Module 3: From Linear to Circular Economy

Co-funded by the
Erasmus+ Programme
of the European Union
www.circularcreatives.eu
Building back better, from Linear to
Circular: Why are Circular Practices the
future for Business?
MODULE 3
This work is licensed under a Creative Comm4.0 International License
http://creativecommons.org/licenses/by/4.0/

The European Commission support for the production of this publication does not
constitute an endorsement of the contents which reflects the views only of the authors,
and the Commission cannot be held responsible for any use which may be made of the
information contained therein
01
Module Presentations Content Introduction to the Course
From the Linear to the Circular
Economy
03 Core Circular Economy Concepts
02
Building back better, from Linear to Circular: Why
are Circular Practices the future for Business?

The European Commission support for the production of this publication does not
constitute an endorsement of the contents which reflects the views only of the authors,
and the Commission cannot be held responsible for any use which may be made of the
information contained therein
Definition of the topic
Each Unit has the following sub
headings
Characteristics and Principles of the
topic
Pros and Cons of the topic
Videos
Discussion Prompt
Section overview

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The module is composed of two units:
Unit 1: From the Linear to the Circular Economy
Unit 2: Core Circular economy concepts
Building back better, from Linear to
Circular: Why are Circular Practices the
future for Business?

Unit 1: From the
Linear to the Circular
Economy
02

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What is Linear Economy?
What is Circular Economy?
Why is the transition from liner to circular relevant?
Learning Objectives

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Why should business adopt circularity?
4
Moving from the Linear Economy to Circular Economy
5
Benefits of moving from the Linear Economy to Circular
Economy
6
Learning Objectives

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Knowledge about Linear Economy
1
Knowledge about Circular Economy
2
Relationships between the two economies
3
Learning Outcomes

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Pros and Cons of Linear Economy
4
Pros and Cons of Circular Economy
5
Relevance in contemporary and future business
scenario
6
Learning Outcomes

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https://www.coursera.org/learn/circular-economy
https://www.coursera.org/learn/circular-economy-metals
https://digitaldefynd.com/best-circular-economy-courses
https://ellenmacarthurfoundation.org/resources/education-and-learning/circular-
economy-courses
https://www.researchgate.net/publication/321764939_Best_Practice_Examples_o
f_Circular_Business_Models
Further Study Material Recommendations (Unit 1)

Unit 2: Core Circular
economy concepts
03

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Role of Business in Circular Economy
1
Circular Economy Business Model Strategies
2
Path to Circular Economy
3
Learning Objectives

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Principles of Circularity
4
Closing the Loop on the Circular Economy
5
Learning Objectives

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Understanding the Benefits of Circular Economy
1
Social Impact on Circular Economy
2
Challenges to the implementation of Circular Economy
3
Learning Outcomes

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• Scan the QR code to read through
the reference material
Further Study Material
Recommendations (Unit 2)

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American Chemistry Council. 2019. “Economic Potential of Advanced Recycling
Technologies in the U.S.” American Chemistry Council. Available online
Benyus, J. 1997. Biomimicry: Innovation Inspired by Nature. Harper Perennial.
ISBN: 0-06-053322-6
Boulding, K. E. 1966. The Economics of the Coming Spaceship Earth. Available via
PDF
Ellen MacArthur Foundation. n.d. “What is the Circular Economy.” Ellen MacArthur
Foundation. Available online
European Academies’ Science Advisory Council. 2015. Circular Economy: A
Commentary from the Perspectives of the Natural and Social Sciences.
Further Study Material Recommendations (Unit 2)

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In this introduction, we’ll cover the following points:
• General scope and motivation of this course
• How it brings the circular economy to you
• The overarching challenges addressed by circularity
• The big contributions of the Circular Economy.
1. Introduction to the course

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The two types of Economic Models are
• The Linear Economy
• The Circular Economy
What are the two types of Economic Models
https://www.slideteam.net/linear-vs-circular-economy-framework.html

Co-funded by the
Erasmus+ Programme
Linear Economy

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Linear Economy - Definition
A linear economy is a topic which is basically used to
describe the olden traditional models and economic
systems that follow a very easy and an uncomplicated
approach to consumption and production.
Though linear economy is a very simple and easy to
follow method, considering the growing concerns over
the social security of the environment and the
sustainability of modern human society which also
includes the discomfort caused by the present climate
emergency. Considering this many critics and scholars
have switched to circular economic source.

