5 Key Circular Business Models You Need To Know (image/pixabay)
The transition to a circular economy is difficult but with rising concerns of climate change looming over us, it is gathering speed. With the required political support and attractive business models, circular economy is expected to be the norm in the next few years. To remain in the competition thus, it is essential for businesses to start adopting business models designed for a circular economy.
Here are five key circular business models to keep in mind:
1. Product-as-a-Service (PaaS): Instead of selling products, companies provide them as a service, shifting focus from volume to performance. Customers pay for the usage rather than ownership, encouraging businesses to design products for durability and easy maintenance. It also helps firms save on material costs, protecting them from material price shocks or scarcity issues.
Read Also: Measures To Enhance Transition To Circular Economy
It also enables accessing a new remanufacturing market, which provides a variety of untapped opportunities for further growth of a business. Examples include car leasing services or subscription-based furniture.
2. Circular Supply Chains: In a circular economy, waste becomes an asset and not a liability. Using recycled or renewable materials in their production processes can ensure partial or complete elimination of waste and pollution. It reduces dependency on virgin resources and minimises waste. For instance, a clothing brand might use recycled fabrics to produce new garments.
3. Product Life Extension: Circular economies design their products keeping in mind their ability to repair, reuse, upgrade, and recycle them. Businesses focus on disassembling, refurbishing, and reconditioning products to extend their lifecycle. While it helps reduce waste and maximises the value derived from products, it also ensures that companies have a continuous income stream throughout the usage cycle of a product. Repair services for electronics or furniture are some examples of the same.
4. Resource Recovery: Focussing on the final stages of the usage cycle, resource recovery involves recovering materials, energy, and resources from products after they are no longer functional. Businesses design systems to recover and reuse materials from end-of-life products. Firms must ensure that users are also incentivised to return the product through deposits or as a product-as-a-service model. It can involve recycling, composting, or repurposing waste into new products. For example, Nike’s ‘Reuse A Shoe’ program.
Read Also: What Are The Benefits Of Circular Economy In Business?
5. Sharing Platforms: In a circular economy, platforms ensure sharing of resources such as tools, vehicles, or accommodations, and industrial assets among users. It therefore reduces the need for individual ownership and promotes the efficient use of resources along with ensuring higher utilization. Car-sharing services are a great example of the same.
