Business Models in Circular Economy
Several different business models have been identified in the circular economy. These business models can be used to develop new circular economy businesses. There are links between different models, and in most cases, companies and their solutions represent several different models. There are five basic models identified, in addition to which enabling models have been identified. There may be many more models and variations.
Sharing
In the sharing economy, companies share and rent products and services. Web-based sharing platforms connect product owners and service providers with customers. They offer businesses selling products and services the opportunity to grow their business and gain new customers. Customers, in turn, benefit from a more diversified offering. The sharing economy improves product utilisation and extends product lifecycles by reducing the need for new products.
Product as a Service
The product-as-a-service business model sells services instead of products. The service company provides the customer company with the right to use a service or product that meets the customer’s needs, instead of the customer company purchasing the product that meets its needs. The client company pays for the right to use the product or service that meets its needs, thus avoiding the costs and risks associated with ownership. The model encourages service companies to use the most sustainable products possible in their service production, which improves environmental sustainability by reducing the amount of waste generated and the need for new products.
Extension of Lifecycle
The product lifecycle extension business model means extending the life of products by designing them from the beginning to maximise their lifetime in their original use. In addition to design, lifecycle extension can be achieved through cost-effective preventive maintenance and repair or through resale.
Resource Effiency
Recycling and remanufacturing are an important part of the circular economy. They can reduce the need to use new virgin raw materials. At the same time, the amount of waste is also reduced. Recycling and reuse of materials, parts and modules, as well as the use of side streams, will improve the efficiency of a company’s operations, brand and profitability. As regulatory and tax incentives to support the secondary raw materials market develop, this business model can also become more profitable.
Enabling
Enablers support the transition of businesses to the circular economy and promote the creation of networks and partnerships. They provide solutions and services ranging from recycling solutions to logistics and management systems and advisory services. Enablers help businesses to identify their potential and optimise their operations to achieve economic and environmental benefits. Promoting cooperation with other businesses and organisations is also important. Enablers can raise awareness of the circular economy through a range of activities, such as providing tools for data management and communication, compensation services and marketplaces.
Renewability
In the Renewability business model, a company develops its products using renewable and recycled raw materials. Processes use sustainably produced renewable energy in a circular economy, using renewable and non-renewable resources in the most resource-efficient and waste-minimising way possible.
