What are the benefits for businesses?
The benefits of the circular economy translate into opportunities for entrepreneurs. This creates new profit opportunities, a more stable supply of materials, a growing demand for certain services, and strengthened customer relationships. These benefits are explained below.
New profit
As a result of the transition to the circular economy, companies are reducing material costs and developing completely new markets where profits can be made. In many sectors, raw materials are a high cost item. The extraction of new raw materials and the uncertainty about their supply in a linear economy are driving up the price of these materials. Circularity can therefore offer new profit opportunities through lower costs, increased security of supply of raw materials, tighter chain cooperation and a more robust supply chain. Circularity allows companies to utilise innovative production techniques and business models that reduce supply chain inefficiencies and increase competitive advantage (Linear risk). In addition, the organisation’s image is strengthened by showing that sustainability is being put into practice (Vermunt et al., 2019).
Stable material supply
A circular economy ensures that the company uses fewer new raw materials and more recycled raw materials, and that the value of these raw materials is maximised over their entire life cycle. The company that employs circular economy strategies reduces their dependency on scarce natural resources and hedges against future price volatility (Linear risks). As a result, an entrepreneur will incur relatively lower material costs than labour costs, which means that the costs and availability of materials have less influence on the stability of the business model.
With more stability, a company can make more favourable and targeted long-term investments (Vermunt et al., 2019). A good example is the company Vanderlande, which installs baggage and parcel transport systems worldwide. Vanderlande developed a conveyor belt that can be disassembled and reassembled quickly. In this way, the company spends less on material costs (Vanderlande, 2019).
Growing demand for services
Within a circular economy there is a demand for new services, where there are opportunities for employees and entrepreneurs. These new jobs and services are according to the Ellen MacArthur Foundation (2015a):
· Reversed logistics companies that collect, transport, repair and redistribute products after use in order to be reintroduced into the market;
· Marketers and sales platforms that facilitate longer product life and higher utilization rates;
· Experts in remanufacturing and product repair who facilitate reuse and repair;
A service provider that fits within the circular economy and can serve as an example is the company Milgro. In addition to waste processing, Milgro assists companies in extracting value from residual flows. In addition, it helps startups to market innovative products with new raw materials. For example, Milgro has developed a raw material management system that provides insight into the supply of wasted vegetables to affiliated companies. This system makes it possible to offer these vegetables again to processors such as the Verspillingsfabriek (Wastelab, 2019).
Optimised customer relations
The circular economy offers new business models and opportunities to retain customers. The transition from product delivery to services, leasing models and rental creates a long-term relationship between customer and supplier, because there is more contact during the life of the product. When the supplier remains responsible for the delivered product, interim service, maintenance, repair and good communication can not only result in customer satisfaction but also customer loyalty, which ensures that the customer will buy products again after the contract expires (Kraaijenhagen, Van Oppen & Bocken, 2016).
An example is the company BMA-ergonomics that provides a residual value guarantee for the sale of its office chairs. After the period of use, the office chairs are bought back and collected from the company that bought them. This gives BMA ergonomics the advantage of being able to refurbish and resell the office chairs. Equally important, the buy-back guarantee means that the customer automatically contacts BMA ergonomics again when they have to buy new office chairs (BMA ergonomics, 2019).
Prepared for the future changes
Circularity enables companies to prioritise their environmental and social impacts. They are better prepared for future changes in environmental regulations as well as reputational risks from negative perception. (Linear risk)
