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Circular Economy

What are the benefits for businesses?

The advantages of circular economy can be translated in to various benefits and opportunities for entrepreneurs. The Ellen MacArthur Foundation has summarized this in four opportunities: new profit opportunities, greater security of supply and resilience, demand for service models and new and enhanced customer relationships. Ellen MacArthur Foundation, 2015a, pp. 13–14.

New profit opportunities

By making the move to the circular economy, companies will reduce their material costs and develop entirely new markets to gain profit. Ellen MacArthur Foundation, 2015a, p. 13.

Profit opportunities within a circular economy are caused by

  • More opportunities for growth and productivity;
  • Assurance of continuity of supply;
  • The creation of new markets;
  • Adding value for consumers; and
  • Optimizing energy consumption and waste reduction.
WBCSD, 2011

Besides this, a circular company will become more future proof through lower costs, increased security of supply, greater chain collaboration and a robust supply chain. In addition, the brand of the organization is strengthened because it gives specific examples of how to integrate sustainability in the organization. Supply Value, 2016

Less volatility and more security of supply

A circular economy ensures that company uses fewer raw materials and more recycled materials, and the value of these raw materials is maximized throughout the lifetime of products. This will result in relatively less material costs than labor costs, reducing the impact of material costs and material availability on the stability of the business model is reduced. Ellen MacArthur Foundation, 2015a, p 14; Kraaijenhagen, Van Oppen & Bocken. 2016 p. 12.

This increases the resiliency of a company. A resilient system is more resistant to sudden changes, and is able to come into balance again after a change through innovative solutions. These solutions will be on the cutting edge of social and environmental domain. Stockholm Resilience Center, 2010, pp. 12–16.

Demand for new service models

Within a circular economy a demand for new services is growing. This creates new job opportunities for employees and entrepreneurs. These new jobs and services are mainly found as:

  • Reversed logistics companies that collect, transport, repair and redistribute products after use, to be reintroduced into the market again.
  • Marketers and sales platforms which facilitate longer service life and higher utilization of products.
  • Experts in the field of remanufacturing and product recovery that facilitate reuse and repair

Ellen MacArthur Foundation, 2015a, p. 14

Entrepreneurs who take up these opportunities in a timely manner will have competitive advantage over laggards. For laggard, the concept of creative destruction applies, which means that new business models will emerge at the expense of existing business models.

OPAi, & MVO Nederland, 2004, p. 34

Optimized customer relationships

Circular economy offers new business models and opportunities to bind customers. The transition to service, leasing and rental models are expected to create a long-term relationship between customer and supplier because there is more contact during the life of the product. If the supplier remains responsible for the product supplied, customer satisfaction and customer loyalty can arise through good communication and frequent intermediate contact and service for maintenance, repair.

Ellen MacArthur Foundation, 2015a; Kraaijenhagen, Van Oppen & Bocken. 2016.