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Circular Economy

How is a circular business model created?

The realisation of the circular economy requires a fundamental systemic change. This new system also requires new business models. In order to apply the various business models, companies need to gain insight into which business model suits the organisation and is promising for the chain. Below, 4 methods are presented that help to make the business model as a whole and the revenue model more circular.

A workbook for developing Circular Business Models

This workbook supports people that want to move their company towards circular business operations ranging with a framework to work on the circular business model. The book consists of two parts. The first part provides a theoretically oriented introduction. In this part the conceptual background of the circular economy is provided, as well as insights into the complexity of a circular economy. Part II of the workbook functions as a do-it-yourself road map. The idea is that the user/reader moves through the various building blocks to inform the development of a circular business model. This is enabled by a simple approach: for each part of the business model a set of questions and activities are presented to the user with a total of nine sets of questions. The workbook of Jonker et al. (2018) can be downloaded here.

Circular revenue model

The revenue model is a decisive part of a business model. After all, it provides insight into the way in which a company generates (financial) value by mapping out the revenues and costs. This means that the revenue model itself cannot be circular, but it does determine who is responsible for the product or service during its life cycle. The preservation of value – central to the circular economy – of a product or service depends on who is responsible for it. Hence, the revenue model is an important part of a circular business model.

In the report below, Copper8 and its co-authors describe four steps with which a revenue model can support circularity:

Step 1: Establish that the company wants to create value in a circular way.

Step 2: Incorporate this intention in the vision and strategy by determining the ultimate goal to which the company works (e.g. a fully closed raw materials chain) and how the company can play a role in this.

Step 3: Make the vision and strategy concrete by determining which circular value proposition you will use to seduce your (potential) customers, and with which partners (suppliers, sector organisations) you will work together.

Step 4: Translate the value proposition into a circular revenue model, such as a Product-as-a-Service model.

See below the full report (in Dutch) of Copper8, KPMG Sustainability and Kennedy van der Laan:

Track for circular business models

If a company wants to apply principles of circularity in its business operations, it can follow workshops at CIRCO. The CIRCO methodology offers SMEs tools to design their product and/or service and business model in a circular way. Municipalities, sector organisations and knowledge organisations, among others, can offer the CIRCO-methodology to companies in their network. For more information, please visit: https://circonl.nl/doe-mee/

Template for circular business models

Another way to highlight an existing or new business model to be developed from a circular perspective is by using the Triple Layered Business Model Canvas. For this template, the widely used Business Model Canvas has been expanded with an ecological and social dimension. The ecological layer is based on the life cycle perspective and the social layer is based on the stakeholder perspective and looks at who has an interest in it. The canvas can be seen on page 27 of Joyce, Paquin, & Pigneur (2015).