they receive in return the value of goods and services. Furthermore, competition is an external effect and in some cases a cooperation at an industry policy level is required. Additionally, suppliers are part of it, because they provide resources and receive income from the company who buys these resources. Additionally, governments can influence a firm through taxes, regulations and a frame for business practices. Finally, the general public is one of the external stakeholders because they deliver to the company loyalty and reputation.144 145

According to Carroll et al. 146 and Wheeler, Sillanpää147 stakeholders can be categorized in more detail, they are classified in four categories. Primary social stakeholders include shareholders, investors, managers, employees, customers, communities, suppliers and partners. Primary non-social stakeholders incorporate the natural environment and future generations. Secondary social stakeholders are regulators, the government, civic institutions, activist groups, media, trade bodies and competitors. The last group, secondary non-social stakeholders, comprises of environmental interest groups and animal welfare organisations.

141 Freeman, 2010, 46 142 Jones and Bouncken, 2008, 85f 143 Thommen, 2018 144 Jones and Bouncken, 2008, 86 145 Thommen, 2018 146 Carroll et al., 2018, 76 147 Wheeler and Sillanpää, 1998, 205

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The authors explain that primary social stakeholders directly influence the company and its success whereas secondary social stakeholders are only indirectly influential. Furthermore, secondary non-social stakeholders are representatives of the primary non-social stakeholders and should also be considered in the management.148

2.4.2 Philanthropic aspect The philanthropic aspect is defined as “initiatives for the public good which have a focus on quality of live through measures of companies concentrating on private initiatives, focusing on material gain and public initiatives with governments which are dealing with provision of public services”149.

The philanthropic sustainability is responsible for the charity aspect and collaborations with non-profit organizations through different social impact projects150. It encompasses all aspects of voluntary business contribution and focuses on voluntary corporate projects. Even though philanthropy may not necessarily be a task for companies, they try to engage in philanthropic activities as this is partly expected by the public. Additionally, the philanthropic aspect is motivated by the willingness of companies to voluntarily engage in social cases which are beyond the law or not regulated or prescribed by law. Companies participate in different ways to reach their presumed philanthropic responsibilities such as donating gifts of monetary resources, product and service donations, volunteerism by employees or management and community development.151

Furthermore, the philanthropic aspect creates and maintains social capital in the community. In case of an image crisis of a company, it can significantly support businesses to reduce the damage and thereby a reduction in loyalty and simultaneously maintain corporate credibility and sustain stable financial results.152 Additionally, it is positively and significantly related to the firm performance also for companies in controversial industries153. For example, a company that generates pollution and is not in the position to modify the production process to reduce these emissions can improve lives through philanthropic operations like a donation to an environmental organization154. Companies manly engage in philanthropic to push their own interests, but the focus should be to combine social with economic interests to design a philanthropic strategy which contribute to a sustainable development155.

148 Carroll et al., 2018, 76 149 McCully, 2008, 13 150 Sanders and Wood, 2015, 19 151 Carroll, 2016, 4 152 Wendong et al., 2019, 1570 153 Yu, 2020, 1 154 Sanders and Wood, 2015, 20 155 Yu, 2020, 1

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2.5 Sustainability models In this sub-chapter, the “Triple Bottom Line”, the “Circles of Sustainability”, the “Three-nested dependencies Model” and the “Prism Model of Sustainability” are described to gain an overview of the different aspects of sustainability that are included in these concepts.

2.5.1 Triple Bottom Line The term “Triple Bottom Line” was coined by Elkington in 1994156. It represents a framework for sustainability that includes economic prosperity, environmental quality and the element which businesses have tended to neglect, the social justice157. The triple bottom line means that performance is measured not only in economic but also in social and environmental terms. This represents the need for companies to not only try to increase their financial profitability but also take responsibility for their actions in terms of environment and society.158

A lot of companies are applying the triple bottom line and at the same time more and more investors, consumers and workers are considering how companies are performing according to the Triple Bottom Line159. The focus of companies has changed in the last decades from only looking at the economic result to a fundamental principle of smart management which includes all three elements to be sustainable on the market160. Smart Management describes the effectively navigating within the world, but not as companies might wish to be but rather how it is and therefore well-run companies use all their knowledge to achieve their objec- tives161. The triple bottom line as accounting model can improve transparency and accountability of financial reports and can help to guide companies through legal problems and stakeholder pressure. If the triple bottom line is correct applied it can lead to “improved market share, improved employee motivation and reduced labour turnover”.162

To realise the model, there are different measures which are incorporated into the triple bottom line index and depend on the company or organization. The set of measures will be determined by stakeholders and the ability to collect the necessary data. A sustainable company should have a positive Return on Investment (ROI) in all three dimensions163. Figure 2 gives an overview which typical measures should be included in the economic, environmental and social bottom line.

156 Elkington, 2018 157 Elkington, 1997, 2 158 Elkington, 1997, 73f 159 Savitz and Weber, 2006, xiv 160 Savitz and Weber, 2006, xiv 161 Savitz and Weber, 2006, 88 162 Ekwueme et al., 2013, 79 163 Savitz and Weber, 2006, xiii

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Figure 2: Triple Bottom Line164

As mentioned before, there is no accepted standard which data is going into each part of the triple bottom line165.

The simplest way of calculating the economic performance is assets minus the liabilities, but today not only the measurement through the income of the production in form of physical capital (e.g. machines) or financial capital is important, it is also relevant to incorporate human capital like experience / skills and additionally intellectual capital to figure out in the economic bottom line if the demand for the products and services is sustainable166.

Hence, the economic or financial bottom line includes the flow of money, profits and market shares, because a company must not only engage in the environmental and social line but also has to be profitable167. Ellington168 emphasized that regarding the economic line is a lack of acceptable indicators but there are some key considerations which could be considered. The factors which could be included as well are: income or expenditures (cost savings, research and development, pricing and profits of innovation programs, long term sustainability costs, set-up costs, transportation costs, labour costs, utility costs), taxes, climate factors, employment and business diversity factors 169 170 171 172.

The environmental measures express “measurements of natural resources and reflect the potential influences” as Asefeso173 mentioned. This bottom line attracts higher attention within the last decades, manly influenced through businesses174.

164 Savitz and Weber, 2006, xiii 165 Asefeso, 2015, 161 166 Elkington, 1997, 74f 167 Omimi, 2013, 31 168 Elkington, 1997, 76f 169 Elkington, 1997, 77 170 Asefeso, 2015, 163 171 Anvari and Turkay, 2017, 6273f 172 Żak, 2015, 253 173 Asefeso, 2015, 163 174 Elkington, 1997, 79

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Elkington stated that one important aspect of environmental sustainability is the concept of natural capital, which has two main forms: “critical capital” (e.g. maintaining of life and ecosystem integrity) and “renewable, replaceable, substitutable capital” (e.g. relocating of ecosystems, environmental remediation, renewable energy)175.

Companies should also try to save resources through the usage of sustainable methods and techniques. As an outcome the environment should be improved and protected. Furthermore, after the end of the products cycle companies should offer recycling programs for their products.176 Air and water quality (amount of water to landfill, greenhouse gas-emissions), energy consumption, natural resources, solid / toxic waste, land use and land cover, waste generation, use of post-consumer, industrial recycled material and investment in environmental protection could also be integrated in the environmental bottom line177 178 179 180. Additionally, international management standards like the ISO norms, especially the ISO 14001 can guide a company to develop a sustainable environmental management system which includes globally recognized requirements181 Companies should be aware that the environmental bottom line varies over time and space because also the capacity of most ecosystems varies in relation to the company size and furthermore, the company’s ecological footprint is continuously changing182.

Lastly, there are “social measures which refer to social dimensions of a community or region”183. This line has the longest history in sustainability because of controversial discussed circumstances like slavery, child labour and bad working conditions184. In this context social regulations are government regulated but some measures also developed through industries and companies185. In this context companies should treat their employees ethically and fairly and engage them in equitable compensation. Additionally, a less stringent cost cutting program and avoidance of outscoring labour to markets which act against human rights can improve this field of sustainability186.

175 Elkington, 1997, 79 176 Omimi, 2013, 31 177 Asefeso, 2015, 163f 178 Omimi, 2013, 31 179 Żak, 2015, 253 180 Elkington, 1997, 81 181 Elkington, 1997, 81f 182 Elkington, 1997, 80 183 Asefeso, 2015, 164 184 Elkington, 1997, 79 185 Elkington, 1997, 86 186 Omimi, 2013, 31

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The focus of the social bottom line could be on measurements of education / skills, equity and access to social resources (equal opportunities), health and well-being, quality of life, social capital (charitable contribution, fund social projects), regional development and safety, sponsorship, charitable donations with money or time, and female empowerment187 188 189 190. Addi- tionally, trust between companies and external stakeholders is an important social factor to maintain long-term sustainability191.

Within the social bottom line there are still issues and opportunities to improve for example in the field of “animal testing, armaments or other military sales, community relations, employment of minorities, human rights, impacts on indigenous peoples, involvement in nuclear power, irresponsible marketing, land rights, oppressive regimes, political contributions, trade union relations, wages and working conditions, and women’s rights”192.

There are some challenges for realising the Triple Bottom Line in practice including the measurement of the three categories, finding data and the policy's contribution to sustainability. Ad- ditionally, the reporting can be expensive but at the same time, the framework allows organizations to evaluate the impacts of their decisions from a long run perspective.193

After 25 years, Elkington recalled on his original Triple Bottom Line concept as he claims that sustainability goals cannot or should not merely be assessed by profit or loss. What is more important is the positive effect on human wellbeing and our planet earth. He criticizes that this is not always taken into account and even goes that far as to say “it is time to either step up – or to get out of the way.” He adds that the triple bottom line was often understood as only an accounting tool, but the original thought was a much broader idea, one that proposed a new solution to change capitalism and the current system. Elkington concludes his recall with hop- ing that a real change will now start to come by new Triple Bottom Line deployments and innovation.194

187 Asefeso, 2015, 164 188 Omimi, 2013, 31 189 Anvari and Turkay, 2017, 6274f 190 Elkington, 1997, 85, 87f 191 Elkington, 1997, 85 192 Elkington, 1997, 88 193 Savitz and Weber, 2006, 218 194 Elkington, 2018

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2.5.2 Circles of sustainability Another framework is called circles of sustainability and has been developed from 2007 onwards in cooperation with the United Nations to help countries and companies to understand sustainability and sustainable development195. It is including four areas economics, ecology, politics and culture. Social life in that framework is understood as a holistic concept across the four interconnected domains. Hence, it is an alternative to the “Triple Bottom Line” and should help countries and companies to decide which issues are key and how to incorporate them in business. Moreover, it should also reflect that the areas can compete with each other leading to tensions. Due to the comprehensive visual representation below it is helpful in reporting.196

Figure 3: Circles of sustainability197

In each of the four areas there are seven subtopics, which further contain seven subtopics and they are assessed with a nine-point scale ranging from critical to vibrant. Afterwards, the figure is visualized with a colour range like a traffic light in order to clearly see which areas are crucial and have to be improved198.

195 Wesarat et al., 2017, 68 196 James, 2015, 48ff 197 James, 2015, 48 198 James, 2015, 52f

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The United Nations developed urban sustainability profiles for cities in South Africa, Australia, India, Papua New Guinea, Brazil, Iran and Malta to give some examples to illustrate the sense of the approach199 200. It should be a “clear and simple graphic representation of the sustainability profile” of a certain region201. The profiles show the differences in the cities in regard to economics, ecology, politics and culture, which are displayed through the nine-point scale ranging, therefore the areas which should be improved are illustrated and give an overview how the cities apply sustainability. The quality of an urban profile depends on the available information and the effort the researcher put into it, it should act as process which is comprehensive and continuously ongoing.202

The circle ecology is about the social-environmental interconnection and its human impact and role within the environment; therefore, the term ecology is split in social and natural realms203. Natural realms include different “environmental conditions from the profoundly mod- ified, through the relatively untransformed, to nature beyond the human” 204. This consists human engagement with the nature and explores “the intersection between the social and natural realms”, and it includes the full spectrum of environmental conditions”205. Consequently, ecology lays across both terms (social / natural realms) as definition for the connection with the human and non-human engagement with and within nature. This means that ecology treats questions of the social-environmental interconnection as well as the unintended effects of humans living on the planet206. The following table shows an overview of all perspectives and aspects of the ecological area.

1. Perspective: Materials and Energy

1. Availability and Abundance; 2. Soil and Fertility; 3. Minerals and Metals; 4. Electricity and Gas; 5. Petroleum and Biofuels; 6. Renewables and Recyclables; 7. Monitoring and Reflection;

2. Perspective: Water and Air

1. Vitality and Viability; 2. Water Quality and Potability; 3. Air Quality and Respiration; 4. Climate and Temperature; 5. Greenhouse Gases and Carbon; 6. Adaptation and Mitigation Processes; 7. Monitoring and Reflection;

199 James, 2015, 139 200 circlesofsustainability.org, 2020a 201 James, 2015, 137 202 James, 2015, 137ff 203 James, 2015, 52 204 Reinert, 2017, 420 205 Stenn, 2019, 102 206 circlesofsustainability.org, 2020b

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3. Perspective: Flora and Fauna

1. Complexity and Resilience; 2. Biodiversity and Ecosystem Diversity; 3. Plants and Insects; 4. Trees and Shrubs; 5. Wild Animals and Birds; 6. Domestic Animals and Species Relations; 7. Monitoring and Reflection;

4. Perspective: Habitat and Settlements

1. Topography and Liveability; 2. Original Habitat and Native Vegetation; 3. Parklands and Reserves; 4. Land-use and Building; 5. Abode and Housing; 6. Maintenance and Retrofitting; 7. Monitoring and Reflection;

5. Perspective: Built-Form and Transport

1. Orientation and Spread; 2. Proximity and Access; 3. Mass Transit and Public Transport; 4. Motorized Transport and Roads; 5. Non-motorized Transport and Walking Paths; 6. Seaports and Airports; 7. Monitoring and Reflection;

6. Perspective: Embodiment and Sustenance

1. Physical Health and Vitality; 2. Reproduction and Mortality; 3. Exercise and Fitness; 4. Hygiene and Diet; 5. Nutrition and Nourishment; 6. Agriculture and Husbandry; 7. Monitoring and Evaluation;

7. Perspective: Emission and Waste

1. Pollution and Contamination; 2. Hard-waste and Rubbish; 3. Sewerage and Sanitation; 4. Drainage and Effluence; 5. Processing and Composting; 6. Recycling and Re-use; 7. Monitoring and Evaluation;

Table 4: Perspectives and Aspects of Ecology Source: own graphical presentation based on James207

Economics it is about producing, using and managing resources and the associated practices and materials208. This can also overlap with politics and ecology in regard to the resource usage, but it focusses on resource valuation. The aim of economics is to gain economic success and welfare which arise through focusing on consumption and exchange with the goal to meet the needs of all. 209 But problems with the influence of power within companies in regard to the outcomes in combination with the used resources are ever-present210. Subsequent is an overview of the perspectives and aspects of the economics area.

207 James, 2015, 58f 208 James, 2015, 52 209 Stenn, 2019, 102 210 James, 2015, 52

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1. Perspective: Production and Resourcing

1. Prosperity and Resilience; 2. Manufacture and Fabrication; 3. Extraction and Harvesting; 4. Art and Craft; 5. Design and Innovation; 6. Human and Physical Resources; 7. Monitoring and Reflection;

2. Perspective: Exchange and Transfer

1. Reciprocity and Mutuality; 2. Goods and Services; 3. Finance and Taxes; 4. Trade and Tourism; 5. Aid and Remittances; 6. Debt and Liability; 7. Monitoring and Reflection;

3. Perspective: Accounting and Regulation

1. Transparency and Fairness; 2. Finance and Money; 3. Goods and Services; 4. Land and Property; 5. Labour and Employment; 6. Taxes and Levies; 7. Monitoring and Reflection;

4. Perspective: Consumption and Use

1. Appropriate Use and Re-use; 2. Food and Drink; 3. Goods and Services; 4. Water and Electricity; 5. Petroleum and Metals; 6. Promotion and Dissemination; 7. Monitoring and Reflection;

5. Perspective: Labour and Welfare

1. Livelihoods and Work; 2. Connection and Vocation; 3. Participation and Equity; 4. Capacity and Productivity; 5. Health and Safety; 6. Care and Support; 7. Monitoring and Reflection;

6. Perspective: Technology and Infrastructure

1. Appropriateness and Robustness; 2. Communications and Information; 3. Transport and Movement; 4. Construction and Building; 5. Education and Training; 6. Medicine and Health Treatment; 7. Monitoring and Reflection;

7. Perspective: Wealth and Distribution

1. Accumulation and Mobilization; 2. Social Wealth and Heritage; 3. Wages and Income; 4. Housing and Subsistence; 5. Equity and Inclusion; 6. Re-distribution and Apportionment; 7. Monitoring and Reflection;

Table 5: Perspectives and Aspects of Economics Source: own graphical presentation based on James211

211 James, 2015, 59f

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Next there is politics which is concerned with the social power of the organization212. This social power is relevant because it influences a company’s authorization, legitimation and the regulation of the social life. Therefore, the perspectives and aspects of this area are more than political factors, it considers the social relationships in general and the key concept in this section is a common social life.213 But it is not political if it has only possible consequences for companies, it is political if “questions of power are directly involved in a pattern of practices or set of meanings”214.

1. Perspective: Organization and Governance

1. Legitimacy and Respect; 2. Leadership and Agency; 3. Planning and Vision; 4. Administration and Bureaucracy; 5. Authority and Sovereignty; 6. Transparency and Clarity; 7. Monitoring and Reflection;

2. Perspective: Law and Justice

1. Rights and Rules; 2. Order and Civility; 3. Obligations and Responsibilities; 4. Impartiality and Equality; 5. Fairness and Prudence; 6. Judgement and Penalty; 7. Monitoring and Reflection;

3. Perspective: Communication and Critique

1. Interchange and Expression; 2. News and Information; 3. Accessibility and Openness; 4. Opinion and Analysis; 5. Dissent and Protest; 6. Privacy and Respect; 7. Monitoring and Reflection;

4. Perspective: Representation and Negotiation

1. Agency and Advocacy; 2. Participation and Inclusion; 3. Democracy and Liberty; 4. Access and Consultation; 5. Civility and Comity; 6. Contestation and Standing; 7. Monitoring and Reflection;

5. Perspective: Security and Accord

1. Human Security and Defence; 2. Safety and Support; 3. Personal and Domestic Security; 4. Protection and Shelter; 5. Refuge and Sanctuary; 6. Insurance and Assurance; 7. Monitoring and Reflection;

6. Perspective: Dialogue and Reconciliation

1. Process and Recognition; 2. Truth and Verity; 3. Mediation and Intercession; 4. Trust and Faith; 5. Remembrance and Redemption; 6. Reception and Hospitality; 7. Monitoring and Reflection;

212 Stenn, 2019, 102 213 circlesofsustainability.org, 2020e 214 James, 2015, 53

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7. Perspective: Ethics and Accountability

1. Principles and Protocols; 2. Obligation and Responsibility; 3. Integrity and Virtue; 4. Observance and Visibility; 5. Prescription and Contention; 6. Acquittal and Consequence; 7. Monitoring and Reflection;

Table 6: Perspectives and Aspects of Politics Source: own graphical presentation based on James215

Lastly, culture is simply how and why the organization does particular things and topics. It consists of practices, discourses and material expressions which are developed over time216. It is more than day-to-day issues within a company and concentrates more on the “businesses’ relationship and role in a community and society”217. The cultural aspect treats people and the place that creates products or services, and focuses on careful practice choices, dialogues and material choices which are connected with the production, use and the management of resources218. Moreover, power is important in the cultural field in regard to “contested outcomes over social meaning”219.

1. Perspective: Identity and Engagement

1. Diversity and Difference; 2. Belonging and Community; 3. Ethnicity and Language; 4. Religion and Faith; 5. Friendship and Affinity; 6. Home and Place; 7. Monitoring and Reflection;

2. Perspective: Creativity and Recreation

1. Aesthetics and Design; 2. Performance and Representation; 3. Innovation and Adaptation; 4. Celebrations and Festivals; 5. Sport and Play; 6. Leisure and Relaxation; 7. Monitoring and Reflection;

3. Perspective: Memory and Projection

1. Tradition and Authenticity; 2. Heritage and Inheritance; 3. History and Records; 4. Indigeneity and Custom; 5. Imagination and Hope; 6. Inspiration and Vision; 7. Monitoring and Reflection;

4. Perspective: Beliefs and Ideas

1. Knowledge and Interpretation; 2. Ideologies and Imaginaries; 3. Reason and Rationalization; 4. Religiosity and Spirituality; 5. Rituals and Symbols; 6. Emotions and Passions; 7. Monitoring and Reflection;

215 James, 2015, 60f 216 James, 2015, 53 217 Stenn, 2019, 102 218 Stenn, 2019, 102 219 James, 2015, 53

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5. Perspective: Gender and Generations

1. Equality and Respect; 2. Sexuality and Desire; 3. Family and Kinship; 4. Birth and Babyhood; 5. Childhood and Youth; 6. Mortality and Care; 7. Monitoring and Reflection;

6. Perspective: Enquiry and Learning

1. Curiosity and Discovery; 2. Deliberation and Debate; 3. Research and Application; 4. Teaching and Training; 5. Writing and Codification; 6. Meditation and Reflexivity; 7. Monitoring and Reflection;

7. Perspective: Wellbeing and Health

1. Integrity and Autonomy; 2. Bodies and Corporeal Knowledge; 3. Mental Health and Pleasure; 4. Care and Comfort; 5. Inclusion and Participation; 6. Cuisine and Emotional Nourishment; 7. Monitoring and Reflection;

Table 7: Perspectives and Aspects of Culture Source: own graphical presentation based on James220

In addition to the “Profile Circles” described above there are also the “Process Circles”, “En- gagement Circles” and “Knowledge Circles” of sustainability. The “Process Circles” are seven steps developed by the United Nations and called “UN Global Compact Model” which monitors and guides sustainability activities in all company areas including the change of the corporate culture221. The “Process Circles” are suitable for past, present and future sustainability activities and guides a company through the creation and implementation of for example the “Profile Circles” but also other sustainability projects. The circle consists the areas: “commit”, “engage”, “assess”, “define”, “implement”, “measure” and “communicate” as seen in the figure below. All the areas are interconnected and the continuous improvement within the stages is crucial for the success.222 223

220 James, 2015, 61f 221 Kleinfeld and Martens, 2018, 114 222 United Nations, 2010, 6 223 James, 2015, 119

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Figure 4: UN Global Compact Model: Process Circles224

“Commit” deals with the leadership commitment to integrate sustainability into the company’s strategy and operations. This should include the cooperate culture, day-to-day operations and transparent governance structures.225 Additionally, the general issue, objectives and the selection of a spatial and temporal frame should be clearly defined226.

“Engage” consists of the involvement of the stakeholders to form a management group including a project facilitator and a reference group. The different parties are recommended to be from different groups e.g. civil society, government and business partners.227 Within this step a company should recognize the community feedback and if necessary, adjust chosen objec- tives228.

“Asses” treats the research phase of the management group including data collection of sur- veys, key documents and other information, also the first outcomes should be defined including future scenarios229 230.

224 James, 2015, 118 225 United Nations, 2010, 10 226 circlesofsustainability.org, 2020f 227 James, 2015, 119 228 United Nations, 2010, 10 229 James, 2015, 119 230 circlesofsustainability.org, 2020f

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“Define” needs to describe the goals, strategies and policies to identify the most relevant issues. At the end of this stage the management group should have a fixed issue and objectives, data about the indicators and targets and relationships between issues and indicators. This is the most crucial phase because it gives a structure which guides through the last three stages231 232.

“Implement” deals with the implementation of the strategies and policies within the company and also across the value chain. This phase addresses the problem, authorize the implementation of the various aspects, liaise with the stakeholders and needs a periodically revision.233 234

“Measure” is about measure and monitor all the impacts and progress concerning the goal and objectives and if necessary, to reassess profiles and processes235 236.

