*2.1. The Relationship between the Concepts of Circular Economy, Sustainability, and Sustainable Development*

According to Islam (2017), sustainability has caused doubts about our consumption patterns within the context of the radical environmental and social changes undergone by our planet: 'The consumption patterns in the world lead to an increasing and unending demand ... There are many problems regarding the human impact on the environment such as the dilemma and tension between the economy and the environment, increasing demand and environmental vulnerability.' As shown by Islam and Yuhan, C. [2], valuable research has identified problems which have demonstrated that *'issues of sustainability can often be multifaceted in nature, with varying scales that could occur on both regional and global levels'*, and as it was also demonstrated *'the strength of environmental sociology as a lens to understand the complexities of the issue of sustainability* ... *The debates on contemporary globalization and sustainability are brought to the foreground, along with an open-ended and arguably long-standing question: Does capitalism have a human face?'* Like a bridge over time, the *Sustainable Brands 2021 Conference* (SB'21, San Diego, CA, USA, 18–21 October 2021), considered the major global event for the largest community of purpose-driven brands and leaders, seemed to offer an answer to the above-mentioned question through the keynote speech given by the cultural anthropologist Philip McKenzie, who want brands to enter a new type of social contract based on both stewardship values and regenerative principles which would change in significant way *how humans think, see, act and exist in the world* so as to direct a framework giving a central focus to people and planet considered together [3].

Kirchherr et al. [4] systematically investigated 114 circular economy definitions based on a coding framework and revealed that economic prosperity (followed by environmental quality) is considered to be the main aim of the circular economy. Within this developed framework they introduced the following definition: 'A circular economy describes an economic system that is based on business models which replace the 'end-of-life' concept with reducing, alternatively reusing, recycling and recovering materials in production/distribution and consumption processes, thus operating at the micro level (products, companies, consumers), meso level (eco-industrial parks) and macro level (city, region, nation and beyond), with the aim to accomplish sustainable development, which implies creating environmental quality, economic prosperity and social equity, to the benefit of current and future generations.'

They also recommended the inclusion of the consumer perspective in any circular economy definition adopted, taking into account the following aspects: the consumer perspective may be seen as the less popular side of the circular economy business model, the most central enabler of circular business models being the consumer [5]; for the circular economy it is essential to promote consumer responsibility [6]; for circular supply chains one must consider consumption processes, and not only the various production and distribution processes [7]; there is a potential circular economy risk of developing unviable business models due to lacking consumer demand determined by the adoption of a supplyside view only [8]; the circular economy involves "rethinking [9] consumption" as a necessary part. On the other hand, Kirchherr et al. also showed that despite the fact that the need for a circular economy to consider novel "production processes and consumption activities" was underlined a long time ago [10], other authors highlighted that "little is known about consumers' willingness to participate in (CE)" [11], with this statement being seen as confirming the research gap concerning the consumers' perspective on circular economy.

Within the context of the above-mentioned wide variation in approaching the circular economy, OECD, Paris, France adopted the approach of describing the circular economy through its characteristics [12], and "increased product repair and remanufacture, increased material recycling, more robust long-lived products through design, increased produce

re-use and repair, increased material productivity, improved asset utilisation, and modified consumer behaviour", as underlined by Ekins et al. [13]. The relationship between the concepts of circular economy (sometimes equated with sustainable development), *sustainability* (consumers make a difference between social and environmental aspects of sustainability) and sustainable development (introduced following the Brundtland report, 1987) *is not obvious*. Where there is no doubt is that a circular economy would be more environmentally sustainable than a linear economy, according to Ekins et al. Moreover, as shown by Maryville University, St. Louis, MO, USA [14], it is essential to understand the differences between the two crucial concepts of sustainability that are often used interchangeably (which can only be achieved when all three following pillars are addressed together: economic/profits, environmental/planet, and social/people) and sustainable development (describing the processes for improving long-term economic well-being and quality of life without compromising future generations' ability to meet their needs). According to Circular Ecology [15], true sustainability and a truly circular economy can be achieved only through balancing the above-mentioned three pillars of sustainability (often visualized as a Venn diagram, intersecting to share a common center, with only this area of sustainability being true sustainability); in addition, when only two out of these three pillars are achieved, none of the below are true sustainability: Social + Economic Sustainability = Equitable; Social + Environmental Sustainability = Bearable; Economic + Environmental Sustainability = Viable; "sustainable development may be considered as the pathway to sustainability".

