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Circular Economy

Which circular business models arise?

Circular entrepreneurship brings new business models with it. These models can be divided into four categories, with the emphasis on the design, use, recovery and organisation of these aspects, respectively. In this article, the 4 types of business models will be presented and illustrated with an example.

Before turning to the circular economy, it is worth typifying the business models of the linear economy. The business model behind the linear economy is to sell as many products as possible that are almost broken. After a relatively short life, the value added carefully to these linear products drops to zero, when the products end up in a landfill (see figure 1: The Value Hill).

Figure 1: a comparison of the linear and circular economy (Achterberg, Hinfelaar and Bocken, 2016).

In a circular economy, business activities are organized in such a way that products are kept as high and as long as possible on the Value Hill. Four categories of circular business activities have been identified: Circular Design, Optimal Use, Value Recovery and Network Organization (see Figure 2: Business Activities on the Value Hill).

Figure 2: Circular business activities on the Value Hill (Achterberg, Hinfelaar and Bocken, 2016).

Circular Design

Circular Design models focus on the development phase of a product. Products are designed to last longer and are easier to maintain, repair, upgrade, refurbish, remanufacture or recycle. In addition, new materials are developed or used, such as bio-based or fully recyclable materials.

Examples of business models in this category (Achterberg, Hinfelaar and Bocken, 2016):

  • Product design: Development of products designed for easy maintenance, repair and renewal, such as a modular product;
  • Long lifespan: Development of products that have a long lifespan;
  • Circular materials: Supply of input materials, such as renewable energy, bio-based materials, or fully recyclable materials;
  • Adequacy: A high price per product can justify lower volumes.


Fairphone is a social enterprise that designs and produces fair and sustainable smartphones by focusing on four themes: good working conditions, sustainable design and reuse and recycling. In developing the first Fairphone, the focus was on sustainability and working conditions in purchasing and assembly processes. In the development of the two subsequent models (2 & 3), a modular design was chosen, allowing parts to be easily replaced or upgraded. Fairphones are still being sold, but a financially viable circular business model has been developed, Fairphone-as-a-Service, of which the lessons, the contract and the financial model have been made public (Fischer en Achterberg, 2017).


Optimal Use

These business models focus on the use phase of a product by optimising use and thus extending its life span and saving resources. These business models make it possible to retain ownership of the product (e.g. by offering a product as a service instead of selling it) and to take responsibility for the product throughout its lifetime (e.g. by offering maintenance services or other add-ons that extend its lifetime). These business models involve a switch from selling products to selling contracts.

Examples of business models in this category (Achterberg, Hinfelaar and Bocken, 2016):

  • Product-as-a-service: Provision of product performance instead of the product itself through a combination of products and services. Ownership of the product is retained by the service provider;
  • Sell and buy-back: the sale of a product on condition that the product is bought back after a certain period, so that it can be reused;
  • Sharing platforms (access provider): Increased product utilization by enabling sharing of usage, access or ownership;
  • Lifetime extension: Extend the useful life of products and components through repair, maintenance, or upgrades;
  • Support lifecycle: Sales of consumables, spare parts and add-ons to support the life cycle of products.


Bundles sells washes instead of washing machines. Bundles offers its customers a sustainable washing machine. They pay a fixed amount per month and an extra price per wash. By attaching a smart meter to the washing machines, Bundles can control its use. In the Wash-App, customers can see their use, and tips are given to reduce the total cost of washing, including the consumption of energy, water and detergent. This reduces the costs for the customer and benefits the lifetime of the machine. This combination creates a financial incentive for the washing machines to last as long as possible.

Value recovery

These business models focus on the output and added value of a product after the use phase. These models generate revenue by transforming used products into new products or usable components or raw materials. The development of return logistics is essential for this model.

Examples of business models in this category (Achterberg, Hinfelaar and Bocken, 2016):

  • Second hand seller: Sale of used products;
  • Innovator: Refurbishment and remanufacturing of used products for the purpose of selling them;
  • Reclaimed materials supplier: Sales of reclaimed materials and components instead of virgin or recycled materials;
  • Recycling facility: Transformation of waste into raw materials. Additional turnover through innovation in recycling technology;

Blackbear Carbon

Blackbear Carbon converts end-of-life tyres into carbon black, an industrial product. Carbon black is mainly used for rubber (70-80%) or for pigments for plastics, mascara, paints and inks. Every year, they collect some 1.5 billion car tyres, which would otherwise end up in landfills and could even lead to health problems. Through the process developed by Blackbear, they can establish a cycle and deliver a product at least as high in quality as traditional suppliers. Hence, an alternative for raw materials (Ewen et al., 2017).

Network Organisation

The activities in the categories discussed above cannot achieve a circular economy in isolation. Cooperation is essential. Network organization models are business activities in which cooperation and coordination of circular value networks are supported.

Currently there are companies such as Recover-E and the Dutch aWEARness that have taken on the role of chain director, but there is also a need for joint coordination that requires new ways of organising.

Examples of business models in this category (Achterberg, Hinfelaar and Bocken, 2016):

  • Recovery provider: Sale of take-back systems and collection services to recover useful materials from discarded products and by-products;
  • Asset tracing & monitoring: Services for tracking, monitoring and trading products, components and materials;
  • Contract management: Facilitating the drafting, handling, execution and/or enforcement of contracts;
  • Financial services: Services that manage cash flows, such as facilitating chain financing, accounts receivable management, inverse factoring, creditworthiness checks;
  • Data services: Services that manage, coordinate and facilitate information flows.

Circular Service

The Circular Service (CiSe) platform functions as a digital payment and administration system for circular companies that want to do business, but do not want to reinvent the wheel every time. The success of circular chains depends on long-term agreements, cooperation and trust between the chain partners. This is accompanied by high administrative costs and a business logic that we – to put it mildly – are not used to. The CiSe Platform used new technologies (such as blockchain and smart contracts) to drastically reduce these costs, provide the required transparency and offer financiers new ways to finance the circular economy. The results are promising (Achterberg, 2019).