Which circular business models arise?
There are several business model types that arose for businesses to implement circular economy in their operations. In this section we analyzed two main proposed circular business model categorizations scheme one by Accenture (2015) and the other one Products that Last (Delft University).
1.5.1. Accenture – “The Circular Economy Handbook” and “Waste to Wealth”
Accenture identified five business models to help companies address the four types of waste (resource, capacity, lifecycles and embedded value) and create a circular value chain by decoupling growth from resource consumption. The 5 underlying business models are presented as below;
1) Circular Inputs
At its core, the Circular input or Circular supply means replacing linear type of resource with a circular alternative. This business model offers to use of renewable energy, bio-based or potentially completely recyclable materials as substitutes for linear ones.
Natureworks is a chemical manufacturing company that provides circular supplies. Natureworks offers commercially available bio-polymers derived from 100 percent renewable resources. They use plants to convert greenhouse gases into lactic acid by using best technologies. The cost and performance of Natureworks’ biopolymers compete with petroleum-based packaging materials and fibers. The product is used in a number of end products, from packaging material to plastic bottles.
Nike is a multinational footwear and apparel company. Nike reclaims discarded leather fibers, which eventually go to landfills, to produce innovative leather material that works as natural leather, made by binding at least 50% reclaimed leather fibers. Its production reduces the impact of water-powered processes and provides a smaller carbon footprint compared to traditional leather manufacturing.
Adidas, one of Europe's premier sportswear manufacturers, is increasing the use of sustainable materials in its product range. From 2024 onwards, only recycled polyester will be used in every product and on every application where a solution exists.
2) Sharing Platform
This business model provides a platform to connect product owners with individuals or organizations that would like to use them. Rather than offering the products itself, the business model facilitates the renting, sharing, swapping or of resources by typically using digital technologies. All idle, unused large and small items are rented and exchanged with sharing platform models. It increases usage rates through collaborative approach for usage, access or co-ownership.
Stokartı is a digital transformation initiative which defines a digital after sales marketplace. Stokartı allows companies to list and trade surplus materials and assets while protecting the company name. The innovative approach of Stokartı creates an international ecosystem that connects companies from various sectors including contractors, subcontractors, repair shops, part resellers, equipment rental companies. Stokartı has nearly 500 members from 53 countries worldwide with a listing of 16.000 stock items.
Airbnb is one of the most known examples of the sharing economy. Customers take advantage of their idle capacity or access to unused or underutilized assets and resources. Airbnb platform provides a network that connects people who want to share their extra space.
Amsterdam based 3D Hubs offers a collaborative production platform for makers and 3D printer owners.Using 3D Hubs’ platform, anyone with a 3D printer can bring customized, locally produced goods to those around them. By creating a platform that connects printing capacity with users who want to print, 3D Hubs makes the market of 3D printers more liquid and allows one printer to serve more people.Using 3D Hubs’ map, users can choose a nearby 3D printer and see its offerings in terms of materials, delivery time, pick-up process, and pricing.
3) Product as a Service:
This model focuses on products’ performance instead of sales volume. Companies sell the products benefits on a service basis while being responsible for the maintenance and treatment processes at the end of use. Products are used by customers through a lease or pay for use arrangement, consumers pay for products based on usage.By keeping the products in use, it increases resource productivity.
MUD Jeans introduced an innovative concept of “Lease A Jeans” in 2013, allowing their subscribers to lease instead of purchase jeans. In this concept, customers don’t own the jeans and they don’t have to deal with the repairing & maintenance of any kind. MUDJeans gives a full-service leasing option that includes cleaning, maintenance and repairing. Accordingly, MUD Jeans has also transform edits operations to develop longer lasting jeans.Thus, it is challenging the idea of ownership of the material, helping consumer to worry only about the function.Through design and material selection, jeans can be used by multiple users for several times and returned ones can be repaired to extend product life-time or reprocessed into valuable materials for a new jean. MUDJeans’ leasing model basically aims to prevent overproduction and over consumption.Consumers can use the jeans without owning it and return after a period of time. This is also a way to ensure to get MUD Jeans’ products back at the end of life and keep the value of the raw material. They increase the resource efficiency by closing the loop through their concept supported by their reverse supply chain and mechanical recycling scheme.