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Linear Economy
Source
Raw materials used to make product, after
use, culminate in a landfill. In economies
based on recycling, such waste materials
are reused. Learn more in: Circular
Economy for India: Perspectives on
Stewardship Principles, Waste
Management, and Energy Generation

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Linear Economy
An economic model based on the sequence take (raw material), make
(products), use (consume), dispose (of non-recyclable waste), which has
demonstrated to be unsustainable for both its resources consumption and its
environmental impact. Learn more in: Tourism Circular Economy: Proposal for a
Research Agenda
A traditional economic paradigm that consists of extracting raw materials;
transforming them; producing and consuming goods and services; and
discarding the resulting waste. Learn more in: Guiding Principles of Design for
Circular Tourism
The economy where the environment is as a simple natural free resource. Learn
more in: Circular Economy and Circular Business Models in the Actual Global
Ecological Context: Various Approaches.
Source

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Linear Economy
The economy where the steps are always the same, collect materials, transform them and use
them, without reusing anything. Learn more in: Circular Economy and Risk Management
Synergies in Disruptive Environments. It is a traditional economic model based on the ‘take-
make-dispose’ approach to using resources. Learn more in: Circular Economy as a New
Sustainable Development Paradigm: Some Open Questions and Issues
A system which extracts a resource, make a product and then sell it. In the process whatever
non-required is produced and also the final product at the end of its shell life is disposed of as
waste, disregarding the concept of reuse or recycle.
An economic model where resources are used to make a product and then discarded after its
useful life. Learn more in: Sustainable Development Through the Circular Economy: Experience
From Emerging Economies
Videos to be inserted: https://www.youtube.com/watch?v=q_6GalOImPc
https://www.youtube.com/watch?v=akBWuYo6QXQ

Characteristics of
Linear Economy

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Source
The linear economic model is generally
characterized by economic activities that
follow a take-make-dispose or take-make-
consume-throw away pattern that
transpire both at the macroeconomic and
microeconomic levels
A. Absence of Feedback
B. Mass Consumer Culture
C. Generation of Wastes

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Absence of Feedback
Unlike a circular economy, a notable characteristic of a linear economy, is that it
lacks a feedback loop.
Businesses across different industries and sectors participate in the economy
through production with the goal of making a profit by distributing and selling
their goods or services to the end-users.
The role of these end-users is confined to consumption.
The entire product journey is linear because it ends with the consumption and
disposal by the consumers. The producers would proceed to create, distribute,
and sell goods and services further using raw materials or other production
inputs extracted from the natural world.

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Mass Consumer Culture
Mass culture refers to a concept used in advertising & marketing in relation to
consumer behavior, although during this first mass culture, consumers were
considered as simple recipients of the stimuli enunciated by the predominant
brands.
Consumerism or mass consumerism is a theory that economic benefits are
attainable through the progressive consumption of products. In other words,
increasing consumption in the market is always a desirable goal and the
wellbeing of an individual depends fundamentally on obtaining consumer goods
and material possession.
Economies and businesses following a linear economic model would excessively
produce goods while focusing on strategies and tactics to attract the public to
these products. Some societies end up preoccupied with the acquisition of
these products and individuals would end up purchasing both essential and
non-essential goods excessively.

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Generation of Wastes
Wastes are materials discarded after the completion of a process. In production,
wastes include substances or by-products that are expended after being
deemed unusable to the current and future production processes. Within the
consumption their outmoded state.
The generation of excessive wastes is another characteristic of a linear
economic model because of a limited-use mindset, as well as the propensity
toward and further promotion of excessive consumption. Resources are
extracted while goods are designed and produced with disposal in mind or
limited consideration about the possibilities for recycling or upcycling.
Watch the Video: https://www.youtube.com/watch?v=LOaTR4Dy5LE

Criticism of Linear
Economy
02

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Criticisms of Linear Economy
The circular economic model is a direct criticism of linear economy. Relevant
concepts such as upcycling, regenerative design, natural capitalism, and Cradle to
Cradle provide additional foundational arguments against a linear economic model.
These arguments or criticisms revolve around two major concerns: environmental
welfare and sustainability and are as follows:

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Harmful to the Environment
A linear economic model damages the environment in numerous
ways.
• Mass production for mass consumption requires the extraction of
natural resources. E.g. mining rare-earth materials for consumer
electronic devices, steel and other metals for production of
automotive vehicles.
• Depending of fossil fuels to run the modern economy takes a toll on
the environment. Burning of oil, gas, and coal for power production
has contributed significantly to greenhouse gas emissions that have
resulted in human-induced global warming and climate emergency.
• Plastics prevalence has resulted in plastic pollution and persistence
of microplastics in the environment. The marketability of fast-moving
consumer goods and the need for packaging materials have
continuously increased the demand for plastics.

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An Unsustainable Model
A linear economy follows a straightforward approach to
production and consumption that involves extracting raw
materials from the natural environment, processing them to
produce market-ready products or final goods, marketing
these goods for consumption, and disposing of these goods or
whatever derivatives after the end of their product life-cycle.
Linear economy considers final goods as disposable materials
without acknowledging that they are created from finite
natural resources. The disposal of these final goods is followed
by the extraction of raw materials from the natural
environment, which are limited.
Hence, one of the major criticisms of the linear economy is its
unsustainability.

