What can companies do to enable the circular economy?
It is well known that most companies today still follow the traditional linear economy pattern (“take-make-use-dispose” scheme). Some companies have adopted new tools and strategies to reduce their carbon footprint. This article examines the principles of circular economics and explains what “circular business models” are.
The Circular Economy in a Nutshell
There are plenty of resources on the Internet that discuss and analyze the framework of circular economies (CE). You’ll find hundreds of articles that cover every aspect of the topic. It’s important also to mention the key principles of this topic.
CE is a way to encourage individuals, organizations, and institutions to rethink how they produce, use, and deliver things. According to the work of the Ellen MacArthur Foundation, the circular economy is based on three core principles.
Now, companies are beginning to tackle this challenge and experiment with ways to integrate such principles into their models of business.
Circular Business Model
This is how you get a “circular business model.”
A circular business model can be defined as any business model that embeds circularity at both the strategic and operational levels. As a result, matchmaking, multi-sided, or product models, as well as solution models, could all become “circular” as long as they move away from linear economic patterns and towards circular ones.
To “go circular,” companies can modify their business model at any level. Value creation, delivery of value, and capture of matter are all included in this.
According to BMI Lab, there are 38 circular patterns that companies can choose from in order to implement circular principles. Some of them are:
- Value creation = improved product longevity, increased functionalities, repair & maintenance, biodegradability.
- Value Deliver = using eco-materials and renewables, recovering energy, recycling waste (as input), localizing production, and only producing on demand.
- Value Capture = Pay-per-use or Rent-instead-of-buy.
It is not surprising that most of these patterns affect more than one layer of a business. When a company decides to offer repair and maintenance services ( Value Creation) in order to extend the life of its products, it may need to invest in new capabilities and resources ( Value Delivery), which will have implications on its cost structure ( Value Capture). In the same way, moving to a subscription revenue model could determine new key activities’ value delivery or change the perception of the value proposition by customers.
Before implementing circular patterns, it is important that firms carefully evaluate every change or modification required for the entire business model. Since there is no “one-size-fits all” solution, firms can experiment and innovate in many different ways.
What about the ecosystem?
Donne said, ” No one is an island.” Business is no different.
In fact, in order to be truly effective with circular strategies and patterns, each company needs to consider the ecosystem they operate within. To make real change, it is crucial to identify key partners, ensure their commitment, and formulate shared objectives. The ultimate goal will only be achieved with it. Any business that wants to “go circular” must first understand the changes needed to its ecosystem to foster circularity. Then, they should take appropriate action.
The conclusion of the article is:
This article gave us a glimpse at the core concepts and ideas that underlie circular business models.
Some companies are doing it successfully, such as RecyclePoints, which we analyzed in this article. RecyclePoints, for example, is one of the companies that has done it successfully.
No matter the industry or geography, any company that is willing to implement concrete changes in this area must be able to design and orchestrate partners as well as a broader ecosystem around them. CE is more likely to happen when companies are able to create and produce their partners, as well as the broader ecosystems surrounding them.
