The basic idea of sustainable circular economy business models is to produce not only economic value, but also environmental and social value. In the circular economy, they key objective is to keep the value of materials and products high for as long as possible. To be able to make a shift to the circular economy, it is essential to design the products in a more intelligent way by increasing their service life and changing their role in the system.
A shift from product-focused activities towards production of services supports the transition. When the product manufacturer maintains the ownership of a product, this will, at the same time, increase the motivation to lengthen the service life of products, and make the repair, remanufacturing and increasingly efficient use of resources more important than before.
In the CloseLoop project of the Strategic Research Council of the Academy of Finland, challenges associated with the development of new business models are systematically assessed, and new circular economy business models and concepts are brainstormed for Finnish companies. These concepts are developed and tested in collaboration with companies and stakeholders, including end-users and consumers.
Towards the circular economy with collaborative intelligent approaches
Digitalisation and the Internet of Things (IoT) offer new opportunities for the development and implementation of circular economy business models. They enable the gathering of information on products in a new way. This provides the manufacturer with increased knowledge on how the product is being used, when the product needs maintenance, and when the product is nearing the end of its service life. This makes it possible to develop new services and optimise the value of the product and its materials. On the other hand, this also increases the complexity of products and thus brings challenges to the preservation of the value of materials and components.
An individual company cannot solve the challenges related to such business operations. What is needed is comprehensive understanding of the viewpoints and needs of various parties. One must also examine what kind of value the business operations create for various stakeholders and what kind of opportunities it offers for creating added value. It is also important to consider what kind of value the new business activities may reduce from different stakeholders. On the basis of such examination, the parties involved can develop a model for the optimisation of common value creation.
The question of value can also be examined at many different levels, taking into account such aspects as economic, social and environmental value. When considering the value received by the end customer, it is also essential to understand the value as a ratio between sacrifices and benefits. The circular economy creates demand for new services and, consequently, for new operators. Such services include collection of products and logistics, the secondary markets of products and platforms that enable longer service life or higher utilisation rate for products.
Concrete business cases of the circular economy
What are business activities conducted in line with the principles of the circular economy like then? For example, business strategies in line with the circular economy can be classified as follows [i]:
Where can one get tips for business activities in line with the principles of the sustainable and circular economy?
In May 2017, the British Standards Institute published the standard BS 8001:2017 [ii], a new standard on the circular economy. It offers guidelines for different types of organizations on how to implement the principles of circular economy in their operations. The standard consists of two parts:
- Information on what the circular economy is all about and why it is advisable to transfer to the circular economy and a more sustainable operating model than before.
- Guidelines on how to implement operations in accordance with the principles of the circular economy. This is the key part of the standard, describing the principles of the circular economy, a flexible implementation model and guidelines supporting the implementation.
The collection of circular economy business cases that may inspire Finnish operators have been collected on the Sitra website. The aim is to gather 100 examples of Finnish forerunner companies engaged in the circular economy on this site by the end of 2017. The examples have been divided in accordance with the five circular economy business models.
Concrete international business cases can also be found on the website http://www.plan-c.eu/bmix/. It brings together descriptions of sustainable business models of various types and examples on how such business models have been put to practice. The site presents eight ‘archetypes’ of sustainable business models and 100 real life business cases related to them.
New tools needed for the development of business activities
In the circular economy, business activities are more networked and systemic than before. Therefore, new tools are needed for both innovation and the development of existing business operations. The examination framework in the figure below emphasises these aspects, providing a holistic development tool for enterprises.
The transition towards business models in line with the circular economy requires examination at various levels. Changes in the business environment can be taken into account by assessing the ongoing development trends and drivers of change. Stakeholder participation in the examination work promotes generation of a shared view on the matter. At the level of business operations, the examination focuses on the key elements of the business model. The impact of operations is assessed from the viewpoints of requirements and the benefits achieved. The examination framework entails an idea of continuous assessment of business activities from the perspective of sustainability and the circular economy. Any changes need to be assessed, and the business model adjusted to the changed circumstances.
A systematic examination framework suited for
the development of business models [iii].
[i] Kraaijenhagen, C., van Oppen, C., Bocken, N., 2016. Circular Business. Collaborate and Circulate. Circular Collaboration.
[ii] BS 8001:2017. Framework for implementing the principles of the circular economy in organizations – Guide.
[iii] Antikainen, M., Valkokari, K., 2016. A Framework for Sustainable Circular Business Model Innovation. Technology Innovation Management Review 6.