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Examples of linear economy
• Plastic packaging – There are countless
purchase products available in supermarkets
that are packaged in plastic and are part of
our daily routine, food and home: from
chocolates, to water bottles, chewing gum,
cleaning products etc. Whenever possible,
prefer cardboard or glass packaging and, in all
situations, separate waste and dispose of it in
recycling containers.
• Fast-food, fast-fashion, fast-everything –
Everything fast is designed to generate more and
more consumption and, therefore, is part of the
linear economy concept. The idea is to buy in
quantity and pay little at a time, but the truth is
that the life cycles of fast products are reduced,
and this is a characteristic that increases
the need for consumption. Examples: fast
food with cheap hamburgers full of packaging,
straws, etc.; most of the clothing and accessories
stores that we see in advertisements and
shopping centers; trade in products and goods for
the home at reduced prices and less durability.

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Examples of linear economy
• Some of the consumption habits that are part of and could be good examples of the linear
structure.
• Disposable diapers: They are produced, sold, consumed and discarded. In the first three years
of life, each baby uses an average of six thousand diapers and each one will need 450 years to
disappear from the environment. Not just disposable diapers but also sanitary towels.
• Plastic bags/wrapping items: Indiscriminate use of plastic bags for shopping, which until
recently were not charged to customers and were offered without any kind of
control. Unnecessary amount of gift wrapping material on birthdays, Easter, Christmas. All of
these are ‘Waste’.

Co-funded by the
Erasmus+ Programme
Circular Economy

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Definition of Circular
Economy
A circular economy is an economic model designed to
minimize resource input, as well as waste and
emission production. Circular economy aims to reach
the maximum efficiency in the use of finite resources,
the gradual transition to renewable resources, and
recovery of the materials and products at the end of
their useful life. Moreover, it targets to rebuild all
available types of capital, including financial, human,
social, and natural. Essentially, a circular economy
describes a regenerative economic system.
Source

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What is Circular Economy?
• Circular economy is an alternative to a
linear economy.
• Circular economy is a viable option to
achieve high levels of sustainability
without diminishing the profitability of
the business or reducing the number of
available products and services.
• A circular economy provides a
systematic shift that changes
the economic system completely.
WATCH THE VIDEO 1
CLICK HERE
WATCH THE VIDEO 1
CLICK HERE

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What is Circular
Economy?
CLICK HERE FOR THE SOURCE

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Principles of Circular Economy
1. Minimization of waste and pollution
The concept suggests the minimization of waste and pollution by
reducing damages from economic activities.
2. Extension of the useful life of products and materials
A circular economy aims to extend the useful life of the products
and materials by creating the loops of the materials and products
circulating in the economy. The goal is achieved through the active
reuse, repair, and remanufacturing of the products and materials
utilized in the economy.
3. Regeneration of natural systems
The regeneration of natural systems is one of the fundamental
concepts of a (circular) economy. It enhances natural capital and
creates the necessary conditions for the regeneration of natural
systems.
CLICK HERE FOR THE SOURCE

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Two Cycles in Circular Economy
Technological Cycles vs. Biological Cycles
A circular economy involves the important distinction
between technological and biological cycles:
• Technological cycles: involves managing the finite
resources. The resources are extracted and used in
multiple economic cycles. This is achieved through
reuse, repair, and remanufacturing of the materials and
resources.
• Biological cycles: are concerned with managing the
renewable resources. Biologically-based materials are
restored into the natural systems and regenerated to
provide renewable resources. In a circular economy,
consumption occurs only in the biological cycles.

Main Differences
between Linear and
Circular Economy

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Main differences
between linear
economy and circular
economy
• Linear economy comes before sustainability, while the
circular economy is based on sustainability. In the
circular economy sustainability policy is part of all layers
of the economic system.
• Linear model encourages greater consumption, while
circular model reduces it.
• Linear economy extracts material and discards waste for
every consumption. Circular model extends the
useful life of materials and products by recovery,
sharing, renting, recycling.
• In linear system there is only some concern
with waste management. In the circular
system, waste is part of business and, therefore, all
layers (social, economic and political) are attentive and
work on waste management.
Videos:
https://www.youtube.com/watch?v=RyIKCfKyZ-g
Source

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Examples of circular economy
Nespresso: Invested heavily in measures to transform its waste,
such as the capsule recycling centre. In it, aluminium is recycled
several times and the coffee powder residue is transformed into
fertilizer.
Ikea: The brand that was born to create strong stimulus to
consumption at a time when sustainability was a distant concept.
Ikea achieved extra prominence in recent times, after announcing
that it will start buying used furniture from its customers.
Goldenergy: Using and providing services through renewable
energy sources is circular. Goldenergy invests in the future of
a circular economy. Therefore, Goldenergy has committed to 100%
green energy and wants to spread the word about change entirely.
https://www.youtube.com/watch?v=8CKmDX0P8gg

