As the world grapples with the challenges of climate change and resource depletion, circular business models have emerged as a crucial tool for sustainability. These models aim to create value by decoupling economic activity from the consumption of finite resources and minimizing waste. However, achieving circularity is not just a matter of good design. It also requires businesses to engage with their customers in new ways, encouraging them to reuse, refurbish, remanufacture, or recycle products. In this article, we will explore the key principles of circular business models and the various strategies businesses can adopt to create value sustainably. We will also discuss the role of digitalization and IoT solutions in enabling circularity and the challenges businesses may face in adapting to this new paradigm.
Circular business models have become a crucial reference for sustainability work in recent years. The concept involves designing products and systems with a sustainable perspective, with the aim of decoupling economic activity from the consumption of finite resources and minimizing waste. However, achieving circularity requires more than just good design – it also requires the establishment of solutions that enable companies to reuse, refurbish, remanufacture or recycle products.
One of the most critical aspects of circular business models is engaging customers in new ways. This includes encouraging them to buy, rent and share reused products, as well as involving them in the refurbishment or remanufacturing process. For example, should customers be able to refurbish products themselves, or should they leave this task to professionals? What kind of support do they need if they choose to refurbish products themselves, and how will the reversed logistics work if they choose to have professionals do it?
Another important question is whether customers want to prolong the life of products or pass them on to others. If so, is there value in providing even the second, third or fourth owner with support? These are critical questions that businesses need to consider when implementing circular business models.
To find inspiration for circular solutions, businesses can refer to the RESOLVE structure, which consists of six steps: regenerate, share, optimize, loop, virtualize, and exchange. They can also gain insights from Accenture’s five alternative business models for achieving competitive advantage, which includes circular supply chain, recovery and recycling, product life extension, sharing platforms, and products as a service.
In all these examples, digitalization and IoT solutions are needed to trace and track materials and material flows more easily, more evidently, and more measurably. Since most of these solutions are new to companies, they need to learn how to adapt them to their context.
In conclusion, circular business models offer a sustainable approach to creating value that benefits the economy, the environment, and society. By embracing circularity, businesses can minimize waste, reduce their environmental impact, and create new opportunities for growth and innovation. However, the success of circular business models depends on engaging customers in new ways, leveraging digitalization and IoT solutions, and adapting these solutions to their context.