Horizon 2020 [16], known as the biggest EU Research and Innovation program representing the financial instrument implementing the Innovation Union, confirmed that research is seen as an investment in the future, and it was placed at the heart of the EU's blueprint for smart, sustainable, and inclusive growth and jobs. 'Digitising and transforming European industry and services' and 'Connecting economic and environmental gains—the Circular Economy' are, for instance, two out of four mutually reinforcing Focus Areas in the current main Horizon 2020 work program. In a report concerning the lastmentioned Focus Areas, it was stated from the very beginning that the circular economy can be made a reality for a better world for all, beyond recognizing that the transformation from a linear economy to it is ambitious [17]. It is interesting to note that the above-mentioned analysis made by Ekins et al. identified important lessons resulting from the Chinese model of regional governance, which has gone beyond the large-scale demonstrations funded by EU's Horizon 2020 program, and is more coordinated than the experimentation occurring among EU, Maastricht, The Netherlands or OECD, Paris, France member states. As a new growth strategy responsibly for responding to significant challenges, the European Green Deal for the European Union (EU) puts people first, protecting their health and well-being from environment-related risks and impacts and increasing active public participation. This significant approach of transforming the EU's economy and society for a sustainable future included the mobilization of industry for a clean and circular economy based on an action plan (adopted initially in 2015, then fully completed in 2019) stipulating the necessary measures: encouraging both green business practices (new business models) and consumers' sustainable choices and product options (supporting them in making greener decisions), and considering the role of digitalization in improving the availability of information on the products' characteristics sold in the EU [18]. The new circular economy action plan (CEAP) adopted by the European Commission in March 2020 as one of the main building blocks of the European Green Deal [19] encouraged (among other aspects) sustainable consumption.

Based on a significant literature review, Hallstedt et al. [20] analyzed the connections between digitalization, servitization, and sustainability, and clarified the combined impact and consequences on product development capabilities in manufacturing firms. Within this framework, they underlined different aspects such as the following: one way to respond to the sustainability trend is to apply sustainable product development; in order to prioritize sustainability in product development, a stronger societal demand for sustainable solutions is needed; how the circular economy has become the primary framework to examine sustainability in practice; the fact that the linear resource society is not seen as a viable solution, and as a consequence the interest in circular economy solutions is expanding very quickly. On the other hand, Het Groene Brein [21] described the clear difference between a linear economy (Step plan: Take-make-dispose; Focus: Eco-Efficiency; System boundaries: Short term, from purchase to sales; Reuse: Downcycling; Business model: Focuses on products) and a circular economy (Step plan: Reduce-reuse-recycle; Focus: Eco-Effectivity; System boundaries: Long term, multiple life cycles; Reuse: Upcycling, cascading and high grade recycling; Business model: Focuses on services). The circular economy needs consumer behavior change, with consumers playing a significant role in ensuring a properly functioning circular economy by both choosing sustainable products and using products longer, and repairing or taking them to the recycling shop. That is why sustainable consumer behavior must be stimulated [22].

In the CSB Sustainable Market Share Index™ review of US consumer purchasing of sustainability-marketed products (CSB meaning Center for Sustainable Business at the New York University Stern School of Business, New York, NY, USA), the new findings reveal among other aspects that sustainability-marketed products performed better in e-commerce compared to conventionally marketed products. On the other hand, in Europe, the largest brand study on sustainability is the Sustainable Brand Index™ (ranking annually both business-to-consumer and business-to-business brands), which measures stakeholders' perception of a brand's sustainability (over 1400 brands, selected independently based on the market share, turnover, and general brand awareness) across 34 industries and eight countries [23]. Depending on how they relate to sustainability, consumers are divided by the Sustainable Brand Index™ into four different behavior groups [24].

As shown by eMarketer analysts [25], there is no doubt that sustainability will remain a key area of concern for consumers (despite the fact that their values do not always directly translate into their behavior), with the current new emerging era in retail and ecommerce making significant information known with regard to the advancement in the direction of building green business practices (such as reusable and sustainably sourced materials, carbon footprint reduction, reusable containers, recyclable packages, green business certification, and donations to environmental causes). New research in a global context allowed for the identification of sustainability (becoming an important source of long-term competitive advantage needing to be done in an orderly, methodical way as companies' digitization or strategy development) as one of the priorities (revealed and accelerated by the COVID-19 pandemic) for Chief Executive Officers (CEOs) in the next normal [26].

