Content of this unit
Main strategies enterprises can use to develop a circular business model
Strategies are the approaches to action that organisations can deploy to achieve the core activities of the circular economy.
Probably the most well-known understood business models (identified by Accenture, management consulting company) that are promising in a circular economy are the below ones:
• Circular supplies: companies which supply renewable energy, biodegradable or fully recyclable material to prevent single-use materials, in other words scarce resources are replaced with fully renewable, recyclable or biodegradable resource inputs
• Resource recovery (or raw material collectors): businesses who recover useful raw materials from by-products or products at the end of their life cycle; waste materials are re-processed into new resources
• Product life cycle extension, which ensures that products stay on the market longer through repairs and resale. The product life extension model helps companies extend the life-cycle of their products and assets to ensure they remain economically useful. Material that otherwise would be wasted is maintained or even improved, such as through remanufacturing, repairing, upgrading or re-marketing. By extending the lifespan of the product for as long as possible, companies can keep material out of the landfill and discover new sources of revenue. The product life extension model lengthens the useful life of products, which creates opportunities for designing and marketing value adding services. The product characteristics as durability, quality and functionality are highly valued in this model.
• Sharing platforms, where more effective use of products becomes possible by enabling shared use; It promotes a platform for collaboration among product users, either individuals or organizations. These facilitate the sharing of overcapacity or underutilization, increasing productivity and user value creation. This model, which helps maximize utilization, could benefit companies whose products and assets have a low utilization or ownership rate. Nowadays it’s most commonly found among companies specializing in increasing the utilization rate of products without doing any manufacturing themselves.
• Product as a service, where the use of products leads to positive value for the owner. It is the process in which the use of a product is sold as a service and the ownership of the product (e.g. washing machine, central heating systems, cars, lawn mowers, etc) often remains with the producer. This strategy can lead to what is called ‘dematerialisation’: you buy (or rent or lease) the use of a product, but you do not own it. This model is attractive for companies that have high operational costs and ability to manage maintenance of that service and recapture residual value at the end of life.
Probably the most well-known understood business models (identified by Accenture, management consulting company) that are promising in a circular economy are the below ones:
• Circular supplies: companies which supply renewable energy, biodegradable or fully recyclable material to prevent single-use materials, in other words scarce resources are replaced with fully renewable, recyclable or biodegradable resource inputs
• Resource recovery (or raw material collectors): businesses who recover useful raw materials from by-products or products at the end of their life cycle; waste materials are re-processed into new resources
• Product life cycle extension, which ensures that products stay on the market longer through repairs and resale. The product life extension model helps companies extend the life-cycle of their products and assets to ensure they remain economically useful. Material that otherwise would be wasted is maintained or even improved, such as through remanufacturing, repairing, upgrading or re-marketing. By extending the lifespan of the product for as long as possible, companies can keep material out of the landfill and discover new sources of revenue. The product life extension model lengthens the useful life of products, which creates opportunities for designing and marketing value adding services. The product characteristics as durability, quality and functionality are highly valued in this model.
• Sharing platforms, where more effective use of products becomes possible by enabling shared use; It promotes a platform for collaboration among product users, either individuals or organizations. These facilitate the sharing of overcapacity or underutilization, increasing productivity and user value creation. This model, which helps maximize utilization, could benefit companies whose products and assets have a low utilization or ownership rate. Nowadays it’s most commonly found among companies specializing in increasing the utilization rate of products without doing any manufacturing themselves.
• Product as a service, where the use of products leads to positive value for the owner. It is the process in which the use of a product is sold as a service and the ownership of the product (e.g. washing machine, central heating systems, cars, lawn mowers, etc) often remains with the producer. This strategy can lead to what is called ‘dematerialisation’: you buy (or rent or lease) the use of a product, but you do not own it. This model is attractive for companies that have high operational costs and ability to manage maintenance of that service and recapture residual value at the end of life.
