Background - The textile and fashion industry is paving the way towards the circular economy to achieve economic and environmental value. Today the industry is mainly dependent on the linear production model of the take-make-dispose system. This linear model excels in making waste out of virgin raw materials that can utilize several lifetimes. In light of generating a wave for the future with the circular economy, the textile and fashion industry is implementing circular economy, business models. The organizations’ cascade use ability of recurrent and abundance resources leads to the circular economy future. Although the circular economy is rich in concept, academia and practitioners sense a lack of implementation of business models. Therefore, the organizations require to develop a unique set of capabilities to harness the benefits from circular economy business models.

Purpose - To achieve successful circular economy business models, the organizations should develop capabilities that reinforce them to innovate their business models. Therefore, this study investigates the dynamic capabilities to gain competitive advantage while utilizing resources by cascade use to achieving economic and environmental values. This study provides the practitioners and academic guide to be a part of the wave of the circular economy.

Methodology - This research conducts multiple case studies with an abductive reasoning approach to extend the theory of dynamic capabilities for cascade use in circular economy business models within the textile and fashion industry. Semi-structured interviews were conducted to gather primary data with three companies that practice cascade use in their businesses while strengthening the data gathered by reviewing company documents. The data were analyzed using thematic analysis.

Findings - Results revealed dynamic capabilities facilitate cascade use in the circular economy business models. These dynamic capabilities undergirded by unique microfoundations. Sensing capability undergirded learning and knowledge creation on resources, information search on competencies, and market sensing to achieve the circular economy. Seizing undergirded microfoundations of business model innovation, collaborations, investments in innovations, and take-back systems. Transformation capability undergirded stakeholder engagement, revitalizing internal organization and transparency. The organizations gain maximum resources utility by these dynamic capabilities.

Practical implications and research limitations - This thesis creates new insights on cascade use in circular economy business models facilitated by dynamic capabilities. The study assists the practitioners to understand and manage organizational activities to leverage cascade use in the circular economy business models to gain competitive advantage. The study limits by the selected interviewed companies with cascade use strategies implemented in their businesses, representing retailers in Sweden.