In the following article, we assume you already know what a circular economy is and that you want practical resources to innovate to reach a circular economy business model. For general circular economy resources, we recommend that you check out the Ellen MacArthur Foundation or the World Economic Forum.
The definition of a circular business model
A circular business model articulates the logic of how an organization creates, delivers, and captures value to its broader range of stakeholders while minimizing ecological and social costs.
What is the difference between a linear and circular business model?
Linear business models are based on the following logic: take natural resources, make products for consumers that eventually become waste.
Circular business models contribute to a circular economy by adhering to the circular economy’s three fundamental principles:
1. Design out waste and pollution
2. Keep products and materials in use
3. Regenerate natural systems
To better understand the relationship between a circular economy (the bigger picture) and circular business models (the smaller picture), it’s helpful to understand how businesses form a value chain. No singular business is the circular economy. That is to say, the circular economy is not one single vertically-integrated business.
Companies are like dots along the circle, forming a network between suppliers and customers called a value chain. This network can either be organized as a straight line between natural resources and landfills (linear economy) or creating a perpetual cycle of value with zero waste (circular economy).
Let’s explore the core circular business model principles:
To dive deeper into the specifics of reimagining your business model, read more on how we approach circular business design.
You can come across different types of circular business models:
1. Coordinating circular value chains through data: Creating products, from recycle to reuse.
2. Circular product design: Creating products, from recycle to reuse.
3. Use, reuse, share, and repair: Creating durable goods from recycled and reused parts can be inputs for downstream circular business models.
4. Collection & reverse logistics: Close the material life-cycle loop by creating products that can be upcycled, repurposed, and re-sold.
5. Sorting & preprocessing: Finding alternative value in the parts that make a product whole.
Circular economy business models come in all shapes and sizes. These are several examples based on our previous work that create actual value:
Too much packaging ends up in landfills while reusable containers like this can be an ideal solution.
During one of the innovation accelerators we facilitated at O.I. and their sub brand Le Parfait, we worked on better waste-free retail concepts. The glass containers by Le Parfait are perfectly suited to eliminate layers of packaging used in the food value chain.
One of the big battlegrounds is the fight against energy waste and the overall reduction of carbon emissions.
Several innovation projects done with ENGIE (GDF Suez)—one of the leading European energy providers—saw this as their main challenge:
A company tries to convince clients to use less of their product (energy) while maintaining a viable and healthy business model.
Interested in learning more? Explore more of our examples of circular business models.
There are several way how sustainability-focused start-ups can make a profit:
1. Default pricing: products with a mark-up
2. Subscription / rental revenue model
3. Platform-based business models
Are you curious about making a profit, while doing good for society with different business model ideas Read the full article and check out more examples.
