Transition towards urban sustainability – case of critical raw materials

Abstract

This study explores urban sustainability transitions with a focus on circular cities and critical raw materials. It highlights multilevel collaborative innovation among various stakeholders to achieve circularity and sustainability. The research identifies key actors such as city procurement organizations, CE development organizations, waste management organizations, and business development organizations, detailing their resources, activities, and value contributions. The findings emphasize the importance of urban-rural symbiosis, comprehensive city strategies, and longitudinal research for effective governance and systemic transformation. Practical implications suggest that professionals, regulators, companies, and cities can benefit from understanding and supporting sustainability transitions.

Headnote

Abstract: This study explores urban sustainability transitions with a focus on circular cities and critical raw materials. It highlights multilevel collaborative innovation among various stakeholders to achieve circularity and sustainability. The research identifies key actors such as city procurement organizations, CE development organizations, waste management organizations, and business development organizations, detailing their resources, activities, and value contributions. The findings emphasize the importance of urban-rural symbiosis, comprehensive city strategies, and longitudinal research for effective governance and systemic transformation. Practical implications suggest that professionals, regulators, companies, and cities can benefit from understanding and supporting sustainability transitions.

Keywords: Sustainability transitions; collaborative innovation; critical raw materials (CRM); circular cities; ecosystem pie; shared value.

1 Introduction

Cities, as hubs of reusable products and secondary materials, can play a major role in innovating use and recirculation of the critical material resources, supporting societal resilience, and reducing virgin material extraction. Multilevel transition towards urban sustainability involves the collaborative innovation of various levels of governmental and non-governmental organizations, as well as other stakeholders to address complex issues such as sustainability and circularity (Hooghe & Marks, 2020). However, despite of the common focus on sustainability, there are critical discrepancies between the interests of involved actors. Managing these tensions between the actors required for collaborative innovation and enhancing systematic innovation are both theoretical and practical problems that need to be solved. Then, understanding the conflicting interests and expectations between ecosystem actors is crucial to enhance transition towards urban sustainability. This paper is based on the assumption that hybrid combination of different levels and related means provides the basis for synergistic, but dynamic forms of selfgovernance.

The Critical Raw Materials Act (CRMA) passed by the Council of the European Union in March 2024 as a part of Green Deal Industrial Plan. One important target of the CRMA, with a strong relevance also for the local governments, is to reduce the consumption of virgin. Critical raw materials (CRM) are crucial to many innovations for green and digital technologies like electric vehicles, renewal energy and electronics. Recently, significant changes in geopolitical has led to the growing interests of security of their supply. This implies developing substituting solutions, improving resource efficiency and developing end of life management through reuse, repair, and recycling (Gstöhl & Schnock 2024). As the act is now proceeding, CRMs provide a valuable case to study the exploration phase of CE transition in the context of cities.

In this study, we utilized an ecosystem approach to explore urban sustainability transitions with a focus on circular cities and critical raw materials. In the circular city context, there are two distinct levels of transition, i.e. the level of "strategy" and that of the "project". Furthermore, four main actor groups were identified. For cities, multidimensional shared value, i.e. pursuing financial success in a way that also yields societal benefits, is natural. Our case findings showed that making the shared value visible can support collaboration between different ecosystem actor groups by highlighting the opportunities for collective impact building. When ecosystem actors are configuring the shared value together, one could focus on what each one can do best.

2 Current understanding

Sustainable Urban transition - towards Circular cities

More than half of the world's population, around 4.4 billion people, lives in cities. This number is expected to increase, with the urban population expected to more than double by 2050, at which point nearly 70% will live in cities (The World Bank, 2025). Cities are major consumers of resources and producers of waste, consume more than 75 % of all world's natural resources (Abu-Rayash & Dinçer, 2021). Thus, there is an urgent need to transform cities into more resilient and sustainable urban environments (Brglez et al., 2024). Cities would need to be more resilient to disruptions and internal and external shocks and long-term changes, without putting increasing pressure on scarce resources or producing more waste (Williams, 2023). Resources are better managed to lessen cities' global ecological impact, and increase resource security and urban resilience (Williams, 2023). Sustainable urban transformation refers to the comprehensive changes in city ecosystems to achieve environmental, social, and economic sustainability. One way to achieve these goals is by adopting circular economy principles (Williams, 2023, Prendeville et al., 2018).