A 2021 study by Accenture and the World Wide Fund for Nature (WWF) Singapore, and entitled "Sustainability in Singapore—Consumer and Business Opportunities" has confirmed that consumer consciousness on sustainability has been accelerated by COVID-19, with the CEO of WWF-Singapore highlighting how encouraging it is to see sustainability influencing consumers' purchasing decisions and giving a new business opportunity to organizations [27]. To provide a broad perspective on businesses' opportunities and challenges, the consumer study was complemented with business perspectives coming from interviews with 23 businesses, including retail.

According to Purcarea [28], in the current VUCA (Volatility, Uncertainty, Complexity, and Ambiguity) time more than ever there is no doubt about retailers' need to become and remain at once consumers' trusted advisors and agile to consumers' changing behaviors, considering the role of consumers' feedback in ensuring the right insights as inputs in the optimization of retailers' processes. Within the current obvious emphasis placed on stimulating sustainable consumer behavior, one of the key questions remains how consumers understand this relationship between the concepts of circular economy, sustainability, and sustainable development. Within this context retailers need to identify consumers' new beliefs, habits, and positive memories one the one hand, and to analyze them in a highly detailed manner, aligning messages to consumers' mindsets and shaping sustainable consumer behavior with sustainable product offerings, on the other. Therefore, we investigated the extent to which there is a positive influence of consumers' willingness

to change their shopping habits (to reduce environmental impact, this willingness not having been elucidated) on retailers' increased concentration on responsibly answering to sustainability as a personal value of consumers (changing their behavior).

#### *2.2. Digitalization and Its Influence on the Retail Industry*

We have seen earlier not only that the circular economy needs consumer behavior change and that sustainable development may be considered the pathway to sustainability, which remains a key area of concern for consumers, but also that sustainability is becoming an important source of long-term competitive advantage for companies. Research by Purcarea et al. [29] showed that Romanian consumers' omnichannel shopping journey is strongly influenced by the successful use of AI-enabled interactions within the blending of physical experiences with digital ones.

#### 2.2.1. Consumers' Relationship and Engagement within Digital Transformation

According to Sheen [30], in the digital age consumers' perspective of value is grounded in the products' performance and the level of the new products' connectedness and the relationship accompanying them, with consumers' relationship and engagement being the new key performance indicators. Consumers can experience the products designed to facilitate the establishment and maintenance of a digital relationship before purchasing them. Today's consumers are fully embracing digital technology, considering the experiences they have with other companies globally, by using web and mobile apps to find information instantaneously and pressuring companies to level up their experiences [31]. As shown by Accenture [32], users change over time how they engage with a product or service, and the business needs to change in response to users' expectations and feedback. Consumers' evaluation of both [33] the companies they do business with and the products purchased by them is determined mainly by their interaction experience (considering factors such as effort, convenience, personalization, uniqueness, in-experience learning, etc.) and product experience (considering factors such as product utility and usability, consumers' needs alignment, and life enrichment), and then by brand perception (consumers' view of the company's industry position and sense of alignment with the company's values, while price includes consumers' estimation of whether the product offers good value for money), with product experience having the greatest impact on customer loyalty.

Purcarea [34] referred to the connection between Marketing 5.0 and Society 5.0 within the context of the digital transformation understood as a complete reinvention of the business by deriving benefit from the digital technologies and supporting capabilities, rightly using the insights obtained based on customers' trust, engagement, and continuously improved customer experience (CX). Digital transformation is defined by the Institute for Digital Transformation as the integration of digital technologies into a business resulting in the reshaping of an organization that reorients it around customer experience, business value, and constant change. According to the Gartner Glossary, there are clear differences between: *digital transformation*, including anything from IT modernization to digital optimization (defined as the process of using digital technology to improve existing operating processes and business models) or the invention of new digital business models (defined as the creation of new business designs by blurring the digital and physical worlds); *digitalization*, meaning the use of digital technologies to change a business model and provide new revenue and value-producing opportunities (it is the process of moving to a digital business); *digitization*, seen as the process of changing from analog to digital form, also known as digital enablement (digitization taking an analog process and changing it to a digital form without any different-in-kind changes to the process itself).

