Purpose

Circular supply chains (CSCs) have experienced significant transformations, reflecting shifts in consumer preferences, a growing emphasis on the circular economy and increasing regulatory pressures. In the used clothing sector, nonprofit organizations (NPOs) have traditionally managed CSCs, but growing competition from for-profit entities is driving NPOs to adopt profit-oriented models. This paper examines how NPOs transformed their CSC capabilities to navigate this shift.

Design/methodology/approach

This study employs a case study approach to collect data from three NPOs, among Sweden’s largest operators of used clothing CSCs, each with distinct operational structures. The dynamic capability view guides the design of semi-structured interviews and data analysis.

Findings

This study identifies seven microfoundations of dynamic capabilities crucial for the competitive management of used clothing CSCs. These seven microfoundations emerged across four distinct levels representing employee, managerial, organizational and supply chain levels. These findings provide a holistic framework for understanding and enabling competitive capabilities in functioning used clothing CSCs.

Originality/value

This study offers empirical insights into maintaining efficiency and competitiveness in used clothing CSCs. Although the evidence is drawn from NPOs, the findings also apply to for-profits, as NPOs have shifted toward profit-driven models. Additionally, this study guides for-profit and policymakers by promoting collaboration with NPOs to achieve synergies. Finally, this study advances the dynamic capability view by introducing four levels at which capabilities arise and their importance for competitive CSC management.