A circular city can incorporate the principles of the circular economy in all its functions and activities, and establish a city system that is regenerative (Brglez et al., 2024). The European Union defines the circular economy as 'an economy where the value of products, materials and resources is maintained in the economy for as long as possible, and the generation of waste minimized' (Eurostat, 2019). Most definitions of a circular city focus on material and energy flow, with strategic actions related to producing goods and services, augmenting the use value of resources, and managing waste (Brglez et al., 2024). Prendeville et al. (2018) conceptualised circular cities to incorporate both top-down and bottom-up approaches. A top-down approach is an institution-driven change, including strategy policy decisions and public-private partnership concerned with developing and facilitating market initiatives. A bottom-up change approach refers to social movements and innovations driven by civil society, NGOs, communities, and businesses through grassroots initiatives and entrepreneurial activities.

Research on sustainability-oriented innovation emphasizes concurrent value creation in multi-actor settings as a prerequisite (Adams, et al., 2016) and thereby expands the focus on social and environmental impacts alongside economic outcomes as the purpose of innovation efforts. Consequently, Ghassim and Foss (2020) emphasized the concept of open sustainability-oriented innovation as the intersection of open innovation, corporate sustainability and external stakeholders. In other words, collaborative innovation endeavours are required to sustainability transition.

Innovation ecosystems - case Circular cities

Although there is a growing interest in developing circular cities, a significant knowledge gap persists regarding the concrete governance mechanisms that support them. Currently, cities are breaking out of traditional local-regional-national hierarchies and act in translocal and transnational city networks or in public-private collaborative arenas (Pierre, 2019; van der Heijden, 2018; van der Heijden, 2019). In other words, urban ecosystems have several forms and directions. Cities have become interesting locations for the study of climate leadership and governance from the local to the global level (van der Heijden, 2018, van der Heijden, 2019). Thus far, the discussion of the outcomes of the transitions has two distinct levels: the level of "strategy" and that of the "project". Generally, the decision-makers at the strategy level are national governments or other relevant city authorities while at the project level, the main decision-makers are associated to some form of local government.

Thus, the gap between high levels of policy ambitions and the reality of limited activity on the ground of urban ecosystem (van der Heijden, 2019) leads to different views on aims and means of urban sustainability transition (Valkokari et al. 2024). In the complex, circular city context, it is essential to understand the roles of city actors and how they interact and rely on one another to achieve a specific goal. Various actors must rely on one another to achieve this goal. Furthermore, co-created linkages among public and private 'actors· provides means for self-governance within the wider urban ecosystem(s) (Vedeld et al. 2021). However, cities face challenges here due to the heterogeneity of their stakeholders and actors,and competing priorities of these heterogeneous actors (Visnjic et al., 2016).

One approach to understanding this is the ecosystem approach. The ecosystem approach enables consideration of actors, resources, and dependencies surrounding the ecosystem-level goal (cf. Jacobides et al., 2018). Ecosystems have a system-level outcome that is greater than any single participant could deliver alone (Aarikka-Stenroos et al., 2021). The ecosystem is defined "by the alignment structure of the multilateral set of partners that need to interact in order for a focal value proposition to materialize" (Adner, 2017, p.42). Alignment structure, defined as "the extent to which there is mutual agreement among the members regarding positions and flows," (Adners, 2017, p. 47).

This study specifically examines the interdependencies between and alignment of the actors that create the internal city ecosystem to achieve a circular goal. To map and analyze these city ecosystems, we employ the ecosystem pie approach developed by Talmar et al., 2020. The ecosystem pie model follows the so-called structuralist tradition of ecosystems (e.g. Adner, 2017, Jacobides et al., 2019). According to the structuralist tradition, the ecosystem is characterized by a system-level goal (Adner, 2017; Jacobides et al., 2019) or value proposition.

The ecosystem comprises actors, including organisations, institutions, communities, and individuals, who are the main agents engaging in value creation and capture within any given ecosystem (Talmar et al., 2019). Actors in ecosystems are performing distinct productive activities (Jacobides et al., 2019). Therefore, when analysing city ecosystems, the focus should be on actors whose productive contributions are at least partially aligned with the specific goals of that ecosystem (Talmar et al., 2019). In the circular city context, the main actors are identified as (1) Procurement, where cities leverage their purchasing and tendering power to further CE development (Prendeville et al., 2018), (2) CE development, which set the strategic agenda and organise development activities within cities (Prendeville et al., 2018), (3)Waste management organisations, which play a central role in enabling resource recovery and recycling (Valkokari et al. 2024), (4) Business development, which involves supporting local companies and start-ups in developing innovative business proposals and solutions that contribute to circular development. (Prendeville et al., 2018).

