Unit 6: Business Management Toolkit — BMT 8 Circular Business Models
What are Circular Business Models?
Circular Business Models are business strategies designed to minimize waste and maximize resource reuse, focusing on sustainable production, extended product life cycles, and regeneration of natural systems. Unlike traditional “linear” models (make-use-dispose), circular models aim to keep products, materials, and resources in circulation as long as possible.
Core Principles:
- Design out waste and pollution
- Keep products and materials in use
- Regenerate natural systems
- Design out waste and pollution
- Keep products and materials in use
- Regenerate natural systems
Key Types of Circular Models
| Model | Description | Example |
|---|---|---|
| Product Life Extension | Repair, refurbishment, and resale to maximize product lifetime | Refurbished electronics, vehicle remanufacturing |
| Resource Recovery | Recycling and recovering byproducts and materials | Recycled plastics in manufacturing, composting food waste |
| Sharing Platforms | Allow multiple users to access products/services | Car sharing, tool libraries, online rental sites |
| Product as a Service | Product ownership remains with the company; customers buy the utility | Leased printers, cloud software subscriptions |
| Circular Inputs | Use renewable/recycled materials in production | Bamboo textiles, biodegradable packaging |
Circular Flow & Value Creation
Traditional Linear Model: Raw\ Materials \rightarrow Production \rightarrow Use \rightarrow Disposal
Circular Model: Raw\ Materials \rightarrow Production \rightarrow Use \rightarrow Reuse/Repair/Recycle \rightarrow Production
Circular Model: Raw\ Materials \rightarrow Production \rightarrow Use \rightarrow Reuse/Repair/Recycle \rightarrow Production
Circular Value Formula:
Circular\ Value = \frac{Recovered\ Materials + Extended\ Use}{Total\ Input} Higher values indicate more sustainable resource usage.
Circular\ Value = \frac{Recovered\ Materials + Extended\ Use}{Total\ Input} Higher values indicate more sustainable resource usage.
Benefits & Limitations of Circular Business Models
| Benefits | Limitations |
|---|---|
|
- Reduced waste and resource consumption - Lower costs over the product lifecycle - Enhanced brand reputation and loyalty - New revenue streams - Improved compliance with sustainability regulations |
- Initial investment in redesign or tech - Complex logistics and reverse supply chains - Requires new business models and partnerships - Potential customer resistance to non-ownership |
Implementation Strategies
- Redesign products for durability and easy disassembly
- Set up programs for take-back, recovery, and remanufacturing
- Develop sharing/rental platforms
- Educate customers and build awareness
- Collaborate with partners across supply chains
Conclusion
Circular Business Models drive sustainable growth by turning resource efficiency into a strategic advantage. They challenge organizations to move away from “take-make-waste” and toward a value-driven circular economy.