“Communicate” deals with the communication of the progress and strategies and the engagement of all stakeholders to achieve a continuous improvement. This also includes public doc- umentation, publication, reporting to all relevant stakeholders and the advising of communities and the levels of government. 237 238

Within the “Engagement Circles” the stakeholder management is in focus, including four parties: civil society (individuals / communities, community-based / faith-based organizations, social movements and networks, non-government organizations / foundations), governance institutions (elders & councils, municipal & provincial governments, states & government organizations, international & global governance organizations), business organizations (small & medium enterprises, corporations & large enterprises, co-operatives & state-run enterprises, non-profit & social enterprises) and research-based entities (individual researches & research groups, research centres & institutes, universities & colleges, think tanks & research-based foundations). Together this four parties are basis for a powerful partnership which is in the position to foster sustainable change.239

231 United Nations, 2010, 14 232 James, 2015, 119f 233 United Nations, 2010, 15 234 circlesofsustainability.org, 2020f 235 James, 2015, 120 236 circlesofsustainability.org, 2020f 237 circlesofsustainability.org, 2020f 238 United Nations, 2010, 20 239 circlesofsustainability.org, 2020c

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The “Knowledge Circles” are dealing with the ways of generating and collecting knowledge to understand sustainability in order to influence our world in a positive way. The “Knowledge Circles” are clustering four main forms of knowledge which are feeling (sensate-, perceptive-, emotional- & revelatory knowing), pragmatics (experiential-, intuitive-, tacit- & situated knowing), reflection (trained-, contemplative-, analytical- & theoretical knowing) and reflexivity (re- cursive-, epistemological-, meta-analytical- & meta-theoretical knowing). The categories overlap and collaborate with each other and are necessary to develop a sustainable approach to remark the sustainability work within cities and companies.240

Summing up the “Circles of Sustainability” are a guiding tool which helps governments and companies to start, standardize, continuously improve, monitor and promote sustainability activities, which can only be successful if a company initiates an organizational change including stakeholder engagement241 242. Critically is the engagement of the companies which is crucial for the success of the initiatives as the United Nations mentioned but a study of Bremer243 shows that only 3% of the world’s largest firms are enlisted. But if the companies show commitment and implement sustainability successful it has a positive impact on the environmental, social and governance performance and additionally the financial performance also increases as Ortas et al. figured out244.

2.5.3 Three-nested dependencies Model A different framework is called “Three-nested dependencies Model” and has been developed from 2001 onwards from Giddings et al.245. It has also the three aspects of sustainability as in Elkington’s246 triple bottom line model (economic, environment, social / society) but while Elkington emphasises that companies have to consider social and environmental aspects in balance with economic ones in order to be profitable, Giddings et al. emphasises that the three aspects of sustainability are “fractured and multi-layered and can be considered at different spatial levels”247. The inner element of this model influences the outer elements, but controls are higher by going inward, this means that the economy has the highest control and influences society and environment248.

240 circlesofsustainability.org, 2020d 241 Bremer, 2008, 227 242 Ortas et al., 2015, 1932 243 Bremer, 2008, 242 244 Ortas et al., 2015, 1951 245 Giddings et al., 2002 246 Elkington, 1997, 73f 247 Giddings et al., 2002, 187 248 Flint, 2010, 35

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Figure 5: Three-nested dependencies Model249

The “Three-nested-dependencies Model” shown in the Figure above gives the environment the same significance as the society because the society could not exist without the environ- ment250. Therefore, is the social system is within the environment and includes all human ele- ments251.

The relation between society and economy shows that society is influencing the economy and not vice versa because people decide for example how they exchange goods and services and created economic models which they are changing, if they are not improving the quality of live anymore252. Although, the political reality is that the economy is prioritized and not the environment as the environment and society are treated like a resource which must be ex- ploited and problems like unemployment or waste need to be solved253.

Although, both economy and society are invisibly nested with the environment despite all other factors that influence the human life because the environment is the prerequisite of the existing of society and economy254. The environment is bounded by physical parameters and consists of all living being on Erath and non-living systems with whom they interact and on which they are dependent255.

The goal of this model should be to increase the awareness for the environment, to protect the ecosphere and also achieve social equity to create equal access to resources and reducing human suffering256.

249 Giddings et al., 2002, 192 250 Willard, 2012, 8 251 Flint, 2010, 35 252 Willard, 2012, 8 253 Giddings et al., 2002, 190f 254 Willard, 2012, 8 255 Flint, 2010, 35 256 Flint, 2010, 35

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But there is also criticism of this model in literature as Langley and Mellor257 mentioned that the economy dimension seen as a single entity is inadequate because also non-monetary aspects must be observed. Additionally, the role of the economy is to meet the human needs inadequately represented and it fails to differentiate between positive and adverse impacts of economic activities. Furthermore, companies, cultural aspects and well-being is underrecog- nized including their linkage with the environment.258 259

2.5.4 Prism Model of Sustainability The last framework is called “Prism Model of Sustainability” and has been developed by the German Wuppertal Institute from Bonniot and Spangenberg260 in 1998. It also shares the economic, environmental and social dimension as the “Triple Bottom Line” and the “Three-nested dependencies Model” but it adds a further dimension which is called institution. The added dimension addresses social and cultural elements of the Agenda 21, (Chapter 2.1) tries to connect the social, environmental and economic needs, initiates the process for institutions and patterns of governance. It further establishes new institutional patterns and procedures261 262. The four dimensions help to measure how far politicians or companies have “actually come in comparison to the overall vision of sustainable development”263.

The figure below shows the “Prism Model of Sustainability” and the connections within the four areas highlighted through the different colours. Red stands for “uses” including societal structures, nature, labour and financial capital, blue for “produces” including institutions, resources, jobs, salaries, leisure and revenues and lastly green which stands for “reproduces” including social-, human- and man-made capital264.

The environmental aspect includes the hole natural capital, which is divided into non-renewable and renewable resources. The economic dimension consists of man-made material like roads, buildings and ducts, the social aspect should increase the awareness of the individual subject like knowledge, a worldview and the experience and last the institutional dimension set the organizational design of our society and the relationship between people in the centre of the stage.265 266

257 Langley and Mellor, 2002, 50f 258 Lozano, 2008, 1844f 259 Carter and Noir, 2012, 1482 260 Spangenberg and Bonniot, 1998, 1 261 Spangenberg, 2002b, 103ff 262 Chai, 2009, 93 263 Stenberg, 2001, 42 264 Spangenberg and Bonniot, 1998, 1 265 Keiner, 2005, 383 266 Stenberg, 2001, 42f

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Nevertheless the “Prism of Sustainability” does not only focus on the four dimensions, it also represents all their linkages. Inside the prism all four dimensions are considered and outside only three (institutional, social, economic). Furthermore, there are different distances regarding the four corners, which symbolizes the set priorities. Therefore, companies or politicians can see how their sustainability initiatives are located within the prism and shows which areas are underrepresented and which are overstressed. If a distance to the target has been defined it is possible to classify the initiatives into no need for improvement, need for improvement or alarming.267

Figure 6: The prism of Sustainability268 with additional description269

267 Spangenberg, 2002a, 298f 268 Spangenberg and Bonniot, 1998, 1 269 Spangenberg, 2002b, 105

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Kain270 criticized “The prism of Sustainability” because the economic dimension “tends to include assets emanating from all four dimensions” which adds confusion to description and analysis. Therefore, the same author suggests developing a “main prism of sustainable development” including the terms mind, artefact, institution and nature to reduce the complexity of social and economic, which could be more confusing than explanatory271. A further point of criticism is that the model pays less attention to the environmental dimension because this is the basis for the development of human well-being, therefore this view needs a model which focus more on the environment like the “Three-nested dependencies Model” 272. Neverthe- less “The prism of Sustainability” can only lead to sustainable development if the focus is on the interaction between the four dimensions because it is not possible that man-made capital, social capital and human capital increases at the same time and amount273

2.5.5 Comparison of different frameworks After analysing various frameworks from academic literature, next those frameworks are compared and in particular it should be pointed out how those theoretical concepts relate to sustainability.

All the reviewed frameworks include different aspects of sustainability. However, the number of those aspects varies quite significantly. Elkington’s 274 “Triple Bottom Line” does only refer to three aspects of sustainability and thereby clearly emphasises that companies have to consider social and environmental aspects in balance with economic ones in order to still be profitable. Within the “Circles of Sustainability” there are four aspects of sustainability, however these are also referring to economic aspects, similar to Elkington275. The other three circles are ecology, politics and culture which shows that the framework goes a bit more in detail with politics but still, the areas ecology and culture are described quite similar to the triple bottom line276. By contrast the “Three-nested dependencies Model” focuses on the same three dimensions as the triple bottom line but treats them in a different way. Economy has the highest control but without the environment none of the two other dimensions (society and economy) would be able to survive, therefore both economy and society are invisible nested with the environment277. This model sets the priority on the environment and not on the other two aspects of sustainability278.

270 Kain, 2000, 25 271 Kain, 2000, 43 272 Keiner, 2005, 383 273 Stenberg, 2001, 44 274 Elkington, 1997, 73f 275 Elkington, 1997 276 James, 2015, 48 277 Willard, 2012, 8 278 Flint, 2010, 35

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Last the “Prism Model of Sustainability” shares also the three dimensions as the “Triple Bottom Line” and the “Three-nested dependencies Model” but it is extended by the institutional dimension which addresses the social and cultural aspects of the Agenda 21 (Chapter 2.1) and their connections with the other three aspects279. As the “Circles of sustainability” it gives companies or politicians an overview how sustainability behaves in the different areas and what part of it should be improved280.

As visible in the table below all four models are sharing the economic and environmental dimension of sustainability. In the social area it seems to be, that only three models shares it, but within the “Circles of sustainability” culture can be seen as social aspect, therefore it has only a different label but also consists the same content with more focus on the corporate culture. This is also suitable for the “Prism Model of Sustainability” which adds the institutional area which is also focusing on cultural and social aspects but acts as a supporting dimension. In summary all models are focusing on addressing different stakeholders as described in Chap- ter 2.4.1, the “Triple Bottom Line” is more an accounting model which tries to measure sustainability in each area, the “Tree-nested dependencies Model” is mainly an environmental measurement toll and the remaining two other Models (“Circles of Sustainability” and “Prism Model of Sustainability”) show how companies or politicians are performing in the different areas of sustainability.

Triple Bottom Line Circles of Three-nested de- Prism Model of Sustainability pendencies Model Sustainability

Economic Economic Economy Economic

Environmental Ecology Environment Environmental

Social Politics Society Social

Culture Institutional

Table 8: Comparison of theoretical sustainability frameworks Grey: Economic Source: own table Green: Environmental Orange: Social Blue: Politics Purple: Culture Gold: Institutional

279 Spangenberg, 2002b, 103ff 280 Spangenberg, 2002a, 298f

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2.6 Benefits and challenges of “Sustainability” Firstly, in this sub-chapter there are the benefits and effects of sustainability described and secondly the challenges to gain a deeper understanding how important this topic is especially for companies.

2.6.1 Benefits of “Sustainability” Within the last decades companies realized that being a good cooperate citizen can have a highly positive impact on revenues281. This awareness was generated through new target groups like the Generation Y who place more focus on a work-life-balance and the lifestyle of health and sustainability with special attention on sustainably produced goods. Furthermore, different stakeholders require more details how the products are produced, and marketing is responsible to avoid getting the reputation of green- or social washing.282

Regarding the benefits are already some results and studies existing as shown below. Sus- tainability has the potential to influence branding. Pai et al.283 for example have examined the effect of perceived sustainability activities on brand equity and brand advocacy. Within that, brand advocacy is basically the reaction of buyers to a brand in terms of their buying behaviour, meaning their intention to buy new products, their resilience to negative information and also word of mouth.284 In contrast to that brand equity refers to “the total value added by the brand to the core product”285. In addition to that the authors are referring to sustainability in a very broad manner and define it as “activities taken voluntarily by corporations to enhance economic, social, and environmental welfare” and thereby have defined five elements286 to measure sustainability including social and environmental concerns. However, they are not applying any theoretical concepts which are explained above. Based on that, it is supposed that sustainability influences the emotional perception about a brand which then promotes the intention to buy the products and, in the following, generates brand equity. Hence, it can be stated that brand advocacy only takes the role of a mediator between sustainability and brand equity. Furthermore, the intensity of brand advocacy depends on the perception of the company’s sustainability actions whereas in that case sustainability attribution has a moderating effect. This is because for customers it is not only significant what their suppliers are doing in terms of sustainability but also why, meaning that it is key to understand how buyers attribute the motives of a firm’s sustainability activities.287

281 Cole, 2017, 59 282 Stehr and Struve, 2017, 3f 283 Pai et al., 2015, 686 284 Pai et al., 2015, 686 285 Mudambi et al., 1997, 434 286 Pai et al., 2015, 695 287 Pai et al., 2015, 686f

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Sustainability attribution can then be divided into intrinsic and extrinsic attribution whereas intrinsic attribution means that the company acts sincere and they actually care about society whilst extrinsic means that they expect to get something back such as increased sales and therefore act more strategically288 289. Hence, customers that recognize that the company is intrinsically motivated are more likely to suppose that it is selfless which is positively associated with the whole brand and forms solid ties between the customer and the brand. After doing a questionnaire with 173 Taiwanese companies, Pai et al.290 came to the following conclusion. First of all, the results confirmed that sustainability is positively related to brand advocacy and also that sustainability attribution functions as a moderator. Moreover, a strong intrinsic attribution and a weak extrinsic had a better effect on sustainability compared to a weak intrinsic and strong extrinsic attribution. Based on that, they could also confirm that sustainability as well as sustainability attribution have positive effects on brand equity, with brand advocacy as a moderator again. To sum it up, it can be concluded from that study that sustainable companies have to be aware how their customers attribute sustainability regardless what the real motivation might be. This is because, as already mentioned, brand advocacy is much weaker in case of extrinsic sustainability attribution.

Vesal et al.291 have also studied sustainability activities regarding branding, however, they fo- cused on brand image. Brand image thereby can be interpreted as the perception of a brand in the sense of how customers associate that brand in their memory292. Such associations can refer to opinions, inferences and beliefs about a firm but also past information as well as evaluation of the firm, which gets immediately triggered when a customer engages with the brand293. In order to build up brand image, communication is the most important tool. Hence, companies have to clearly express how their products but also the firm in general differs from competitors, related to different features and attributes. For that it is particularly important to have well established CRM capabilities as that enables companies to communicate their sustainability activities. Therefore, environmental sustainability plays a major role for brand image. This is because companies often have a stronger relationship with their customers as they share certain operations and therefore it is easier for them to perceive the sustainability practices of their suppliers.294 Based on that, Vesal et al.295 proposed that environmental sustainability has positive effects on brand image and also that CRM moderates that relationship.

288 Du et al., 2007, 226 289 Story and Neves, 2015, 113 290 Pai et al., 2015, 688ff 291 Vesal et al., 2020, 4ff 292 Keller, 1993, 3 293 Brown and Dacin, 1997, 69 294 Vesal et al., 2020, 4 295 Vesal et al., 2020, 4

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Furthermore, brand image is supposed to increase market performance as it increases sales for example. Surely another issue is the importance of environment for the customers in general or more precisely for the decision-makers in the customer companies. Hence, it is supposed that if the supplier company has a positive brand image regarding sustainability and that is valued from their customers, they can achieve higher market performance. Based on those hypotheses, 140 manufacturing companies from Iran were asked to answer certain questions. The results basically confirmed all the above-mentioned suggestions. To summarize, it can be stated that environmental sustainability has positive effects on brand image and that those relationship positively correlates with the CRM practices of the firm. Furthermore, the study confirmed that market performance is also increased due to the improved brand image and finally that relationship is stronger in case the customer company has a positive attitude towards sustainability.

Similar to the just discussed results, Lai et al.296 have studied the effect of sustainability and corporate reputation on brand equity and brand performance, such as decreased costs or increased revenues. They concluded that sustainability again positively influences brand equity, corporate reputation as well as brand performance. Furthermore, their study confirms that corporate reputation positively directs brand equity and brand performance; and brand equity then also directs brand performance. Furthermore, they emphasize that acting responsible towards the environment makes customers aware of a company’s sustainability activities which then can convince them to pay higher prices and influences preferences and purchase intention, which again positively effects brand reputation and profitability.297

Therefore, sustainability can attract more customers than advertising and customer loyalty gets enhanced as Cole298 mentioned. If a customer is loyal to a firm, there are positive effects on the financial performance of a company. Customers spend more money per sale, buy goods or services more frequently, are resistant against marketing measures of other companies and generate word-of-mouth recommendations to family and friends.

A study by Gürlek et al.299 analysed whether sustainability creates customer loyalty. The findings show that corporate image is relevant in the hospitality sector and it can be boosted through CSR activities. Additionally, it was seen that corporate image can improve the company-customer loyalty relationship.

296 Lai et al., 2010, 459ff 297 Khojastehpour and Johns, 2014, 332 298 Cole, 2017, 59 299 Gürlek et al., 2017, 409ff

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Another study of Rivera et al.300 also researched the influence of CSR on consumer brand loyalty. The focus was on brand awareness, brand attitude and customer satisfaction through sustainability. The findings are that sustainability has a positive effect on loyalty and an indirect positive influence on brand awareness and consumer satisfaction. Only brand attitude has no significant influence on loyalty through sustainability. The implications of this study are that through sustainability, companies gain a competitive advantage by increasing the brand value, that it is relevant to integrate sustainability in the development of the marketing strategies. Furthermore, they should increase the sustainability measures to improve the impact on brand attitude and the sub variables: attitudinal loyalty, purchase intention, expenditure level and intention to recommend.

A study of Axjonow et al.301 analysed whether the publication of sustainability reports has a positive influence on the corporate reputation customers. The results showed that reporting companies have in general higher reputations but there is no increase after the publication of such reports. The implications are conform with the other studies and indicate that companies must use other channels to communicate their sustainability activities in order to receive a better reputation, for example to promote it on the company website or other advertising measurements.

In this context Plewa et al.302 investigated the effects of sponsorship to promote the company’s sustainability activities and used a study procedure with a panel sample of 400. The results show that sponsorship is an effective way to promote sustainability but only if the measures operates on the national and not on the mass level.

Holzapfel et al.303 investigated how sustainability influences sales and marketing based on the case of Kessel AG. They found out that only a sustainable strategy which is integrated in all dimensions of a company can generate a competitive advantage. They gained a better image, customer and employee loyalty, increased support within the sales department, reached new markets and achieved a positive differentiation from competitors. Summarized, sustainability has become a strategic success concept and supports to achieve company goals and strategies and pushes to consequently pursuing the company. For customers sustainability is becoming a decision-making criterion when buying products.

300 Rivera et al., 2019, 395ff 301 Axjonow et al., 2016, 220f 302 Plewa et al., 2016, 796ff 303 Holzapfel et al., 2017, 109

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Another effect is a higher willingness to pay from customers. Struve & Stehr304 analysed whether there is a higher willingness to pay for sustainable coffee. The results display that the willingness to pay is 42 % higher and that this willingness increases with an increasing sustainability. This example shows that there is a high economic potential of labelling and com- municating sustainable products.

The declaration of products through sustainability seals plays another important role. There is a group of customers who pay attention to certificated products. Thogersen305 found that before the purchase customers are willing to protect the environment, are personally convinced that their purchase decision saves the environment, there is an awareness of understanding the various eco-labels and there must also be trust in these eco-labels. During the purchase process there is raised attention to products with sustainability seals and the decision to buy is based on these seals.

Another important factor is customer satisfaction. Thereby, customer satisfaction expresses whether a company meets its customers’ expectations for example relating to product, services, employees or order handling.306 The reason why a positive relationship between customer satisfaction and sustainability is proposed is on one hand related to stakeholder theory and on the other hand to signalling theory. Stakeholder theory emphasises that companies acting socially and environmentally responsible tend to satisfy their stakeholder such as customers. In contrast to that, signalling theory assumes that sustainability activities function as signals in order to gain reputation and decrease information asymmetry, which again positively affects customer satisfaction.307 The positive relationship between sustainability and customer satisfaction was confirmed by Jean et al.308 within a study of companies in China and Taiwan. Furthermore, Ashraf et al.309 also found out that sustainability leads to improved customer satisfaction as well as customer loyalty due to the reason that satisfied customers are much more likely to buy again. Moreover, within that study, customer trust has been identified as a positive effect of sustainability.

A company must balance three key stakeholders (shareholders, customers and others like employees). These three can be addressed through an authentic and honest communication policy of all their sustainability activities and, as mentioned before, through a transparent product policy. For companies, trust is the first goal which a company should achieve to enable long lasting customer relationships.310

304 Stehr and Struve, 2017, 140 305 Thøgersen, 2000, 291f 306 Homburg and Rudolph, 2001, 7 307 Jean et al., 2016, 520 308 Jean et al., 2016, 525 309 Ashraf et al., 2017, 1366 310 Stehr and Struve, 2017, 8f

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Therefore, trust is one of the most influential elements that implies companies and is often referred to as a positive effect of sustainability311. Lee & Lee312 for example have examined the effect of sustainable reputation on trust and what a potential increased trust level might entail. From questionnaires with 201 South Korean companies, they discovered that only business practice sustainability reputation (meaning activities that are legally prescribed and the company sticks to) have a significant positive effect on trust. In contrast to that, the effect of philanthropic sustainability reputation (Chapter 2.4.2) is quite low and not substantial. Based on that, they confirmed that there are certain benefits that companies gain from trust. On the one hand partner companies have to share certain information regarding products, costs or demand which can be challenging because of information asymmetry.313 However, trust makes it much easier to be comfortable with sharing information and reducing information asymmetry. On the other hand, risk-reward sharing plays a major role at companies because having a balance between the risk one partner takes and the rewards the other gets is key and can be increased by trust. 314 Han & Childs315 have also confirmed that sustainability has positive impacts on trust which leads to relationship commitment.

Commitment has been researched more in detail regarding sustainability by several authors and can refer to customer commitment defined as “enduring desire to maintain a valued relationship”316. Based on that, Ashraf et al. 317 figured out that customer commitment positively correlates with sustainability association. What has to be considered in that regard as well is that commitment can also refer to employees because sustainability activities are often used to be more attractive for future employees318 and also positively influence employees’ attitudes, which leads to an increased motivation as well as decreased absenteeism and turnover rates319. The positive relationship has been confirmed by several authors e.g. 320 321 322.

311 Lee and Lee, 2019, 3 312 Lee and Lee, 2019, 4ff 313 Gundlach and Cannon, 2010, 402 314 Cannon and Perreault, 1999, 441 315 Han and Childs, 2016, 30 316 Moorman et al., 1992, 316 317 Ashraf et al., 2017, 1367 318 Greening and Turban, 2000, 254 319 Peterson, 2004, 313 320 Ali et al., 2010, 2799 321 Peterson, 2004, 308 322 Turker, 2009, 196

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However, the effects of philanthropy (Chapter 2.4.2), as an aspect of sustainability, are discussed controversially. The philanthropic sustainability activities have to do with the altruistic actions of companies. Thus, the implementation of such activities increases the kindness and reputation of companies when they support non-profit organizations. As a result, the philanthropic prestige of sustainability reflects the reliability of the company. However, Lee & Lee323 could only verify low and unsubstantial effects of philanthropic sustainability. They only found that philanthropic activities help to improve employee commitment and efficiency, improve brand information and reputation.

Moreover, it is necessary to reflect the views of stakeholders regarding the motives of the company's charitable activities. Essential efforts in the context of charitable contributions are more likely to be seen as true and to increase the company’s public profile, to establish partnerships with stakeholders, and to bring favourable feedback and encouragement from stakeholders.324

In conclusion, sustainability has positive impacts on several factors for companies. In the list below, the just discussed effects of sustainability for companies are summarised in order to gain a comprehensive overview.

