Circular Economy Business Models Research Articles

Exploiting the Potential of Public Procurement: Opportunities for Circular Economy

SummaryThe objective of a circular economy (CE) is to maintain the value of products, materials, and resources in the economy by closing material loops and minimizing waste generation. In recent years, the role of public procurement has been recognized as an important, but as yet not fully exploited, opportunity by cities and municipalities in their transition toward circular societies. This study analyzed public procurement opportunities to promote CE. Different approaches and examples of circular public procurement were identified using case studies. In addition, opportunities to promote CE through sustainable and green public procurement policy were identified analyzing predefined sustainable or green public procurement criteria. The study concludes that public procurement can promote CE and related business models by setting criteria and requirements for the extension of product life spans, efficiency and/or intensity of use, and efficient cycling of biological or technical materials, as well as for the securing of clean and nonrisky cycles. Circular procurement can occur through the procurement of better‐quality products in circular terms, the procurement of new circular products, the use of business concepts that support the CE, and investments in circular ecosystems. Several sectors and product groups were identified as having potential for circular procurement, such as construction, waste, and wastewater management, transportation, food, and catering, furniture, and textiles. The study also suggests that the use of certain tools, such as performance‐based procurement, life cycle approach, and life cycle costing, as well as criteria concerning reuse and recycling of materials, could promote circular procurement. Market dialogue and cooperation between procurers and actors in the supply chains are important for the future development of circular procurement.

Business Models for Circular Economy and Sustainable Development: the Case of Lease Transactions

The purpose of this paper is to discuss the features of leasing as a business model in the circular economy, which is presumed to support sustainable development by product recirculation and driving economic performance. In particular, this study highlights microeconomic benefits for listed Romanian companies, showing that adopting a greener business model, as in the case of leasing, does not penalize firms economically but it is a catalyst for increasing their performance, both in terms of accountancy-based measures (return on assets and return on sales), but also in terms of the subjective perceptions of investors and financial analysts operating on the capital market (proxied by Tobin’s Q and market to book value of equity). Based on 266 observations from companies listed on the Bucharest Stock Exchange (BSE) during 2013-2016, the study uses regression analysis to show that financial performance is higher for quoted Romanian companies that use leasing and renting and that performance is also directly associated with leasing intensity, i.e. the share of the value of the rights to use leased goods in the total value of property, plant and equipment.

Perceptions of Circular Business Models in SMEs

Testing circular economy business models is crucial in understanding Circular Economy features across various industries. This paper analyses Circular Economy perceptions in Romanian SMEs by investigating entrepreneurs from PVC joinery industry. Using a multidimensional framework, ReSOLVE, as a conceptual model, and Lewandowski systematization, we measured 6 business actions and their relations with Value creation. The results of our survey can be described as mixed. Of the 6 business actions of ReSOLVE framework, for half of them (Regenerate, Optimize and Exchange) we can definitely conclude that these are correlated with Circular Economy in terms of Value Creation, while for a fourth there are variables significantly correlated without being able to conclude its overall contribution in terms of Value creation. Our empirical investigation contributes to literature development on Circular Economy research in SMEs and a step forward to shape future research initiatives.

A Review and Typology of Circular Economy Business Model Patterns

SummaryThe circular economy (CE) requires companies to rethink their supply chains and business models. Several frameworks found in the academic and practitioner literature propose circular economy business models (CEBMs) to redefine how companies create value while adhering to CE principles. A review of these frameworks shows that some models are frequently discussed, some are framework specific, and some use a different wording to refer to similar CEBMs, pointing to the need to consolidate the current state of the art. We conduct a morphological analysis of 26 current CEBMs from the literature, which includes defining their major business model dimensions and identifying the specific characteristics of these dimensions. Based on this analysis, we identify a broad range of business model design options and propose six major CEBM patterns with the potential to support the closing of resource flows: repair and maintenance; reuse and redistribution; refurbishment and remanufacturing; recycling; cascading and repurposing; and organic feedstock business model patterns. We also discuss different design strategies to support the development of these CEBMs.

