By 2029, supply chains will not be allowed to produce waste, as customers and many governments will find it unacceptable. Therefore, it is natural to envision that during the 2030s, the circular economy will be not just the mainstream but also the only economy.
Throughout history, many leading companies still need to adapt to a changing competitive landscape and adopt new superior business models.
Today, the emergence of digital business models challenges companies that have difficulty moving away from their brick-and-mortar legacy and consequently find themselves with a new digital-born industry leader.
The new disrupts the old; the winner is one step ahead of the competition. We will see born-circular actors disrupting born-linear models.
The Benefits of a Circular Economy
- Changes our existing throwaway economy, eliminating waste and pollution and spreading the resources;
- Tackles climate change and biodiversity loss simultaneously;
- Untwists the capability to achieve economic growth from the consumption of natural resources;
- Create jobs, prosperity, and resilience while cutting greenhouse gas emissions, waste, and pollution;
- Presents a business case for each sector to be more sustainable while increasing competitiveness;
Circular Business Models
Circular Inputs - Turning Waste Into Assets
In a circular economy, renewable, recycled, or highly recyclable inputs are used in production processes – enabling partial or total elimination of waste and pollution.
Circular-born factories can expect lower costs for their production input as it does not have to be mined from scarce resources – it comes from overabundance and recycled materials.
Circular-born designed products don't expire. Instead, they become the end-of-current-usage loop. They also profit from high material and components recovery rates in initial quality and increased material flow management.
Sharing Economy - Changing The Perception of Used Goods and Co-owning
Maximizing how inactive assets are used across society while providing customers affordable and suitable entry to products and services.
This also includes sharing industrial assets like conveyor belts, forklifts, machinery, and warehouses.
Access to an asset no longer requires buying or renting from traditional suppliers being enabled by individual people and companies.
Product As A Service - Shifting From Volume To Performance
The customer purchases a service for a limited time while the provider maintains ownership of the product and remains incentivized for its ongoing maintenance, durability, upgrade, and treatment at the end of its use.
These shifts focus from volume to performance, maximizing the usage factor and useful life, increasing resilience by retaining control of products and materials, saving material costs, protecting against material price shocks, and hedging against material scarcity issues.
The born-circular benefits from endless customer connection and wisdom in their products' use.
The born-circular gains access to potential untapped opportunities for businesses as a new remanufacturing/refurbishment market.
Suppliers have an obligation and an economic stimulus for safer removal mechanisms, a responsibility previously on the end-user, often without a financial incentive.
Product Use Extension - Creating The Modular Future
Designing products for repairability, upgradability, reusability, ease of disassembly, reconditioning, and recyclability of all components.
In a linear supply chain, you sell your product to the next in line, and the primary focus is on selling large volumes.
By designing circular business models, you have a continuing income stream throughout the product's usage cycles.
Resource Recovery - Controlling The Material Flows
Resource recovery focuses on the end stages of the usage cycle, namely the recovery of embedded materials, energy, and resources from non-functional products at the end of use.
The circular business models have a straightforward economic stake in extracting all their product's recoverable value.
Their design focuses on making value recovery easy and effective. Their business model ensures that users are incentivized to return the products, for example, contractually, through deposits, or in the product-as-a-service model.
The current recycling practice often devalues the quality of the materials. Circular companies ensure resources are recovered to maintain the quality high.
Key Takeaways - Adapt To Survive
For many companies in the linear economy, shifting to a circular economy will be just as difficult as the brick-and-mortar transition to a digital environment.
We will see many entities, unable to adapt, fail against circular business models that offer:
- Lower costs;
- Recurrent income sources throughout the usage cycles;
- Climate-friendly and attractive products;
- Higher customer centricity;
- Increased resilience due to better control of material flow;
Quitting existing competitive edges, restructuring essential assets, changing well-functioning supply chains, and investing in circular business models, are crucial to surviving in ten years.