Ecosystem pie includes six actor-level constructs: resources, activities, value addition and capture, dependence and risk (Talmar et al. 2019). These constructs interact both within and between actors (Talmar et al. 2019, Adner, 2017). In this study, we have focused on resources, activities and value aspects to shed light on multidimensional shared value between the actors.

3 Methodology

3.1. Research design

The aim of this paper is to advance understanding urban sustainability transition in a multi-actor ecosystem setting and, in particular, the multilevel transition that aims to bridge together strategic agendas and more operative development lead by different actors and their interconnected but not necessarily aligned aims. To explore such complex social issues of systemic transition towards circularity of cities -and especially on circularity of critical raw materials (CRM), we formulated the main research question: How are different ecosystem actors and their activities supporting or influencing transition(s) towards urban sustainability in the context of critical raw materials? To assess this phenomenon 'in a new light' (Robson, 2002), p. 59), a qualitative explorative case study fits our purposes.

3.2. Data collection and analysis

We focused on the complex issues of sustainability transition and to assess this phenomenon from several perspectives, the study is based on a qualitative research approach. Case study as a research approach focuses on real-life events and takes the context (Yin, 2018), that is, the urban sustainability transition into consideration. Finnish cities can provide an interesting area for the study as Finland ranks high on sustainability performance and actions (Lafortune et ah, 2022), and the circular economy transformation process can be identified also at city levels.

We conducted semi-structured interviews (n=15) among actors that participated in the strategic planning and development of activities for urban sustainability, the special focus was on circularity of critical raw materials. In addition to public officials in cities, we have interviewed representatives of business development and waste management organisations within urban ecosystems. Altogether, we had 15 interviewees from 3 Finnish cities. Interview recordings, transcriptions, and written interview memos were used as data sources. We analyzed the data through thematic, qualitative analyses in a multidisciplinary research team. The analysis proceeded from the recognition of citylevel patterns to identification of crossing themes, and each round of analysis generated a more profound form of categorization.

In this paper, we utilised an ecosystem pie introduced by Talmar et al. (2020) to answer to the main research question, i.e. to analyse how are different ecosystem actors and their activities were supporting or influencing transition(s) towards urban sustainability in the context of critical raw materials? We focused on the four ecosystem actors, we had interviewed. The analyses were first made by two researchers, who were involved in interviews and then reflected together by three authors. This second round provided research triangulation, as the researchers have different backgrounds, i.e. sustainable supply chain management, service business and interorganisational collaboration.

4 Findings

The purpose of the examined ecosystem in this study is defined as enhancing circularity of CRMs. According to the interviews, the motivation for improving the circularity of CRMs in cities is based on reducing emissions, implementing climate actions and securing the supply of materials and products. According to the interviews, even though CRMs as such are not in many cases explicitly implied in organizational or city-level plans and strategies, these aspects are often aligned with broader circularity goals and strategies of cities or individual organizations.

The following sections focus on describing the findings of the current study according to the key constructs of the ecosystem pie model (Talmar et al., 2020): the resources, activities, and value aspects of the organizations that are involved in the ecosystem. These sections are organized according to the perspectives of four actor groups that were included in this study: city procurement organizations, city CE development and strategy organizations, city waste management organizations and city business development organizations. The ecosystem pie for summarizing the findings is presented in Figure 1.

4.1. Procurement

Resources: The resources for the city procurement organizations included guidelines and mandates for enhancing circularity of CRMs and innovative purchasing. The interview participants described that national and city-level guidelines have a critical role in guiding how procurement in cities is executed and which factors are prioritized. The lack of clear policies and guidelines on which materials are considered CRMs and how these materials should be taken into consideration in procurement processes can lead to misalignments between diverse strategic aims of the city. For example, procurement might prioritize financial efficiency, which could lead to negative effects concerning optimizing the circularity of materials.