Co-funded by the
Erasmus+ Programme
Circular Business Models

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Source
Source: freepik

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Defintion of Circular Business
Model
A circular business model is a way of organizing a company's operations
to increase efficiency and reduce environmental impact. These strategies
are especially popular with companies in the manufacturing sector.
Companies may use a variety of techniques to become more sustainable,
including reducing waste, reusing materials, moving to a leasing instead
of sales model and redesigning their supply chains. These strategies are
only feasible if companies are able to implement them while maintaining
profitability, making them a popular choice for businesses that produce
durable and high-value goods.
Source

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Source

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Benefits of a circular business model
Creating a circular business model can have a wide variety of environmental, social and
operational benefits. These are some of the primary advantages that companies can gain by
implementing a circular business model:
• Sustainability
• Innovation
• Efficiency
• Resilience and resource security
• Improved customer relations

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Sustainability
The primary social objective of a circular business model is to create a more
sustainable way of doing business. Many circular business models encourage the
use of renewable energy and the recycling of materials, which can reduce
emissions. Recycling can also reduce environmental impact by preventing the
disposal of used products in landfills and by reducing the demand for new material
extraction. This allows companies to use less land in their operations and conserve
natural resources.
Many circular business models also encourage the use of local suppliers. This
benefits the environment by reducing the need for long supply chains and by
reducing emissions caused by transportation operations. If a business is looking for
a way to reduce its impact on the environment, implementing a circular business
model may be a good first step.

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Innovation
Implementing circular business model principles often requires business leaders to
rethink their approach to commerce. This gives companies more opportunities for
innovation and can help drive new ideas within corporate leadership. Implementing
a circular business model gives companies the chance to reimagine their operations,
which can lead to improvements in sustainability but can also help them find ways
to reduce their costs, streamline their workflows and reach their strategic goals.
For example, a company may begin collecting its own products back from customers
after use. This allows the company to reduce its reliance on new materials and
suppliers, which can reduce its environmental impact. This move also allows the
enterprise to save money on sourcing raw materials and increase its overall
profitability.

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Efficiency
Another important benefit is increased efficiency, or more revenue at a lower cost.
Reusing materials and recycling used products allows companies to source raw
materials while reducing their procurement costs. Companies may pass these
savings on to their customers.
Companies can gain additional savings by sourcing materials locally resulting in
avoiding import costs, tariffs, high-inventory supply chain costs and transportation
costs.
Many companies rely on obsolescence (the idea that old products will fail or
become unpopular). This allows companies to earn revenue by constantly
developing and introducing new products to replace them. Circular business models
encourage companies to increase the lifespan of their products and reuse old
products. While this may reduce revenue, it will also reduce the resources spent on
R&D, marketing, new manufacturing processes and procurement of new materials.

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Resilience and resource security
One of the most important benefits that a circular business model can offer is
increased stability and resilience within a corporate structure. Circular models
encourage companies to reduce their reliance on raw materials and increase the
use of recycled materials. This allows companies to build a reliable procurement
system that avoids variations in the cost of raw materials, which may occur because
of conflict, economic factors or natural disasters.
Companies can also enhance resource security by replacing high-impact materials
such as rubber and cotton with recycled or synthetic materials or with low-impact
natural replacements such as hemp. These materials are often easier to source
because they don't require the same growing conditions. This can also make the
sourcing and transportation process cheaper, more sustainable and simpler.

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Improved customer relations
Customers are becoming more aware of company sustainability practices and often
prefer buying from businesses that mirror their values. Introducing a circular
business model can give you a new approach to marketing products and enhance
your customer relationships. Recycling old products, offering rental services,
building sustainable practices and offering repairs can help demonstrate that the
business had the same values as the customers, which may lead to increased sales
and customer retention.

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Challenges posed by circular business models
Although circular business model has a wide variety of benefits, it often
requires rebuilding operations completely, which can cause significant
challenges. Some of the primary challenges could be:
• Lack of regulatory support
• Cost
• Risk
• Fashion and Changing tastes

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Let’s discuss the challenges in
detail
Lack of regulatory support
In some cases, local governments may not offer the
necessary incentives to make circular business
models a profitable and sustainable option. To avoid
this challenge, it's important for businesses to
research laws and regulations in their area that
might prevent them from implementing a circular
business model successfully.

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Cost
Implementing a circular business model often
requires companies to significantly reorganize every
aspect of their operations, which may introduce
greater costs. When building a circular business
model, it's important for companies to pair
innovation with cost reduction measures.

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Risk
While circular business models can positively impact
customer relationships, changing operations on a
large scale can be risky and may lead to a loss of
profit. In these cases, it may be helpful for
companies to implement changes slowly or test
their initiatives in the market before overhauling
their operations.

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Fashion and changing tastes
Although reducing reliance on obsolescence can
have a number of benefits, it may also prevent
companies from adapting to current fashions and
trends. Companies that pursue greater recycling and
longer product lifespans can maintain relevance by
developing new products that use recycled
materials and sustainable manufacturing practices.