Benefits including Source

Company-related Higher brand value325 326 327 328 Increased financial performance329 330 331

Customer-related Better reputation332 333 334 Higher customer satisfaction335 336 337 Increased brand equity338 339

323 Lee and Lee, 2019, 4ff 324 Cuypers et al., 2015, 5 325 Cole, 2017, 59 326 Gürlek et al., 2017, 409ff 327 Rivera et al., 2019, 395ff 328 Axjonow et al., 2016, 220f 329 Cole, 2017, 59 330 Holzapfel et al., 2017, 109 331 Stehr and Struve, 2017, 140 332 Vesal et al., 2020, 4ff 333 Lai et al., 2010, 459–486 334 Khojastehpour and Johns, 2014, 332 335 Homburg and Rudolph, 2001, 7 336 Jean et al., 2016, 525 337 Ashraf et al., 2017, 1366 338 Pai et al., 2015, 686f 339 Lai et al., 2010, 459–486

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Better brand image340 Positive effects on customer relationships341 342 Improved customer loyalty343 344 345 346 347 Increased (customer) trust348 349 350

Brand advocacy351

Employee-related Increased attractiveness for future employees 352 Positive influence on employees’ attitudes353 Increased motivation354 Increased employee commitment355 Decreased absenteeism and turnover rates (= decreased staffing costs)356

Table 9: Overview of benefits created through Sustainability Source: own table

2.6.2 Challenges of “Sustainability” Porter and Kramer357 recognized that many businesses have a wrong approach to sustainability. They criticize that companies rarely connect sustainability to their strategy and business operations and thereby cannot realize the incorporated opportunities. It is argued that when companies would analyse sustainability with the frameworks they use as a guidance for their normal business decisions, they would not view sustainability as a cost factor but as a chance. Therefore, Porter and Kramer claim that linking sustainability to the core business and installing the activities that best fit to the strategy are pre-conditions for companies to unlock the opportunities and potential for competitive advantage and innovation of sustainability.358

340 Vesal et al., 2020, 4ff 341 Vesal et al., 2020, 4ff 342 Pai et al., 2015, 686f 343 Ashraf et al., 2017, 1366 344 Cole, 2017, 59 345 Gürlek et al., 2017, 409ff 346 Rivera et al., 2019, 395ff 347 Axjonow et al., 2016, 220f 348 Lee and Lee, 2019, 3–6 349 Han and Childs, 2016, 30 350 Ashraf et al., 2017, 1366 351 Pai et al., 2015, 686f 352 Greening and Turban, 2000, 254 353 Peterson, 2004, 313 354 Peterson, 2004, 313 355 Greening and Turban, 2000, 254 356 Peterson, 2004, 313 357 Porter and Kramer, 2006, 80 358 Porter and Kramer, 2006, 78ff

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Also challenging is sustainability reporting because the existence of detailed sustainability reports are not an indicator whether a company is acting sustainable on the market or not, therefore companies must offer trustworthy sustainability activities to be recognized from customers as sustainable companies where the report is guiding the sustainability activities359 360. There are also general gaps in reporting as a study of “Ernst & Young” from 2015 shows that 74% of the 100 companies with the highest turnover in Austria do not publish any sustainability report, additionally 49% of the “Prime Market Companies” and 68% of the “Public Companies” did not publish any sustainability reports.361

Another challenge is that most reports are based on the principles of the Global Reporting Initiative (GRI). This non-profit company was founded in 1997 and has established itself as the standard for sustainability reporting. But the problem is that their organizational stakeholders are dominated by industry giants. Examples of this are: Bosch, BP, Daimler, GM, RWE, Nike, Siemens etc., therefore, industries and companies have an impact on the GRI and thus on the credibility of the reports which is a challenge for sustainable acting companies.362

In regard to the reporting is additionally the communication of the sustainability activities challenging because external and internal stakeholders of a company have an incomplete, incon- sistent and different understanding of what sustainability means, therefore companies must make it a core part of the business activities to have an understanding within the hole company including management and employees, which can then communicate their sustainability en- thusiasm to all other stakeholders363.

Also challenging for companies is greenwashing as authors suggest that greenwashing includes both social and economic issues364 365. Seele & Gatti summarized the available literature and developed a new definition which describes greenwashing as ”a co-creation of an external accusation toward an organization with regard to presenting a misleading green message”366.

359 Knoppe, 2015a, 27 360 Fiala and Kaufmann, 2012, 15 361 Ernst & Young, 2015, 13ff 362 Fiala and Kaufmann, 2012, 15 363 Bansal et al., 2016, 10 364 Lyon and Maxwell, 2011, 29 365 Bazillier and Vauday, 2009, 1 366 Seele and Gatti, 2017, 249

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An example of Greenwashing is the company BP which received for decades awards and certificates for sustainability activities, also their production facilities were certified according to the ISO 14001 standard367. This standard is a "globally accepted and applied standard for environmental management systems"368. BP was doing greenwashing through sustainability measures such as the change of the logo and the transformation from an oil company to an energy company which focus on solar energy to build a good image369. But in fact the “Black Book of Corporations” figured out that BP was trying to hide two weeks the amount of oil spilled in the “Deepwater Horizon oil platform” in the Gulf of Mexico, furthermore, BP is exploring oil in the untouched nature of the Arctic and additionally a human rights organizations reported that a subsidiary of BP in Columbia supporting a Colombian brigade to protect its oil businesses, which kidnapped oil trade unionists, therefore BP admitted to violating human rights in Columbia370.

Greenwashing leads to misleading corporate claims and to a negative effect on legitimacy, where both has implications for the stakeholder relationship of a company, therefore companies should invest more effort in the communication of their sustainability activities to face the challenge of greenwashing371.

Furthermore, is within the environmental area the energy, water and waste consumption challenging because companies are forced from governments and institutions to reduce carbon emissions, water consumption and waste production372. Companies should remember that environmental sustainability means that a company should not consume more resources than it can regrow or regenerate373. Therefore, companies “need consistent, flexible, and predictable policies that foster for example emission reductions without compromising firm competitiveness”, this could be achieved through collaborative solutions which includes all stakeholders and changes in the company structure374.

To conclude, the challenges of sustainability are listed in the table below, which illustrates the just discussed challenges of sustainability for companies to give a thorough overview.

367 Fiala and Kaufmann, 2012, 16 368 umweltbundesamt.de, 2020 369 Fiala and Kaufmann, 2012, 16 370 Werner-Lobo and Weiss, 2014, n.p. 371 Seele and Gatti, 2017, 237f 372 Conard, 2013, 3378 373 Vogt and Weber, 2019, 3 374 Bansal et al., 2016, 6

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Challenges including Source Strategic integration of Sustainability375 Trustworthy sustainability reporting and communication of sustainability activities376 377 Not becoming a greenwashing company378 Environmental sustainability through forces from governments and institutions379

Table 10: Overview of challenges created through Sustainability Source: own table

3 Circular Economy Within this section “Circular Economy” is researched in detail including the importance and historical development, definitions, different models and last the benefits and challenges of this concept.

3.1 Importance and historical development of “Circular Economy” The term “Circular Economy” is relatively new, although the concept itself is for humans well known for centuries where human societies lived in synergy with the nature and we considered ourselves as part of this nature as Sillanpää and Ncibi mentioned380. This changed with the industrialization four to five decades ago, where a lot of companies dumping waste into rivers and lakes. This is still happening in emerging and developing economies, furthermore the concept of recycling was not implemented and accepted from consumers and companies.381

The “Circular Economy” concept raises interest to both practitioners and scholars as it is seen as an operationalization for businesses to implement a sustainable development within their companies382 383.

The human history shows that we harm our nature through “mining, intensive agricultural practices, various pollution incidents, landfills, overfishing, and overexploitation of resources in general” and ourselves through slavery, colonialism and armed conflicts, therefore there must be a change in the energetic, industrial and agricultural systems384. Humans recognize that our earth is not able to support the current population as latest estimates predict the world population to reach 9.7 billion in 2050 and a beak of nearly 11 billion around 2100385.

375 Porter and Kramer, 2006, 78ff 376 Knoppe, 2015a, 27 377 Fiala and Kaufmann, 2012, 15 378 Seele and Gatti, 2017, 237f 379 Conard, 2013, 3378 380 Sillanpää and Ncibi, 2019, 1 381 Lacy and Rutqvist, 2015, 19 382 Ghisellini et al., 2016, 11f 383 Murray et al., 2017, 369 384 Sillanpää and Ncibi, 2019, 2 385 United Nations, 2019

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The “Circular Economy” is the most recent approach of a sustainable integration of economic activity and environmental wellbeing386. Within the last couple of decades, this theory emerged as an alternative economic concept compared to the current Linear Economy which is called “take, make and dispose”387 because this alternative concept is able to cope with the before mentioned sustainability issues388.

A further reason for the relevance is the challenge of the balance between industrial development, environmental and human health as well as economic growth. Therefore, the development of low carbon and low resource usage arose which is included in the “Circular Economy” concept though the valuation of materials within a closed-looped system that enables to use natural resources while additionally reducing pollution and hinder resource constraints by continuous economic growth.389 Moreover, responsibility and long-term thinking are in trend as companies, governments and customers are focusing on leaving a lighter footprint on the planet and respect and do not harm the nature390. Therefore, it requires that companies bring new circular economy business models, consumers that create demand for products and services which apply aspects of the circular economy and furthermore, decision makers which enable better policy instruments and governance391. As a result, companies are growing without extracting and consuming the earth’s resources, do not waste energy, are not generating products that end up in landfills or damage the environment392.

Circular Economy is high relevant because it change the economic logic and replace our current production through “reuse what you can, recycle what cannot be reused, repair what is broken, remanufacture what cannot be repaired”393. A study of “The Club of Rome” in 2015 consist of Finland, France, the Netherlands, Spain and Sweden found out that if countries make the chance to a circular economy approach each nation’s greenhouse-gas emissions would be reduced by up to 70% and the workforce grow by 4%394.

386 Murray et al., 2017, 369 387 Ghisellini et al., 2016, 11 388 Sillanpää and Ncibi, 2019, 1 389 Winans et al., 2017, 825 390 Lacy and Rutqvist, 2015, 19 391 Antikainen et al., 2018, 115 392 Lacy and Rutqvist, 2015, 19 393 Stahel, 2016, 435 394 Wijkman and Skånberg, 2015, 50ff

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Furthermore, the increased awareness is indicated through research programmes, within the past decade, which promote circular economies by boosting remanufacturing and reuse through South Korea, China and the United States395. The transformation to a circular economy would have significant impacts for the economy, our environment as well as the society, furthermore, the understanding of those impacts is necessary for researches and policymakers for designing future developments in this area396.

However, to understand the concept of circular economy, it is relevant to describe how it developed to this point397. In economic literature the first time the concept was written by John Law in 1720 in “Money and Trade Considered” and by Richard Cantillon in “Essai sur la nature du commerce en general” in which concepts like “input-output tables, national accounts tables, and general equilibrium approaches” where developed. In 1759 François Quesnay described in “Tableau économique” the flows of expenditure between classes and how their created output within a certain year is consumed and furthermore how it can be guaranteed to reproduce the same circuit in the following year and all subsequent years.398 These three historical roots are showing the first basic approaches of the circular economy.

In 1798 Thomas Malthus published his work “An Essay on the Principle of Population” in which he mentioned that the continued growing of the population would diminish the world’s ability to feed itself399. This work served as a warning about the usage of the resources, the balance of the natural world influenced by human beings and destabilizing effects through the demo- graphic growth400.

That the relevance of the circular economy concept rises was historically through alarming global sustainability issues, called wake-up calls, which alert politicians, industrialists and the general public of the global situation and the need to tackle the rising social, economic and environmental issues as several authors mentioned401 402 403. These wake-up calls are as well found in the historical development of “Sustainability” Chapter 2.1 in Table 2 and are therefore strongly connected with “Circular Economy”.

395 Stahel, 2016, 436 396 Rizos et al., 2017, 1 397 Lacy and Rutqvist, 2015, 20 398 Cardoso, 2018, 120 399 Malthus, 1986, 33f 400 Cardoso, 2018, 120f 401 Sillanpää and Ncibi, 2019, 2 402 Winans et al., 2017, 826 403 Geissdoerfer et al., 2017, 764

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The first wake-up call was in 1962 through Rachel Carson’s “Silent Spring” in which the author stated out the negative effects on the life in soil, water and air through pesticides which irrev- ocably harmed animals and through this the world’s food supply had contaminated without the knowledge of the public because the chemical industry spreading disinformation and public officials indifferently acting to tackle the problem404. The second important wake-up call was published in 1972 through the Club of Rome (consist of a group of renowned economists and scientists) with the book “The Limits of Growth” 405. They authors build a model of the world which consist of five major trends: “accelerating industrialization, rapid population growth, widespread malnutrition, depletion of non-renewable resources and a deteriorating environment”406. They writers conclude that, in case of actual continuing growth within the world, the limits to growth of our planet will be reached within the next one hundred years and as a result, there will be an uncontrollable decline in population and industrial capacity407.

The last historically important wake-up call for the development of the circular economy concept was the publishing of the report “Our Common Future” in 1987 through the Brundtland Commission of the United Nations408. They two key concepts within this report are first the concept of “needs” of the world’s poor essential demands and second the limitations through the state of technology and social organization on the environment’s ability to meet the present and future needs. Therefore, social and economic goals should be defined regarding sustainability in all countries409. The differences how “Sustainability” and “Circular Economy” became institutionalised are that sustainability operates in a broader framing, that can be adapted to different contexts and goals, while the “Circular Economy” underlines economic and environmental benefits compared to a linear system410.

404 Carson et al., 1962, n.p. 405 Du Pisani, 2006, 90 406 Meadows, 1972, 21 407 Meadows, 1972, 23 408 Kropp, 2019, 8 409 Brundtland, 1987, 41 410 Geissdoerfer et al., 2017, 764

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Numerous scientists, environmental activists and politicians declare that they are the founders of the Circular Economy concept although through the short historical background it is more fair that numerous authors had developed this concept or get influenced from other schools of thought411 412. The main driver of the modern Circular Economy concept is the science of En- vironmental Economics which combines since the early 1960s conventional studies in the field of welfare economics and the theory of economic growth with input from sustainable develop- ment413 414 415. In 1996 Kenneth E. Boulding published the essay “The Economics of the Com- ing Spaceship Earth” which served as an important foundation for the Circular Economy416 417. Boulding mentioned that the open economy is a “cowboy economy” in which humans act reck- less, exploitative, and violent. This should chance to a closed economy called “spaceman economy” in which the earth became a single spaceship without unlimited resources. The mankind “must find his place in a cyclical ecological system which is capable of continuous reproduction of material form even though it cannot escape having inputs of energy”.418 The description of Boulding within “The Economics of the Coming Spaceship Earth” are near to the characteristics of the “Circular Economy”, although Boulding does not mentioned the same terminology but similar phrases like “cyclical ecological system” and “closed economy”.

The book “The Entropy Law and the Economic Process” of Georgescu-Roegen served as well as basis for the development of the “Circular Economy” and was later used from Pearce and Turner419. Georgescu-Roegen suggested “a fourth law of thermodynamics where matter, like energy, becomes progressively unavailable”420. The economic process should have basic con- cern on the entropy and economics should focus on the complexity, indeterminism and the human factors of the economic process421. In 1981 Timothy O’Riordan puplisehd his book “En- vironmentalism”422 in which he actively contributed to the policy analysis, environmental governance and sustainability, furthermore he developed “the green ideology of environmentalism” and as sequel this served as a basis for policy and decision makers for “environmental planning, resources management and pollution control”423.

411 Sillanpää and Ncibi, 2019, 3 412 Wautelet, 2018, 2 413 Pearce, 2002, 57 414 Ghisellini et al., 2016, 17 415 Murray et al., 2017, 372f 416 Ghisellini et al., 2016, 14 417 Geissdoerfer et al., 2017, 759 418 Boulding, 1966, 7f 419 Ghisellini et al., 2016, 14 420 Antikainen et al., 2018, 117 421 Schlegel et al., 1973, 475 422 O'Riordan, 1981 423 Sillanpää and Ncibi, 2019, 4

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Within the paper, “Product life as a variable: the notion of utilization” from 1986 published by Walter R. Stahel, the product life of the current unsustainable linear economy was the main objective in which products are not repairable, therefore income has to be spent for replacement and waste is growing. He suggested a “self-replenishing system which creates an economy based on a spiral-loop system that minimizes matter and energy flow, and environmental deterioration without restricting economic growth or social and technical progress”.424 In 1989 Frosch and Gallopoulos developed in “Strategies for Manufacturing” the term “industrial ecosystem” in which “wastes from one industrial process can serve as the raw materials for another, thereby reducing the impact of industry on the environment” and “the consumption of energy and materials is optimized”425.

In 1990 Pearce and Turner mentioned the first time the term “Circular Economy” in their book Economics of Natural Resources and the Environment“426. Therefore, many scholars mentioned that the circular economy system was instituted by Pearce and Turner who build their theoretical framework on the studies of Kenneth Boulding and on the laws of thermodynamics of Georgescu-Roegen, which are both described above427 428 429. The authors explain the transformation from a traditional linear economic system to the circular economy system based on the hypothesis of an extensive interdependence between economy and environment430. Fur- thermore, they described the interactions between economics and environment with additionally environmental measures to protect the nature and its natural resources431.

424 Stahel, 1986, 186 425 Frosch and Gallopoulos, 1989, 144 426 Rizos et al., 2017, 2 427 Ghisellini et al., 2016, 15 428 Murray et al., 2017, 372f 429 Su et al., 2013, 216 430 Turner et al., 1993, 17ff 431 Sillanpää and Ncibi, 2019, 5

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With the book “Regenerative design for sustainable development”, published by John T. Lyle in 1994, the basis for ideas on regenerative design which could be applied to all systems beyond the agriculture had built. This book treats “regenerative theories, practices, and strategies for the utilization of water, land, energy resources and waste valorisation”432. In 2002 William A. McDonough and Michael Braungart published the book “Cradle to Cradle: Remaking the Way We Make Things” in which they suggest to go beyond the concept of eco-efficiency in which for example a car reduce petrol consumption and CO2 emissions but it is still polluting433. Therefore, the authors suggest that “eco-effectiveness” should drive the economic development and thinking and not “eco-efficiency” because “doing more good” is better than “doing less harm”434. Principles of the cradle-to-cradle concept are beyond material aspects, for example the use of renewable energy sources, promotion of biodiversity, cultural and social di- versity435.

The Ellen MacArthur Foundation (EMF) is historical relevant, which is not part of the modern founders of the concept, although the foundation promotes and popularizes the transition to the circular economy because they are publishing reports which treats: accelerated transition of the concept, opportunities for the customer goods sector and accelerating the scale-up across global supply chains436. The foundation is a charity which is founded by a group of global companies. Today the foundation focus on four areas: “business and government, education, insight and analysis as well as communications and publications, with the goal of accelerating the transition to a circular economy”.437 The table below gives an overview of the just described historical developments of the circular economy.

Year Milestone Historical roots 1720 John Law: “Money and Trade Considered” 1755 Richard Cantillon: “Essai sur la nature du commerce en general” 1759 François Quesnay: “Tableau économique” 1798 Thomas Malthus: “An Essay on the Principle of Population”

432 Sillanpää and Ncibi, 2019, 6 433 McDonough and Braungart, 2002, 51 434 Lacy and Rutqvist, 2015, 21 435 Rizos et al., 2017, 3 436 Sillanpää and Ncibi, 2019, 6f 437 Lacy and Rutqvist, 2015, 22f

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Wake up calls 1962 Rachel Carlson: “Silent Spring” 1972 The Club of Rome declares "The Limits to Growth" 1987 Brundtland report: "Our common future" Developments in the 20th & 21st century 1966 Kenneth E. Boulding: “The Economics of the Coming Spaceship Earth” 1971 Georgescu-Roegen: “The Entropy Law and the Economic Process” 1981 Timothy O’Riordan: “Environmentalism” 1986 Walter R. Stahel: “Product life as a variable: the notion of utilization” 1989 Robert A. Frosch and Nicholas E. Gallopoulos: “Strategies for Manufacturing” 1990 David W. Pearce and R. Kerry Turner: “Economics of Natural Resources and the Environment” 1994 John T. Lyle: “Regenerative design for sustainable development” 2002 William A. McDonough and Michael Braungart: “Cradle to Cradle: Remaking the Way We Make Things” 2013 Ellen Macarthur: “Toward the Circular Economy“

Table 11: Overview of the historical development of “Circular Economy” Source: own graphical presentation based on Sillanpää and Ncibi438 with included stages of Cardoso439 and Ghisellini et al.440 3.2 Definition/s of the “Circular Economy” For “Circular Economy” several definitions can be found in literature, additionally it is challenging because the concept is a holistic and multidimensional concept and the definition depends on who’s defining it, there are distinct definitions from economists, chemists, industrialists, strategists and ecologists441. Lieder and Rashid442 mentioned that “there are various possibilities for defining Circular Economy” and Yuan et al.443 point out that “there is no commonly accepted definition of Circular Economy”. The investigation of “Circular Economy” definitions is from academic and practical relevance444, therefore the table below gives an overview of the most important definitions.

438 Sillanpää and Ncibi, 2019, 2–6 439 Cardoso, 2018, 119ff 440 Ghisellini et al., 2016, 14 441 Sillanpää and Ncibi, 2019, 7f 442 Lieder and Rashid, 2016, 37 443 Yuan et al., 2006, 5 444 Kirchherr et al., 2017, 221

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Author Definition Preston “Circular economy is an approach that would transform the function of resources in the economy. Waste from factories would become a valuable input to another process – and products could be repaired, reused or upgraded instead of thrown away.”445 Su et al. “The focus of the circular economy gradually extends beyond issues related to material management and covers other aspects, such as energy efficiency and conservation, land management, soil protection and water.”446 Ellen MacArthur Circular economy is “an industrial system that is restorative or re- Foundation generative by intention and design. It replaces the ‘end-of-life’ concept with restoration, shifts towards the use of renewable energy, eliminates the use of toxic chemicals, which impair reuse, and aims for the elimination of waste through the superior design of materials, products, systems, and, within this, business models’’. The overall objective is to “enable effective flows of materials, energy, labour and information so that natural and social capital can be rebuilt.’’447 European Environ- Circular economy “refers mainly to physical and material resource ment Agency aspects of the economy – it focuses on recycling, limiting and reusing the physical inputs to the economy, and using waste as a resource leading to reduced primary resource consumption.”448 Mitchell “A circular economy is an alternative to a traditional linear economy (make, use, dispose) in which we keep resources in use for as long as possible, extracting the maximum value from them whilst in use, then recovering and reusing products and materials.”449 European Commis- The circular economy is an economy “where the value of products, sion materials and resources is maintained in the economy for as long as possible, and the generation of waste minimised. The transition to a more circular economy would make an essential contribution to the EU's efforts to develop a sustainable, low-carbon, resource-efficient and competitive economy.’’450

445 Preston, 2012, 1 446 Su et al., 2013, 215f 447 Ellen Macarthur Foundation, 2013, 7 448 European Environment Agency, 2014, 11 449 Mitchell, 2014, 2 450 European Commission, 2015, 2

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Sauvé et al. Circular economy refers to the “production and consumption of goods through closed loop material flows that internalize environmental externalities linked to virgin resource extraction and the generation of waste (including pollution).’’451 Ghisellini et al. “The radical reshaping of all processes across the life-cycle of products conducted by innovative actors has the potential to not only achieve material or energy recovery but also to improve the entire living and economic model.”452 Geissdoerfer et al. Circular Economy is “a regenerative system in which resource input and waste, emission, and energy leakage are minimised by slowing, closing, and narrowing material and energy loops. This can be achieved through long-lasting design, maintenance, repair, reuse, remanufacturing, refurbishing, and recycling.”453 Murray et al. “The Circular Economy is an economic model wherein planning, resourcing, procurement, production and reprocessing are designed and managed, as both process and output, to maximize ecosystem functioning and human well-being.”454 Kirchherr et al. “The circular economy is most frequently depicted as a combination of reduce, reuse and recycle activities, whereas it is oftentimes not highlighted that CE necessitates a systemic shift”455. Korhonen et al. “Circular economy is an economy constructed from societal production-consumption systems that maximizes the service produced from the linear nature-society-nature material and energy throughput flow. Successful circular economy contributes to all the three dimensions of sustainable development. Circular economy limits the throughput flow to a level that nature tolerates and utilises ecosystem cycles in economic cycles by respecting their natural reproduction rates.”456

Table 12: Definition/s of "Circular Economy" Source: own table

451 Sauvé et al., 2016, 49 452 Ghisellini et al., 2016, 27 453 Geissdoerfer et al., 2017, 759 454 Murray et al., 2017, 369 455 Kirchherr et al., 2017, 221 456 Korhonen et al., 2018, 39

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The second definition from Su et al. within the chronological table above indicates that circular economy is more than material management and “covers other aspects, such as energy efficiency and conservation, land management, soil and water protection” 457. Preston458 and The European Environment Agency459 shared that the circular economy would transfer the function of resources which are mainly physical or material.

