Circular business models

Many ideas for the design of business models for the circular economy have been put forward. Some are based on case studies, others derived from theory. But why is it so difficult to provide a comprehensive overview of circular economy business models? The answer is simple: because there are so many of them.

Prof. Florian Lüdeke-Freund, Prof. Stefan Gold and Prof. Nancy Bocken, have reviewed the circular economy literature and found 26 major business model types, including for example ‘remanufacturing’, ‘waste exchange’, and ‘product-as-a-service’. These business model types reveal a lot about the numerous design options for the development of circular economy business models.

This is important not only for researchers, but also – and maybe much more so – for supply chain managers, business and product developers, innovation managers, and other practitioners working to make their businesses more sustainable. An astonishing variety of design options was found, including numerous value propositions, customer relationships, or supply chain approaches to close material and energy flows. Theoretically speaking, this variety allows for the development of more than 4 million different business model designs for the circular economy.

One of the main challenges of practically implementing circular economy principles is rethinking companies’ supply chains, and as a consequence the way they create and deliver value through their business models. This is because generations of engineers, operations managers, and business administrators spent decades or even centuries on optimising forward supply chains that conduct resources and goods ‘from cradle to grave’, and not from ‘cradle to cradle’ .

For companies to create more circular production and consumption systems, they must develop and improve the reverse flows of their supply chains, and sooner or later that requires them to adapt their business models – for example, replacing non-renewable with renewable inputs, using recycled materials and creating products that are easier to refurbish or remanufacture. Companies can even replace physical products with less material-intensive services. A well-known example is
Obviously, as soon as customers and their needs are affected, companies have to reposition themselves in the marketplace and adjust their logic of creating (economic) value with and for their customers, while they try to maintain natural resources and do less harm also in social terms. As our review shows, changes on the production side are rather invisible to customers and other stakeholders, and can lead to the need to rethink a company’s business model.

Full article: https://menafn.com/1098532657/The-circular-economy-Four-million-business-models-and-counting