Co-funded by the
Erasmus+ Programme
Elements of Circular Business Model

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Elements of Circular
Economy
Image source

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Elements of a circular business
model
Implementing a circular business model involves
restructuring multiple parts of a company's operations.
These are the primary elements of a circular business
model:
Recycling
Companies often procure their own used products from
customers or source materials from other industries.
This may require businesses to organize pre-processing
workflows that separate usable materials from old
products.
Source

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Waste as a resource
Companies look for ways to use fewer resources and raw
materials and view waste from one process as feedstock
for another process. Some companies also create
partnerships that allow them to reuse waste from
different businesses or industries.
Renewable energy
Increased reliance on renewable energy. Companies can
achieve this by sourcing materials from local areas and
reducing pollution caused by transportation. They may
also reduce energy use and introduce green technology
in their workplaces. Companies that are unable to greatly
reduce their energy consumption often offset their
carbon use by investing in sustainability initiatives.
Elements of a
circular business
model

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Extended product lifecycles
Increase the length of product lifecycles by
designing products to last longer and optimizing for
repair or refurbishment. One way to pursue this is
by removing obsolescence and building more
durable products. They can also set up repair
programs and encourage their customers to invest in
refurbishment rather than buying new products.
Companies can also offer refurbished goods to new
customers at lower rates.
Elements of a
circular business
model

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Responsible sourcing
Most companies are unable to rely completely on
recycled materials and still require raw materials.
Companies who want to pursue a circular business
model can mitigate the effects of their procurement
activities by sourcing these materials more
responsibly. This may include replacing high-impact
agricultural products, sourcing goods from
sustainable local producers, reducing inventory and
shortening supply chains.

Co-funded by the
Erasmus+ Programme
Types of Circular Business Model

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Types of circular business models
1) Retain product ownership (RPO)
• Involves leasing products instead of selling them. This can be a good way to
preserve resources and reduce waste while maintaining revenue.
• Not possible with customer goods, such as hygiene supplies, food and paper
products.
• Works best with durable products with high value, like office and home
appliances, furniture, specialized machinery and some electronics.
• Especially true if a product is expensive and may only be used a few times.
• Allows earning revenue from a product that they might not sell otherwise.
• May need investing in repair and refurbishment services and may collect less
revenue from each transaction than in a sales model.

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2) Design for recycling (DFR)
• Companies design their products to be reused or create products that they can easily
mine for reusable resources in the future.
• Helps reduce reliance on raw materials, significantly reduces the amount of waste in its
operations and increases efficiency.
Ways to implement DFR strategies into their business model:
• Encouraging their customers to return old products so that they can be refurbished or
transformed into new goods.
• Seeking partners and create symbiotic relationships that encourage recycling. For
example, a company might contribute its waste products to another enterprise that has
the expertise to recover materials and integrate them into their own products.

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3) Product life extension (PLE)
• Involves creating durable, high-value products with long lifecycles.
• Reduces reliance on raw materials, lowers energy use, reduces development and
manufacturing costs, and creates a culture of sustainability.
• Provides opportunities for a secondary market of used and refurbished goods.
• Enhances the relationship between a business and its customers. Companies may
make fewer sales to each customer, but the reliability and quality of their products
can improve customer retention.
• Shows the customers that they mirror the company’s values, creating a stronger
bond, greater brand loyalty and more referrals.

The Role of Business in
Circular Economy
04

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Role of Business in Circular
Economy
source
• Narrowing principle works well in
linear economy. It is about ‘resource
efficiency’, or ‘doing more with less’.
• Narrowing loops is an essential strategy in a
Circular Economy. But it does not take into
account what happens with the product
after it has been used.
• In the linear economy, many efficiently
manufactured products are thrown away
after only being used once.
• Circular economy tries to retain the value of
products and materials for as long as
possible.

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Role of Business in Circular Economy
• Circular Economy allows focusing on issues of resources
and how they are used and managed in a business
context.
• There are many resource strategies in the business
context that can address this.
• The aim here is to keep resources and products at their
highest value for as long as possible and to extend their
lifetime.
• One strategy is ‘narrowing loops’. This is about reducing
the amount of materials needed per product or service.
Source

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Slowing loops
• Products need to be created that have a long life span, and people should be
made to want WANT to keep these products for a long time.
• Building more durable products can increase resources consumption
for production, so there is a trade-off between durability and resource efficiency.
• If products are designed for ease of repair, maintenance, upgradation,
refurbishment and remanufacturing, the extra resource used in production can
be offset by the longer use-cycle of the product.
• Business models need to be developed and value chains to support continuous
reuse over time should be created.
• This is called slowing loops: through the design of long-life goods, product-life
extension and service loops of repair and remanufacturing, the use of products
can be extended or intensified, resulting in a slow-down of resources used.

