Categorisation System for the Circular Economy
1.4.1. The Value Hill
To help businesses position themselves in a circular context and strategies to implement circular economy in their business. The Value Hill was developed by Circle Economy together with Sustainable Finance Lab, , Nuovalente, TUDelft, and het Groene Brein.
The Value Hill is basically built on the main three lifecycle stages (pre-use, use and after use) of a product and therefore enables businesses to position themselves on the value hill and explore gaps in the circular network.
In the context of the Value Hill, on top of the mountain, the value of the product is at its highest. The aim therefore is to preserve the value added and keep the product close to that top point that refers to the usage phase.
The product is valued during the production phase and reaches its highest level at the top. This stage is fed up with circular strategies to keep the product as long as high as possible on the hill with the maximum value.
After the usage phase, the product loses value going downhill. Products are aimed to cascade as slowly as possible down and recapture to value by feeding back into a previous phase to optimize the residual value of products.
The travelling of products on the value hill is supported with circular business models which can be positioned in four different categories;
1- Circular Design Models: These business models are focussing on pre use and the design phase. The aim is to prolong the use phase and increase circular resource efficiency of products and assets.
2- Optimal Use Models: The aim of these business models is to extend the life of products and optimize the usage phase. It refers to the top of the Value Hill.
3- Value Recovery Models: These business models relate to the after use phase of a product. The aim is to capture value from end of life products.
4- Circular Support Models: These business models include supporting activities under all circular economy models and circular networks.
1.4.2 Circular Economy Categorisation System
CE Finance Expert Group proposed a circular economy categorisation system consisting of 14 circular categories organised in four high level category groups or models. These groups align with the Value Hill Business Model Tool.
1- Circular Design/Production
Circular Design/Production models focus on the development phase of a product. It aims to increase circular resource efficiency of products and assets. Products are designed to last longer and are easier to maintain, repair, upgrade, refurbish, remanufactured or recycle. In addition, new materials are developed or used, such as bio-based or fully recyclable materials.
Circular categories in this group:
1.a Design and production of products and assets that enable circular economy strategies, through e.g. (i) increased resource efficiency, durability, functionality, modularity, upgradability, easy disassembly and repair; (ii) use of materials that are recyclable or compostable
1.b Development and deployment of process technologies that enable circular economy strategies
1.c Development and sustainable production of new materials (including bio-based materials) that are reusable, recyclable or compostable
1.d Substitution or substantial reduction of substances of concern in materials, products and assets to enable circular economy strategies
1.e Substitution of virgin materials with secondary raw materials and by-products
Fairphone
Fairphone is a social enterprise that designs and produces fair and sustainable smartphones by focusing on four themes: good working conditions, sustainable design and reuse and recycling. In developing the first Fairphone, the focus was on sustainability and working conditions in purchasing and assembly processes. In the development of the two subsequent models (2 & 3), a modular design was chosen, allowing parts to be easily replaced or upgraded. Fairphones are still being sold, but a financially viable circular business model has been developed, Fairphone-as-a-Service, of which the lessons, the contract and the financial model have been made public (Fischer en Achterberg, 2017).
2- Circular (Optimal) Use
These business models focus on the use phase of a product by optimising use and thus extending its life span and saving resources. These business models make it possible to retain ownership of the product (e.g. by offering a product as a service instead of selling it) and to take responsibility for the product throughout its lifetime (e.g. by offering maintenance services or other add-ons that extend its lifetime). These business models involve a switch from selling products to selling contracts.
Circular categories in this group:
2.a Reuse, repair, refurbishing, repurposing and remanufacturing of end-of-life or redundant products, movable assets and their components that would otherwise be discarded
2.b Refurbishment and repurposing of end-of-design life or redundant immovable assets (buildings/infrastructure/facilities)
2.c Product-as-a-service, reuse and sharing models based on, inter alia, leasing, payper-use, subscription or deposit return schemes, that enable circular economy strategies
2.d Rehabilitation of degraded land to return to useful state and remediation of abandoned or underutilised brownfield sites in preparation for redevelopment
Bundles
Bundles sells washes instead of washing machines. Bundles offers its customers a sustainable washing machine. They pay a fixed amount per month and an extra price per wash. By attaching a smart meter to the washing machines, Bundles can control its use. In the Wash-App, customers can see their use, and tips are given to reduce the total cost of washing, including the consumption of energy, water and detergent. This reduces the costs for the customer and benefits the lifetime of the machine. This combination creates a financial incentive for the washing machines to last as long as possible.
3- Circular Value Recovery
These business models focus on the output and added value of a product after the use phase. These models generate revenue by transforming used products into new products or usable components or raw materials. The development of reverse logistics is essential for this model.
Circular categories in this group:
3.a Separate collection and reverse logistics of wastes as well as redundant products, parts and materials enabling circular value retention and recovery strategies
3.b Recovery of materials from waste in preparation for circular value retention and recovery strategies (excluding feedstock covered under
3.c) 3.c Recovery and valorisation of biomass waste and residues as food, feed, nutrients, fertilisers, bio-based materials or chemical feedstock
3.d Reuse/recycling of wastewater
Blackbear Carbon
Blackbear Carbon converts end-of-life tyres into carbon black, an industrial product. Carbon black is mainly used for rubber (70-80%) or for pigments for plastics, mascara, paints and inks. Every year, they collect some 1.5 billion car tyres, which would otherwise end up in landfills and could even lead to health problems. Through the process developed by Blackbear, they can establish a cycle and deliver a product at least as high in quality as traditional suppliers. Hence, an alternative for raw materials (Ewen et al., 2017).
4- Circular Support Models
The activities in the categories discussed above cannot achieve a circular economy in isolation. Cooperation is essential. Network organization models are business activities in which cooperation and coordination of circular value networks are supported.
Circular categories in this group:
4.a Development/deployment of tools, applications, and services enabling circular economy strategies
Circular Service
The Circular Service (CiSe) platform functions as a digital payment and administration system for circular companies that want to do business, but do not want to reinvent the wheel every time. The success of circular chains depends on long-term agreements, cooperation and trust between the chain partners. This is accompanied by high administrative costs and a business logic that we – to put it mildly – are not used to. The CiSe Platform used new technologies (such as blockchain and smart contracts) to drastically reduce these costs, provide the required transparency and offer financiers new ways to finance the circular economy. The results are promising (Achterberg, 2019).
I:CO
I:CO is a leading global solutions provider for the collection, certified sorting, reuse and recycling of used clothing and shoes, since 2009. It is a subsidiary of SOEX, which has specialized in collecting used textiles and shoes throughout Germany, Europe and the world, sorting, domestic sales and export of second-hand clothing as well as recycling used textiles. Through the in-store take-backsystem and partner network, I:CO offers fashion brands and retailers a product end-of-life solution.
They have more than 60 retail partners including Levi’s, The North Face, Forever 21 and H & M.Their visionis to enable a circular economy for the textile industry, where used textiles and shoes circulate in closed loops and are used over and over again for the production of new products. The I:CO take-back system is the basis for this circular economy.
LOOP
TerraCycle is a recycling platform that is known for recycling hard-to-recycle materials. Lately, Terracycle has built a coalition with major consumer product companies such as Procter & Gamble, Nestle, PepsiCo, Unilever etc. and launched a zero-waste platform.
The platform offers to receive products from well-known brands in durable containers that are available on Loop’s e-commerce site . Throughout the service, the platform aims to allow reuse in order to eliminate packaging waste. After use, Loop collects the empty containers and applies hygienical cleaning to make them ready for reuse.
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