W3/L3: Circular Business Models

1. What is a Business Model?

Definition (Osterwalder & Pigneur, 2010)

A business model describes how an organization creates, delivers, and captures value.

Key Benefits

✔ Provides a roadmap for innovation.
✔ Clarifies value creation and delivery.
✔ Helps in strategic decision-making.

Elements of a Business Model

1. Value Proposition → What value is provided to customers?

2. Value Creation & Delivery → How is the value provided?

3. Value Capture → How does the business make profits?

🔹 Example: Uber’s Business Model Canvas

• Value Proposition: On-demand, affordable transportation.

• Value Creation: Mobile app for seamless booking.

• Value Capture: Commission-based pricing.

2. What is a Circular Business Model (CBM)?

Definition (Bocken et al., 2016)

A circular business model (CBM) is one where a business creates, delivers, and captures value while closing and slowing material loops.

• Unlike traditional business models, CBMs require ecosystem transformation.

• Focuses on reducing waste, extending product life, and maximizing resource efficiency.

🔹 Example: Patagonia repairs and resells worn-out clothes instead of discarding them.

3. Circular Resource Flow Strategies

To implement circular economy concepts, businesses adopt three resource flow strategies:

(A) Slowing & Intensifying Resource Loops

• Goal: Extend product lifespan through repair, reuse, and upgrading.

• Slowing: Keeping products in use for longer.

• Intensifying: Maximizing product use across multiple life cycles.

🔹 Example: Refurbished smartphones (Swappie, Apple’s Certified Refurbished Program).

(B) Closing Resource Loops

• Goal: Recycle materials to create a continuous cycle of resource use.

• Process: Collect post-use materials → Reprocess → Use in new production.

🔹 Example: Loop Industries recycles PET plastic bottles into high-quality plastic.

(C) Narrowing Resource Loops

• Goal: Reduce resource consumption by improving material efficiency.

• Focus: Using fewer materials per product while maintaining quality.

🔹 Example: Minimalist packaging in Apple products reduces material waste.

4. Five Types of Circular Business Models

CBMs can be classified into five main types:

(A) Circular Supply Models

✔ Focus: Replace scarce, non-renewable materials with sustainable alternatives.
✔ Suitable for: Companies dealing with high environmental footprint materials.
✔ Strategies: Using recyclable, biodegradable, or renewable inputs.

🔹 Example: Piñatex (Ananas Anam)

• Uses pineapple leaf fibers to create vegan leather.

• Leftover biomass is converted into fertilizer or biofuel.

🔹 Example: RubyMoon Swimwear

• Creates swimwear from recycled fishing nets and ocean plastics.

(B) Resource Recovery Models

✔ Focus: Recover waste materials and convert them into valuable resources.
✔ Suitable for: Industries that produce large volumes of by-products.
✔ Strategies: Closed-loop recycling, industrial symbiosis, Cradle-to-Cradle designs.

🔹 Example: MarinaTex (Bioplastic)

• Made from fish skin and scales + red algae.

• Biodegrades in less than a month, unlike conventional plastic.

(C) Product Life Extension Models

✔ Focus: Extend product lifespan through repair, refurbishment, and resale.
✔ Suitable for: Capital-intensive industries and consumer electronics.
✔ Strategies: Remanufacturing, upgrading, second-hand markets.

🔹 Example: Apple’s iPhone Refurbishment Program

• Used iPhones are repaired and resold at a lower cost.

🔹 Example: IKEA’s Buy-Back & Resell Program

• Customers return old furniture → IKEA refurbishes & resells.

(D) Sharing Models

✔ Focus: Promote collaborative consumption to increase resource efficiency.
✔ Suitable for: Products with low utilization rates.
✔ Strategies: Peer-to-peer sharing, rental services, platform models.

🔹 Example: TaskRabbit & NeighborGoods

• Platforms that connect users to share resources.

🔹 Example: Olio (Food Sharing)

• Helps people share surplus food instead of wasting it.

(E) Product-Service System (PSS) Models

✔ Focus: Shift from product ownership to service-based models.
✔ Suitable for: Companies where maintenance costs are high.
✔ Strategies: Leasing, pay-per-use, subscription-based models.

🔹 Example: Mud Jeans (Clothing Rental)

• Customers lease jeans for €9.95 per month.

• After 12 months, they return, exchange, or buy the jeans.

5. Implementing Circular Business Models

Key Steps for Success

1. Adopt a Circular Business Model Canvas

   • Modify traditional Business Model Canvas to integrate circular principles.

2. Develop a Circular Value Proposition

   • Define how your business reduces waste & maximizes resource efficiency.

🔹 Example: Lena Library (Fashion Rental Service)

• Solves overconsumption in fashion by renting out designer clothes.

Challenges in Implementation

❌ Rebound Effect: Increased efficiency can lead to higher overall consumption.
❌ Consumer Resistance: Customers prefer ownership over leasing.
❌ High Initial Costs: Transitioning to circularity requires investment.

6. Traditional Business Models vs. Circular Business Models

7. Summary & Key Takeaways

✔ Circular Business Models (CBMs) aim to close, slow, and narrow resource loops.
✔ There are five main CBMs → Circular Supply, Resource Recovery, Product Life Extension, Sharing, and Product-Service Systems.
✔ Implementation requires ecosystem collaboration (partners, customers, and industries).
✔ Challenges include high investment costs, consumer resistance, and complexity.
✔ Successful CBMs reduce waste, extend product life, and create new revenue models.