Following my previous article on sustainable strategies, I want to focus on the importance of circular business models (CBM) for sustainable strategies.
Sustainable strategy in circular business demonstrates company's sustainable transition. Andrea de Santis/Unisplash
Why is a CBM a place for embedding sustainable strategies? Because this model integrates environmental and economic value creation by shifting the business logic from generating profits from one-time sales of goods to generating earnings from a continual flow of reused materials and products over time by capitalising on the value embedded in used products (Linder & Williander, 2017).
According to Harmaala (2021), companies must adopt CBMs to remain competitive and resilient in uncertain futures while also radically changing internal values to benefit from CBM in:
- higher productivity, reduced supply dependence and expanded growth,
- increased competitiveness, employment, and innovation
- efficient supply chain by recovering resources used to create products
- lower operational waste and minor impact on the environment and
- use resources more efficiently.
Sustainable business strategies also aim to reduce damaging environmental consequences, restoring resource procurement while reducing the waste generated in production. These strategies target overall systems and strategy optimisation rather than individual product/service life cycle components. Therefore, the CBM is a complete place for sustainable strategy placement to be activated within local conditions, competitors, and regulations. To illustrate, below are three successful companies with sustainable strategies placed in the following CBMs:
Functionality rather than ownership model serves users’ needs without owning physical products. This model enables businesses that machinery and capital are optimally utilised while companies better manage material flows, decouple growth from material use and facilitate sustainable development. An example is Finnish company Tamturbo offering compressed air technology, which is oil-free, environmentally friendly, energy-efficient, and significantly cheaper for the customer than the total cost of technology ownership. To achieve this, Tamturbo offers a subscription model Air-as-a-Service, wherein customers only pay for the compressed air they use.
Encouraging sufficiency reduces consumption and production through demand and supply. For instance, Nederland-based Homie offers customers the to rent their washing machines and to pay per wash. Homie, with their subscription model, encourages washing laundry at lower temperatures and, when needed, reducing washing powder, energy, and water and, in that way, decreasing the environmental impact. With CBM, due to its popularity, Homie is also changing customer behaviour towards a more sustainable one.
Repurposing for society or the environment with prioritising social or environmental value creation over economic profit. This business model integrates local communities and stakeholders into the organisation. A relevant example is the north Holland United Repair Centre, which wants to make clothing repair the new norm by offering services for cross-industry collaboration of apparel brands, local fashion designers, NGOs, and educational institutions. United Repair Centre reduces textile waste and has a positive social impact while contributing to local communities by creating working places for people with refugee backgrounds and young adults to enter the labour market.
To transition to more sustainable and operational businesses, we need more companies with innovative and profitable CBM with sustainable business strategies in the core.
Have your company challenges identifying correct sustainable strategies or making the business model more circular?
Contact us, and let’s see how we can assist you with your company's sustainable transition.
References
- Atasu, A., Dumas, C., Van Wassenhove, L. (2021) The Circular Business Model, Harward Business Review (July-August 2021)
- Harmaala, M. M. (2021). Transition from linear to circular business models with service design methodology to drive innovation and growth.
- Linder, M., & Williander, M. (2017). Circular business model innovation: Inherent uncertainties. Business strategy and the environment, 26(2), 182-196.
- Long, T. B. (2019). Sustainable Business Strategy, Encyclopedia of the UN Sustainable Development Goals: Decent Work and Economic Growth.
Comments