Circular Business Models

Since the beginning of industrialisation, the underlying economic logic of business is one known as ‘take-make-use-dispose’. The causal consequence of this line­arity is not only the production of unwanted material at the end of a product’s lifetime, which is also known as waste, but also the depletion of resources and further negative impacts along all steps such as CO2 emissions, micro plastics or soil poisoning,… This results in a situation where current and further eco­nomic activity depends on massive resource extracti­on, and an increasing pressure on our environment.

By design, waste has become an integral part of our industrialised consumer society, so much so that incremental chan­ges or efficiency measures do not offer acceptable solutions. To really tackle the problem, companies need to fundamentally change their business model – their underlying way of doing business. Ins­tead of focusing on traditional linear-oriented business models, companies need to develop circular business models that allow for sustainable and closed resource loops in their industry.


“In a circular economy, we use as few raw materials as possible and utilize them optimally. Products are designed so that as few raw materials as possible are needed and the raw materials used are used for as long as possible and then reused to a high standard. Designers design in a different way and manufacturers produce in a different way.” – QUOTE?

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Principle 1: Maximum Utilisation of Functionality

The maximum utilisation and reusability of technical materials are known as the RE activities.

  • REdesign: This is about making sure that the components of a product (i.e. of a car, house or polymer, etc.) can be disassembled and processed again with ease, without too much loss or “cost” (energy, labour, etc.). This requires new ways of design;
  • REpair: maintaining and reusing existing products with or without a limited modification and possibly an upgrade, all with a view to extending their lifespan;
  • REfurbishing: upgrading and updating products and product components with a view to a second life and then putting them back on the market ‘as new’;
  • REmanufacture: remanufacture of the entire product, or reuse of parts of a product on the basis of ‘second-hand’ raw materials and components;
  • REpurpose: use products, parts of products or possibly the raw materials in another application;
  • REcycling: recovering raw materials and materials with a view to reuse, preferably of a high quality so that they are ‘as new’ again.

Principle 2: Organising Cycles

Circular cycles make it possible to create and maintain value by having parties cooperate in such a way that products, materials and raw materials can be optimally used. A common classification is to distinguish two main types of cycles:

  • closed cycles and
  • open cycles.

The first is about the recycling of raw materials. The second is about up-cycling and the conversion of raw materials and materials. This means that a certain substance that no longer has any value in its current function is converted into a new valuable raw material.

There are four ways to organise a cycle, namely:

  • Closing a materials cycle (as completely as possible). Material returns to the chain with the same level of quality, if possible.
  • Utilising the value of materials for as long as possible; materials remain in circulation longer.
  • Obtaining materials geographically as close as possible and keeping them there.
  • Reducing (radically) the use and consumption of materials in the various phases of the cycle.

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Circular Business Models

On the basis of these two circular principles, products are designed differently, raw materials are reconsidered and production processes are organised differently. As a business model is defined as the structure of how an organisation creates, delivers and captures value, it is logical that this structure will change when switching from a linear to a circular model.

An interesting list of ecosystem patterns is found in the white paper ‘Business Model innovation for the Circular Economy’ from Stechow, Takacs & Frankenberger – University of Sanct Gallen. You can download the paper from the website or find it here.