Our Mission: Food, Education, Medicine

#CircularTuesday: 5 business models for the circular economy-minded business

business model - climateaction

#CircularTuesday: 5 business models for the circular economy-minded business

Hello readers, Welcome to #CircularTuesday on CleanbuildVoices!

 

Concerns about climate change mean the transition to a circular economy is gathering momentum and this transition is likely to move faster than previous transformations.

 

For one, there is growing pressure from individuals and governments for companies to become climate neutral and secondly, it has political support. This means customers and many governments will make it difficult for supply chains to produce waste.

 

Based on the above premise, one can anticipate that the circular economy will not only disrupt conventional/linear business models but will also be the mainstream and only economy in the coming years.

 

It, therefore, becomes imperative that companies focus on the transition to circularity as failure to do so will lead to businesses that have a circular foundation becoming the new industry leaders in the coming years.

 

For companies to transition to circularity, they need to invest in circular business models, abandon their current competitive advantages, change highly-operational supply chains, and write off important assets.

 

In no particular order, below are five important circular business models that companies can adopt to be on par with companies that have a circular foundation in terms of higher business model advantage:

 

Resource efficiency and recycling

 

This is centered on the end stages of the usage cycle of products e.g. recovering resources from products that are no longer useful in their current application at the end of use.

For companies to adopt circularity in their business models, they must have a direct economic interest in the extraction of all their products recoverable resources.

 

In addition, their design must make resource recovery easy and effective, and ensure that users are incentivized to return the products at the end of their use.

 

Product-as-a-Service (PaaS)

 

In this business model, a customer buys a service for a short period while the provider retains ownership of the product (increasing resilience by maintaining control of products and resources) and gets incentives for the product’s ongoing maintenance, upgrade, durability, and treatment at the end of its use.

 

Companies that adopt this model have a responsibility and an economic incentive for safer disposal mechanisms because they won’t only center their products on performance but also maximize their products’ usage aspect and useful life, resulting in continued customer contact and access to insights on how their products are used.

 

Product-life extension

 

Unlike the linear economy where companies’ primary interest is in selling as many new products as possible, companies that have a circular foundation design their business models to generate a steady flow of income throughout the usage cycle of their products.

 

For your company to adopt this model, it must design all components of your products to be repairable, upgradable, reusable, easy to disassemble, reconditionable, and recyclable.

 

Renewability

 

Renewable, recycled, or highly recyclable resources are used in production processes in a circular economy and this enables limited or full waste and pollution elimination.

 

That way, resources for production accrue lower costs as they come from recycled or left-over materials instead of already depleting resources.

 

For companies to fit into this model, they must design products in ways that end their current usage loop instead of their life.

 

Sharing economy concept

 

This entails maximizing the usage of idle assets across a community while providing customers with affordable and convenient access to products and services. In addition, allows for sharing industrial assets.

 

That way, access to an asset no longer requires buying or renting from traditional suppliers but is instead provided by individual people and companies. And what’s more, your company has a higher percentage of its expensive assets being used.

 

Bottom line

 

Companies with a linear economy foundation, need to make that shift to a circular economy or risk losing out to companies with a circular foundation who have far better prospects in terms of lower costs, eco-friendly products, recurrent income sources, and high resilience as a result of better material flow management, etc.

 

To successfully transition, companies must create a transition strategy with the circular economy concept as a key driver and adopt circular elements in their business models as well.

Related Post