If you don’t have a circular business model, transitioning to one should be your number one priority. Jennifer Torry, senior business design director at co:collective, a NY-based strategic and creative transformation consultancy, explains why.
- We’re rapidly running out of the virgin materials to make many of the products we so casually buy, use and toss. By 2030, we’d need two earths to sustain projected consumption levels, according to the WWF.
- The good news is that circular models are not just better for the planet, they’re better for business. Shrinking their environmental footprint, trimming operational waste, and using expensive resources more efficiently appeal to chief executives.
- Linear economy companies that don’t adapt in time will lose out on lower costs, repeat income sources throughout usage cycles, more climate-friendly products, higher customer retention, and increased resilience.
“We need to become more efficient in reusing our resources. . . . That’s a big part of our climate-change battle: learning how to use and reuse our resources and make more out of them for the sake of the planet. That’s why circular business models are required in many industries,” once said Thomas Gros, chief executive and cofounder of Circulee.
Gartner predicts that by 2029, supply chains will not be allowed to produce waste, as customers and many governments will find it unacceptable and, in some cases –, illegal. During the 2030s, the circular economy will not only be the mainstream economy, it will be the only economy.
Five circular business models you might consider exploring
- Circular inputs: This is where renewable, recycled, or recyclable inputs are used. Here, waste becomes an asset, not a liability you pay to dispose of. This also lowers costs as production input is not mined from scarce resources – it comes from excess materials and recycled materials. Nike (NYSE:NKE) Grind is a great example of this model.
- Product as a service: In this model, the customer purchases a service for a limited time while the provider maintains ownership and is responsible for the product’s ongoing maintenance. Here, there’s a shift from volume to performance, keeping items in circulation longer while saving on material costs. Feather furniture rental runs their business on this model.
- Sharing economy: We know this one well – think Airbnb (NASDAQ:ABNB). Here, idle assets are maximized for community use. ‘Access to’ rather than ‘buying from’ means individuals and businesses can benefit from higher utilization and profit from expensive assets while reducing the production of more.
- Product use extension: This model is all about repairability, upgradability, reusability, ease of disassembly, reconditioning, and recyclability of all components. Here, you generate income throughout the product’s usage cycles. The more that your product designers can be encouraged to design for circularity from the beginning, the easier this gets. Ikea is a beautiful example.
- Resource recovery: This focuses on using resources from existing products that are no longer functional in their current application. Think outdated cell phones reused for parts. It’s important in this model that users are incentivized to return the products to make value recovery easy. Verizon’s (NYSE:VZ) trade-in service is based on this model.
What can business leaders do today?
Linear economy companies who don’t adapt in time will lose out on lower costs, repeat income sources throughout usage cycles, more climate-friendly products, higher customer retention, and increased resilience. But figuring out how to adapt can be daunting.
It’s a transition, and a “do nothing strategy” is not an option. But in the near term, business leaders shouldn’t think about it in the binary. It’s not about being either a ‘linear’ or ‘circular’ business. The reality is, for a while, they’ll likely be both. They’ve got to compete today while building for tomorrow. And a ‘good for the planet’, ‘bad for the planet’ mindset gets us nowhere. Incremental improvements will.
This is about thinking big and starting small. Start by imagining the future – what hypotheses do you have about how your business might thrive in five years’ time? Now ask yourself, what is the fastest most cost-effective way you can test that hypothesis today? There’s no right or wrong here, just start by starting. It’s time to explore what might be possible, pilot new initiatives, and build a transition strategy to succeed in the circular economy.
co:collective is a creative and strategic transformation partner. We use purpose to design, build, and transform businesses to become generative. Generative businesses generate more love from customers, create more innovation, build loyal bonds with their talent, and become more resilient by balancing the needs of all of their stakeholders.
The opinions of guest authors are their own and do not necessarily represent those of SG Voice.