Managing a Complex Global Circular Economy Business Model: Opportunities and Challenges

This article presents an in-depth case study detailing the history, experiences, and wider practitioner and policy lessons from a circular economy business model over a 30-year period, highlighting the successes, difficulties, and conflicts of adopting a circular economy model. The case is based on interviews, key documents, and customer insight. The findings demonstrate how sustained circular economy business practices can deliver significant new revenues, resource productivity, and business continuity benefits, but also require managers and practitioners to develop competencies and capabilities, such as balancing linear and circular systems, to address complex and highly dynamic factors, including rapid technological shifts and market volatility.

Switching the behaviour of consumers to circular products and services with particular reference to the appeal of green batteries: An econometric analysis of evidence from Thailand

Abstract Used and discarded primary batteries are a major source of toxic pollution. The substitution of green primary batteries for conventional non-green batteries is however contingent on consumers’ willingness to pay premium prices for green primary batteries. The aim of this article is to explore evidence as to whether the environmental concern of individuals can prompt them to pay premium prices for green primary batteries. An econometric model is used to investigate the determinants of consumers’ purchasing behaviour and their willingness to pay premium prices for green batteries. Data for the study were obtained through a survey of Thai consumers in July 2016, which elicited 213 responses. An Analysis of the survey data shows significant evidence of environmental concern among Thai consumers as a factor that bears on the willingness to pay premium prices for green battery products and services. Gender, age and product lifespan are also shown to influence preference for green battery products and services. Further findings include that Thai consumers would pay a premium of 29 per cent over the price of non-green conventional battery price to enhance their concern for the environment, but that they would make no distinction between eco-labelled green primary batteries the production and use of which corresponds the ‘cradle-to-grave’ business model; and green battery product services, which relate to the ‘closed loop’, circular economy business model.

Family Businesses Transitioning to a Circular Economy Model: The Case of “Mercadona”

Sustainability addresses environmental and social issues affecting this and future generations. When family businesses perceive that the community is disrupted, recognize an environmental problem and respond by implementing new environmental policies or regulations, the family business’s socio-emotional values press to transition to a more sustainable production system, such as the ‘Circular Economy.’ Drawing on the Dubin (1978) methodology—a paradigm for building models through deduction—we design a sustainable model, which shows family businesses’ responses to changes in the environment. It explains the reasons why family firms transition to the Circular Economy, based on the theory of Socio-Emotional Wealth (SEW). We check the model through the case study of the food retail leader in the Spanish market—Mercadona—which applies policies about energy, resources and waste to become a Circular Economy business model. Because of the strong family character of Mercadona, this case can be useful for the decision-making of other family businesses.

Industry 4.0 and the circular economy: a proposed research agenda and original roadmap for sustainable operations

This work makes a case for the integration of the increasingly popular and largely separate topics of Industry 4.0 and the circular economy (CE). The paper extends the state-of-the-art literature by proposing a pioneering roadmap to enhance the application of CE principles in organisations by means of Industry 4.0 approaches. Advanced and digital manufacturing technologies are able to unlock the circularity of resources within supply chains; however, the connection between CE and Industry 4.0 has not so far been explored. This article therefore contributes to the literature by unveiling how different Industry 4.0 technologies could underpin CE strategies, and to organisations by addressing those technologies as a basis for sustainable operations management decision-making. The main results of this work are: (a) a discussion on the mutually beneficial relationship between Industry 4.0 and the CE; (b) an in-depth understanding of the potential contributions of smart production technologies to the ReSOLVE model of CE business models; (c) a research agenda for future studies on the integration between Industry 4.0 and CE principles based on the most relevant management theories.

Digitalisation as an Enabler of Circular Economy

Digitalisation can boost the transformation towards a more sustainable circular economy. It can help closing the material loops by providing accurate information on the availability, location and condition of products. Digitalisation also enables more efficient processes in companies, helps minimise waste, promotes longer life for products and minimises the transaction costs. Thus, digitalisation boosts the circular economy business models by helping to close the loop, slow the material loop and narrow the loop with increased resource efficiency. However, there are still many challenges to be solved in order to gain the desired benefits and gaps hindering digital technology-aided circular business models implementation. The existing literature that discusses the opportunities and challenges of digitalisation is still very limited, and therefore, our exploratory and qualitative study seeks to clarify these perspectives. There is a significant research gap in understanding those challenges and finding solutions to them. In our study, we identified challenges related to adopting novel business models, data collection and management, collaboration and competence requirements. The virtualization of products and processes, collaboration with stakeholders and utilising digitalization were highlighted to be major opportunities in adopting CE-based business models.

