Circular business: what kind of businessmodel is it?

One model that is becoming more important and interesting is circular business. Want to know how to deploy circular business? Read on!

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One of the best known and most sustainable business models we know is a business in the circular economy. The circular economy focuses on extending the life of raw materials, components and products. It is important to preserve value through reuse.

Why are circular businesses so important?

Why should you too consider the circular business? You know that it is good for the environment and that it costs a lot of money at the same time. But do you know the actual reason why you should do your part in this?

The reason why circular business can be important for your business is to make a change to the current economy. The making, using and discarding is blurring. Once you begin a circular process you are not only being environmentally friendly, you are also giving your products a new life which makes you earn.

This can be done in many different ways. You work with stakeholders to shape the economy. There is no more destruction of value and you take out everything that is left in it. Why not try to gain more from these opportunities?

Business models within the circular business

Of course, there are all kinds of possibilities within a circular business. I’ve picked out the most important ones for you and listed them for you:

Optimal use

The use of a product is taken into account by making it sustainable. The life span is extended as long as possible to prevent loss of value. For example, your product is provided as a service or maintenance is offered so that the life span is longer.

Recover value

The added value of a used product is exhausted as much as possible. These products are converted to new or usable products. You can think of second-hand sales, renewal of used products, sale of recovered materials and recycling.

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Network organization

As mentioned, collaboration is a key component to forming the circular economy. This model focuses on business activities where collaborations and networks are important.

But how do you envision this? Some examples are:

• selling take-back systems and collection services to obtain usable material from discarded products.
• tracking, monitoring and trading of products.
• contract management (drafting, handling, monitoring and executing contracts).
• activities that manage cash flows
• managing, coordinating and facilitating information sources

Circular design

This involves the development phase of a product. It focuses on making products last longer and then easier to maintain.

Think of products that are designed to be maintained, repaired and renewed, the development of products that then last longer, organic and recyclable products or a higher price per product so that there are fewer purchases.

The pros and cons of a circular business

There are some advantages and disadvantages to the business model that you should be aware of:

Pros

• Environment
  Kind of obvious, but the circular business improves the environment. Less raw materials are consumed which reduces waste. Fewer greenhouse gases are emitted, soil, air and water become cleaner and natural areas are preserved for longer.
• Optimized customer relationships
  You can focus on long-term customer relationships and the customers’ wants/needs once something goes wrong with a product. Through good communication, customer loyalty can be created: you help optimize a product to satisfy the customer.
• Growing demand for services
  There will be more employment opportunities because the circular business consists of all kinds of processes that require optimal investment. The possible employment opportunities are people who collect, transport and/or repair the products. Marketers and other salespeople can also facilitate the occupation of the products. Lastly, professionals in the field of reuse and product repair can be hired.

Photo by Noah Buscher on Unsplash.

Cons

• Costs rise
  You invest a lot in this process. It takes a while before you get anything in return, and not all customers are waiting for circular products. Demand could go down as the products last longer.
• Business risks
  You need to be prepared to integrate the business. You need to have a clear plan and aspiration that you can’t just walk away from. In addition, you need to build relationships with new partners. There can be a lot of costs involved which can reduce revenue.
• May not always save on sustainability
  Customers may as well spend their money on non-durable products. You don’t know if it will actually have an effect if you use this in your business.