Economic and environmental impact of circular business models: A case study of White Goods-as-a-Service using multi-method simulation modelling

Abstract

Circular business models are gaining traction in academia and industry as an instrument to deliver environmental benefits while being economically profitable. Despite this increased interest, studies that quantitatively assess the impact of circular business models are limited. This study provides researchers and practitioners with a quantitative analysis tool to assess the dynamics of circular business models from both an economic and environmental perspective. Using the case study of white goods-as-a-service, this study employs multi-method simulation modelling in combination with statistical design and analysis of simulation experiments to investigate the effect of different factors including payment schemes (i.e., fixed fee, pay-per-use, and hybrid) and subscription contract duration (i.e., long-term, mid-term, and short-term) on the economic and environmental performance of access-based models. In addition, as the adoption of access-based models is economically challenging for manufacturers due to a discrepancy between costs and revenue streams, this study analyses the effect of different levers to improve the liquidity performance of access-based business models including deposit schemes, cancellation and collection fees, as well as partnering with financial institutions to cover the initial revenue gap.