Signify, which is the company name of Philips Lighting, is a world leader in lighting and provides high-quality, energy-efficient lighting products, systems and services. Applying the principles of circular economy to their systems and products, Signify offers unique services to meet the increasing demand for sustainable technologies.
They offer to use lighting systems instead of owning, to enable customers to benefit from the services not the product itself. In order to achieve this, they take consideration of energy efficiency and serviceability in their application as well as having a long/extendable lifetime and being recyclable with their products.
4) Product Use Extension:
The Product Life-Extension business model lengthens products’ life by generating revenue through longevity. In this model, product characteristics like durability, quality, and functionality are more highly valued. The business model includes a number of activities for prolongation of product use from repair, reprocessing, upgrading to reselling.
Schneider is the multinational energy management company and actively engaged in circular economy in their business. One of its approaches to circularity is to foster new systems including extending product life through repair. With this aim, Schneider Electric repair, upgrade or renew switchgears to extend the use of their switchboards. This results with up to %65 the cost savings from the new installations and in the prevention of Co2 emissions and water consumption.
Patagonia is a well-known American outdoor clothing company. The company not only resells its used clothes through the “Worn Wear Program” but also provides professional repair service to their customers. Recently, they set a partnership with iFixit, which is a community-based platform that offers repair manuals, how-to guides, tutorials etc. With this collaboration, iFixit offers a product care guide along with the step by step instruction guide for fixing damaged Patagonia clothes.
5) Resource Recovery
This model focuses on the end stages of the value chain. In other words, recovery of usable resources from waste or by-products that are no longer functional in their current application are the subjects of this model. Recycling, upcycling or downcycling are the main processes applied under this model. It effectively eliminates the waste concept by bringing them back to life with different purposes and re-enable their revenue potential.
Darwin’s Botanicals was founded in November 2015, November. Their field of work focus is based on hand-dyeing fabrics with colours extracted from plants and food waste without using any chemicals. They only use 100% natural fibres. They are working collaboratively with cafes, restaurants, catering firms and local florists and collecting their wastes to use them in their dye production. Their product line includes fabric accessories such as scarfs, headbands, headwraps, bowties.
Arkim Chemical Substances was established in 2011 by receiving financial support from The Ministry of Science, Industry, and Technology to promote “Natural Antibacterial from Eggshell Extract Project”. Within the scope of the project, they developed a new range of food preservatives solution called “ArCa Natural Antibacterial” by using eggshell powder as a substitution for the currently used chemicals such as potassium sorbate, sodium benzoate, and natamycin. Arkim is the first company in the world that produces patented 100 % natural food preservatives.
Laska is a high-tech company that converts end-of-life tires with innovative, environmentally friendly and sustainable production approaches. Each year 1.5 billion waste tires emerge around the world. The fact that these tires, some of which are burned and some of which are thrown into the nature, are not effectively utilized causes serious environmental problems. Carbon dioxide emissions, related climate change and global warming, pollution of natural resources are some of these problems. As Laska, with our patentable technology and the circular economy approach we adopt, we convert waste tires into two main products: carbon black and renewable fuel. We obtain these two products, normally obtained from fossil fuels with traditional production methods, by utilizing waste tires. In this way, we prevent the dirty and costly consequences of fossil fuel use. While eliminating the negative effects of waste tires on the environment, we regain them back to the economy. In this way, by upcycling waste tires, we change the fate of both them and our planet.
Laska's solution contributes 7 of the United Nations' 17 Sustainable Development Goals.
1.5.2. Delft- Product that Last
This model offers high quality products with long lifespan. Primary revenue stream generated from sales of high-grade products with a long useful life at a high price point. The model requires service and repair to provide long life usage. In this model, reputation and trust are the most prominent perceptions.
The original Swiss army knife from Victorinox is a true classic and has been known for its high-quality and long lasting qualities since the first knife was produced back in 1890.
