There are different business models for the circular economy. In this new micro series of posts, we are going to address 4 of them. In this first post, we will talk about slowing down the cycle.
There are different ways to approach the circular economy, reflected in different business models that offer various impacts on profits and sustainability. These solutions are important because the current economy is detrimental to the planet.
The circular economy aims to reduce waste and resource use by considering every aspect of a product’s life cycle. Circular business models attempt to find economically viable ways to continually reuse products and materials, incorporating renewable resources wherever possible.
Slowing the cycle
Slowing down the cycle conserves resources in the economy by reducing unnecessary consumption. This allows for extended product life and reuse.
A common business model is product service systems. These provide services to meet the needs of users so that they do not have to own the products. For example, there are brands that have a rental service that allows users to use and then return the products.
While most of the business models that slow down the cycle are related to extending the value and useful life of the product. Below, we will highlight a few ways to achieve this:
- Design for durability and repair. Most of a product’s environmental impacts are defined in the design phase. Circular design strategies include ease of part replacement (modularity).
- Lifetime warranty and repair services. Products are repaired rather than discarded.
- Product reuse. Products can find new owners through B2C platforms or manufacturer and retailer initiatives. For example, IKEA offers a buyback and resale service.
- Restoration of a product’s original function. Manufacturers or third parties can remake products and return them to their original function. For example, this is the case with smartphones.
On the other hand, we can talk about sufficiency or reduction of end-user consumption.
Advantages and disadvantages of slowing down the cycle
According to specialists in the field of circular economy, this is potentially the most impactful environmental strategy. But it is also the most difficult to implement, because it requires a significant rethinking of the business model.
To slow down the pace of production, it is necessary to focus on value over volume. On the other hand, you have to move from a faster to a slower mode of consumption. Companies may have lower material costs (fewer products), but higher labor and logistics costs. They may have to change product design and outsource repair services.
Some customers or users value longevity, better warranties, repairs and maintenance, but others prefer novelty. Rental models may be one way to address this problem, allowing consumers to exchange items after relatively few uses.
In the next post we will look at another type of business model, based on shortening the cycle.
Photo credit: PM