Furthermore, Geissdoerfer et al. mentioned that Circular Economy is “a regenerative system in which resource input and waste, emission, and energy leakage are minimised by slowing, closing, and narrowing material and energy loops” 460, waste would be used “as a resource to reduce primary resource consumption” as Preston461 and the European Environment Agency462 mentioned. This leads to a “sustainable, low-carbon, resource-efficient and competitive economy as indicated by the European Commission463. Additionally, should the circular economy “limits the throughput flow to a level that nature tolerates and utilises ecosystem cycles in economic cycles by respecting their natural reproduction rates” as Korhonen et al. mentioned464.

Preston465, the Ellen MacArthur Foundation466, the European Environment Agency467, Mitch- ell468, Geissdoerfer469 and Kirchherr et al. 470 are sharing that products could be repaired, reused, maintained, refurbished or upgraded instead of thrown away with the focus on “recycling, use of renewable energy, eliminating the use of toxic chemicals” as the Ellen MacArthur Foun- dation471 and the European Environment Agency472 supplemented.

According to Mitchell, they before mentioned aspects should keep the “resources in use for as long as possible” 473, which increases the “value of products, materials and resources” as the European Commission mentioned474. As stated by Murray et al. 475 and Ghisellini et al. 476 the circular economy “maximize the ecosystem functioning and the human well-being.

457 Su et al., 2013, 215f 458 Preston, 2012, 1 459 European Environment Agency, 2014, 11 460 Geissdoerfer et al., 2017, 759 461 Preston, 2012, 1 462 European Environment Agency, 2014, 11 463 European Commission, 2015, 2 464 Korhonen et al., 2018, 39 465 Preston, 2012, 1 466 Ellen Macarthur Foundation, 2013, 7 467 European Environment Agency, 2014, 11 468 Mitchell, 2014, 2 469 Geissdoerfer et al., 2017, 759 470 Kirchherr et al., 2017, 221 471 Ellen Macarthur Foundation, 2013, 7 472 European Environment Agency, 2014, 11 473 Mitchell, 2014, 2 474 European Commission, 2015, 2 475 Murray et al., 2017, 369 476 Ghisellini et al., 2016, 27

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Subsequently after analysing all the above mentioned twelve definitions one summarized could try to explain “Circular Economy” as a:

• regenerative system in which the demand of resources is minimised by slowing, closing, and narrowing material and energy loops477, • in which waste would be used as a resource to reduce primary resource consumption 478 479 • which is leading to a sustainable, resource-efficient and competitive economy480. • It limits the throughput flow to a level that nature tolerates and utilises ecosystem cycles in economic cycles, by respecting their natural reproduction rates481, where • products could be repaired, reused, maintained, refurbished or upgraded instead of thrown away482 483 484 485 486 487 with focus on recycling, use of renewable energy and eliminating the use of toxic chemicals488 489, which should • keep the resources in use for as long as possible490, which increases the value of products or materials491 as well as • maximize the ecosystem functioning and the human well-being492 493.

3.3 Circular Economy Models In this sub chapter, the different “R Frameworks”, as well as the “ReSOLVE Framework” are described to gain an overview of the different aspects of the circular economy approach which are included in these models.

477 Geissdoerfer et al., 2017, 759 478 Preston, 2012, 1 479 European Environment Agency, 2014, 11 480 European Commission, 2015, 2 481 Korhonen et al., 2018, 39 482 Preston, 2012, 1 483 Ellen Macarthur Foundation, 2013, 7 484 European Environment Agency, 2014, 11 485 Mitchell, 2014, 2 486 Geissdoerfer et al., 2017, 759 487 Kirchherr et al., 2017, 221 488 Ellen Macarthur Foundation, 2013, 7 489 European Environment Agency, 2014, 11 490 Mitchell, 2014, 2 491 European Commission, 2015, 2 492 Murray et al., 2017, 369 493 Ghisellini et al., 2016, 27

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3.3.1 R Frameworks For decades, several R frameworks are used in academics and in practice as well, which shows that the Circular Economy has its foundation in established thinking494 495. Several authors understand the different R frameworks as the core principles behind the circular econ- omy496 497. The implementation of this principles is only possible if the design of the product is optimized for circularity and it needs the ability for disassembling and reusing498. There are distinctions between the various R frameworks, which are illustrated as 3Rs, 4Rs, 6Rs or 9Rs frameworks. All four models are sharing (1R) reduce, (2R) reuse and (3R) recycle. The 4R framework adds a fourth aspect (4R) recover which is also included in the 6R and 9R framework. 499 Within the 6R and 9R framework are repurpose and remanufacture added, which can be classified into (2R) reuse because both are a partial aspect of it500 501. The 9R framework adds in addition refuse, repair and refurbish and is the most nuanced one as Kirchherr et al. mentioned502. The first added dimension refuse can be seen as a partial aspect of (1R) reduce, repair and refurbish as a partial aspect of (2R) reuse503.

To understand the meaning of the different Rs each is explained individually within the next sub-chapter.

3.3.1.1 Reduce Reduce is associated with the use of the resources in pre-manufacturing which focuses on the reduced use of energy, raw materials, other resources during manufacturing as well as the reduction of emissions and waste during the use of the product504 505. Additionally, it consists of refusing, rethinking, redesigning which all prolonging the lifespan of products as well as the preserving of natural capital506.

494 Kirchherr et al., 2017, 223 495 Blomsma and Brennan, 2017, 603f 496 Reh, 2013, 119ff 497 Zhu et al., 2010, 1324f 498 Janik and Ryszko, 2019, 524 499 Kirchherr et al., 2017, 223 500 Jawahir and Bradley, 2016, 105 501 Čobanova, 2019, 69f 502 Kirchherr et al., 2017, 223 503 Jawahir and Bradley, 2016, 105 504 Čobanova, 2019, 70 505 Jawahir and Bradley, 2016, 105 506 Kirchherr et al., 2017, 223

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Reduce is used in three ways, as a generic term, producer and consumer oriented507. The generic description from Francis suggest that it is about “eliminate the production of waste rather than the disposal of waste itself after it has been created”508. Reduce is mainly linked to producers in the pre-market stage which is about the conceptualisation and the design of the life-cycle of the product in which companies should use less material per unit or dematerialization in the product design509. A higher level of circularity in the product chain is achieved through “reduced consumption of natural resources, sustainable resource extraction, and security of supply of resources”. As consequence, less amounts of natural resources are required to produce new virgin or primary material as well as benefits for the environment.510

The enhancement of longevity of products boosts not only the lifespan, it is crucial to design emotional attachments to make user unwilling to replace it, this is described as durable emotional attachment in literature511. Therefore, products should be designed to foster sustainable behaviour512. For the customer behaviours it is evident that consumer using such long lasting products less frequently, with more care and longer, as well as making repairs for life exten- sion513. Additionally, participating in the sharing economy through simultaneous use and sharing of products is attributed to a more effective product use over time as Hollander and Bakker mentioned514. The focus on reduce and customer orientation enables to concentrate on recyclable and renewable materials as well as the extending of the lifespan which reduce the environmental impact before the product is available on the market515. Subsequent, the different forms of reduce are described.

3.3.1.1.1 Refuse Refuse is related to the decrease of consumption and the preventing of the use of raw materi- als516 517. In literature the focus is more on reduce then on refuse because not all Rs are explained or refuse is integrated into the reduce R. However, refuse is critical to include because prevention is healthier than only minimizing.518

507 Reike et al., 2018, 255 508 Francis, 2003, 121 509 Reike et al., 2018, 255 510 Potting et al., 2017, 14 511 Fitzpatrick et al., 2014, 157 512 Daae and Boks, 2013, 22ff 513 Reike et al., 2018, 255 514 Hollander and Bakker, 2012, 114 515 Sihvonen and Ritola, 2015, 641 516 Čobanova, 2019, 70 517 Janik and Ryszko, 2019, 524 518 Reike et al., 2018, 255ff

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Refuse is applied by consumers and producers519. For producers, it addresses the concept and design of the products, where they can avoid using hazardous materials and design production processes to avoid waste520. An example for producers is to avoid plastic foil for the packaging of the products521. The refuse for consumers is to buy less, or use less, which is associated to consumption products which aims to prevent the waste creation and it changes the habits of the consumers, to a post-material lifestyle522.

3.3.1.2 Reuse Reuse is defined as reuse of the product as a whole, or some of its components, after the first life-cycle for subsequent life-cycles by another consumer, to reduce the usage of materials, gain environmental as well as economic growth and it consists of repurpose, remanufacture, repair and refurbish which are described below523 524 525 526.

The difference between reuse and recycle is that reuse does “not require the reprocessing of materials into new products, materials or substances”527 Furthermore, are the environmental and economic values of second-hand items higher than the values of recycled materials and offering therefore higher values to buyer and seller as Yang et al. mentioned528.

Through reuse, emission of noxious substances and other environmental impacts can be avoided or reduced, additionally there is an increased demand from customers for reused products which offers a durable design which last for more than one life-cycle529. To determine the benefit of reuse, companies should evaluate the different forms of reuse, what would be reused, which actors are involved as well as what would drive the reuse as a strategy530. Sub- sequent, the different forms of reuse are explained.

519 Reike et al., 2018, 255 520 Bilitewski, 2012, 1f 521 Potting et al., 2017, 26 522 Hedlund-de Witt, 2012, 76 523 Jawahir and Bradley, 2016, 105 524 Kirchherr et al., 2017, 223 525 Q. Z. Yang et al., 2014, 219 526 Janik and Ryszko, 2019 527 Rizos et al., 2017, 9 528 Q. Z. Yang et al., 2014, 219 529 Ghisellini et al., 2016, 15f 530 Fleischmann et al., 1997, 3ff

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3.3.1.2.1 Repurpose Repurpose is defined as the using of a discarded product or parts of it in a new product with a different purpose, this also preserve a product from becoming waste531 532 and it can be an option which stimulate the product developer’s creativity as Shivonen et al. suggest533. Repur- posing is common by artists and in industrial design, they adapt discarded goods or components for another function and the material gets a new life-cycle. The new created product can be a low or high value end-product.534 For example, can be an old smartphone used for environmental monitoring or educational purpose535.

3.3.1.2.2 Remanufacture Remanufacture is described as re-processing of used products, to restore them to their original state, or create a like-new form through the reuse of as many parts as possible without the loss of the functionality536 537.

Remanufacturing involves the highest effort compared to all other restore measures and offer therefore superior quality and reliability. Additionally, the environment profited because the energy usage which has been used for the components in the first life of the product remains.538 The remanufacture process is depending on the complexity of the product and its domain, it includes, “inspection, test, full disassembly, part replacement or refurbish, clean, reassembly and re-inspection”539. Additionally, could also new and innovative parts be combined with refurbished parts during the remanufacturing process, this supports innovation and not delaying it540. Furthermore, are manufacturers receiving feedback on reliability and durability as well as reaching through the remanufacture process lower-priced markets, because of cost savings up to 50% of the original production costs541. Summing up remanufacture contains refurbish as well as repair and results in products which offer equal warranties as new products542.

531 Janik and Ryszko, 2019, 524 532 Sihvonen and Ritola, 2015, 641 533 Sihvonen and Ritola, 2015, 641 534 Reike et al., 2018, 256 535 X. Li et al., 2010 - 2010, 477f 536 Čobanova, 2019, 70 537 Jawahir and Bradley, 2016, 105 538 King et al., 2006, 261f 539 ROSE et al., 2002, 186 540 Gehin et al., 2008, 571 541 Bras and McIntosh, 1999, 170 542 Sihvonen and Ritola, 2015, 641

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3.3.1.2.3 Repair Repair is defined as maintenance and repair of defective products, solving specified faults, to extend the product’s life543 544. Products are going out of use mainly through two reasons, first functional obsolescence which is the physically fail of a product and second fashion obsolescence where the goods losing their appeal through new products with different or additional features. The decision of the consumer whether a product will be repaired or thrown away affect also the product life span of a good.545

Repairing is the only process which can be executed by different actors without the change of the ownership, it can be done by the customer, by other not professional people, at the customer’s location as well as through a company546. The quality of repaired products is weaker as from remanufactured or refurbished products and additionally the warranty is only valid for the replaced components and not for the whole product547. Repair is placed between direct reuse and remanufacture as part of the extension of the reuse concept548.

3.3.1.2.4 Refurbish Refurbish is described as restoring a used product through replacing depleted parts for new ones, sending old parts to the recycling facility and selling the refurbished devices549 550. Re- furbishing a product demands more effort than repairing, but less than remanufacture551.

Within the refurbish process critical modules are checked, fixed and if necessary replaced552. Refurbish is a step within the remanufacturing process and is only an own process if the restoring of the product does not modify it substantially553. The quality of a refurbished product should be better as only repairing it and it has the goal to achieve a certain quality and functionality for the refurbished components and not for the whole product554.

543 Janik and Ryszko, 2019, 524 544 King et al., 2006, 259 545 King et al., 2006, 259f 546 Reike et al., 2018, 255 547 King et al., 2006, 259f 548 Sihvonen and Ritola, 2015, 641 549 Janik and Ryszko, 2019, 524 550 Potting et al., 2017, 26 551 King et al., 2006, 261ff 552 Ijomah et al., 1999 - 1999, 193 553 Sundin and Bras, 2005, 917 554 Thierry et al., 1995, 119

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For the pricing, companies must pay attention that customers expect the prices for refurbished products higher as for only repaired ones although they would not pay the original producer price for products which are “like new” quality555. Furthermore, refurbished products within the EU must come with a one-year warranty according to EU law556. The concept is applied for buildings as overhaul but additionally for “airplanes, trains, mining shovels, or engines and machinery”557 as well as for smartphones558.

3.3.1.3 Recycle Recycle is described as a process which convert material that would be considered as waste, into new materials or products559. The EU adds that it “includes the reprocessing of organic material but does not include energy recovery and the reprocessing into materials that are to be used as fuels or for backfilling operations”560.

It consists of mixed caused by consumer products or producer waste and using expensive technological equipment561 which includes shredding, melting and other processes to capture pure materials562. Recycling should meet the needs of the customers as an example in China shows where most of the discards are attributed with economic value, if the items are brought to waste collectors for recycling purpose. Therefore, it requires promoting a transparent and fair buy-back and trade-in, sorting waste at the source, depot recycling as well as offering fixed or special collection day programs.563

A literature review of Reike et al.564 figured out that recycling enables benefits from usable resources, reduce the quantity of waste as well as decreasing the related environmental impact. Achieving from recycled materials the same quality as from raw materials because only few materials, for example metals, had little quality loss, additionally require recycling extra energy to reform them into manufactured products565 566.

555 King et al., 2006, 259f 556 Mugge et al., 2017, 284 557 Reike et al., 2018, 255f 558 Mugge et al., 2017, 284f 559 Jawahir and Bradley, 2016, 105 560 European Union, L312/10 561 Yan and Feng, 2014, 98ff 562 Graedel et al., 2011, 358 563 Q. Z. Yang et al., 2014, 219 564 Reike et al., 2018, 255f 565 Reike et al., 2018, 255f 566 King et al., 2006, 263

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Out of all R’s recycling is used most frequently567, therefore the circular economy is associated with the recycling principle, but this is the least sustainable solution compared to the other R’s regarding to resource efficiency and profitability as Stahel mentioned568. Recycling is also challenging because some waste materials can only be recycled to a certain point or are unrecy- clable. Furthermore, for rare earth metals are only low levels of recycling possible and economies of scale are hard to achieve.569

3.3.1.4 Recover Recover is “the process of collecting products at the end of the use stage, disassembling, sorting and cleaning for utilization in subsequent life-cycles”570. Additionally, energy or metal as well as metal compound recovery is a partial aspect of recover571. Within the material recovery is attempted to retrieve valuable or hazardous materials during the post-use phase of parts of a product572.

The energy can be extract from waste through incineration in combination with producing en- ergy573. For the recovery of waste it is necessary to compare it with recycling especially for two reasons, first the amount of the energy which can be recovered and second which type of fuel is replaced by the produced energy from the waste574. Although, it is better to use environmental friendly recovery of resources through applying innovative recovery technologies575.

3.3.1.5 Application of the R frameworks All R frameworks are sharing a hierarchy system, where the first R has a higher priority compared to the second R and so on as Kirchherr et al. mentioned, as example the 3R, 4R and 6R have as first priority “reduce”, as second “reuse” and as third “recycle”576.

As an example, for the application serves the 9R framework because it is the most nuanced one577 and through the literature review where founded numerous applications of the different R frameworks, but the main principles remain the same578 579.

567 Reike et al., 2018, 255f 568 Stahel, 2013, 4 569 Ghisellini et al., 2016, 16 570 Jawahir and Bradley, 2016, 105 571 Sihvonen and Ritola, 2015, 642 572 Ilgin and Gupta, 2010, 567 573 Reike et al., 2018, 257 574 Rizos et al., 2017, 11 575 Ghisellini et al., 2016, 19 576 Kirchherr et al., 2017, 223 577 Kirchherr et al., 2017, 223 578 Q. Z. Yang et al., 2014 579 Sihvonen and Ritola, 2015

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Within “Figure 7” the low R-number stands for high circularity and the high R-number for low circularity. R0- as well as R1- strategies are called “circularity strategies”. They reduce the consumption of natural resources and used materials within a product chain because it requires less products for offering the same function and they are achieved through innovations in core technologies.580 Smarter product manufacturing and use (R0-R2) is additionally associated with extending the lifetime of the product, however R2 requires innovations in product design. Lifetime extension R3-R7 is the next option and below the useful applications of material (R8, R9). The last option has the lowest relevance in the circular economy concept as the materials cannot be used in other products, therefore it is a low circularity strategy as well as more circularity is equal with more environmental benefits.581

Figure 7: 9R Model582

580 Potting et al., 2017, 15 581 Potting et al., 2017, 4ff 582 Potting et al., 2017, 5

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3.3.2 ReSOLVE framework The ReSOLVE framework was introduced by the Ellen MacArthur Foundation, McKinsey and SUN in “Growth Within: a circular economy vision for a competitive Europe, a report”. It consist of six elements how organisations and governments can implement circularity.583 The elements, which are Regenerate, Share, Optimise, Loop, Virtualise, and Exchange, can be applied across all scales of the built environment.584 The elements are circular business opportunities which are still applied from global leaders and differ from how it would look in a framework for growth in the linear economy. All the elements increase the “utilisation of physical assets, prolong their life and shift resource use from finite to renewable sources”.585

Additionally, in combination with the ReSOLVE framework the Ellen MacArthur Foundation developed the Circular Economy System Diagram or Butterfly Diagram seen in Figure 8, which consist of three principles which can be translated into the six business actions of the Re- SOLVE Framework586. For a better understanding of the ReSOLVE Framework and the Circu- lar Economy in general, first the System Diagram is explained and second the steps of the ReSolve framework.

Figure 8: Circular Economy System Diagram "Butterfly"587 adapted from588

583 Ellen Macarthur Foundation, 2016, 6 584 Iyer-Raniga, 2019, 4 585 Ellen Macarthur Foundation, 2015b, 22 586 Ellen Macarthur Foundation, 2015b, 22 587 Gower and Schroeder, 2016, 8 588 Ellen Macarthur Foundation, 2015b, 20

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The first principle is “preserve and enhance natural capital by controlling finite stocks and balancing renewable resource flows”589. This deals with the dematerialising of the utility and should deliver an optimal amount of utility. If resources are required, they are wisely selected and should use better-performing or renewable resources, for example using renewable energy instead of fossil fuels. Additionally, Circular Economy improves the natural capital through flows of nutrients within the system and build the requirements for regeneration. 590 591

The second principle is about “optimise resource yields by circulating products, components, and materials at the highest utility at all times in both technical and biological cycles”592. Prod- ucts should be designed for remanufacturing, refurbishing as well as recycling to enable the circulating of materials and technical components. Within the circular economy tighter, inner loops are preferred because this saves resources and energy, for example maintenance instead of recycling. Furthermore, products are having more than one product life and therefore as well an increased product life and optimised reuse. Additionally, increases the sharing of products the product utilisation. 593 The technical cycle is attributed with the before mentioned different reuse possibilities, material recovering and restoring as well as the management of stocks of finite materials. Within the biological cycle, the products are consumed and as next step regenerated and returned to the biosphere.594

Last the, third principle is described as “foster system effectiveness by revealing and designing out negative externalities”595. This consists of the management of externalities, like land use, the pollution of air, water and noise as well as toxins. Additionally, its related to negative health effects and resource use.596 597

As mentioned before, these three principles are now translated into the six business actions of the ReSOLVE framework, visible in Figure 9, which are described subsequent.

589 Ellen Macarthur Foundation, 2015d, 5 590 Ellen Macarthur Foundation, 2015b, 22 591 Ellen Macarthur Foundation, 2015d, 5 592 Ellen Macarthur Foundation, 2015d, 7 593 Ellen Macarthur Foundation, 2015d, 7 594 Arup, 2016, 16 595 Ellen Macarthur Foundation, 2015d, 7 596 Ellen Macarthur Foundation, 2015b, 22 597 Ellen Macarthur Foundation, 2015d, 7

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Figure 9: ReSolve Framework598 adapted from599

Regenerate treats in the build environment the use of renewable energy through for example solar or wind energy, land restoration through saving land as well as building on brownfield sites, resource recovery and renewable production systems like electricity production600 601. Furthermore, it is about regenerating and restoring of natural capital through safeguarding, restoring and increasing of the resilience of the ecosystems and last valuable biological nutrients should be safely returned to the biosphere602 603.

Share can be achieved with the maximizing of the product utilization through mutual usage, the different forms of reusing described in Chapter 3.3.1.2 which prolonging the lifetime through maintenance, repair, a durable design and upgradability604 605. In the build environment are peer-to-peer renting, infrastructure sharing like parking sharing or shared infrastructure areas, appliances sharing, co-housing, office-sharing and shared water consumption relevant606.

598 Gower and Schroeder, 2016, 9 599 Ellen Macarthur Foundation, 2015b, 21 600 Iyer-Raniga, 2019, 4 601 Ellen Macarthur Foundation, 2016, 6 602 Arup, 2016, 19 603 Ellen Macarthur Foundation, 2016, 6 604 Iyer-Raniga, 2019, 4 605 Ellen Macarthur Foundation, 2015b, 23 606 Iyer-Raniga, 2019, 5

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Optimise is possible through enhanced performance or efficiency of a product, this can be achieved through a longer use period, decreased resource usage, designing out waste and optimizing of the logistics system607. Furthermore, waste should be removed in the production and supply chain, starting from sourcing, to the production, use phase and last the end-of-use collection608. Additionally, for optimization big data, automation, remote sensing and steering is important to be as efficient as possible and can increase energy, water and material effi- ciency609. Every of the mentioned actions is realised without chances to the technology or product610.

Loop is associated with keeping products, components and materials in closed loops as well as prioritise inner loops, such as remanufacturing (Chapter 3.3.1.2.2) and refurbishing (Chap- ter 3.3.1.2.4)611. Furthermore, recycling of materials through right material choices to ensure recyclability is important as well as anaerobic digestion and extracting biochemicals from organic waste, for example zero-waste food production within a closed loop612.

Virtualise treats the shift of the physical resource use to virtual use through replacing physical products like e-books instead of books, physical locations through online shopping or video conferencing as well as delivering of remote services like cloud storage. Additionally, tele- working, smart appliances as well as virtualisation of products and processes are within the build environment examples for virtualization.613

Exchange can be achieved through careful selection of resources and technology, therefore, shifting to renewable energy and material, using of alternative materials, new technical solutions like 3D printing, advanced delivery models with new service-centric ones, are relevant614 615.

3.3.3 Comparison of the frameworks After analysing the R frameworks as well as the ReSOLVE framework from academic literature, next those frameworks are compared and in particular it should be pointed out how those theoretical concepts relate to the “Circular Economy”.