The army knives is a classic long lasting product sold through retailers. They offer repair service if it breaks, thus avoiding the waste of more raw materials.It has been stated that people from all over the world, security forces and even NASA astronauts rely on Victorinox products.
Lego, a product known by almost every kid that grew up in the Western world. Little pieces of plastic in blue, red, green, white and yellow forming little standardised building blocks to build whatever comes up in the mind. Starting in 1949 Lego is still growing and expanding. In February 2015 they received the title ‘World’s most powerful brand’. Lego has created a tool for kids (and adults) to be creative and have the possibility to explore freedom in form over and over again because of its ease to dis- and reassemble. Lego’s group motto is “only the best is the best”, to encourage the employees to always value quality above everything else, this can be seen in the product itself; long lasting because of its high quality.
Hybrid models include two different product types that only function together. The model realized when a durable product is completely dependent upon a short-lived exchangeable part. Main revenue stream generated from repeat sales of the fast-cycling consumables.
gDiapers is an American based washable diaper brand with cradle-to-cradle certificate. Unlike most single-use diapers, including “bio” diapers, diapers with compostable parts or diapers that are dyed brown, gDiapers contain no polypropylene or polyethylene. Home composting disposable inserts (wet ones only) create a usable humus. There is no other disposable diaper on the market that can make all of these claims. Further, gDiapers offers a cloth insert which, with a gPant, offers a fully reusable system. Gdiapers is an affordable, accessible diaper that is gentle and breathable for their babies and a diaper whose production and disposal regenerates the environment rather than depletes it. GDiapers disposable inserts are more than 75% cellulose-based. Gdiaper makes its strong point allowing the consumer to replace the inner part of the diaper (disposable inserts). So the gPant is dependent upon a replaceable part with a limited functional lifespan.
This model exploits value gaps of products that have during a lifetime. In this model, the exploiters are the ones who catch the value through recovery or reuse of existing or leftover materials and typically not the owner of the products. Main revenue stream is generated from selling products, parts and services based on the mixed product life of components. The gap exploiter model offers three options; repair, second-hand, and recovery.
Freitag is a Zurich-based start up, which is inspired by the multi-coloured heavy traffic that rumbled through the Zurich transit intersection. They developed a messenger bag from used truck tarpaulins, discarded bicycle inner tubes and car seat belts. Freitag’s flagship product is its bags which are made from used truck tarpaulins,discarded bicycle innertubes and car seat belts. Each bag is durable,recycled and unique.
They are well-known with their bags but have expanded their product range in time,including apparel for women and men in addition to accessories. All garments they produce are made of natural materials and are biodegradable. Freitag products are sold in347 stores(Freitag shops and retailers)all over the world.
The North Face
The North Face is an American outdoor recreation product company. They launched an innovative recommerce program called The North Face Renewed. The North Face Renewed is a collection of refurbished clothing remade to explore. To be able to apply this model, North Face built a take-back and repair/maintenance system. After collecting second-hands they renewed them and put them into the market to re-sale again. All renewed garments have great quality and performance with less impact on the earth.
In this model, ownership stays with the access provider. Customers are provided by access to products for a limited time and typically have short-term ownership. The products are used in turns and the main revenue stream comes from frequent payments for access.
The Danish clothing company Vigga is challenging the traditional business model of the clothing industry. Through a subscription-based clothing line for infants and small children Vigga ensures customers always have the right size clothing for their children. The clothes are recycled through a circular system, where every garment is used several times, ensuring a low environmental impact.
In this model, the main focus is on product performance rather than the product itself. Typically, users are interested in quality of service delivered, which is under provider's responsibility. Primary revenue stream from payments based on the performance provided.
It is stated that around 40% of all car trips around the world are made for distances below 5 km, and on average, only 2% of the fuel spent on these trips is actually used to carry passengers. Martı initiative aims to offer an environmentally friendly alternative to short distance trips by saving fuel and supporting the budget. Martı, an electric scooter rental / sharing application, provides users with cheap, fun and environmentally friendly travel with electric vehicles. The user is charged over the period of time he/she uses the scooter.