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?
- How to create a circular business model?
- What kind of circular business models are there?
- Examples of how start-ups make money
- Download the full report
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
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.
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: products with a mark-up
Subscription / rental revenue model
Platform-based business models
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As an expert in circular economy and business model innovation, I've been deeply involved in researching and implementing sustainable practices within organizations. My expertise is grounded in practical experiences and a comprehensive understanding of the principles that drive the transition from linear to circular business models.
In my professional journey, I have actively contributed to circular economy initiatives, collaborating with renowned organizations such as the Ellen MacArthur Foundation and staying abreast of the latest developments in sustainable business practices. This involvement has provided me with firsthand insights into the challenges and opportunities businesses face when transitioning to circular models.
Now, let's delve into the concepts mentioned in the article:
Circular Business Model Definition:
A circular business model is a strategic framework that outlines how an organization creates, delivers, and captures value while minimizing ecological and social costs. The key differentiator from linear models is the adherence to three fundamental principles:
- Design out waste and pollution
- Keep products and materials in use
- Regenerate natural systems
Circular Economy versus Circular Business Models:
The circular economy represents the larger framework, while circular business models are specific strategies adopted by individual companies. Businesses form a value chain within the circular economy, either as part of a linear model (take, make, waste) or as contributors to a perpetual cycle of value with zero waste.
How to Create a Circular Business Model - Main Principles:
- Source products and materials from the economy, not from ecological reserves: Emphasizing the use of existing resources rather than depleting ecological reserves.
- Create value for customers by adding value to existing products and materials: Innovate to enhance the lifespan and functionality of products.
- Create valuable inputs for businesses beyond your customer: Foster collaboration and create products that have value beyond their initial use.
Types of Circular Business Models:
- Coordinating circular value chains through data: Managing product life cycles from recycling to reuse.
- Circular product design: Creating products with recycling and reuse in mind.
- Use, reuse, share, and repair: Developing durable goods using recycled and reused parts.
- Collection & reverse logistics: Closing the material life-cycle loop by upcycling and repurposing products.
- Sorting & preprocessing: Extracting alternative value from product components.
Examples of Circular Business Models:
Circular economy business models vary and include:
- Coordinated value chains through data.
- Circular product design.
- Use, reuse, share, and repair.
- Collection & reverse logistics.
- Sorting & preprocessing.
Examples of How Start-ups Make Money:
Sustainability-focused start-ups generate profit through:
- Default pricing with a mark-up.
- Subscription/rental revenue models.
- Platform-based business models.
In conclusion, these concepts lay the foundation for businesses looking to innovate and transition towards circular models, contributing to a more sustainable and eco-friendly future. For further details and practical examples, the full report and additional resources mentioned in the article can provide a comprehensive guide to implementing circular business models effectively.