Developing and implementing circular economy business models in service-oriented technology companies

The service sector has the potential to play an instrumental role in the shift towards circular economy due to its strategic position between manufacturers and end-users. However, there is a paucity of supporting methodologies and real-life applications to demonstrate how service-oriented companies can implement circular economy principles in daily business practice. This paper addresses this gap by analysing the potential of service-oriented companies in the information and communication technology (ICT) sector to build and implement circular economy business models. To this end, the Backcasting and Eco-design for the Circular Economy (BECE) framework is applied in an ICT firm. BECE, previously developed and demonstrated for product-oriented applications, has been developed further here for applications in the service sector. By shifting the focus from a product-oriented approach to a user-centred eco-design, the paper shows how ICT firms can identify, evaluate and prioritise sustainable business model innovations for circular economy. The two most promising business model innovations are explored strategically with the aim of designing circular economy models consistent with the company's priorities of customer satisfaction and profitability. The findings suggest that ICT companies may be able to support the deployment of a circular economy in the service-oriented technology sector. Importantly, micro and small organisations can play a fundamental role if provided with macro-level support to overcome company-level barriers. Finally, the BECE framework is shown to be a valuable resource to explore, analyse and guide the implementation of circular economy opportunities in service-oriented organisations. Further research to verify the application of the findings to other service-oriented organisations is recommended.

The role of second-hand markets in circular business: a simple model for leasing versus selling consumer products

This paper explores the role of the second-hand market when transitioning to a closed-loop system where products are leased multiple times. The total cost of ownership for consumers and profitability for manufacturers are compared in circular and linear business cases. We find that while second-hand markets were beneficial for manufacturers of durable goods in a linear system, since they increased the consumers’ willingness-to-pay for new products, the same second-hand markets might restrict the profitability of a closed-loop business model. A high resale value results in a relatively low cost of ownership in the sales system and additional activities in the closed-loop model (such as managing the lease contracts and refurbishment) add significant costs to the supply chain. Consequently, the economic (and environmental) benefits of leasing products already traded on second-hand markets in the linear system are often limited. Our simple analytical model allows a quick and dirty analysis of multiple scenarios with a minimum of inputs. We argue that manufacturers lack these kinds of models to guide them in navigating circular economy business models.

Do circular economy business models capture intended environmental value propositions?

The circular economy (CE) can be a driver for sustainability and CE can be promoted and supported by the creation of new and innovative business models, which embed CE principles into their value propositions throughout the value chains. This study focuses on the environmental value propositions of the CE business models. The term environmental value proposition refers here to an absolute value being a promise of environmental improvement, which a company provides to the environment by its impacts throughout the whole value chain. The aim of this study is to outline a framework for evaluating the environmental value propositions of CE business models. The framework consists of an environmental value propositions table (EVPT) and a step-by-step approach towards an evaluation process. The framework was tested in three CE business model cases. The outlined framework enables a better understanding of circular economy principles, combining them with the environmental value proposition. With the framework, companies can plan and design new CE business models or they can verify intended environmental benefits and analyse their contribution to sustainability. The biggest challenges, when applying the framework, were related to the estimation of environmental benefits gained from the environmental value propositions at the system level. In the future, intensive scientific work should concentrate on developing environmental assessment methods specifically for companies developing new CE business models.

Towards a new taxonomy of circular economy business models

Circular Economy has undoubtedly become one of the hot topics in public debates about new and more sustainable industrial paradigms and strategies. In this respect, the fashion of Circular Economy is in the fact that it aims at overcoming the dominant linear take, make, disposal economy model, i.e. “a traditional open-ended economy model developed with no built-in tendency to recycle, which is reflected by treating the environment as a waste reservoir” (Su et al., 2013). Circular Economy, indeed, bases on the establishment of closed production systems, where resources are reused and kept in a loop of production and usage, allowing generating more value and for a longer period. Despite the interest for Circular Economy by politicians and practitioners, scholars, particularly in the strategic management field, are still struggling with a lack of a framework explaining how companies willing to become circular adapt their existing business model or create a new one. By extensively reviewing, through the lens of business model literature, the extant contributions on Circular Economy, we propose a taxonomy of Circular Economy Business Models based on the degree of adoption of circularity along two major dimensions: (i) the customer value proposition & interface, i.e. the implementation of the circularity concept in proposing value to customers; (ii) the value network, i.e. the ways through which interacting with suppliers and reorganizing the own internal activities. The taxonomy is then initially tested through some explorative case studies, showing in practice the ability of the framework to properly distinguish different modes of adoption of Circular Economy.