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Waste reduction
• Out of narrowing, slowing and closing loops, slowing is actually the most
important and hardest strategy to implement.
• This is because it requires not only changing the way the products are designed
and manufactured, but also how these products are used in our everyday life.
• If loops are slowed down, the amount of resources that are put into the loop can
be decreased, and the amount of waste that has to be processed and recycled at
the end can be reduced!
• After many cycles of reuse the loop needs to be closed and recycled.
• Braungart and McDonough in their work on the Cradle to Cradle concept,
referred to separating technical materials from biological materials. When
materials are not mixed, they are much easier to recycle. Most of the clothes we
wear are mixes or blends of different materials, which makes them difficult to
recycle.

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Dismantling and recycling
• The start up Re Blend spins new yarn out of these discarded mixed
materials that they then use for new furniture and clothing.
• The need is to be able to separate these materials and reuse them in
their original form.
• Separating materials means, that flows are not contaminated, and
products can easily be dismantled and re manufactured or recycled.
• These strategies of disassembly and reassembly will be instrumental
in closing the loops.

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Distinct strategies
How to narrow, slow, and close resource loops as distinct Circular Economy
strategies?
• Narrowing loops can be achieved through using fewer resources per product, and
this strategy is aimed at reducing the resource use related to the product and
production process. E.g ‘lean manufacturing’, where the efficiency of production
processes is constantly optimized, which saves money and environmental impact.
• Another example is lightweighting cars, which saves materials in the production
phase as well as saving on fuel in the use phase.

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Slowing consumption of products
Instead of focusing on product life extension, businesses can also focus
directly on slowing consumption of products or resources.
A part government funded spin-off from TU Delft experiments
with business models to slow consumption.
• Customers should be incentivized to reduce the impact of home
appliances, starting with washing machines. Consumers pay per wash
rather than buying the washing machine by providing quality washing
machines that last a long time and are built to be reused and recycled.
• By stimulating fewer and lower temperature washes, customers only pay
when they use the washing machine and they pay less if they wash at
cold temperatures. The aspiration is to prove such radical circular
business strategies work in the real economy!

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Extension of product lifecycle
Remanufacturing
This is already being done a lot for medical devices. Used devices are
thoroughly checked and tested for compliance, worn parts are replaced
and software is updated to current standards. This way the life cycle of
the product can be extended, which saves costs for medical facilities, and
decreases waste.
Challenging current consumption models
Patagonia launched the Common Threads Initiative to encourage people
to consume less, and instead repair, reuse and recycle clothing. With their
ad “Don’t buy this jacket”, the company was trying to create awareness
for ‘slow consumption’. Many people still did buy that jacket, highlighting
the complexity of slowing loops in practice.

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Closing resource loops
Can be achieved through recycling, by closing the loop between disposal and production, for circular
flow of resources. In major industries like paper, metals, plastics, recycling rates are already high.
Value chains and business models should be designed so that the products do not become a ‘waste’ in
the first place, and are instead recovered or recycled.
Can help to reduce the amount of waste that goes to landfills, save on costs for raw materials, as
recycled materials can be used in new products.
• Nike Grind for example makes new sports fields out of old trainers.
• G-Star’s “Raw for the Oceans” turns ocean plastic into new garments, and Interface
• Networks makes new carpets out of old fishing nets. They also work with local communities to
prevent future disposal of fishing nets into the sea.

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Waste to value
• Some ‘waste to value’ business models, especially relating to materials which been
landfilled or dumped in the sea, would not be necessary.
• Prevent the waste in the first place, and create continuous loops of reuse of
products and recycling of materials.

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Business examples
What might be considered waste in one process can often be a resource for
another. In a perfect world, companies would combine strategies of narrowing,
slowing and closing resource loops in a circular business model.
• In the food industry, Gunter Pauli’s work on the “Blue Economy” and creating
multiple ‘value cycles’. For instance, mushrooms can be grown using coffee waste,
and in this way coffee waste becomes ‘food’. Salad crops can be fertilized with fish
poo through an aquaponics process, connecting fish tanks to salad beds.
• MUD Jeans that are the first in the world to ‘lease jeans’ to end-consumers, and
their aim is to stimulate a sustainable lifestyle through clothing reuse and recycling.

Circular Economies
Business Model
Strategies

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Circular Economies Business Model Strategies
To help companies adopt circular strategies that can narrow, slow and close resource
loop, business model innovation is essential. Business model
• Is a management tool that is used to present the company’s organizational structure and
value creation processes.
• Describes the organisational and financial architecture that defines how an organisation
converts resources and capabilities into economic value.
• Describes the core “value creation logic” of a business.
• Consists of different elements that can be innovated to enable and integrate more
circularity, and these elements can be structured into three value dimensions.
Video: https://www.youtube.com/watch?v=v6yCgjFv5LM
https://www.youtube.com/watch?v=v6yCgjFv5LM
https://www.youtube.com/watch?v=5pHhAwkNrlg

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Value Proposition Dimension
• Describes ‘Which value is provided and to who’.
• Describes ‘How value is created and delivered’.
• Describes ‘How value is captured and how this value can be turned into a profit’.
Each of these value dimensions consists of a number of business model elements. Taking
a fictional backpack company ‘Waterproof Bags Incorporated’ as an example, go through
these elements together.
The value proposition dimension consists of three elements, the actual value
proposition, the customer segments and customer relationships. For the backpack
company the main value proposition is that the bags are a 100% waterproof. The target
customer segment is ‘Adventurous Outdoors People’. For customer relationship the main
strategy is co-creation powered by social media, where the customers are involved in the
development of upcoming models.

