Circular Economy business models explained

We assume you already know what a circular economy is and want practical resources to innovate to reach a circular economy business model. For general circular economy resources, check out the Ellen MacArthur Foundation or the World Economic Forum.

Table of Contents

What is a circular business model?

Circular business model definition

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.

Linear versus Circular business models

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.

  • Design out waste and pollution
  • Keep products and materials in use 
  • Regenerate natural systems
The circular economy value journey

Have a look at different ways to create value in the circular economy. 

Circular economy versus circular business models

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).

How to create a circular business model?

main circular business model principles

  1. Source products and materials from the economy, not from ecological reserves.
  2. Create value for customers by adding value to existing products and materials.
  3. Create valuable inputs for businesses beyond your customer.

Create your own circular business model

Read our in-depth article on how to create circular economy business models yourself.

What kind of circular business models are there?

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.

examples of circular business models

Circular economy business models come in all shapes and sizes, here are some examples we think are great.

Examples of how start-ups make money

How sustainability-focused start-ups make money

Make a profit, while doing good for society with different business model ideas:

  • Default pricing: product with a mark-up
  • Subscription / rental revenue model
  • Platform-based business models

Download the full report.

circular economy report

Read the full report containing:

  • Intro to the Circular Economy
    Context: why now?
    Framework: Circular Business Loop

  • Building Better Business Models
    Comparing circular businesses
    Ecosystem & Business Design

  • Define your Strategy
    Setting KPIs + examples