Towards Circular Economy implementation: an agent-based simulation approach for business model changes

This paper introduces an agent-based approach to study customer behavior in terms of their acceptance of new business models in Circular Economy (CE) context. In a CE customers are perceived as integral part of the business and therefore customer acceptance of new business models becomes crucial as it determines the successful implementation of CE. However, tools or methods are missing to capture customer behavior to assess how customers will react if an organization introduces a new business model such as leasing or functional sales. The purpose of this research is to bring forward a quantitative analysis tool for identifying proper marketing and pricing strategies to obtain best fit demand behavior for the chosen new business model. This tool will support decision makers in determining the impact of introducing new (circular) business models. The model has been developed using an agent-based modeling approach which delivers results based on socio-demographic factors of a population and customers’ relative preferences of product attributes price, environmental friendliness and service-orientation. The implementation of the model has been tested using the practical business example of a washing machine. This research presents the first agent-based tool that can assess customer behavior and determine whether introduction of new business models will be accepted or not and how customer acceptance can be influenced to accelerate CE implementation. The tool integrates socio-demographic factors, product utility functions, social network structures and inter-agent communication in order to comprehensively describe behavior on individual customer level. In addition to the tool itself the results of this research indicates the need for systematic marketing strategies which emphasize CE value propositions in order to accelerate customer acceptance and shorten the transition time from linear to circular. Agent-based models are emphasized as highly capable to fill the gap between diffusion-based penetration of information and resulting behavior in the form of purchase decisions.

Integrating Backcasting and Eco‐Design for the Circular Economy: The BECE Framework

SummaryThe circular economy (CE) is essential for decoupling economic growth from resource consumption and environmental impacts. However, effective implementation requires a systemic change across supply chains, involving both technological and nontechnological innovations. Frameworks are beginning to emerge to foster CE thinking in organizations. However, literature review carried out as part of this research has revealed gaps in their ability to fulfil CE requirements. Furthermore, few frameworks provide support on how CE requirements may be implemented. To address these issues, this article presents a new framework, BECE (backcasting and eco‐design for the circular economy), to ensure that businesses can implement CE requirements more readily. BECE empowers organizations to tackle the CE holistically by embedding the concept into corporate decision making and by bringing operational and systems thinking together, thus increasing the likelihood of successful implementation. The potential of the BECE framework was tested through a pilot workshop focusing on the development of a CE business model through redesign of products and supply chains. Using vacuum cleaners as an illustrative case study, several product design and supply‐chain alternatives were identified, including the development of scenarios and action plans for their implementation at the business level. Although the case study focuses on a particular product, the BECE framework is generic and applicable across different products and business sectors.

Circular economy business models in developing economies: Lessons from India on reduce, recycle, and reuse paradigms

According to the UN Sustainable Development Goals in 2016, the demand for resources will require natural resources equivalent to two and three planets by 2030 and 2050, respectively. The linear economic model driven by a “take‐make‐dispose” philosophy is unable to manage the demand and supply balance in consumption of natural resources. This imbalance is affecting the sustainability of the countries and enterprises as well as affecting the global supply chain leading to socioeconomic and environmental risks and volatility. Realizing the future resource scarcity challenge, the current linear economy model is giving way to the circular economy model. The circular economy model focuses on careful alignment and management of resource flows across the value chain by integrating reverse logistics, design innovation, collaborative ecosystem, and business model innovation. This article examines how circular model is pushing the companies in developing economies like India to design and implement business models that are based on reduce, reuse, and recycle paradigms.

