Circular Business Models: doing More, with Less, for Longer
Lead contributor: Alon Rozen
This chapter summarizes the primary Circular Business Models (CBMs) that are enabling the transition to a more Circular Economy and how they can increase both the performance and sustainability of organizations adopting them. As we collectively search for an effective path to a circular and sustainable economy, successfully experimenting with and implementing new business models that incorporate circular-by-design principles should help rapidly transfer best practices across sectors and fuel rapid adoption.
Circular Business Models can help slow, narrow, and even close resource loops as we transition from value chain thinking to a value cycle mindset. Once we realize that 80% of waste and environmental impact is defined at the design stage, we can see how important it is to apply design principles properly. Thus, the attraction for integrating the principles of “designing for X” (X being reuse, disassembly, testing, …) ensures we can do more with less for longer. When done properly, CBMs contribute to lowering costs, and reducing emissions and resource consumption, while increasing value and creating deeper relationships between providers and users. Thus, CBMs take us from the realm of feel-good solutions, in which profitability is sacrificed in the name of sustainability, to that of business model optimization where profit, purpose, people and planet co-exist harmoniously.
CBMs are a source of significant competitive advantage for companies as they can (and should) generate additional economic benefits (lower costs and higher revenues), create new value-accreting partnerships with suppliers and stakeholders, and new ways of connecting with their users as the relationship is redefined into a more collaborative exchange of value. What is encouraging is that CBMs can be developed for products and services, tangible, or intangible/intellectual solutions, for high-value or low-value materials, commodity raw materials or high embedded-value products. Besides superior performance, CBMs will create new jobs, promote innovation in industry and services, embed clean energy further into the economy, dematerialize many parts of the economy, reduce waste, and increase the sustainability of cities and communities, while promoting responsible consumption and production.
Primary CBMs presented in this chapter include those that slow resource loops (Maintenance & Repair, Reuse, Sharing), narrow resource loops (Refurbishing, Remanufacturing, Product-as-a-Service) and close resource loops (industrial Symbiosis, Upcycling, Recycling). While research and practice in this domain are still emerging, CBMs are often categorized as one or a combination of three strategic approaches to increasing circularity: retaining product ownership such that we speak more about usership than ownership, extending product lifecycles such that assets are used longer and more intensively while avoiding the extraction of virgin raw materials, and/or implementing design-for-X principles such that products are engineered to last longer and be easier to repair, maintain, disassemble, upgrade, return and recycle.
What are Circular Business Models?
When business models are designed for circularity, they help to slow, narrow and close resource flows effectively and efficiently – boosting performance while reducing environmental impact. Discover how Circular business models (CBMs) can be developed for all industries, organizations big and small, and are crucial for the transition.
What is the impact of CBMs?
Thanks to CBMs, we can do more – increase economic activity, with less – extract less of the planet’s finite resources, for longer – keep already extracted resources and existing assets in use (and reuse) sustainably. Explore how CBMs are key to designing out waste and regenerating our planet.
How can we do more with what we have?
CBMs plays a crucial role in slowing resource flows by finding various ways to use and reuse already extracted virgin materials. Common CBMs that slow resource flows include Maintenance & Repair, Remanufacturing and Sharing. Explore now how this helps increase economic activity without hurting the planet.
Why is remanufacturing so impactful?
Remanufacturing is one of the most impactful CBMs as it can significantly reduce the use of virgin materials, energy and water while extending the useful life of machines, appliances, and more. Learn now how it is not only great for the planet, but it is also a highly efficient and profitable business model.
How can we do more with less?
By increasing the usage of products, we need to manufacture less. This includes refurbishing and selling products as a service. Many successful businesses are using this approach. Explore now, how CBMs help narrow resource flows by finding ways to do more with less.
How important is refurbishing?
One important CBM that helps narrow resource flows is refurbishment. With the explosion of electronic gadgets in modern living, this business model offers consumers the option to buy “like new” and reconditioned products at a more accessible price. Discover why this is a highly profitable CBM.
Closing Resource Flows
CBMs that help close the loop include reuse, recycling (especially upcycling) and industrial symbiosis. This can reduce costs while reducing environmental impact. Learn now, how CBMs help to close resource flows by “closing the loop” such that there is no waste in the ecosystem, just like in nature.
How can we turn industrial waste into raw material?
Discover how Industrial symbiosis is a CBM in which one company’s waste becomes another company’s raw materials. This often requires matching companies from different industries, for example a shoe manufacturer that uses the rubber from a tire manufacturer for its’ shoes.