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Elements of value creation and delivery
Consists of four elements: Key resources and capabilities, channels, key partners, and
key activities. So, for the backpack company:
• The key resources and capabilities include the development of new lightweight
waterproof materials.
• Establishing channels with and focus on online sales to support the online community.
• The main partner is a big cycling parcel delivery company to promote the backpacks.
• Their key activities are lean manufacturing and sales.
• The value consists of two elements: revenue flows and costs. The revenue is, income is
from selling the bags. The costs consists of manufacturing, retail, and managing the
online community.
• The value proposition can be a long-life product with low maintenance and costs. This
can be appealing to customers with a high environmental awareness or those who are
bothered by obsolete products. The relationship with customer segments more closer,
and service-oriented by offering a financial reward upon return.

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Value creation and delivery elements
• Value creation & delivery elements can be devised to create and deliver circular offer.
• Operating a circular strategy, requires specific activities, resources, technologies,
capabilities, and partner networks to successfully prolong the life of products and
close material loops.
• Company should aim to shape these elements in a way that it has everything in place
it needs to embed circular practices in their business model. This can include finding
partners with the required capabilities.
• For e.g. partners that can test, certify quality of repaired products, provide discarded
products to be upgraded or reused.
• Value capture elements in a circular business model can be adjusted to generate
additional revenue from selling the same product several times or by capitalizing on
the associated environmental benefits.
• There is also potential to reduce production costs by using cheaper secondary
materials or by avoiding costs for end-of-life disposal.

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Innovating the elements of a business model can align the core value creation logic of a
company with a circular strategy in a more systematic way. For every business
model, depending on the circular strategies operated, or the type of product, the business
model elements will be shaped differently. But by paying close attention to how these
elements are shaped and by making sure that they support implementation of the specific
circular strategy, circularity can become a part of a company’s value creation logic and the
barriers can be gradually removed.
Generally, people associate circular business with “recycling companies or “reuse shops”,
or “car sharing platforms”.
Circular Economies Business Model Strategies

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So what makes a circular business circular?
There are 3 key ingredients that any circular business model should ideally have.
1. A circular company should engage in some form of circular value creation
This is at the heart of a circular business model. Circular value creation means that the
business model should include one or more ways to close, slow or narrow resource loops.
Several strategies exist to create circular value, like recycling, repairing,
remanufacturing and reusing, we can also optimize the utility rate of goods, make
products more resource efficient, or avoiding the use of toxic substances.

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2. It should make use of value propositions that enable circularity
A solid value proposition is the second key requirement for a circular business
model, circularity is important, but it also has to be a business, and without customers
there’s no business. And which value proposition is best really depends on the needs and
motivations of your customers. If customers are interested in a product made from waste
materials, then you could use a circular branding strategy.
Value propositions to enable circularity

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This is what FlagBag does for their leisure bags and purses: in the design they
clearly emphasize the origins of the waste materials they use. For other customers, a
premium brand strategy may be more suited. Vitsoe, for example, produces furniture
products that last a lifetime, and they put the product quality at the center of their value
proposition.
Another value proposition strategy that can enable circularity is product-service
offering, where a company delivers the product as a service instead of selling it directly.
The company then still owns the product and it’s now in their best interest to make sure
that it lasts as long as possible, which makes repairing, reusing, or remanufacturing more
important.
Examples of value proposition in circular business

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This strategy is used in “pay-per-copy” models, that allow companies like Ricoh
to manage their copy machines like assets. Other useful value proposition strategies
focus on reducing costs with the customer, like offering a cheaper product or service than
the linear alternative, providing a platform to share under utilised capacity, or eliminating
product stocks by production on demand. Some companies have also showed that you
can use circular business models to increase business without necessarily branding
yourself as a circular business. Nearly New Office Facilities, for example, focuses on its
customers’ need for affordable office furniture and a healthy work environment. The fact
that they use materials from old furniture in the manufacturing of new furniture is
something many people may not even notice.
Examples of value proposition in circular business

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3. The company should be embedded
in a circular value network:
The third key ingredient for a circular
business model, is the value network
surrounding the company.
Embedding in a Circular Value Network

Importance of a
Circular Value Network
06

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Value Networks
• Closing, slowing or narrowing resource loops is only possible to achieve when all the
stages of a product life cycle are connected in such a way that the product and its
resources can be kept inside the economy.
• And this requires collaboration between the company and other actors in the value
network. Such collaboration can be set up with customers or suppliers in the value
chain, or with companies, governments, or civil society in a wider value network.
• Value networks can be set up for many different purposes. A deposit refund scheme
improves the return of goods to the producer.