607 Iyer-Raniga, 2019, 4 608 Ellen Macarthur Foundation, 2015b, 23 609 Ellen Macarthur Foundation, 2016, 7f 610 Ellen Macarthur Foundation, 2015b, 23 611 Iyer-Raniga, 2019, 4 612 Ellen Macarthur Foundation, 2015b, 23 613 Ellen Macarthur Foundation, 2016, 8f 614 Arup, 2016, 19 615 Ellen Macarthur Foundation, 2016, 9

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In literature numerous R frameworks have been developed because the concept of the “Circu- lar Economy” is still in progress, therefore with the academic research development the Rs where extended from 3Rs till the latest evolution of 9Rs616 617. Nevertheless, all models, except the 3R model, are sharing: Reduce, Reuse, Recycle and Recover. A sub-category for Reduce is Refuse and by Reuse are Repurpose, Remanufacture, Repair and Refurbish sub-catego- ries618, all visible in the table below.

Compared to the other two frameworks serves the System Diagram “Butterfly” as basis for a better understanding of the Circular Economy in general and the three principles of it are translated into the six business actions of the ReSOLVE Framework619. The comparison between the R frameworks and the ReSolve Framework shows similarities between Reduce and Opti- mise, the different forms of Reuse with Share and Loop, Recycle with Loop and Recover with Regenerate. The ReSOLVE framework adds Virtualise and Exchange which are booth ways how to apply the Circular Economy concept because virtualise treats dematerialization and Exchange deals with the shift to renewable energy, materials and technologies620.

System ReSOLVE R Frameworks Diagram Framework “Butterfly”

Reduce Refuse Optimise

Remanu- Share Reuse Repurpose Repair Refurbish facture Loop Three Princi- ples for better Recycle Loop understanding of all elements Recover Regenerate

Virtualise

Exchange

Table 13: Comparison of theoretical Circular Economy frameworks Dark grey: Reduce Source: own table Light grey: Sub-categories of Reduce Dark green: Reuse Light green: Sub-categories of Reuse Orange: Recycle Gold: Recover Blue: Virtualise 616 Kirchherr et al., 2017, 223 617 Blomsma and Brennan, 2017, 603f Purple: Exchange 618 Kirchherr et al., 2017, 223 619 Ellen Macarthur Foundation, 2015b, 22 620 Ellen Macarthur Foundation, 2016, 9

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3.4 Benefits and challenges of the “Circular Economy” Firstly, in this sub-chapter there are the benefits of the circular economy described and secondly the challenges to gain a deeper understanding how important this topic is.

3.4.1 Benefits of the “Circular Economy” The integration of circular economy practices leads to a longer product life, minimising resource use as well as waste, and companies generate value through the utilization of resources in several cycles, which all lead to an increased financial performance621 622. A study of McKinsey and the Ellen MacArthur foundation prove the before mentioned advantages as this approach has the potential to boost Europe’s productivity by 3 % by 2030, which generates cost savings of € 600 billion per year and € 1,8 trillion savings in economic benefits623. An empirical study which examined the link between the circular economy and firm performance within European small and middle sized companies proved the previous mentioned aspects and confirm that the usage of renewable energy, re-planning of water usage, minimisation of waste as well as the minimisation of the use of materials has environmental and economic benefits624. Another example for cost saving is the communications service company British Telecommunications which achieved advantages through analysing their footprints of some key products and their connections within the supply chain by introducing circular economy procurement standards for all suppliers625.

Moreover, through the reduction of waste and pollution companies can achieve economic value by decreasing input, increasing efficiency as well as the prevention of waste626. Ghisellini et al. figured through their research out that lower pollution and good waste management deliver economic benefits for companies and municipalities like the creation of new jobs and increased welfare for low income households627. The circular economy has a positive influence on several environmental externalities, “such as land use, air, water and noise pollution, re- lease of toxic substances, and climate change”628.

621 Aboulamer, 2018, 765 622 Lüdeke‐Freund et al., 2019, 39 623 Bové and Swartz, 2017, 1 624 Aboulamer, 2018, 766 625 Benton et al., 2015, 32 626 Bassi and Dias, 2019, 531 627 Ghisellini et al., 2016, 26 628 Ellen Macarthur Foundation, 2015a, 13

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Furthermore, fosters the circular economy innovation because of the aspiration to create goods that are circular by design and reverse logistics networks629. Especially the environmental innovation is used as a transformative tool to break out from the status quo and establish a circular economy-oriented system630. Further innovation driven benefits are: “higher rates of technological development, improved materials, labour and energy efficiency” 631.

Additional benefits can be achieved through replacing raw materials with recovered or recycled alternatives, through that a company can reach a higher confidence of supply or price and achieve reputational gains632. For example, the German Window-maker company Veka has gained reputational benefits through the recycling of its PVC window frames as this material can be recycled up to ten times633. Aboulamer mentioned that for companies the circular economy reduces instability and improves customer retention, resulting in increasing profits634. Fur- thermore, circular products and services enhance the customer interaction and loyalty because they engage creatively the customers, through new business models like rentals or leasing contracts, as well as circular products635.

Moreover, the shift to a circular economy, the using of less virgin material and more reuse and recycling, reduces the companies challenge of volatile raw material prices and increases resilience. For Europe, in general, the European Environment Agency argued, that the before mentioned arguments can reduce the dependency on imports. The growing worldwide competition for natural resources has significantly contributed to increased prices and volatility.636 Addition- ally, the problem of the supply chain through disruption by natural problems or geopolitical troubles is minimized as “decentralised operators provide alternative materials sources”. The last benefit for companies is the increased demand for business services because of the need of reverse logistics companies which reintroduce products into the system, sales platforms which enable higher utilisation or longer lives of products as well as the process of refurbishing and remanufacturing which require new processes and specialised skills.637

629 Ellen Macarthur Foundation, 2015d, 11 630 Jesus and Mendonça, 2018, 75f 631 Ellen Macarthur Foundation, 2015d, 11 632 Benton et al., 2015, 25 633 Benton et al., 2015, 37 634 Aboulamer, 2018, 768 635 Ellen Macarthur Foundation, 2015d, 14 636 European Environmet Agency, 2016 637 Ellen Macarthur Foundation, 2015a, 14

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The impact on the job creation potential is attributed on the one hand to increased spending through lower prices of the end products and on the other hand are labour intensity of recycling activities and higher skilled employees in refurbishing and remanufacturing. Therefore, jobs are created across industrial sectors, through local reverse logistics, within enterprises.638 This positive effects are confirmed by a comparative study concerning the impacts of the circular economy for the employment impacts, consist of 65 reviewed academic papers on behalf of the Ellen MacArthur Foundation, SUN and McKinsey639.

In general, through the circular economy the growth measured with the gross domestic product (GDP), can be increased through a combination of higher revenues and lower production costs because of more productive utilisation of inputs. Additionally, there are indirect effects like increased savings and spending through the higher household income, what results in a better remuneration to labour.640 All these effects of the circular economy development should push the GDP in Europe to an increase of “11 % by 2030 and 27 % by 2050, compared with 4 % and 15 % in the current development scenario”641.

Another general benefit through the circular economy is achieved through land productivity and soil health, as now the land degradation costs estimated 40 billion USD annually worldwide. Furthermore, there are other hidden costs through the loss of biodiversity or increased fertiliser use as well as the loss of inimitable landscapes. Through the circular economy it is possible to use more biological material through anaerobic digestion or composting process, which reduce the need for additional nutrients. Additionally, gains the environment higher land productivity as well as less waste in the food value cain.642

For customers are mainly three benefits visible. First the increased disposable income, second the greater value of products and third the reduced obsolescence. The first aspect was figured out through an analysis of the Ellen MacArthur Foundation, that indicates a “circular economy development path which could increase the disposable income of an average European household through the reduced cost of products and services and a conversion of unproductive to productive time”, thereby the average disposable income of EU households would rise up to 3,000 €, or 11 % compared to the current development path by 2030.643

638 Ellen Macarthur Foundation, 2015d, 11 639 Ellen Macarthur Foundation, 2015c, 35f 640 Ellen Macarthur Foundation, 2015d, 11 641 Ellen Macarthur Foundation, 2015c, 33 642 Ellen Macarthur Foundation, 2015d, 13 643 Ellen Macarthur Foundation, 2015c, 65f

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The second benefit increases for the customer the utility as the circular economy offer additional choice or quality as well as improved tailored products or services that meet better the customer needs. Last the third benefit is generated through long lasting or reusable products which helps to improve quality of life as well as budgets. Customers have less ownership costs and gain higher convenience because there are no problems with repairs and returns. 644

In conclusion, the Circular Economy has positive impacts on several factors, in general, for companies as well as for customers. In the list below, the just discussed effects of sustainability are summarised to gain a comprehensive overview.

Benefits including Source

General

Reduction in negative environmental externalities645 646

Minimising imports dependency647

Creating jobs648 649

Economic growth650 651

Land productivity and soil health652

Company-related Better financial performance through savings653 654 655 Increased efficiency and waste prevention656 Increased reputation657 658 659 Foster innovation660 661 Reduced volatility and higher security of supply662 Need for new business services663

644 Ellen Macarthur Foundation, 2015d, 15 645 Ghisellini et al., 2016, 26 646 Ellen Macarthur Foundation, 2015a, 13 647 European Environmet Agency, 2016 648 Ellen Macarthur Foundation, 2015c, 35f 649 Ellen Macarthur Foundation, 2015d, 11 650 Ellen Macarthur Foundation, 2015d, 11 651 Ellen Macarthur Foundation, 2015c, 33 652 Ellen Macarthur Foundation, 2015d, 13 653 Aboulamer, 2018, 765 654 Lüdeke‐Freund et al., 2019, 39 655 Bové and Swartz, 2017, 1 656 Bassi and Dias, 2019, 531 657 Benton et al., 2015, 25 658 Aboulamer, 2018, 768 659 Ellen Macarthur Foundation, 2015d, 14 660 Ellen Macarthur Foundation, 2015d, 11 661 Jesus and Mendonça, 2018, 75f 662 Ellen Macarthur Foundation, 2015a, 14 663 Ellen Macarthur Foundation, 2015a, 14

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Customer-related Increased disposable income664 Greater value of products665 Reduced obsolescence666

Table 14: Overview of the benefits created through the Circular Economy Source: own table

3.4.2 Challenges of the “Circular Economy” A general challenge of the circular economy are rebound effects which can be caused through higher spending effects resulting from a reduced price and an increased production of companies, which lead to an higher customer demand and environmental burdens. To prevent this effect, companies should ensure that the products are a good substitute for not-circular alternatives and the focus should be on markets with a low-price sensitivity.667

Implementing the circular economy approach can lead to problems between the existing linear system and the new circular system, this can be seen for some stakeholders as threats and for others as opportunities668. Furthermore, there are no mandatory technical regulations or mandatory standards with implementation details, therefore the legislation is behind the emerging circular economy practices. Hence there are lacks in the operational implementation. Additionally, environmental laws are in some areas to restricted and do not consider the circular economy concepts. The policies should foster stakeholder participation and be innovative with the input of current circular economy developments.669

Furthermore, it is challenging to achieve the same attractive design with products made from recovered materials, as there is no specific market for such products, they must compete within existing markets. Therefore, such products should achieve the same quality standards as normal products670.

664 Ellen Macarthur Foundation, 2015c, 65f 665 Ellen Macarthur Foundation, 2015d, 15 666 Ellen Macarthur Foundation, 2015d, 15 667 Zink et al., 2014, 1107 668 European Environmet Agency, 2016 669 J. Li and Yu, 2011, 110 670 Singh and Ordoñez, 2016, 349

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Additionally, to achieve a certain knowledge, regarding design and quality, which offers product life extension beginning with a longer life, reparability, possibilities of refurbishment as well as remanufacturing and at the end, the product recycling, is difficult. Therefore, products must be tailored to the circular economy approach. Nevertheless, it is difficult for such products to be competitive on the market because for example laptops compete in very aggressive markets, which makes recycling more suitable as longer product life. Therefore, companies must antic- ipate which circular economy strategies should be applied to what product categories.671

Another aspect, mentioned by Kirchherr et al. figured through a large survey out, that cultural barriers within companies slow down or derail the realization of the circular economy approach. Therefore, the authors suggest that this approach has not reached the mainstream and is mainly treated from professionals.672 This problem is caused as the circular economy is often treated in the corporate social responsibility or environmental departments of a company, which have less influence as finance or operational departments. The circular economy approach is in many companies a niche discussion as companies do not figure out the increased customer awareness or they think that this approach is not a long-lasting customer desire which lead to a hesitant company culture.673

Another challenge is caused, as recycling has its given limits, therefore it is unlikely that the circular economy could generate continuous economic growth in the future674. Additionally, virgin products are often cheaper as recycled ones, and customers prefer a cheaper price and are not considering the product’s whole lifecycle675. To make recycling useful it needs high investments in technologies to make recycling economical useful and there are still existing limitations in material properties and these limits are hindering a higher value from resource and value recovery676. Therefore, companies should consider the effectiveness of technologies in regard of improving existing technologies or creating new ones677.

Furthermore, have circular products high short-term costs bounded with low short-term economic benefits. It is difficult simultaneously adapting and maintaining competitive prices for such products and there are high purchasing cost for environmental friendly materials as well as high recycling costs.678

671 Bakker et al., 2014, 15 672 Kirchherr et al., 2018, 270 673 Kirchherr et al., 2018, 268 674 Ghisellini et al., 2016, 27 675 Lieder and Rashid, 2016, 41 676 Velis and Vrancken, 2015, 774 677 Pringle et al., 2016, 546 678 Shahbazi et al., 2016, 440

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Jiang et al. suggest that for example the remanufacturing process is “a matter of trial-and-error, which is labour intensive, error-prone and heavily dependent on experiences and knowledge of operators”679. A different example are the production costs for electricity-based plastics, which are two to three times higher as plastics produced with mineral combustibles. Therefore, Palm et al. suggest that there is research and development necessary to reduce the costs.680

Regarding the public awareness it is challenging because a lot of customers were for example not aware of refurbished products as Weelden et al. figured out681. Nevertheless, the awareness is necessary for the realization of the circular economy approach, as customers are a crucial part of it. Lieder and Rashid mentioned that there is an increased social awareness, but it is still required to change the people’s mind-set to focus on performance and fit-for-use rather than thinking in regard of new or second-hand products.682 Furthermore, Kirchherr et al. suggest that customers change their mind too quickly und follow often trends, resulting in buying regularly new goods, which is the opposite of long lasting reused, refurbished or remanufactured goods683. Additionally, Weelden et al. mentioned that some customers have an emotional thrill of newness that they would miss when they buy products which are used before684.

The last challenge is that customers are not aware of remanufactured or refurbished products, which results in a reduction of the perceived value, quality, health as well as safety and therefore customers reject such products before taking them into consideration. Furthermore, such products are not considered when they are not in established retail channels. Customers are often not willing to take extra effort to go to a special shop which only offers refurbished or remanufactured products. All these aspects forces producers to not invest effort in refurbishing as well as remanufacturing.685

To conclude, the challenges of the Circular Economy are listed in the table below, which illustrates the just discussed aspects to give a thorough overview.

Challenges including Source General Rebound effects686 Difficulties in implementing687, lack of standard systems688

679 Z. Jiang et al., 2019, 31 680 Palm et al., 2016, 554 681 van Weelden et al., 2016, 746 682 Lieder and Rashid, 2016, 47 683 Kirchherr et al., 2018, 268 684 van Weelden et al., 2016, 747 685 van Weelden et al., 2016, 746f 686 Zink et al., 2014, 1107 687 European Environmet Agency, 2016 688 J. Li and Yu, 2011, 110

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Company-related Design and quality challenges689 690 Cultural troubles691 Technological limits of recycling692 693 694 695 High purchasing and production costs696 697 698 Customer-related Lack of public awareness699 700 Thrill of newness701 702 Consumer knowledge and perception703

Table 15: Overview of the challenges created through the Circular Economy Source: own table

689 Singh and Ordoñez, 2016, 349 690 Bakker et al., 2014, 15 691 Kirchherr et al., 2018, 270, 268 692 Ghisellini et al., 2016, 27 693 Lieder and Rashid, 2016, 41 694 Velis and Vrancken, 2015, 774 695 Pringle et al., 2016, 546 696 Shahbazi et al., 2016, 440 697 Z. Jiang et al., 2019, 31 698 Palm et al., 2016, 554 699 van Weelden et al., 2016, 746 700 Lieder and Rashid, 2016, 47 701 Kirchherr et al., 2018, 268 702 van Weelden et al., 2016, 747 703 van Weelden et al., 2016, 746f

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4 Sustainability initiatives and practices in the smartphone industry Chapter four treats the research questions of this thesis beginning with the “Best practise initiatives of sustainability”, followed by “Issues within the Smartphone Industry and their solutions” and last “Actions to improve sustainability”.

4.1 Initiatives and best practises of sustainability This sub-chapter contains the general sustainability initiatives of the most relevant smartphone manufacturing companies, selected concerning their sustainability activities and market shares704, mainly in the environmental and social area of sustainability. To gain a broader insight this section is not just limited on companies which exclusively producing smartphones. At the end of this sub-chapter the best practices of sustainability are illustrated.

4.1.1 Shift GmbH The first company is the family owned Shift GmbH founded in 2014 in Germany with twenty employees705. Their mission statement says that they “want to try to do as much good they can and do as little damage as possible”706. The phones of the company are based on a modular design concept which enables them and at the same time the customers inexpensive repairability, an above the average life expectancy as well as a more efficient recycling707. In regard to the repairability the follow the principle “what has to be replaced first, is the easiest and fastest to reach”. Within the box of contents, they include a screwdriver for thirteen screws which are uniform in size and length. These screws hold the modules reliably together and offer full access to all components. Another advantage of the company Shift is that this device makes no design compromises.708

Their most powerful phone is called Shift6m and was announced in 2017 and has 13 different modules (loudspeaker, front- and back-camera, 3,5 mm audio-connector, antennae-module, back-cover including NFC-Modul, AMOLED display, charging-connector, loudspeaker and mi- crophone, battery, mainboard with CPU and memory as well as Dual-Sim and MicroSD port) 709. All these modules make this device the most modular smartphone available on the market, which is confirmed by my research.

704 Canalys, 2019 705 Shiftphones, 2019, 5 706 Shiftphones, 2019, 1 707 Shiftphones, 2019, 4 708 Shiftphones, 2019, 11 709 Shiftphones, 2019, 6

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The production of the company is in China, because all primary components are produced within Asia, therefore it is for the environment better to produce in China because otherwise every component have to be packaged and exported by air freight, which needs more space, weight and packaging waste compared to the delivering of the end product710. Regarding to the supply chain the company disclosure all information from their suppliers and try to convince them to use fair and sustainable raw materials as well as operating on fair guidelines711. Con- cerning the used raw materials is the company evaluating how to improve their sustainability activities. At the moment they are using fair tin from the company FairLötet, and environmentally friendly “Solder Paste” from the Japanese manufacturer Senju Metal. Furthermore, they avoid the conflict material coltan and replace this through ceramic for the capacitors.712

A different environmental measure of the Shift GmbH is a device deposit which they introduced in 2016. This deposit is always granted regardless of the state of the product although, the better the condition of the device, the higher the value that the Shift GmbH will refund the customers if the device will be returned to the company. The firm wants to foster with this deposit as well as with the buyback program the customer to bring back the old device in order to reuse, recycle and correct disposal of the products can be initiated. Furthermore, if the customer wants to switch from his old device to another Shiftphone, he or she will benefit from further special conditions. All these measures should encourage the customers to use their phone carefully and as responsibly as possible. The submitted Shiftphones depending on the condition are used as second-life devices or disassembled into their primary components. The still functioning primary components are used to repair other devices. Faulty components are recycled for raw material reuse, plastic parts are 100% recycled. Antennas and batteries are recycled from the RU Recycling- und Umweltdienst GmbH which is an experienced environmental company that offers waste prevention, long-term use, repair and recovery of the raw materials.713

Additionally, the packaging consists of recycled paper and uncoated natural cardboard and does not contain any plastic. Furthermore, the printing is made with environmentally friendly colour and Cradle2Cradle organic printing. Moreover, there is no loss of the guarantee by installing other operating systems as well as self-repairs because of the modular design.714

710 Shiftphones, 2019, 17 711 Shiftphones, 2019, 35 712 Shiftphones, 2019, 28ff 713 Shiftphones, 2019, 21f 714 Shiftphones, 2019, 22f

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The Shift GmbH is investing all their profits in sustainable and social projects715. This is enabled through their company structure which is a combination of a GmbH and a foundation. Within this structure it is not possible to withdraw profits, sell or inherit company shares, therefore long-term social justice and sustainability is guaranteed.716 Another social aspect for the Shift GmbH are the wages. Within the employees of the host country Germany exist a six-tier salary plan by whom the top-level employees earn only slightly more than the doubly of the employees in the lowest level. The managing directors are earning less salary as the highest level because the company want to ensure that also temporary workers and students receive a wage above the minimum allowed wage. Additionally, the production workers in China are earning more than the local minimum, for example at the factory in Hangzhou three times more than the local minimum wage.717 Furthermore, they are actively improving the working conditions at their own production facility in China718. The social measures for the employees in Germany as well as in China are natural light, plants and nobody must work with workwear like hood and facemask. They can wear whatever they want because all modules are only plugged and not soldered or glued, therefore they need no extraction system or other safety relevant systems or clothing. Additionally, they offer everywhere a flexible 40-hour week with fair wage as mentioned before and they do not employ temporary workers and rely on a gradual qualification of specialist.719

The research aiming to confirm the sustainability activities of the Shift GmbH shows that there are no scientific articles available, however my research revealed that there are no indications for greenwashing. Furthermore, they won the German “Bundespreis Ecodesign” in 2018 which promote innovative ecological products with good publicity. Dr. Thomas Holzmann who was a member of the jury of this award mentioned that this project is a “lighthouse in an industry in which sustainability has so far hardly played a role. The device considers all aspects of ecological product design including the modular structure, repair instructions, the return system as well as competitive design”.720 Furthermore, the German TV station “ProSieben” with their science magazine “Galileo” proved through a report the sustainability activities of the company in 2018721.

715 Shiftphones, 2019, 3 716 Shiftphones, 2019, 14 717 Shiftphones, 2019, 15ff 718 Shiftphones, 2019, 4 719 Shiftphones, 2019, 18f 720 bundespreis-ecodesign.de, 2018 721 prosieben.at/tv/galileo, 2018

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4.1.2 Fairphone The next company is “Fairphone” a Dutch enterprise based in Amsterdam, Netherlands, with 70 employees, which developing smartphones that have the same name as the company. They started in 2010 as awareness campaign about conflict minerals and become an independent company in 2013, they call themselves a “Social Enterprise” which started a movement for fairer-made electronic devices722. The Fairphone is a prominent researched object as they were the first company who was starting to focus on a sustainable built smartphone as several authors confirm723 724 725. Within their mission statement the company mentioned that “we openly share our efforts to reduce harm to the environment, improve the lives of everyone involved in making our phone, and change the rules of doing business”, with the focus on circular economy. The Shiftphone as well as the Fairphone is based on a modular design concept which enables repairability, a higher average life expectance and a more efficient recycling. They also include a screwdriver within the box of contents for self-repairing. Further- more, compared to not modular Smartphones it makes no design compromises.726 727

Their latest product is the Fairphone 3 Plus launched in September 2020, which is only a small update of the Fairphone 3 (better Bluetooth module, improved camera as well as 40% of the device consist of recycled plastic compared to 9 %). Therefore, the research is focusing on the predecessor device launched in August 2019 as there are more sources available and the device is nearly the same compared to the Fairphone 3 Plus.728 729 730 The Fairphone 3 has six different modules (loudspeaker, front- and back-camera, LCD display, battery, back-cover, back-module with charging connector). All these modules make it to the second most modular device on the market, only the Shiftphone offers more modules.731

722 fairphone.com, 2018 723 Exner et al., 2016, 269 724 Wernink and Strahl, 2015, 126 725 Kannengießer, 2020, 126f 726 fairphone.com, 2019c 727 fairphone.com, 2019a 728 fairphone.com, 2019c 729 fairphone.com, 2019a 730 fairphone.com, 2020a 731 fairphone.com, 2019c

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Furthermore, Fairphone disclosures all information from their suppliers, including all materials, suppliers and manufacturing locations and salaries for each device individually listed, including resource transparency through certifications and tracking systems732. As in the case of Shiftphone, Fairphone decided to produce in China as an own producing facility would require a large initial investment as well as all required components would still come from Asia733.

