Consumer involvement plays a key role in creating attractive circular economy business models

Maria Antikainen

The dominant linear economic model is coming to its end with non-renewable natural resources dwindling and becoming more expensive. As the current trend continues, the Earth’s carrying capacity will be exceeded five-fold by 2050. We understand the need for change, as demonstrated by the EU’s investment in the related research. In Finland, the circular economy is high on the agenda of both the Government Programme and national research funding programmes.

By ‘circular economy’ we mean a system in which materials are recycled and their value is maintained or even increases. The key issue is the more efficient and smarter use of resources. The circular economy is creating major growth potential for Finnish companies. According to a report by Sitra, such growth potential could even add up to EUR 1.5–2.5 billion per year in Finland (report is in Finnish).

Shift to circular economy still in its infancy

To shift to a circular economy, we need systemic change that impacts on all parts of the related economic system, as well as on the interactions between such parts.  For example, the transition could occur via systemic innovation, in which new, innovative business models are achieved through cooperation between actors.

Traditional business models and boundaries are broken down within a circular economy. As corporate revenue models undergo radical change, companies need to wake up to the need to reform their business operations and value chains.

Much is now expected of consumers: many models require that they embrace radically new practices. Multiple barriers to this exist, such as the desire to own things and the difficulty of changing habits.

Consumer habits can change if people are offered sufficiently cost-effective and easy solutions that meet their needs. Services based on the sharing economy, such as accommodation or car rental from other consumers, car pooling and the buying and selling of second-hand clothes are good examples of innovative models that have been quickly adopted by consumers.

A glance at the business environment and consumers of the future

In addition to the present, we must turn our gaze towards the future circular economy: its business environment and future consumers. What will attractive, global circular economy businesses look like in 2030? And how can interaction between consumers, businesses and other actors be intensified in the future?

Rapid experimentations as a method – The Kalasatama smart grid as a model

The wise use of technology and the transition towards service-based thinking form the basis of the circular economy’s innovative business models. A smart grid has been created at Kalasatama which brings real-time energy consumption data into the pockets of every local resident (article is in Finnish). The rapid experimentations performed at Kalasatama are a prime example of how circulation economy business models should be developed.

Depending on the purpose and objectives, rapid experimentations can be performed based on a number of approaches and methods. The idea behind rapid experimentationsto move quickly from the drawing board to the experiment itself. Analysis of and learning from the information gathered are critical. The advantage of rapid experimentations lies in the fact that tested information is obtained quickly at moderate cost. Rapid, circular economy experimentations mean living for a moment in the future economy and obtaining valuable information on what the best business models will consist of.

New user-driven circular economy business activities being created in AARRE project

We need more rapid experimentations like the one in Kalasatama. Through trial and error, they will take us towards successful business models and accelerate the transition to a circular economy. New, user-driven circular economy business activities are being created under VTT’s leadership through the AARRE project (article is in Finnish). This project is a networked research project (2015–2017) being undertaken in partnership with the business sector, with Tekes as the main funder. In addition to VTT, the other research organisations involved include the Finnish Environment Institute (SYKE) and the Consumer Society Research Centre of the University of Helsinki.

Maria Antikainen, Senior Research Scientist

Anna Aminoff, Senior Research Scientist

Outi Kettunen, Research Scientist

Henna Sundqvist-Andberg, Senior Research Scientist

A discussion of solutions for the circular economy of the future will be held during VTT’s seminar on ‘Foresight and socio-technological change’ on 11 November 2015 in Helsinki: Welcome!
 

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