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Setting up a value network
• Online platforms can be used to manage the movement of goods in a network.
• And setting up a value network at a local scale can help avoid the loss of resources in
complex global value chains.
• So, a successful circular business model can be identified by the fact that it uses a
combination of the three ingredients, strategies that create circular value, strategies
that deliver the value to the customer, and strategies that maximize the value within a
circular value network.

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The Importance of a
- An Example
How does the success of a circular business model depend on
making smart combinations of circular value creation strategies,
value proposition strategies, and value network strategies?
For e.g., a company that produces repairable and recyclable
smartphones. While the design for repair and recycling of the
smartphone is a key condition to create circular value, that circular
value is actually only created in the repair shop or recycling facility.
Therefore, the producer needs to find ways to incentivise their
customers, to work together with repairers and recycling companies
to make sure the smartphones are repaired when broken, and
recycled when repair is no longer possible. Here are explore some
combinations of circular strategies that make this possible.

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Setting up an extended producer responsibility (EPR) scheme in
Europe
This is a collective, government controlled mechanism in which
producers finance the collection and recycling of end-of-life
smartphones. Although this value network strategy has been
shown to support increased recycling, many smartphones still end
up in consumers drawers at home, as there is no real incentive for
them to have their phones repaired or collected. Also, the
producer of the smartphone has no direct benefit of its design-for-
circularity efforts, as there is no direct link between producers and
recyclers. The value of the design efforts, in other words, gets lost.
Source
The Importance of a
- An Example

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Better circular business models can be designed to solve
this problem. For example, the producer can directly
cooperate with its customers by offering a discount on
new products when an old smartphone is sent back. The
producer can then re-market the collected smartphones
in other markets or can capture residual material value
by sending the phones to a recycler.
Source
The Importance of a
- An Example

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An effective combination of circular strategies to capture all
circular value of smartphones designed for circularity, is
introducing “smartphone-as-a-service” as a value
proposition. This allows the producer to keep control over its
product during and after the use phase, and it creates
leverage to maximize the reuse, repair and recycling value of
their products. As owner of the products, the smartphone
company can engage in partnerships with repairers and
recyclers as key partners in its business model. Providing
information such as product disassembly guidelines or the
bill of material, or jointly organizing reverse logistics, can
help these partners to improve their own activities.
The Importance of a
- An Example

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Circular Business
Models
Through designing ‘circular’ business models, specific
changes in the resource flows should be seen in our
economy. We want to move away from linear patterns
by slowing and closing resource loops. There is one
important characteristic of business models that slow
and close resource loops. Their value creation logic is
designed to create and capture value from
maintaining and utilizing the embedded value in
resources for as long as possible.
One tool that helps in designing business models that
maintain and capitalize on resource value for as long as
possible is the circular business model canvas which
incorporates, value proposition, value creation and
delivery, and value capture.
https://timreview.ca/article/1000

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What is a “Closed-loop” Economy?
• The Closed-loop economy is a process where every
product is fully utilized even after its final use by
the consumer. This economy supports the
environment by fully making use of every product
and its packaging by least wastage and recycling
these products. Reusing recycled products and
supporting sustainability is the main intent of this
Circular Economy or Closed-loop economy.
• A closed-loop economy is an economic model in
which no waste is generated; everything is shared,
repaired, reused, or recycled. What would
traditionally be considered “waste” is instead
turned into a valuable resource for the creation of
something new.
https://www.roadrunnerwm.com/blog/what-does-it-mean-to-
close-the-loop

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How the closed-loop
economy works
A closed-loop economy is essentially the result of
multiple companies operating on a closed-loop supply
chain. This requires an intelligent re imagining of how
products (and packaging) are designed, manufactured,
sold, refurbished, and recycled. At Quincy Recycle, we
have a large nationwide recycling and reuse network, so
we are constantly buying and selling recycled materials
for businesses across the nation. When more
businesses join the network loop, more material is
saved, and costs are reduced even further.

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Right now, most companies operate according to the
linear economy model. Raw materials are extracted and
then supplied to manufacturers for the design and
creation of products. These products are then
consumed and disposed of by other companies or
individuals. Most material is wasted, little is saved.
Then, this finite process starts over from square one (as
long as there is access to more raw materials).
How the closed-loop
economy works

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On the other hand, the closed-loop
circular economy is, well, a circle. It
has no end, and therefore it has no
waste. After consumption, the
materials are collected and
reprocessed into raw materials that
are ready for manufacturing.
How the closed-loop economy works

Co-funded by the
Erasmus+ Programme
www.circularcreatives.eu
Any questions?
Thank you

Module 3: From Linear to Circular Economy

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