Concerning the raw materials Fairphone focusing on the materials which had the greatest potential to make positive impacts. They improve material sourcing in two areas, first more responsible mining practices and second an increased use of recycled materials. They are using tin from conflict free mines as well as integrate recycled tin into their supply chain. Tungsten is mined from East Africa to support the local economy and demonstrating that small-scale mining can lead to more responsibility. By Gold is Fairphone the first electronics company who source gold from Fairtrade certified mines, which offers improved working conditions as well as a premium for the workers of the produced gold. Cooper is used from recycled sources and they are collecting old phones to increase the supply of recycled cooper within the industry. For cobalt, neodymium and Lithium they are cooperating with several partners to find a possibility for responsible raw material supply. The last material on which they focus is plastic, there they achieve that 50 % of the modules are made with post-consumer-recycled plastic. In average Fairphone has been sustainably sourced 32.75 % of their eight focus materials, which are described above.734

Relating to recycling Fairphone offering a buyback program if a customer buys a new Fair- phone 3 or 3+. In detail 20€ for a Fairphone 1 and 40€ for a Fairphone 2. Furthermore, it is possible to send every other smartphone for free to Fairphone to recycle them. Within the year 2020, their goal is to reach 20,000 recycled smartphones. Moreover, 55 % of the returned phones are getting a new life through refurbishing and are sold through a trusted partner. 45 % gets safely recycled and are sent to a European recycling facility, where the reclaim the valuable raw materials of this devices.735 They are using the recycled materials for the production of future Fairphones, to closing the loop of the supply chain and fulfilling the idea of the circular economy736. The packaging of Fairphone is similar as the packaging from Shiftphone. They are using eco-friendly material, which can be easily recycled and printing with a natural soy-based ink. Moreover, there is no loss of the guarantee by self-repairs and by installing of other operating systems. Furthermore, Fairphone is offering four-year software support of the Android operating system737.

732 fairphone.com, 2020c 733 Wernink and Strahl, 2015, 134 734 fairphone.com, 2019b 735 Fairphone, 2020b 736 Wernink and Strahl, 2015, 131 737 fairphone.com, 2019b

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The company is spending 16 % of the selling price of a Fairphone 3 in product development and impact research to figure out how they can foster fairer material supply chains, improved working conditions, modular and long-lasting smartphones and long-term software support. Only 1 % of a sold device is profit, which they invest in social and environmental impact.738 Other social measures of Fairphone are made with their final assembly partner Amia which has it headquarter in Taiwan. They work together to improve employee satisfaction, working conditions as well as employee retention in the factory. The two companies made an employee satisfaction survey conducted by a 3rd-party NGO, the “Economic Rights Institute”, and made based on this survey a three-year action plan which includes trainings for employees, improving communication between employee and the management, health and safety improvements, better living conditions and the improvement of the quality of the canteen.739 Last they introduced a “living wage bonus” which is quarterly paid to improve the employees quality of life, employee satisfaction and to reduce in long term the need to work overtime. Therefore, 1.50€ of a produced Fairphone 3 are shared with all the factory’s employees.740

To confirm their sustainability activities they received several certifications like the Fairtrade Gold standard, the EcoVadis gold medal for CSR which is only awarded to 1% within they operating industry, the B-Corporation certification which stands for addressing social and environmental issues, as well as an iFixit 10/10 score which addresses the repairability of the smartphone741. Furthermore, they received several sustainability awards like the German En- vironmental Award, the international business cooperation award, Sustainia Community Award as well as the United Nation Momentum Change Award to mention just a few742. Additionally, the company was compared from Greenpeace in 2017 with 16 leading consumer electronics companies and as a result they were ranked on the first place in regard to three categories which are energy-, resources-, and chemicals consumption743.

4.1.3 Apple The next company is “Apple”, founded in the USA, which influenced in 2007 with the iPhone the hole industry. Their iPhone changed the world more than any other device as Dießen- bacher and Reller mentioned744. Apple is a best practice example in regard to long-term usage because a study in 2017 showed that 63 % of all iPhones ever sold are still in use745.

738 fairphone.com, 2020b 739 fairphone.com, 2019e 740 fairphone.com, 2019d 741 fairphone.com, 2020d 742 fairphone.com, 2018 743 greenpeace.org, 2017 744 Exner et al., 2016, 271 745 newzoo.com, 2017

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Furthermore, are running 85% of the Apple devices with the latest operating system, compared to only 11 % Android devices746. This is caused as Apple is offering continuous software updates for their devices. Their latest update iOS 14 is distributed from the latest phone, till a 5- year-old device (iPhone 6S), which is the longest update support within the smartphone indus- try747. This confirms a comparison between the Google Nexus devices which have the longest Android update support with an average of 28 months, compared to 50.1 months for iPhones748.

Additionally, has Apple implemented different environmental measures. In general Apple is focusing on carbon reduction, energy efficiency, renewable electricity as well as the reduction of water usage749. Furthermore, they use disassemble robots which recover materials from old products which are needed for the production750. Apples approach to a circular economy is a circular supply chain which include the use of recycled and renewable materials, minimizing material inputs, longevity as well as collecting and recovering of materials from the end-of-life. Their goal is to use only recycled and renewable sources for the production.751 Concerning the raw materials Apple analysed all their used materials and set the priority on the most significant ones which represented about 90 % of the total shipped products. The focus is at the moment on aluminium, cobalt, cooper, glass, gold, lithium, paper, plastics, rare earth elements, stell, tantalum, tin, tungsten and zinc752.

Refurbishing is also for Apple relevant as their offer a trade in and an upgrade program by which the customers give back their old phone, receive money and get a new device. The old devices were refurbished and passed on to new users through AppleCare and an employee reuse program. 753 The first choice for apple is reusing of recovered parts which are refurbished and used as replacement parts for devices being repaired. Additionally, free recycling of old devices for customers is possible and Apple works together with recyclers, academic institutions and other stakeholders to recover the highest quantities of raw materials. Within their final assembly sites for the iPhone they reduced the waste and achieved the “UL Zero Waste to Landfill” certification, which require at least the reduction of 90% of the waste from the final assembly sites.754

746 Schischke et al., 2019, 14 747 apple.com, 2020b 748 Lobao, 2017 749 apple.com, 2020a, 9ff 750 apple.com, 2020a, 29 751 apple.com, 2020a, 31 752 apple.com, 2020a, 32 753 apple.com, 2020a, 40 754 apple.com, 2020a, 41

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In the social area Apple is focusing on labour, human rights, health and safety. Within labour and human rights, they want to restrict the working hours for suppliers, to 60 hours per week including overtime and one day of rest. Additionally, wages, benefits, and contracts must be legal, labour should not be involuntary, child labour is forbidden as well as discrimination, harassment and abuse. Furthermore, it should be possible that employees can report grievances and that they have a freedom of association and collective bargaining.755 Regarding to health and safety Apple is focusing on occupational health and safety as well as hazard prevention, identification of each emergency scenario and prepare and implement emergency plans, possibilities for employees to report incidents, keeping all health and safety permits as well as safety trainings.756 Therefore, Apple developed a supplier code of conduct which consists of all requirements for them757.

So far, all mentioned examples are from smartphone only producing companies or restricted to the smartphone division. The following examples are not only limited on the smartphone division and are valid for the hole company.

4.1.4 Google Google was founded in the USA and influenced the human life with services and software like the Google-search, YouTube, Gmail, servers and cloud services as well as the smartphone operating system Android758. In the environmental area of sustainability, they are focusing on water savings as well as renewable energy through electricity from sources like wind and so- lar759. Furthermore, carbon neutrality by Google is attained since 2008, they achieved this through reducing of the total energy consumption, purchasing of renewable energy as well as buying carbon offsets for any remaining emissions they have not eliminated760.

Their circular economy approach is to finally “design out waste, keep products and materials in use and promote health materials and safe chemistry”761. Therefore, by 2022 the want to include recycled materials in every Google product and foster these used materials and substances can be reused for further products. Google is offering for free recycling of old products and a trade-in program by whom customers earn a credit if they buy a new Pixel smartphone.762

755 apple.com, 2020c, 10ff 756 apple.com, 2020c, 34 757 apple.com, 2020c, 44 758 google.com, 2020 759 google.com, 2019b, 10 760 google.com, 2019b, 33 761 google.com, 2019b, 10 762 google.com, 2019b, 44ff

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In detail their circular economy approach is based on three pillars, first design out waste through reduction of pollution based on a design which eliminates the negative impacts, second keep products and materials in use through balancing of safety, quality, durable design, repair, reuse, remanufacturing and at the end recycling. Last the third pillar, promote healthy materials and safe chemistry to enable safe and healthy use, reuse and recycling of the re- sources763.

In the social area, Google has a supplier code of conduct which consist of all requirements for them. Google is focusing on treating workers fairly, no child labour, no sexual harassment and verbal abuse, prevention on discrimination as well as collective bargaining rights and a healthier manufacturing process which eliminates harmful substances. Through their self-assessments, risk assessments and independent third-party audits they ensure to operating ethically and they engage workers to get their opinions what needs to be improved. Additionally, Google is creating a safe and healthy workplace through keeping all laws and standards.764

All subsequent companies as well as all other examined companies are applying within their reports some of the “Sustainable development goals” of the United nations described on page 13.

4.1.5 Samsung: Samsung is a South Korean company who offers flash and RAM storage, screens, household appliances as well as the Android based Galaxy smartphones which have the highest market shares765 766. In the environmental area Samsung is focusing on the reduction of greenhouse gas emissions, renewably energy use, up to 100% in 2020, conservation of the biodiversity as well as reduced water usage767. Furthermore, the foster transparency by their suppliers concerning mining minerals768.

Regarding to the circular economy approach they set five principles: expanding the purchase and use of sustainable resources, maximizing the product lifespan, minimizing the use of raw materials, reducing the use of virgin natural resources and raw materials as well as extending the product lifespan and customer satisfaction. Since 2020 they use 100 % sustainably- sourced paper in packaging, they increased the use of recycled plastics and they take back an increased amount of e-waste through collecting of end-of-life electronic products through stores and service centres to extract the raw materials and reuse them.769

763 google.com, 2019a, 4 764 google.com, 11ff 765 samsung.com, 2020a 766 Canalys, 2019 767 samsung.com, 2020b, 26f 768 samsung.com, 2020b, 102 769 samsung.com, 2020b, 29ff

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Concerning the social sustainability, they concentrate on labour and human rights policies and education, adverse impact and risk management and stakeholder engagement770. They implemented different safety policy standards and certifications771, offer a career development program for employees, foster diversity and inclusion as well as intercultural adaption and inte- gration772. Moreover, health and safety management are important including workplace safety, enhanced safety capabilities, safety training, improvement of the work environment as well as illness prevention773. Additionally, Samsung is selecting new suppliers carefully through the evaluation of five areas which are procurement and quality, environment, health and safety as well as labour and human rights774. Therefore, to control the suppliers, they have a supplier code of conduct, a self-assessment tool as well as on-site audits775.

4.1.6 Huawei Huawei is a Chinese company which is a provider of information and communications technology, network infrastructure and smart devices776. In the environmental area of sustainability, they are focusing on reducing of the carbon emissions, investing in renewable energy777, work-

778 779 ing on a greener supply chain to reduce CO2 emissions as well as reducing water usage .

Huawei is also fostering the circular economy approach through using less materials, optimized packaging and transportation, longer product lifespans enabled through more durability as well as easier disassembling, improved product recycling systems and the use of eco- friendly materials. They are offering a global recycling program which enables customers to recycle their old products for free and a product trade-in program where customers receive a discount if the give back their old device and buy a new one. These returned devices are reused through a refurbishing program.780

In the social area of sustainability Huawei is focusing on anti-corruption and anti-bribery, workforce diversity and anti-discrimination, employee training and development to support employee’s growth, health and safety as well as a good working environment781. As the other before mentioned companies they offer a supplier code of conduct including a qualification process for all new suppliers including their sustainability measures782.

770 samsung.com, 2020b, 33 771 samsung.com, 2020b, 58 772 samsung.com, 2020b, 86ff 773 samsung.com, 2020b, 90ff 774 samsung.com, 2020b, 96 775 samsung.com, 2020b, 100 776 huawei.com, 2020 777 huawei.com, 2019, 58 778 huawei.com, 2019, 68 779 huawei.com, 2019, 74 780 huawei.com, 2019, 71ff 781 huawei.com, 2019, 84ff 782 huawei.com, 2019, 90

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4.1.7 Best practice initiatives The best practice initiatives are for a better overview and understanding sorted into the lifecycle phases of a smartphone which includes raw materials extraction, production, end of life and other uncategorized activities783. The sources within the subsequent summarizing part are based on the research within the Sub-Chapters “4.1.2 till 4.1.6”.

4.1.7.1 Raw materials extraction and Production The initiatives within the raw materials extraction and production are suitable for the environmental and social area of sustainability. It contains to convince suppliers to use fair and sustainable raw materials which ensures that on the one hand side the environment is protected as well as on the other hand side the workers are treated in a fair way as well as offer them secure working conditions. This can be achieved through using certificated raw materials, which is realised by several smartphone manufacturers. Furthermore, leads a transparent supply chain to a better awareness through the public as well as it enables to verify all the activities within the supply chain of a smartphone manufacturer, nevertheless only the Shift GmbH as well as Fairphone are offering fully transparency through disclosure all information of all suppliers, all materials, suppliers and manufacturer locations and salaries. Most manufacturers are focusing on some raw materials which the prioritise to have the greatest impact and are not concentrating on all raw materials as it is still difficult to find for every material a sustainable mining source.

4.1.7.2 Production During the production within the environmental area of sustainability the measures of carbon reduction, use of renewable energy, energy efficient production as well as energy saving products, less toxic materials and reduction of water and waste are visible. Furthermore, smartphone manufacturers are reusing some recycled materials from the wasted old smartphones during their production. Some other companies even focus on environmental friendly packaging through recycled paper and environmental friendly printing.

783 van der Velden et al., 2016, 156

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In the social area of sustainability, the integration of fair wages in the production facilities as well as in the host country are found. Furthermore, companies are focusing on improving the working conditions and the increase of the employee satisfaction through promotion prospects or better working conditions and atmosphere. Concerning the working time is one company introducing a flexible 40-hours week with less overtime and another company apply a 60-hour week, including overtime and one day of rest. Furthermore, realised is occupational health, safety as well as hazard prevention including safety trainings and emergency plans. Moreover, sustainable measures are legal voluntary contracts, no temporary workers, no child labour, no discrimination, harassment and abuse. Workers should also have the possibilities of bargaining rights as well as reporting grievances. All these measures are mostly written in a code of conduct for the suppliers and monitored through an auditing system.

4.1.7.3 Use Within the use phase of a smartphone only in the environmental area of sustainability measurers are visible. For two companies (Fairphone and Shift GmbH) modularity is the key to enhance sustainability because it enables easier repair and predicted a longer life expectancy. Moreover, only these two companies are offering cheap self-repairs through offering spare parts on their websites, repair instructions as well as no loss of guarantee through such repairs or installing of other operating systems. Nevertheless, nearly all companies have the approach of a long product life and using time to save the environment. Therefore, some companies only promise the approach, during others offering long-term software support up to five years and the modular companies Fairphone / Shift GmbH a long-term module and spare parts support for their smartphones.

4.1.7.4 End of life At the end of the life of a smartphone within the environmental area of sustainability several initiatives are visible. For two companies (Fairphone and Shift GmbH) enables modularity more efficient and easier recycling because the modules are not glued or soldered. Moreover, one company (Shift GmbH) is charging a device deposit to increase the willingness of customers to send back their device for recycling as well as encouraging customers to use the smartphone more carefully. Furthermore, most smartphone manufacturers are offering a buyback program where the customers receive money for the old device if they buy a new one and give the old phones depending on their conditions a second life through refurbishment or remanufacturing. Additionally, most companies are reusing disassembled primary components for repair to reduce the environmental impact. Recycling of the old phone is offered for free from every company but only limited on the company’s own device except Fairphone which are taking back all used smartphones from different brands for free recycling. Additionally, all companies are separating the recycled end of life phones and parts.

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4.1.7.5 Other initiatives In this section only two companies (Fairphone and Shift GmbH) are offering additional sustainability measures in the environmental and social area through investing most of their profits in enhancing sustainability in the areas product development, impact research, fairer material supply chains, improved working conditions as well as modular and long-lasting smartphones with long-term software support, which lead to an overhaul higher sustainability within the companies.

The summarized best practise initiatives within the table below shows that more companies are integrating sustainability into their corporate principles as well as in the whole product value chain by realizing that solving the sustainability issues takes more than only manufacturing of a few goods in a different manner784.

Smartphone

lifecycle phases: Environmental & Social Raw materials - Convince suppliers to use fair and sustainable raw materials; extraction & - Using some certificated raw materials; Production - Transparent supply chain Environmental - Carbon reduction; - Using renewable energy - Energy efficient production and products; Production - Reduction of water and waste; - Less toxic materials; - Use of recycled raw materials; - Recycled paper for packaging; - Environmental friendly printing Social - Fair wages in the production facilities and in the host country; - Improve working conditions; - Increase employee satisfaction; - Flexible 40-hour week with less overtime; - 60-hour week, including overtime and one day of rest; Production - Occupational health, safety and hazard prevention; - Legal voluntary contracts; No temporary workers; - No child labour; - No discrimination, harassment and abuse; - Bargaining rights; Possibility of reporting grievances; - Auditing system through a code of conduct

784 Wernink and Strahl, 2015, 126

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Environmental - Modularity (easier repair, longer life expectancy); Use - No loss of guarantee by self-repairs and installing other operating systems; - Long product life and using time approach Environmental - Modularity (more efficient recycling); - Device deposit; - Buyback program; - Giving old phones a second life through refurbishment or remanufacturing; End of life - Reuse disassembled primary components for repair; - Free recycling of old smartphones; - Recycling of end of the life phones and parts Environmental & Social Other - Investing most profits in sustainable and social projects

Table 16: Overview of the best practice initiatives and practices Source: own table Grey: Smartphone lifecycle phases Green: Environmental Orange: Social Blue: Environmental and Social 4.2 Issues within the Smartphone Industry and their solutions This section consists of initiatives and practises which are against the principles of sustainability as well as solutions how to treat these inconveniences.

4.2.1 Raw material extraction In general, a smartphone requires a lot of materials to be functional. It consists of chemical elements, about 50 % plastics, epoxy resin, flame retardants, glass, ceramics as well as about 40 % metals.785 786 The materials are available on different places where they can be extracted, which leads to a complex global supply chain for a smartphone manufacturer. They buy from hundreds of suppliers who are themselves supplied by several other suppliers, which makes it difficult to ensure that sustainability at every supplier is guaranteed.787 788

785 Exner et al., 2016, 276f 786 van der Velden et al., 2016, 156 787 Wernink and Strahl, 2015, 124 788 Exner et al., 2016, 276

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Regarding the metals are about 40 required especially tantalum, tungsten, copper, iron, nickel, aluminium, lead, tin, silver, chromium, gold, cobalt, and palladium789 790. The raw materials are mainly mined in South America, Asia and African countries. Within these countries the extracting and processing leads to CO2 emissions, soil and water pollution, toxic risks for the environment and health of the mine workers791. Moreover, Exner et al. mentioned that the mining and trading of mineral ores has contributed to the financing of armed groups as in the “Second Congo War 1998 – 2003” were in the newspapers headlines like the “blood cell phones” dom- inated792. Through the public awareness the government of the USA introduced the “Dodd- Frank Act” who obliged public listed companies to report the use of conflict minerals but this is only limited on gold, tantalum, tungsten, and tin and leaves therefore a lot of room for improvement. In comparison the EU only provides a voluntary approach to stop profits from materials trade, used to finance armed conflicts.793 Moreover, several smartphone manufacturers committed to reduce child and slave labour in Congo, nevertheless such practises are still happen as Cascais figured out794.

To solve the problem of materials “better global tracking, legislation, and investments made in high-risk areas to provide safe and fairly paid mining” can increase sustainability795 as well as a certification systems which ensure sustainable mining of raw material from conflict regions796. Examples for certifications are the ISO standards like the ISO 26000 (social responsibility), the ISO 14000 (sustainable development) as well as within the EU the legislation on EcoDesign and Energy Labelling797.

4.2.2 Production Environmental problems are caused through greenhouse gas emissions during the manufacturing, resulting mainly from electricity use as well as water and soil pollution798. All investigated companies are working on the reduction of emissions, water usage as well as toxic materials, to use less electricity and the integration of renewable energy as described in Chapter “4.1.7 Best practice initiatives”. Moreover, the smartphone manufacturers can use greener materials from for example renewable and biodegradable plastics, recycled materials and natural materials like bamboo. Furthermore, fewer material usage can be achieved through cut down of packaging and accessories which are for example all manuals, chargers and headphones.799

789 Wernink and Strahl, 2015, 124 790 Exner et al., 2016, 277 791 van der Velden et al., 2016, 156 792 Exner et al., 2016, 277 793 Wernink and Strahl, 2015, 125 794 Cascais, 2017 795 Wernink and Strahl, 2015, 133 796 Exner et al., 2016, 285 797 van der Velden et al., 2016, 151f 798 van der Velden et al., 2016, 156 799 Velmurugan, 2017, 200

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Regarding the social issues, smartphones and their components have a lack of labour rights as well as low wage labour within the production800. Moreover, can laws from countries be worked around from global acting smartphone manufactures through the implementing of several services in different countries by having several supplier options in a range of locales. This is realised through the organizing of flows, money, power and resources and can only be stopped through the integration of global laws.801

As mentioned in the “Problem Statement as well as in “4.1 Initiatives and best practises of sustainability” Apple has developed a code of conduct for their suppliers, which prescribe a maximum of 60 working hours and one day off during a week. Through real-time tracking and weekly reports Apple tracks the working hours of 1.3 million workers. In 2015 Apple mentioned that 97 % of the employees are within their code of conduct802. However, during an investigation by Apple’s supplier Pagetron “China Labor” found out, that just 1.1 % of workers do not do more than 36 hours of overtime per month803.

In 2010 14 suicides happened caused by the terrible work conditions at Foxconn, which is Apples Chinese main assembler, which is the most prominent example of Apple’s failure to ensure good working conditions for those who working on their products804 805. Apple promised to improve the working conditions as well as addressing measures to all social issues every year in their sustainability reports but during the production of the iPhone X in late 2017 Apple was forced to admit that child labour was being used for 11 hours per day assembling this new phone.806 These problems are not Apple exclusive, also companies like “IBM, Microsoft, Google, Intel, GE, HP, Dell, Cisco, Amazon, BlackBerry, Vizio, Philips, Sony, Panasonic, Toshiba, Fujitsu, Nintendo, Samsung, LG, Acer, HTC, Lenovo, Huawei, ZTE and Xiaomi” rely on Foxconn as main supplier, who build up a network starting with the raw material exploration, through processing to a final 24-hour assembly line by whom the advanced production system destroys the human feelings through the loss of variety and the pride in one’s own achieve- ments. A worker describes herself as a cog in the machine, therefore, this work dehumanizes the workers.807

800 Josephs, 2014, 216ff 801 Vonk, 2018, 6f 802 apple.com, 2016 803 Hagemann, 2017, 45 804 Xu and Li, 2013, 371ff 805 Höfner et al., 2019, 20 806 Y. Yang, 2017 807 Höfner et al., 2019, 20f

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The above mentioned social problems can be solved through the in Chapter “4.1.7 Best practice initiatives” which are strict monitoring systems for the code of conduct, legal voluntary contracts, offer flexible work with less overtime and the possibility for the employees to report grievances. To prevent dehumanisation the companies should offer more variety within the work and increase the employee satisfaction through measures like natural light, a better canteen, or financial bonuses.