As part of the digital evolution of a business, *digital adoption* is seen as the adaptation of digital technology to enable the understanding and analyzing of data and information related to the business, its customers, competitors, and industry, to create new customer touchpoints, and to deliver key digital experiences [35]. Digital adoption has been accelerated by the COVID-19 pandemic [36]. E-commerce growth, for instance, is driven

by this digital evolution, e-commerce sales being promoted by both forward-thinking consumer-product companies and retailers implementing effective conversational commerce strategies which are always-on in exploring unexpected changes. ZK Research confirmed that the COVID-19 pandemic significantly accelerated the digitization of the shopping experience, which had already started prior to the pandemic, with consumers seeking more and more digital experiences for all their needs and businesses struggling to personalize CX (and enhance customer engagement and loyalty accordingly) by finding and giving a lot of attention to shoppers' identities [37]. Moreover, according to the ZK Research 2021 IT Priorities Study, 67% of the technically savvy shoppers preferring a digital experience (the so-called "shopper 2.0s") confessed that following a single bad experience in the past 12 months they changed their brand loyalties; COVID-19 accelerated companies' digital CX plans (the number-one digital initiative being CX improvement), and the digital transformation of CX has generated substantial spending not only in contact centers, but also in mobile application development and digital experience management; unfortunately, customers' checkout experience was often disregarded, notwithstanding its critical dimension for retailers' success in today's digital-first era, in which retailers are also clearly challenged to invest in technology enabling the conversion of unknown shoppers and guests (as customers who never shopped with a retailer before) into data capable of being identified.

It is also well known that within their digital transformation, companies' new operating mode is enabled by digital technologies (including analytics, Internet of Things/IoT, AI and its subset Machine Learning, with technology and data being the backbone: digital infrastructure, technology strategy, IoT platforms, data lakes and data architecture, data governance, analytics platforms), which are valorized by an end-to-end transformation, the new value being captured from technology [38]. One of the main effects of the impact of the disrupting technologies which are the supporting structure of Industry 4.0 is on customers' expectations (considering the improvement of the way they are served), and not only on product enhancement, collaborative innovation, and organizational forms [39]. Retailers' advancement on the Romanian retail market [29] involves acting on the new patterns and behaviors by considering the new technology adoption, which is a central metric for assessing the successful use of Artificial-Intelligence-enabled interactions, for instance, within this context being Romanian consumers' perceptions of Artificial Intelligence.

According to the European Commission [40], the existing Industry 4.0 paradigm is complemented by its vision on "Industry 5.0", in which research and innovation drive the transition to a sustainable, human-centric, and resilient European industry, moving the focus from shareholder to stakeholder value, and, among other aspects, attempting to capture the value of new technologies (required by the twin green and digital transitions) while respecting planetary boundaries: "The Green Deal announced in December 2019 clearly sets out what Europe must do to transition to a sustainable economy ... Innovations in green technology, combined with EU initiatives aimed at Digitising European Industry (including better use of big data and artificial intelligence) are a reality ... The concept of the circular economy is a blueprint for a new economy, complies with the 12th UN's SDG for "sustainable consumption and production patterns", generates rapid and lasting economic benefits, and receives broad public support. It provides a positive, coherent innovation challenge, through which young people see the relevance and opportunities in terms of re-thinking and redesigning their future ... the transition towards Industry 5.0 has already started ... " On the other hand, the in-depth analysis of the regulatory sea change in sustainable finance and reporting made known by Reuters Events in August 2021 revealed, among other aspects, the impact of the technological improvements [41].

The above-mentioned new circular economy action plan (CEAP) adopted by the European Commission in March 2020 as one of the main building blocks of the European Green Deal also made reference to "Mobilizing the potential of digitalization of product information, including solutions such as digital passports, tagging and watermarks" as one of the aspects to be regulated on the basis of establishing sustainability principles by

the European Commission. This was within the context of building a sustainable product policy framework by designing sustainable products and empowering consumers and public buyers. According to the European Commission [18], there is continuous work being done towards harnessing the potential of research, innovation, and digitalization, as well as building the sustainable product policy framework and more sustainable production and consumption patterns. Within this context, a key building block is empowering consumers and providing them with cost-saving opportunities. Consumers' enhanced participation in the circular economy involves receiving trustworthy and relevant information on products at the point of sale. Products' journeys can be tracked with the help of digital technologies which can also make securely accessible the resulting data. Product passports, resource mapping, and consumer information (as applications and services) are driven by the architecture and governance system provided by the European data space for smart circular applications.
