Generate more circular business models
The circular economy will soon be the only economy
If you don’t have a circular business model, transitioning to one should be your number one priority. And this is not me being dramatic.
Gartner predicts that by 2029, supply chains will not be allowed to produce waste, as customers and many governments will find it unacceptable.¹ And in some cases – illegal. During the 2030s, the circular economy will not only be the mainstream economy, it will be the only economy.
We’re rapidly running out of the virgin materials to make many of the products we casually buy, use and toss today. By 2030, we’d need 2 earths to sustain projected consumption levels.²
The good news is, circular models are not just better for the planet, they’re better for business. It’s not hard to understand why shrinking their environmental footprint, trimming operational waste, and using expensive resources more efficiently appeals to CEOs.
“We need to become more efficient in reusing our resources. . . . That’s a big part of our climate-change battle: learning how to use and reuse our resources and make more out of them for the sake of the planet. That’s why circular business models are required in many industries.”
– Thomas Gros, CEO and cofounder of Circulee ³
Here are five circular business models you might consider exploring:
01. Circular inputs: This is where renewable, recycled, or recyclable inputs are used. Here, waste becomes an asset, not a liability you pay to dispose of. This also lowers costs as production input is not mined from scarce resources – it comes from excess materials and recycled materials. Nike Grind is a great example of this model.
02. Product as a service: In this model, the customer purchases a service for a limited time while the provider maintains ownership and is responsible for the product’s ongoing maintenance. Here, there’s a shift from volume to performance, keeping items in circulation longer while saving on material costs. Feather furniture rental runs their business on this model.
03. Sharing economy: We know this one well – think Airbnb. Here, idle assets are maximized for community use. ‘Access to’ rather than ‘buying from’ means individuals and businesses can benefit from higher utilization and profit from expensive assets while reducing the production of more.
04. Product use extension: This model is all about repairability, upgradability, reusability, ease of disassembly, reconditioning, and recyclability of all components. Here, you generate income throughout the product’s usage cycles. The more that your product designers can be encouraged to design for circularity from the beginning, the easier this gets. Ikea is a beautiful example.
05. Resource recovery: This focuses on using resources from existing products that are no longer functional in their current application. Think outdated cell phones reused for parts. It’s important in this model that users are incentivized to return the products to make value recovery easy. Verizon’s trade-in service is based on this model.
Linear economy companies who don’t adapt in time will lose out on lower costs, repeat income sources throughout usage cycles, more climate-friendly products, higher customer retention, and increased resilience. Figuring out how can be daunting.
It’s a transition, and a “do nothing strategy” is not an option. It’s time to explore what might be possible, start pilot initiatives, and build a transition strategy to succeed in the circular economy.
Inspiration
→ The Circular Business Model – HBR
→ Circular Business Model Examples (in fashion) – Ellen MacArthur Foundation
→ Transitioning to a circular business model with design – McKinsey & Company
By Jenn Torry
Senior Business Design Director
Jenn Torry is a business designer who specializes in helping companies solve hairy systemic problems that require collaboration to fix. She is passionate about environmental causes and outside of co: acts as an advisor to startup founders looking to find the right product-market fit.
¹ Gartner: Preparing for 2029; ² WWF Living Planet Report; ³ McKinsey quote of the day