To enable better payment companies should offer fair wages and bargaining rights for customers as well as the suppliers should invest more of their profits into social measurers as only about 1.8 % of the selling price of a phone are spent for the production costs. Therefore, most smartphone manufacturers as well as the suppliers make high profits, for example the supplier Foxconn 4.4 billion US-Dollar within the fiscal year 2017.808

Moreover, through the manufacturing process are the workers are exposed to hazardous materials which can lead to serious health issues809. This is also addressed by several smartphone manufactures through higher safety standards, including higher protection of the workers, safety trainings, as well as the use of less toxic materials and processes as described in Chapter “4.1.7 Best practice initiatives”.

4.2.3 Modular Smartphones For Fairphone and the Shift GmbH modular design is the solution to enable a high and easy repairability, simpler recycling, upgradeability as well as longer product life. Nevertheless, a life cycle assessment of a modular smartphone shows that such devices have an about 10 % higher life cycle impact in comparison to a conventional design. Therefore, such devices are only more sustainable if this circumstance can be compensated through higher likeliness that a broken device gets repaired as well as an extending product life through upgrades as well as the integration of refurbishment.810 This is also validated by the Fraunhofer institute which confirms that the impact per year of use is decreasing with the ongoing product life811. There- fore, modularity is an appropriate approach for a circular design but only if the customers are taking advantage of the theoretical benefits. Therefore, there are several uncertainty factors like willingness to upgrade in a few years or the willingness to perform simply repairs by themselves which are not predicable because of missing experiences and studies.812

808 Höfner et al., 2019, 20 809 van der Velden et al., 2016, 156 810 Schischke et al., 2019, 1 811 Fraunhofer Institute, 2020, 12 812 Schischke et al., 2019, 14

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Moreover, a durable design can, compared to a modular design lead to significant lifetime extension, even if repairs are not intended by design, as the long-term use example of the iPhone described above showed. Other smartphone brands offer faster innovation within new devices which are announced annually, which cannot be achieved through upgrade modules within an expected lifetime of five years of a modular device813.

Additionally, trust in the manufacturer of a modular device concerning long-term hard- and software support is an important factor to achieve longevity. Therefore, it is necessary to trust the manufactures in two ways. First delivering a good long-lasting product and second the company must have the ability to stay on the market and continue to support the old device instead of bringing a new updated better smartphone within 2-3 years814.

Furthermore, manufacturers must balance the options and possibilities for exchanging modules as well as parts to achieve an optimum modularity strategy. Therefore, Proske and Jae- ger-Erben figured out that to little modularity is caused if important upgrades are not possible, functional spectrum cannot be expanded compared to competitors as well as the product is getting boring. Too much modularity is caused if high material input is used to achieve it, a high turnover rate of modules as well as rebound effects caused through overprovisioning with obsolescence and modules through non-use of the customers815.

The current modular smartphones of Fairphone and the Shift GmbH are criticized regarding the design, which is thicker as competitor smartphones and it appears to be not so valuable because of a plastic bodies instead of aluminium or glass unibodies of the competitors. Fur- thermore, these devices often perform lower compared to competitors in the same price range. Therefore, the companies need to improve their products through research and development to build more competitive devices which can survive longer on the market.816

813 van der Velden et al., 2016, 160 814 Proske and Jaeger-Erben, 2019, 65 815 Proske and Jaeger-Erben, 2019, 64 816 Zwiers et al., 2018, 21

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4.2.4 Smartphone usage time In 2019 1.37 billion smartphones have been sold worldwide817. This quantity of phones is important as the average operating life is 18 months. The phones will be replaced even if they are still fully functional818. Moreover, the smartphone has become a lifestyle and status object, which leads to relatively short product innovation- and life cycles. The annual re-edition of all smartphone manufactures except Fairphone and Shiftphone GmbH leads to the customer desire to have the latest device every year.819 Furthermore, it is important to understand that devices with certifications can give the customers the feeling of buying ethically devices but the short buying intervals are from a resource consumption perspective not sustainable820.

To gain higher sustainability, smartphone manufactures must create more awareness for example through already conscious consumers to increase the number of people who decide to buy sustainable devices by understanding the story behind the production of their smartphones821. Nevertheless, to achieve sustainability in the smartphone industry it requires a social transformation of the current product-service system and a change in the minds of the customers822. This can be achieved if customers sustainability becomes an identity expression. Through sustainable lifestyle, alternative forms of consumption as well as social commitment, the transformation to a more sustainable economy can be achieved. Products like the Fair- phone and the Shiftphone are supporting that change but not lead to a reduced consumption because the demand for such products is still too low.823 824

Therefore, a further factor is diversification in order to be able to reach more consumers and to bring the awareness for a sustainable smartphone in the mind of the customers, which lead to a more sustainable consumption decision825. Nevertheless, not exclusive smartphone manufacturers are responsible for the average operating life of a smartphone, as the contract length plays an important role. Instead of offering contracts which encourage customers to upgrading to a new phone which is still usable, the industry should offer customers savings if they take a longer contract and therefore use the smartphone for a longer time826.

817 statista.com, 2020 818 van der Velden, 2014, 47 819 Exner et al., 2016, 272 820 Exner et al., 2016, 288 821 Wernink and Strahl, 2015, 135 822 Proske and Jaeger-Erben, 2019, 57 823 Haucke, 2018, 1719 824 Haucke, 2018, 1728 825 Zwiers et al., 2018, 31 826 Velmurugan, 2017, 200

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4.2.5 Repair For repair it is necessary to know that it goes hand in hand with recycling, because a repair friendly phone can also be easier recycled827. Repair is relevant because parts like the display or a glass back break through accidental drops as well as the battery has a reduced charging capacity due to aging effects. The carbon footprint of such parts is less than for the main electronics, like the processor, flash memory, the RAM or printed circuit board assemblies.828

All smartphones except the Fairphone and the Shiftphone are selling spare parts to other businesses but not to customers to self-repair their phones829. Therefore, most phones are difficult to repair as they need different kind of screws, special tools to open it or they are glued to- gether830. Nevertheless, most manufactures increased the intern modularity for serviceability, as for example the iPhone offers 13-15 connectors on the mainboard, whereas first iPhones had only three connectors but repairability is only possible through authorized service part- ners831. Most smartphones are therefore hard to repair by home user and the repairs of the service partners are mostly to expensive and “many consumers just opt to buy new phones instead”832.

The only two before mentioned manufactures, offer several spare parts which can be easily replaced833. The battery of a smartphone is most often the first part which needs to be replaced as the frequency with which repair instructions are called up shows. However, a permanently installed battery has a significant impact on the number of dismantling steps as well as the required time for the repair. It can be more difficult through the above-mentioned different kind of screws and glued parts. Only Fairphone and Shiftphone offer changeable batteries, without the need of special tools for the battery exchange.834 835

827 Reuter A and van Schaik, 2018, 78 828 Schischke et al., 2019, 2 829 Wernink and Strahl, 2015, 130 830 Schischke et al., 2019, 16 831 Schischke et al., 2019, 2 832 Vonk, 2018, 753 833 Wernink and Strahl, 2015, 130 834 Prakash et al., 2016, 160ff 835 Velmurugan, 2017, 200

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The research showed that political forced regulations like the anti-planned-obsolescence law in France and the lawsuit which forced for example Apple to make the iPod battery replaceable lead to more repairability836. Moreover, a change in the society and pressure of customers, caused Apple which integrated planned obsolescence of working iPhones by reducing the power of the device, through a software update, can lead to a rethink of companies. In this case Apple was obliged to pay 25 US-Dollars in the U.S. for every owner of an iPhone which was slowed down through this software update.837 Another software update of Apple caused phones to stop working if the identify unauthorized repairs. The media described this case as an attack to independent repair shops, which fosters the right of the repair movement838.

4.2.6 Recycling / Disposal Another issue is that at the end of the product life cycle of a smartphone only a few materials are circular designed. This means that a lot of raw materials are not used for reuse, remanufacturing or recycling. This is caused as a lot of old devices are stored over years in the drawer of the customers. 839 Some devices get inappropriate disposed or they are going to illegal recycling in emerging countries, which than has negative ecological effects for these countries as there is a lack of recycling facilities840. The raw materials like the different metals, plastics as well as chemical substances get distributed in the biosphere and there is no possibility to retrieve them.841

In a single device there is only a small amount of valuable raw materials but the large quantity of smartphones, as mentioned before, made the junked smartphones to an important source for smartphone manufacturers842. For example, the gold concentration in a ton of used cell phones is about 50-times higher as in a ton of gold ore from South Africa843. Urban mining for example can help to reduce the energy consumption by 50 % compared to conventional mining as well as a higher recovery rate from old mobile phones. Therefore, high-quality recycling could help smartphone manufactures to reduce supply bottlenecks as well as raw material import risks.844

836 van der Velden et al., 2016, 160 837 Stempel, 2020 838 van der Velden et al., 2016, 160 839 Velmurugan, 2017, 193 840 Wernink and Strahl, 2015, 126 841 Exner et al., 2016, 280f 842 Zwiers et al., 2018, 12 843 Exner et al., 2016, 278 844 van der Velden et al., 2016, 157

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Moreover, Reuter et al. confirms that a modular design of a smartphone like the Fairphone as well as the Shiftphone is beneficial for recycling because dismantling before recycling maximizes the recovery of metals as well as plastics but modularity has also its limits because there are only some easily dismountable modules as well as different materials are combined which are difficult to recycle. Moreover, it is not possible to achieve 100 % of material recovery and circularity of a complex product like a smartphone because there is always a material loss during the recycling process. Therefore, lifetime extension, reuse, refurbish as well as repair are besides recycling necessary to get the maximum value from the used materials845.

To solve the recycling problems, it is necessary to introduce a recycling system for electronic devices which is resource-efficient and based on the circular economy approach846. This can be supported for example through a mandatory deposit system for smartphones. Through this, recycling companies could calculate their future capacities for the processing of electronic waste, which can lead to investments in new plants for extracting raw materials from old smartphones.847 Moreover, the customer awareness must be increased that their old smartphones consist of valuable raw materials which can be used for new products848. To achieve more sustainable behavioural patterns regarding the reusing as well as recycling, Welfens et al. figured out that economic incentives, communication and collection campaigns are the main drivers to achieve this849. Therefore, buy-back or take-back systems which are introduced from all researched smartphone manufacturers are playing an important role in sustainable waste management because it prevents phones from landfills and encouraging reuse and recycling. Most effective are such programs if cash payments and vouchers are granted, followed by convenience of the service. Only if the system is efficient and if it raises public awareness, it can promote sustainability. Success of a buy-back program can be measured through the “number of countries covered, the number of people reached with the recycling message in dedicated campaigns, and the weight of mobile devices and accessories recycled”.850

Moreover, smartphone manufacturers as well as the governments should share the responsibility of waste recycling through an increased public environmental awareness, which could be executed with recycling fees or a prepaid device deposit like the example of Shiftphone above. Moreover, environmental education can help to promote a higher awareness of the customers.851

845 Reuter A and van Schaik, 2018, 78 846 Exner et al., 2016, 288 847 Zwiers et al., 2018, 20 848 Exner et al., 2016, 288 849 Welfens et al., 2016, 108 850 Velmurugan, 2017, 203 851 Yin et al., 2014, 517

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Furthermore, companies which offer products in a continual cycle of consumer use and replacement obscure through recycling practises which are thought as unsustainable852. Moreo- ver, some parts of a smartphone cannot be reused or recycled, therefore they must sent to special disposal firms which are able make the remaining materials insoluble through high temperature, that they will not deploy toxic substances into the environment853.

The table below summarizes the issues and their solutions within the smartphone industry, categorized in the four lifecycle phases of a smartphone which are described in “4.1.7 Best practice initiatives” to gain a better overview.

Smartphone lifecycle phases: Environmental & Social Issues Solution - Complex supply chain; - Transparent supply chain; Raw materials - Pollution, toxic risks, wars, health - Reduction of usage, safety extraction risks, child / slave labour measures, stricter laws, global tracking, certifications Environmental Issues Solution - Emissions through electricity - Reduction of emissions use, water / soil pollution; through decrease of electricity-, water-, soil pollution-, material- usage, renewable en- Production ergy; - High material consumption - Use of green / recycled materials, cut down packaging / accessories

852 Vonk, 2018, 755 853 Velmurugan, 2017, 204

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Social Issues Solution - Lack of labour rights and work - Stricter laws and code of con- around laws lead to child labour duct, better monitoring sys- and overtimes; tems, legal voluntary contracts, flexible work, less overtime, possibility of reporting grievances; Production - Code of conducts not adhered - Stricter rules and monitoring - Monotone work (dehumanisation) - Offer more variety, increase employee satisfaction; - Low wage; - Bargaining rights, fair wages, investing of profits in this area; - Health issues (hazardous materi- - Occupational health, safety als) and hazard prevention; Environmental Issues Solution - Short average operating life, short - Build awareness by the cos- product innovation- and life cycles; tumers through existing conscious consumers, social transformation through change of the product-service system and offering several sustainable alternatives; Use - Annual re-edition of smartphones; - Longer contract lengths combined with savings for customers; - Expensive and difficult self-re- - More modularity e.g. ex- pairs; changeable battery, cheaper repairs; - No right of self-repair; - Support self-repair; - Planned obsolescence - Laws against obsolescence

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Environmental Issues Solution - Full recycling potential remains - Reuse of recycled materials, unused (combined materials, lack investments in high-quality re- of technology); cycling, easier recycling through modularity (not glued and soldered materials); - Illegal recycling (harm the bio- - Laws for mandatory deposit sphere); systems; - Lack of recycling facilities; - Global recycling facilities; - Low willingness for recycling; - Build up customer awareness End of life through education, collection campaigns, device deposits, buyback programs; - Recycling as single measure is - Integrate the Circular Econ- not sustainable; omy through lifetime extension, reuse, refurbish, repair and recycling; - Non-recyclable parts - Send to special disposal firms to make them insoluble Environmental Issues Solution Others: - Modular design causes 10 % - Longer use as conventional Modular prod- higher life-cycle impact; phones through easier / uct design cheaper repairs, long term hard- / software support, trust; - Balancing modularity is difficult; - Figure out the right balance; - Modular phones have lack of - no solution found; continuous innovation; - Design / performance issues - Improve products, build more competitive phones through research and development

Table 17: Sustainability issues and their solutions within the Smartphone industry Source: own table Grey: Smartphone lifecycle phases Green: Environmental Orange: Social Blue: Environmental and Social

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4.3 Actions to improve sustainability Through the analysing of the “Initiatives and best practises of sustainability” in Chapter 4.1 as well as the “Issues within the Smartphone Industry and their solutions” in Chapter 4.2, are within this sub-chapter the final actions to improve sustainability given. They are as in the two sub-chapters before categorized in the four lifecycle phases extended with a “General / other actions” called category.

4.3.1 General / other actions In general social and environmental sustainability needs to be included in the whole lifecycle of a smartphone to act as a sustainable company as Van der Velden mentioned.854 For the environmental sustainability, a smartphone should be designed with reuse, recycling as well as minimal disposal in mind. This starts with a reduced energy input in the manufacturing process, substituting of hazardous substances and the minimizing of mixing materials to enable easier recycling855. The different lifecycle phases including the Circular Economy elements (refuse, reduce, reuse, repair, remanufacturing, refurbish, recycling, recover) are in detail described in the following sub-chapters. The social actions are mainly described in the production lifecycle phase to cover both researched sustainability aspects.

Moreover, governments as well as the smartphone industry should reach for effective regulations and legislation for the hole product value chain of a smartphone to mitigate and reduce the different harmful impacts856. Examples of political regulations are the anti-planned-obsolescence law in France857 and the “Dodd-Frank Act” which are obliging public listed companies in the USA to report the use of conflict materials858.

Within this master thesis, Fairphone and Shift GmbH are offering with their smartphones an alternative which shows that these devices can be designed according to the principles of sustainability as well as the circular economy. Through more durable and easily repairable devices as well as transparent production it is shown that more environmental and social sustainability can be achieved.859. Nevertheless, there is a long way to produce a complete sustainable smartphone860

854 van der Velden et al., 2016, 151 855 Velmurugan, 2017, 200 856 Velmurugan, 2017, 204 857 van der Velden et al., 2016, 160 858 Wernink and Strahl, 2015, 125 859 Schischke et al., 2019, 4f 860 Exner et al., 2016, 287

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Bas van Abel manager of Fairphone mentioned that for a truly sustainable smartphone you would have to change the whole world861. Starting with the mining conditions, the production, the end of life treatment including a circular economy approach as well as the customer awareness for more sustainability862 863. Moreover, zero-waste certifications which are for example achieved through Apple are not the solution to achieve environmental sustainability, as the creation of digital devices still causes harm864.

To face sustainability issues, companies should invest more of their profits into sustainability to ensure better payment in the production facilities, as well as in other sustainable and social projects in the areas of product development, impact research, fairer material supply chains and improved working conditions865 866 867.

4.3.2 Actions for “Raw materials extraction” Phase In the environmental and social area of sustainability it is necessary to offer full transparency within the supply chain including all materials, suppliers and manufacturing locations and salaries, including resource transparency through certifications and tracking systems868. A transparent supply chain leads companies to a better awareness through the public as well as it enables to verify all the activities as described in “4.1.7.1 Raw materials extraction and Pro- duction”.

Regarding the raw materials extraction Fairphone as well as Shift GmbH are serving as sym- bolic companies who try to chance people into a sustainable society as well as put pressure through the public awareness to competitors, to deal with sustainability869. Nevertheless, only few resources of the devices are labelled as fair and there is a long way to ensure that the hole supply chain is based on the principles of sustainability870. Additionally, other companies are starting to convince the suppliers to use fair and sustainable raw materials like Samsung and Apple871 872. Another possibility to achieve sustainability is to use only certificated raw materials which ensure sustainable mining of raw material from conflict regions873.

861 Haucke, 2018, 1728 862 Wernink and Strahl, 2015, 124 863 Exner et al., 2016, 276 864 Murray et al., 2017, 376 865 Höfner et al., 2019, 20 866 Shiftphones, 2019, 3 867 fairphone.com, 2020b 868 fairphone.com, 2020c 869 Kannengießer, 2020, 127 870 Exner et al., 2016, 287 871 samsung.com, 2020b, 102 872 Vonk, 2018, 755 873 Exner et al., 2016, 285

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Nevertheless, to guarantee long-lasting sustainability, the measures need to be observed through a monitoring or tracking system and a code of conduct for the suppliers including a self-assessment tool as well as on-site audits874 875.

To reduce the environmental impact in general the Circular Economy aspect of refuse should be considered because it is related to the decrease of consumption and the preventing of the use of raw materials876 877. For producers, it addresses the concept and design of the products, where they can avoid using hazardous raw-materials878.

4.3.3 Actions for “Production” Phase The actions for the production phase in the environmental area of sustainability are first of all reduce, which treats the use of the resources in pre-manufacturing which focuses on the reduced use of energy, raw materials and other resources during manufacturing879 880. Addition- ally, it consists of refusing, rethinking and redesigning which all prolong the lifespan of products as well as the preserving of natural capital881. Particularly in the smartphone industry the focus is on the reduction of emissions, toxic materials, electricity-, water usage, soil pollution, material input and waste through more efficient production / products and cut down packaging / accessories as described in the Sub-Chapter “4.1.7.2 Production“. Furthermore, is the use of renewable energy a sustainable measure which is applied from several smartphone manufacturers as well as in the literature of environmental sustainability and the circular economy882 883 884 885.

Furthermore, reuse which is in the production mainly the use of recycled raw materials as well as recycled paper from the “End of Life” cycle is relevant886 887. To determine the benefit of reuse for companies, they should evaluate the different forms of reuse, what would be reused, which actors are involved as well as what would drive reuse as a strategy888.

874 Wernink and Strahl, 2015, 133 875 samsung.com, 2020b, 100 876 Čobanova, 2019, 70 877 Janik and Ryszko, 2019, 524 878 Bilitewski, 2012, 1f 879 Čobanova, 2019, 70 880 Jawahir and Bradley, 2016, 105 881 Kirchherr et al., 2017, 223 882 Elkington, 1997, 79 883 Stahel, 2016, 436 884 Ellen Macarthur Foundation, 2013, 7 885 European Environment Agency, 2014, 11 886 Shiftphones, 2019, 22f 887 Benton et al., 2015, 25 888 Fleischmann et al., 1997, 3ff

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Modular smartphones like the Fairphone and the Shiftphone have to introduce additional sustainable measures because the must compensate the 10 % higher life-cycle impact. Therefore, such devices are only more sustainable if this circumstance can be compensated through a longer product life which can be enabled through more frequent repairs, upgrades as well as the integration of refurbishment889. Moreover, trust in the manufacturer of a modular device concerning long-term hard- and software support is necessary890as well as the right balance of modules891. Lasty, such products need improved competitiveness through research and development to build more competitive devices which can survive longer on the market892.

In the social area of sustainability it is also necessary to implement a code of conduct for the production facilities of the companies as in the “Raw materials extraction” phase, which needs to be observed through a monitoring or tracking system including a self-assessment tool as well as on-site audits893 894. This should ensure fair wages, legal contracts, bargaining rights, no child work, improved working conditions, flexible work, less overtime as well as possibilities of reporting grievances as in detail described in “4.1.7.2 Production”.

To increase the employee satisfaction in order to be more sustainable a company’s social impact and corporate responsibility includes the welfare of people through providing jobs, employment stability, job satisfaction or education / training and complying with health and safety standards895. Moreover, the social aspect is characterized by protecting and preserving human rights, supporting developing countries and developing the standard of life in all places where the firm operates. Moreover, companies should not discriminate against ethnicity, status or gender as well as cooperating with schools, organizations and universities.896

Furthermore, it is necessary for companies to offer high safety standards which is addressed by several smartphone manufactures through higher safety standards, including higher protection of the workers, occupational health, safety trainings, emergency plans as well as the use of less toxic materials and processes as described in Chapter “4.1.7 Best practice initiatives” 897 898.

889 Schischke et al., 2019, 1 890 van der Velden et al., 2016, 160 891 Proske and Jaeger-Erben, 2019, 64 892 Zwiers et al., 2018, 21 893 Wernink and Strahl, 2015, 133 894 samsung.com, 2020b, 100 895 Q. Z. Yang et al., 2014, 221 896 González-Rodríguez et al., 2015, 841 897 apple.com, 2020c, 34 898 samsung.com, 2020b, 90ff

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4.3.4 Actions for “Use” Phase The actions for the “Use” phase are in the environmental area to increase the average operating life as well as the circular economy aspect repair. To increase the average operating life companies must change their product innovation- and life cycles and not announce a re-edition of their smartphones annually899. Furthermore, the customers must build higher awareness through campaigns of the impact, social transformation and mindset change900 901. Moreover, savings if customers take a longer contract should be enabled902.

Repair is defined as maintenance and repair of defect products, solving specified faults, to extend the product’s life903 904. Companies should offer easier and cheaper repair especially for parts which needs to be replaced more frequent like the battery905 906. Furthermore, self- repair should be supported including repair instructions to ensure a longer usage-time of a smartphone907 908.

4.3.5 Actions for “End of life” Phase This phase consists of remanufacturing and refurbishing to offer the product a second life, in the environmental area. Remanufacturing is described as re-processing of used products, to restore them to their original state, or create a like-new form through the reusage of as many parts as possible without the loss of the functionality909 910. Remanufacture contains refurbish as well as repair and results in products which offer equal warranties as new products911. Re- furbishment is restoring a used product through replacing depleted parts for new ones, sending old parts to the recycling facility and selling the refurbished devices912 913 . Refurbishing a product demands more effort than repairing, but less than remanufacture914. Moreover, is reuse of dissembled primary components for repair an action to improve environmental sustainability in this life cycle phase915 916 917.

