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.

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.

Dive deeper into how we do circular business design.

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.