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.