899 van der Velden, 2014, 47 900 Wernink and Strahl, 2015, 135 901 Proske and Jaeger-Erben, 2019, 135 902 Velmurugan, 2017, 200 903 Janik and Ryszko, 2019, 524 904 King et al., 2006, 259 905 Prakash et al., 2016, 160ff 906 Velmurugan, 2017, 200 907 van der Velden et al., 2016, 160 908 bundespreis-ecodesign.de, 2018 909 Čobanova, 2019, 70 910 Jawahir and Bradley, 2016, 105 911 Sihvonen and Ritola, 2015, 641 912 Janik and Ryszko, 2019, 524 913 Potting et al., 2017, 26 914 King et al., 2006, 261ff 915 Shiftphones, 2019, 21f 916 apple.com, 2020a, 41 917 samsung.com, 2020b, 29ff

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Recycle is described as a process which convert material that would be considered as waste, into new materials or products918. Easier recycling can be achieved through more modularity and not glued or soldered materials as well as an increased recycling-rate through high-quality recycling enabled through technological developments919 920. Moreover, companies should build global recycling facilities and introduce a recycling system for electronic devices which is resource-efficient and based on the circular economy approach921.

To achieve more sustainable behavioural patterns regarding the reusing as well as recycling, Welfens et al. figured out that economic incentives, communication and collection campaigns are the main drivers to achieve it922. Furthermore, support buy-back systems sustainable waste management which include cash payments, vouchers or a convenient service923.

Last there is, recover which is “the process of collecting products at the end of the use stage, disassembling, sorting and cleaning for utilization in subsequent life-cycles”924. Not recyclable parts should be sent to special disposal firms to make them insoluble925.

The table below summarizes all researched actions to improve sustainability in the smartphone industry, categorized in five categories as above mentioned.

918 Jawahir and Bradley, 2016, 105 919 Reuter A and van Schaik, 2018, 78 920 van der Velden et al., 2016, 157 921 Exner et al., 2016, 288 922 Welfens et al., 2016, 108 923 Velmurugan, 2017, 203 924 Jawahir and Bradley, 2016, 105 925 Velmurugan, 2017, 204

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Smartphone lifecycle phases: Environmental & Social - Include social / environmental sustainability in the whole lifecycle; General / other - Effective regulations and legislations as basis for further actions; - Global chance necessary to offer sustainability; - Investing profits in environmental and social sustainability Environmental - Integration of the Circular Economy within “Raw materials extraction” (refuse), “Production” (reduce / reuse), “Use” (repair) General / other “End of life” (reuse, remanufacturing, refurbish, recycling, recover) Environmental & Social - Full transparency within the supply chain; Raw materials - Convince suppliers to use fair and sustainable raw materials; extraction - Using only certificated raw materials; - Include effective tracking / monitoring systems Environmental Raw materials - Refuse: minimizing raw material demand extraction Environmental - Reduce: emissions, toxic materials, electricity-, water usage, soil pollution, material input, and waste through more efficient production / products and cut down packaging / accessories; - Use renewable energy; - Reuse: recycled raw materials as well as recycled paper from Production the “End of Life” Cycle; - Additional for Modular Phones: Compensate the 10 % higher life-cycle impact through enabling longer use via: long term support, trust, right balance of modules, improved competitiveness through research and development

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Social - Introduce a strict code of conduct with an enhanced monitoring system which ensures: fair wages, legal contracts, bargaining rights, no child work, improved working conditions, flexible work, less overtime, possibilities of reporting grievances; Production - Increase employee satisfaction through for example variety in work, natural light, better canteen; - Offer high safety standards through: occupational health, safety and hazard prevention, safety trainings, emergency plans; Environmental - Increase the average operating life through: no planned obsolescence, long product life / using time approach, no annual re-edition of phones, longer contract lengths combined with customer Use savings, offer sustainable alternatives, build customer awareness through campaigns and change of the product-service system; - Repair: offer easier and cheaper repair for example modular battery, repair instructions, no loss of guarantee by self-repairs Environmental - Before recycling: remanufacturing, refurbish through buyback programs, who offer a second life for the phone; - Reuse: dissembled primary components for repair; - Recycling: end of life phones and parts, easier recycling through more modularity and not glued and soldered materials, End of life investments in high-quality recycling for higher recycling-rate, build up global recycling facilities, increase recycling motivation of customers through device deposit, education, collection campaigns, buyback programs; - Recover: raw materials, send not recyclable parts to special disposal firms to make them insoluble

Table 18: Overview of actions to improve sustainability Source: own table Grey: Smartphone lifecycle phases Green: Environmental Orange: Social Blue: Environmental and Social

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5 Conclusion Reviewing the literature of sustainability showed that this concept has a long history and has its foundation in the forestry industry where only as much wood should be cut as can grow back926. It has been developed through the United Nations and researchers to a broad term which contains three components environmental, social and economic aspects which are intertwined and not separate927, meet the needs of the present without compromising the ability of future generations928 929 930 931 by carrying capacity of the ecosystem932 through development of renewable natural resources which implies respecting limits933 of the site’s natural land, water and energy resources934 (oceans, earth and atmosphere935 and by improving the quality of the human life936 937 through rising of real income, increasing educational standards and improvement of the health of the nation to advance the general quality of life938.

The analysis of the researched sustainability models “Triple Bottom Line”, “Circles of Sustain- ability”, “Three-nested dependencies Model” and “Prism Model of Sustainability” indicated that all four models are focusing on addressing different stakeholders and addressing the economic, environmental and social dimension939 although the “Prism Model of Sustainability” adds the institutional perspectives940 and the “Circles of Sustainability” politics941. The “Triple Bottom Line” is more an accounting model which tries to measure sustainability in each area942, the “Tree-nested dependencies Model” is mainly an environmental measurement toll943 and the remaining Models “Circles of Sustainability” and “Prism Model of sustainability” showing how companies or politicians are performing in the different areas of sustainability944 945.

926 Schulze, 2006, 68 927 McKeown, 2002, 8 928 Brundtland, 1987, 41 929 Morelli, 2011, 5 930 EPA Sustainability, 2014 931 forumforthefuture.org, 2020 932 IUCN et al., 1991, 10 933 Holdgate, 1993, 481 934 Vieira RK., 1993, 10 935 The President's Council on Sustainable Development, 1999, n.p. 936 IUCN et al., 1991, 10 937 forumforthefuture.org, 2020 938 Pearce et al., 1989, 1 939 Elkington, 1997, 73f 940 Spangenberg, 2002b, 103ff 941 James, 2015, 48 942 Elkington, 1997, 74f 943 Flint, 2010, 35 944 Elkington, 1997 945 Spangenberg, 2002b, 103ff

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The researched benefits which are created through sustainability are for companies a higher brand value946 947 948 949 as well as increased financial performance950 951 952. Regarding customers are better reputation953 954 955, higher customer satisfaction956 957 958, increased brand equity959 960, better brand image961, positive effects on customer loyalty and relationships962 963 964 965 966, increased trust967 968 969 as well as brand advocacy970 found. And last advantages, which are employee-related are improved attractiveness for future employees971, positive influence on employee’s attitude972, increased motivation973, employee commitment974 and decreased staffing costs975. The researched challenges of sustainability are strategic integra- tion976, trustworthy sustainability reporting and communication of sustainability activities977 978, not becoming a greenwashing company979 and environmental sustainability through forces from governments and institutions980.

The results within the second researched topic are that the “Circular Economy” approach is based on former times where human societies lived in synergy with the nature and we considered ourselves as part of this nature981.

946 Cole, 2017, 59 947 Gürlek et al., 2017, 409ff 948 Rivera et al., 2019, 395ff 949 Axjonow et al., 2016, 220f 950 Cole, 2017, 59 951 Holzapfel et al., 2017, 109 952 Stehr and Struve, 2017, 140 953 Vesal et al., 2020, 4ff 954 Lai et al., 2010, 459–486 955 Khojastehpour and Johns, 2014, 332 956 Homburg and Rudolph, 2001, 7 957 Jean et al., 2016, 525 958 Ashraf et al., 2017, 1366 959 Pai et al., 2015, 686f 960 Lai et al., 2010, 459–486 961 Vesal et al., 2020, 4ff 962 Ashraf et al., 2017, 1366 963 Cole, 2017, 59 964 Gürlek et al., 2017, 409ff 965 Rivera et al., 2019, 395ff 966 Axjonow et al., 2016, 220f 967 Lee and Lee, 2019, 3–6 968 Han and Childs, 2016, 30 969 Ashraf et al., 2017, 1366 970 Pai et al., 2015, 686f 971 Greening and Turban, 2000, 254 972 Peterson, 2004, 313 973 Peterson, 2004, 313 974 Greening and Turban, 2000, 254 975 Peterson, 2004, 313 976 Porter and Kramer, 2006, 78ff 977 Knoppe, 2015a, 27 978 Fiala and Kaufmann, 2012, 15 979 Seele and Gatti, 2017, 237f 980 Conard, 2013, 3378 981 Sillanpää and Ncibi, 2019, 1

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This chanced through the industrialization and the concept of the “Circular Economy” was getting more relevant especially within the last twenty years982 983. The investigation of the term showed that the “Circular Economy” is a regenerative system in which the demand of resources is minimised by slowing, closing, and narrowing material and energy loops984, in which waste would be used as a resource to reduce primary resource consumption985 986 which leads to a sustainable, resource-efficient and a competitive economy987. It limits the throughput flow to a level that nature tolerates and utilises ecosystem cycles in economic cycles, by respecting their natural reproduction rates988, where products could be repaired, reused, maintained, refurbished or upgraded instead of thrown away989 990 991 992 993 994 with focus on recycling, use of renewable energy and eliminating the use of toxic chemicals995 996, which should keep the resources in use for as long as possible997, which increases the value of products, materials or resources998 as well as maximize the ecosystem functioning and the human well-being999 1000.

The analysis of the researched Circular Economy models “R Frameworks”, “ReSOLVE Frame- work” and the “System Diagram”, showed as result that the different R frameworks serve as core principles behind the circular economy and are sharing the dimensions: Reduce, Reuse, Recycle as well as Recover1001 1002 1003. The System Diagram serves as basis for a better understanding of the Circular Economy and is translated into the six business actions of the ReSOLVE Framework which are applied from global leaders1004. They are related to the R Framework as follows: similarities between Reduce and Optimise, the different forms of Reuse with Share and Loop, Recycle with Loop and Recover with Regenerate.

982 Lacy and Rutqvist, 2015, 19 983 Ghisellini et al., 2016, 11 984 Geissdoerfer et al., 2017, 759 985 Preston, 2012, 1 986 European Environment Agency, 2014, 11 987 European Commission, 2015, 2 988 Korhonen et al., 2018, 39 989 Preston, 2012, 1 990 Ellen Macarthur Foundation, 2013, 7 991 European Environment Agency, 2014, 11 992 Mitchell, 2014, 2 993 Geissdoerfer et al., 2017, 759 994 Kirchherr et al., 2017, 221 995 Ellen Macarthur Foundation, 2013, 7 996 European Environment Agency, 2014, 11 997 Mitchell, 2014, 2 998 European Commission, 2015, 2 999 Murray et al., 2017, 369 1000 Ghisellini et al., 2016, 27 1001 Kirchherr et al., 2017, 223 1002 Blomsma and Brennan, 2017, 603f 1003 Kirchherr et al., 2017, 223 1004 Ellen Macarthur Foundation, 2015b, 22

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The ReSOLVE framework adds Virtualise and Exchange which are booth ways of applying the Circular Economy 1005.

The researched benefits which are build up through the circular economy are in general reduction in negative environmental externalities1006 1007, minimising of imports dependency1008, creating jobs1009 1010, economic growth1011 1012 and land productivity and soil health1013. Regard- ing to the company are better financial performance through savings1014 1015 1016, increased reputation1017 1018 1019, efficiency and waste prevention1020, fostering innovation1021 1022, reduced volatility and higher security of supply1023 and need for new business services1024. Last, in the customer related area are increases the disposable income1025, offer a greater value of prod- ucts1026 and reduces the obsolescence’s discovered1027.

The researched challenges of the circular economy are in general rebound effects1028, difficulties in implementing1029 and lack of standard systems1030. Company-related are design and quality challenges1031 1032, cultural troubles1033, technological limits of recycling1034 1035 1036 1037, high purchasing and production costs1038 1039 found.

1005 Ellen Macarthur Foundation, 2016, 9 1006 Ghisellini et al., 2016, 26 1007 Ellen Macarthur Foundation, 2015a, 13 1008 European Environmet Agency, 2016 1009 Ellen Macarthur Foundation, 2015c, 35f 1010 Ellen Macarthur Foundation, 2015d, 11 1011 Ellen Macarthur Foundation, 2015d, 11 1012 Ellen Macarthur Foundation, 2015c, 33 1013 Ellen Macarthur Foundation, 2015d, 13 1014 Aboulamer, 2018, 765 1015 Lüdeke‐Freund et al., 2019, 39 1016 Bové and Swartz, 2017, 1 1017 Benton et al., 2015, 25 1018 Aboulamer, 2018, 768 1019 Ellen Macarthur Foundation, 2015d, 14 1020 Bassi and Dias, 2019, 531 1021 Ellen Macarthur Foundation, 2015d, 11 1022 Jesus and Mendonça, 2018, 75f 1023 Ellen Macarthur Foundation, 2015a, 14 1024 Ellen Macarthur Foundation, 2015a, 14 1025 Ellen Macarthur Foundation, 2015c, 65f 1026 Ellen Macarthur Foundation, 2015d, 15 1027 Ellen Macarthur Foundation, 2015d, 15 1028 Zink et al., 2014, 1107 1029 European Environmet Agency, 2016 1030 J. Li and Yu, 2011, 110 1031 Singh and Ordoñez, 2016, 349 1032 Bakker et al., 2014, 15 1033 Kirchherr et al., 2018, 270, 268 1034 Ghisellini et al., 2016, 27 1035 Lieder and Rashid, 2016, 41 1036 Velis and Vrancken, 2015, 774 1037 Pringle et al., 2016, 546 1038 Shahbazi et al., 2016, 440 1039 Palm et al., 2016, 554

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Last in the customer area are lack of public awareness1040 1041, thrill of newness1042 1043 as well as the consumer knowledge and perception researched1044.

The above-mentioned findings support the answering of the research question “What are sustainability initiatives and practices in the smartphone industry?” as “Sustainability” is the basis for this work and helps to evaluate the several activities of the smartphone producers. The different elements of the “Circular Economy” are also applied from all analysed smartphone manufacturers and therefore, the theoretical basis helps to give recommendations for the improvement of sustainability within the smartphone industry.

The first sub-question of the main research question which is “What are best practise initiatives in the social and environmental area of sustainability?” The examination of the companies Shift GmbH, Fairphone, Apple, Google, Samsung and Huawei showed that there are several initiatives available within the smartphone lifecycle phases. The best practise initiatives in the raw materials extraction and production phase within the environmental and social area of sustainability are to convince suppliers to use fair and sustainable raw materials, the usage of certificated raw materials as well as a transparent supply chain. Within the production in the environmental area carbon reduction, using renewable energy, energy efficient production and products, reduction of water, waste and toxic materials, use of recycled raw materials as well as recycled paper and environmental friendly printing, is visible. The social aspect in the production consist of fair wages, improved working conditions, increased employee satisfaction, occupational health, safety and hazard prevention, legal voluntary contracts, no temporary workers, no child labour, no discrimination, harassment and abuse, bargaining rights, possibilities of reporting grievances as well as an auditing system through a code of conduct. In the use phase are in the environmental area modularity (enables easier repair and a predicted longer life expectancy), no loss of guarantee by self-repairs or installing other software as well as long product life and using time visible. During the end of life phase in the environmental dimension modularity (enables more efficient recycling), device deposits, buyback programs, refurbishment, remanufacturing, reuse of disassembled primary components for repair, are visible. Another aspect which addresses the social and environmental area of sustainability are investing of profits in sustainable and social projects.

1040 van Weelden et al., 2016, 746 1041 Lieder and Rashid, 2016, 47 1042 van Weelden et al., 2016, 746 1043 Lieder and Rashid, 2016, 47 1044 van Weelden et al., 2016, 746f

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The second sub-question is “What are initiatives and practises in the smartphone industry that are against the principles of sustainability?” The analysis of the literature showed that there are several lacks within the social and environmental sustainability. Within raw materials extraction are environmental and social issues in a complex supply chain1045 1046, pollution, toxic risks, wars, health risks, child and slave labour1047 1048 1049. In the production phase are the environmental issues of emissions through electricity use, water / soil pollution1050 as well as a high material consumption1051. In the social area of sustainability within the production are the issues lack of labour rights1052 and work around laws which lead to child labour and over- times1053, that the code of conducts are not adhered1054, monotone work (dehumanisation)1055, low wages as well as health issues (hazardous materials)1056. In the use phase are figured out the environmental issues of short average operating life1057, short product innovation- and life cycles1058, annual re-edition of smartphones1059, expensive and difficult self-repairs1060, no right of self-repair and planned obsolescence1061 1062. The research showed in the end of life phase within the environmental dimension the issues that the full recycling potential remains unused (combined materials, lack of technology)1063, illegal recycling (harm biosphere)1064, lack of recycling facilities1065, low willingness for recycling1066 and non-recyclable parts1067. Last modular smartphone design causes the issues of a 10 % higher life-cycle impact1068, balancing modularity is difficult1069, there is a lack of continuous innovation as well as design / performance issues1070

1045 Wernink and Strahl, 2015, 124 1046 Exner et al., 2016, 276 1047 van der Velden et al., 2016, 156 1048 Exner et al., 2016, 277 1049 Cascais, 2017 1050 van der Velden et al., 2016, 156 1051 Velmurugan, 2017, 200 1052 Josephs, 2014, 216ff 1053 Vonk, 2018, 6f 1054 apple.com, 2016 1055 Höfner et al., 2019, 20f 1056 van der Velden et al., 2016, 156 1057 van der Velden, 2014, 47 1058 Exner et al., 2016, 288 1059 Exner et al., 2016, 272 1060 Schischke et al., 2019, 16 1061 Stempel, 2020 1062 van der Velden et al., 2016, 160 1063 Velmurugan, 2017, 193 1064 Wernink and Strahl, 2015, 126 1065 Exner et al., 2016, 288 1066 Exner et al., 2016, 288 1067 Velmurugan, 2017, 204 1068 Schischke et al., 2019, 1 1069 Proske and Jaeger-Erben, 2019, 64 1070 Proske and Jaeger-Erben, 2019, 65

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The last and third sub-question is “Which actions can be established to improve sustainability within the smartphone industry?” The research is based on the two before analysed sub-questions and lead to the final recommendations. General improvements in the environmental and social area of sustainability are to include social / environmental sustainability in the whole lifecycle1071, effective regulations and legislation as basis for further actions1072, global chance is necessary to offer full sustainability1073 1074 1075 and investing profits in environmental and social sustainability1076 1077. Moreover, plays the integration of the Circular Economy in the environmental area in all lifecycle phases an important role. Within “Raw materials extraction” (refuse), “Production” (reduce / reuse), “Use” (repair) “End of life” (reuse, remanufacturing, refurbish, recycling, recover).

Within the raw materials extraction phase in the environmental and social area the recommendations full transparency within the supply chain1078 1079, convince suppliers to use fair and sustainable raw materials1080 1081, using only certificated raw materials1082, and include effective tracking / monitoring systems1083 are given. Within the environmental area in the raw materials extraction phase is refuse through minimizing the raw material demand necessary1084 1085. Dur- ing the environmental production phase was figured out reduce: emissions, toxic materials, electricity-, water usage, soil pollution, material input, and waste through more efficient production / products and cut down packaging / accessories1086 1087 1088, use renewable energy1089 1090 1091 1092, reuse: recycled raw materials as well as recycled paper from the “End of Life” Cycle1093 1094, additional for modular phones:

1071 van der Velden et al., 2016, 151 1072 Velmurugan, 2017, 204 1073 Haucke, 2018, 1728 1074 Wernink and Strahl, 2015, 124 1075 Exner et al., 2016, 276 1076 Shiftphones, 2019, 3 1077 fairphone.com, 2020b 1078 Wernink and Strahl, 2015, 124 1079 Exner et al., 2016, 276 1080 samsung.com, 2020b, 102 1081 Vonk, 2018, 755 1082 van der Velden et al., 2016, 151f 1083 Wernink and Strahl, 2015, 133 1084 Čobanova, 2019, 70 1085 Janik and Ryszko, 2019, 524 1086 Čobanova, 2019, 70 1087 Jawahir and Bradley, 2016, 105 1088 Kirchherr et al., 2017, 223 1089 Elkington, 1997, 79 1090 Stahel, 2016, 436 1091 Ellen Macarthur Foundation, 2013, 7 1092 European Environment Agency, 2014, 11 1093 Shiftphones, 2019, 22f 1094 Benton et al., 2015, 25

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compensate the 10 % higher life-cycle impact through enabling longer use1095 via: long term support, trust1096 and right balance of modules1097. In the social area of the production are important: introduce a strict code of conduct with an enhanced monitoring system1098 1099, increase employee satisfaction1100 and offer high safety standards1101 1102. Within the use phase in the environmental area are the measures increase the average operating life1103, repair: offer easier and cheaper repair for example modular battery, repair instructions and no loss of guarantee by self-repairs 1104 1105 1106 1107. Last in the end of life phase within the environmental area are the recommendations before recycling: remanufacturing, refurbish through buyback programs which offer a second life for the phone1108, reuse: dissembled primary components for repair1109 1110 1111, recycling: end of life phones and parts1112, recover: raw materials and send not recyclable parts to special disposal firms to make them insoluble1113.

Summing up it is remarkable that all sustainability initiatives are still existing within the industry, but the realization and the monitoring need further improvement, therefore it is a long way to produce a complete sustainable smartphone1114

1095 Schischke et al., 2019, 1 1096 van der Velden et al., 2016, 160 1097 Proske and Jaeger-Erben, 2019, 64 1098 Wernink and Strahl, 2015, 133 1099 samsung.com, 2020b, 100 1100 Q. Z. Yang et al., 2014, 221 1101 apple.com, 2020c, 34 1102 samsung.com, 2020b, 90ff 1103 van der Velden, 2014, 47 1104 Prakash et al., 2016, 160ff 1105 Velmurugan, 2017, 200 1106 van der Velden et al., 2016, 160 1107 bundespreis-ecodesign.de, 2018 1108 Welfens et al., 2016, 108 1109 Shiftphones, 2019, 21f 1110 apple.com, 2020a, 41 1111 samsung.com, 2020b, 29ff 1112 Exner et al., 2016, 288 1113 Velmurugan, 2017, 204 1114 Exner et al., 2016, 287

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5.1 Limitations and Further Research The goal of this thesis was to give a comprehensive overview of the topics sustainability and circular economy as well as the sustainability initiatives and practices in the smartphone industry. During the reviewing process for this master thesis, several different, papers, articles and books have been analysed and critically discussed as well as compared with other sources. It was challenging to prove the sustainability activities of the smartphone manufacturers as in their sustainability reports everything seems perfect. However, through the research I figured out that a lot of sustainable practices had also negative aspects or showed a lack of sustainability. Additionally, is this master thesis limited on only a few companies, otherwise it would have blown the scope of the work. Therefore, a further research, analysing all smartphone manufacturing companies would be exciting.

Furthermore, it would be interesting how members of the several companies would assess the sustainability activities, which need further research from company insiders or investigative journalists to prove all the initiatives and practices in this industry. Moreover, a lot of factors which are not analysed in this thesis would be interesting for further research. Starting with the influence of sustainability on the financial performance. How successful are companies like Fairphone or the Shift GmbH compared to the big market players or how successful would be companies like Apple, Samsung and Huawei if they apply sustainability and the circular economy in a perfect way?

Additionally, the influence of the several stakeholders of smartphone manufactures is not in detail researched, especially the political influence. How are the different laws influencing the companies? Would strict political regulations chance the hole smartphone industry and how? Moreover, it would be interesting how the customers think about sustainability. Would lead more sustainability to higher market shares or do customers only pay attention on functionality, design and the price? Another interesting further research topic would be if philanthropic aspects of sustainability are sufficient to attract more customers or if a strategic integration is required. Moreover, the influence of sustainability and the circular economy in different continents is an interesting research topic. Are there local differences within the continents concerning customer preferences or political regulations regarding to the sustainability strategy of companies?

As a result of the literature review a general overview of the topics sustainability and circular economy is given. Moreover, the three research questions are answered detailed and give first insights in the sustainability activities and practices of the companies including measures how to improve sustainability in general.

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