Implementation of Circular Economy Business Models by Small and Medium-Sized Enterprises (SMEs): Barriers and Enablers

Small and medium-sized enterprises (SMEs) are increasingly aware of the benefits of closing loops and improving resource efficiency, such as saving material costs, creating competitive advantages, and accessing new markets. At the same time, however, various barriers pose challenges to small businesses in their transition to a circular economy, namely a lack of financial resources and lack of technical skills. The aim of this paper is to increase knowledge and understanding about the barriers and enablers experienced by SMEs when implementing circular economy business models. Looking first at the barriers that prevent SMEs from realising the benefits of the circular economy, an investigation is carried out in the form of a literature review and an analysis of a sample of SME case studies that are featured on the GreenEcoNet EU-funded web platform. Several enabling factors that help SMEs adopt circular economy practices are then identified. The paper concludes that although various policy instruments are available to help SMEs incorporate circular economy principles into their business models, several barriers remain. The authors recommend that European and national policies strengthen their focus on greening consumer preferences, market value chains and company cultures, and support the recognition of SMEs’ green business models. This can be achieved through the creation of dedicated marketplaces and communities of practice, for example.

How Supportive Are Romanian Consumers of the Circular Economy Concept: A Survey

The aim of this paper is to investigate consumer behavior regarding the environment and the adoption of new patterns of behavior and responsible consumption in the promotion of a Circular Economy (CE) in Romania. With this goal in mind, a questionnaire survey was performed on-line on a nationwide scale to explore consumers’ behaviors and attitudes, which was distributed in all four of Romania’s macro-regions and interviewing 642 respondents. The results indicate that the consumers have a positive attitude towards the importance of the environmental protection, in general and it also measures the frequency of adopting eco-friendly behaviors by the consumers, showing that the consumption behavior is not very consistent with the general attitude regarding environment. As a parallel, consumers are aware of the importance of CE business models, in general, both for the economy and for the environment, but the adoption of consumption patterns specific to CE business models, necessary for the development and the success of the CE business models, has a low probability in the absence of direct or indirect incentives and benefits fostering the adoption of these consumption patterns. In conclusion, the development of CE business models in Romania requires a national strategy, which includes means to sustain the adoption of necessary new consumption behaviors, besides awareness raising and educational campaigns for explaining to consumers the liaison and the impact of their behavior to the environment and to the economy.

Designing the Business Models for Circular Economy—Towards the Conceptual Framework

Switching from the current linear model of economy to a circular one has recently attracted increased attention from major global companies e.g., Google, Unilever, Renault, and policymakers attending the World Economic Forum. The reasons for this are the huge financial, social and environmental benefits. However, the global shift from one model of economy to another also concerns smaller companies on a micro-level. Thus, comprehensive knowledge on designing circular business models is needed to stimulate and foster implementation of the circular economy. Existing business models for the circular economy have limited transferability and there is no comprehensive framework supporting every kind of company in designing a circular business model. This study employs a literature review to identify and classify the circular economy characteristics according to a business model structure. The investigation in the eight sub-domains of research on circular business models was used to redefine the components of the business model canvas in the context of the circular economy. Two new components—the take-back system and adoption factors—have been identified, thereby leading to the conceptualization of an extended framework for the circular business model canvas. Additionally, the triple fit challenge has been recognized as an enabler of the transition towards a circular business model. Some directions for further research have been outlined, as well.

Market-based Approach in Shift from Linear Economy Towards Circular Economy Supported by Game Theory Analysis

Abstract Purpose of the article is to partially describe underpinning economics for the circular economy. A circular economy (closed-loop system) is an advancement from the linear economy (open-loop system) which behaves according to the hierarchy of 6R, preferring reuse, remanufacture or recycle solutions insead of disposal (known also as a „linear dead-end“). This new approach is a trigger of new business models seeking many times vor various kinds of support from the side of government. However, governmental support is not neither the only option nor the most functional one. Underpinning economics for the circular economy can be based also at market-based tools. What we have in mind under this term for the purspose of this paper is the game in the market being played between buyers and sellers. Methodology: We have analyzed this interaction using game theory tool (interactive decision theory). The scietific goal of our paper was to suggest a quick market-based solution how to support circular economy business models whilst helping to the society to solve certain social problems. Our findings have led to a newly proposed way, how the current game in pricing could be changed. An emphasis shall be placed on strategies how to rise prices of linear economy products whilst offering wider social benefits to small sellers of such products. The price increase of linear economy products is considered in this paper as a market-based incentive to support recycled, remanufactured ones, whilst circular economy products are becoming more economically feasible in comparison with more expensive linear economy products.