Another resource perspective was that the city procurement should have clear mandates to take the circularity of CRMs forward. This is critical for prioritizing CRM circularity in city procurement, for example through including designed roles in the organization focusing specifically on this topic. The mandate to take CRM circularity into consideration in city procurement is mediated, for example through project funding that is directed specifically to CRM circularity, in addition to higher-level guidelines, policies and regulation that steer city procurement priorities.

Innovative procurement was also mentioned as a resource for city procurement. The logic behind this perspective is that these resources of procurement organization aims to influence the uptake of novel and innovative solutions for improving the circularity of CRMs by procuring solutions that are not yet widely used or are new on the market. This type of resources can enable activities that improve the market position of, for example, novel technological solutions.

Activities: The activities for the city procurement organizations included influencing the national guidelines for circularity of CRMs and executing market dialogue with the companies involved in the field. The interviewees described that influencing the national guidelines for circularity of CRMs is likely to happen through wider communities and networks than the procurement organization of an individual city. For example, hubs of multiple cities could be formed for enhanced volume and strength of impacting the national-level policies.

Market dialogue, which is a typical activity of innovative procurement, was described by the interviewees as an action to shape markets towards CRM circularity. Market dialogues were referred to as interactive buyer-supplier interphases that could potentially improve the availability of suitable solutions in the market, taking CRM circularity into consideration.

Value: The city procurement representatives described that the contribution of the actions of this city department to CRM circularity is improving and ensuring material efficiency in purchasing. City procurement policies and processes can influence which aspects are prioritized in city operations, which market actors and offerings are promoted and what kind of demand is created in the market.

4.2. Circular economy development

Resources: The resources for CE development organizations included CE-related competencies and capabilities, and national and global-level CE networks. The CE development organization representatives described that CE is prioritized and well understood in strategic level of city planning and execution. All of the cities included in this study had explicitly indicated a СЕ-focused development plan and strategy and designed roles were included for advancing CE-related goals in city organizations. However, competencies specifically related to CRM circularity received less attention, and the capabilities associated with this particular topic remained relatively limited.

CE development representatives also mentioned the role of national and regionallevel networks in advancing CE activities. The cities have established collaboration with relevant national and regional stakeholders, including joint municipal authorities, research institutions and related companies to enhance CE activities. While these networks provide support for enhancing CE in general level, designated networks are needed for CRM-oriented actions and coordinators or orchestrators for facilitating them are required.

Activities: The activities of CE development organizations included developing and implementing CE strategies, facilitating СЕ-focused pilots or demonstrations, and raising awareness of СЕ-related themes in cities. Developing and implementing CE strategies was described as a core reason for the existence of the CE development department in cities, and therefore it was considered a key activity to address the circularity of CRMs. Additionally, cities take part in various projects concerning CE implementation areas. One of the roles of cities in these often EU- or nationally funded projects is facilitating pilots or demonstrations for novel CE solutions, often with companies. Novel solutions for CRM circularity can also be developed within these experiments. Finally, the interviewees noted that awareness of CE solutions, particularly those related to CRMs, remains relatively low both among citizens and within city organizations. Raising awareness through, for example, communication campaigns was mentioned as one of the activities that could improve awareness.

Value: The value added by the CE development organization was described to execute through СЕ-related planning and strategies in cities. CRM circularity can be promoted through a top-down approach, as СЕ-strategies foster a СЕ-oriented mindset by providing guidance for various activities across multiple departments and broader city structures and activities.

4.3. Waste management

Resources: The resources for waste management organizations included waste management services, subcontracting network and material-related competences. First, waste management services were seen as the core and fundamental enabler of CE in the waste management organizations. These services were described as critical tools to influence the circularity of CRMs. The waste management services in the interviewed organizations included for example, waste collection, recycling, hazardous waste disposal, and energy recovery. The services also included for example, environmental reporting and landfill management to promote the CE. The existing subcontracting networks of waste management organizations were seen as a key resource for enabling these services. For example, waste management organizations utilize subcontractors for waste transportation and processing, among other services.

The waste management organizations also described a variety of material-related competences that were seen as key resources for enabling CRM circularity. Each interviewed waste management organization described specific material-related competencies in which they have specialized expertise, such as textile waste, minerals and stone, nutrient cycling and fertilizers, and plastics. However, Extended Producer Responsibility (EPR) was mentioned as a factor that shifts the responsibility of materials to companies, and due to which waste management organizations might not prioritize certain material competences.

