Circular Business Model

To see if circular economy can contribute to business model innovation this chapter first explains the principles of circular economy, furthermore it will focus on business models and circular business models. Finally, it will give suggestions for business models that incorporate the paradigms of circular economy.

4.1 The concept of Circular Economy

The current growth and consumption patterns are highly unsustainable. Society is increasingly damaging the ecosystem and endangering the provision of resources and ecosystem services. The current “take-make-waste” or “Cradle-to-Grave” industrial model can be seen as the main drive of this environmental deadlock. The concept of CE builds and combines several preceding concepts and therefore has

In 1966, the American economist Kenneth E. Boulding already wrote about the idea without using the exact term of CE. Boulding appropriately names our current economy the “cowboy economy”. The cowboy being symbolic of the illimitable resources and also associated with reckless, exploitative and violent behaviour. Which is characteristic of open societies (K. Boulding, 1966). Consumption and growth patterns of society are following a highly unsustainable path, which is increasingly damaging the ecosystem and endangering the availability of resources on our planet. This stands in contrast with the closed economy of the future. Closed system meaning, a system in which there is neither increase nor decrease in material entropy2. Boulding described this closed system as the “spaceman economy”, in which the earth has become a single spaceship, without unlimited reservoirs of anything. This calls for the need of finding a cyclical ecological system, which is capable of continuous reproduction of material. The paper of Boulding from 1966 already gives a valuable description of the different economic systems. Boulding is one of the first scholars that described a cyclical closed economy.

In 1990, Pearce and Turner, known in the field of environmental economics, first coined the term Circular Economy. They argue in their book “Economics of natural resources and the environment” that the classic

Business, government and other societal actors usually have different interest in CE. Most businesses continue to strive for profit maximisation and focuses on mitigating risks. Then the goals of implementing CE are to secure the supply of resources, anticipate governmental intervention or attract new customers. Since implementing CE will often be a process that includes many actors and different parties, it is important to understand the different interests and interpretations of CE.

To better understand the concept of CE, EMF has developed a framework consisting out of 5 approaches. Comparing the various approaches in figure 3, one can conclude that there is a general aim throughout these approaches that focuses on resources a how they should be managed to sustain them for the future. CE generally aims to close material loops and treat them in two separate cycles (Figure 2): Biological nutrients, which can safely re-enter the biosphere since they are non-toxic and biodegradable, and technical nutrients, which can be reused again and again (EMF,