Activities: The activities of waste management organizations included technology development and regulatory influencing. The waste management organizations are involved in various technology development activities, for example they develop new treatment methods for raw materials in the chemical and plastics industries, seek higher value-added processing for materials, identify substitute materials for critical raw materials, explore new applications for various materials, and innovate processes to enable shorter processing cycles.

The waste management organizations also aim to influence the existing regulatory and policy environment by for example, providing statements on key CE issues and indirectly by participating in CE associations and networks.

Value: The waste management representatives described that their contribution to CRM circularity is related to improving and ensuring material efficiency in waste management. Additionally, easiness of material efficiency to other actors in the ecosystem was described as added value. This is executed through various waste management services.

4.4. Business development

Resources: The resources for city business development organizations included businessrelated competences, guidelines and industrial networks. The city business development organizations provide multiple business-related services to other ecosystem actors, which are based on diverse business-related competencies, for example linked to competitiveness of companies, the market and business growth. The actions of business development organizations are based on СЕ-related guidelines of cities, for example CE strategies that in some cases include CRM circularity-related guidelines. The business development organizations also facilitate and coordinate, as well as take part in various СЕ-related industrial networks, some of which deal specifically with CRM circularityrelated aspects.

Activities: The activities of business development organizations included business development services and network actor engagement. The business development services included for example, supporting companies in СЕ-related business and strategy planning and providing information about the market situation. CRM circularity was described to be developed especially within СЕ-related experiments and piloting in companies, which the business development services facilitate and support. The role of business development organizations in business networks is to facilitate and coordinate communities, include new actors into the networks and link actors together to enable for example novel business opportunities, value chains, industrial symbiosis or knowledge transfer.

Value: The activities of business development organizations enable regional competitive advantage in the field of CE through the competitiveness of local companies. The potential for CRM circularity was described to be advanced specifically though business growth of existing companies and uptake of novel business models. Additionally, these activities are reflected in increasing and maintain employment opportunities in regions.

4.5. Summary of case findings

To shed light on how actors' roles contribute to ecosystems' value co-creation, we summarized case findings from the perspective of shared value (Table 2), highlighting the complementary roles of four actor groups.

Typically, sustainability transition remained as a rather generic aim and created tensions between the conflicting expectations regarding development of the city ecosystem. The case findings revealed varying priorities regarding circularity in the cities, with CRMs not typically being prioritized. Additionally, connections between actor groups were not systematically developed, potentially causing sub-optimization. However, the case findings demonstrate that the concept of shared value could provide a starting point for more systematic collaboration for innovation.

5 Discussion and conclusions

The research contributes to academic discussion by bringing up the topic of innovation with sustainability transition in city ecosystems. The study suggests that transition towards urban sustainability in the context of critical raw materials includes developing urban-rural symbiosis integrating several resource (such as waste, water, and energy) management systems. This paper discusses the importance of the shared value that contributes to the realization of multilevel urban sustainability transitions through collaborative innovation arrangements. The ecosystem approach draws attention to a variety of actors involved in innovating sustainable products, processes and consumption models. However, prior ecosystem research has mainly considered the definitions and functioning of business or innovation ecosystems. Our findings indicate that at such systemic transformation processes are time-consuming and therefore longitudinal research is needed to shed more light on configuring shared value.

Future research is needed to understand how and why these ecosystems emerge (Jacobides, et al., 2018) and how they evolve (Paasi et al., 2022). Especially, the longitudinal research over the sustainability transition would provide novel understanding on governance practices that are needed between the high-level strategy and of the operative project portfolio. Here, interdependencies between ecosystem actors could be made better visible through the concept of shared value. However, this requires open discussion and interaction between ecosystem actors, and raising even the negative impacts to the discussion to solve the tensions between the actors.

5.1. Practical implications

The findings benefit professionals and managers interested in understanding urban sustainability transitions, and how key players in the emerging ecosystems and their interest and activities in value creation are changing. For companies involved in the ecosystem, the findings provide support for understanding challenges and opportunities of sustainability transitions. For regulators, the findings are important for designing policy tools that boost and support the urban sustainability transitions. For cities, the findings provide understanding of means to enhance the sustainability transitions by establishing appropriate and aligned sustainability indicators at multiple levels.

References

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