Circular business models
Definition
A circular business model describes how companies can generate revenue or make profit, including the way it operates and finances its activities, within a circular economy.
Uncommon to the business models typical of a linear economy, circular business models describe how, for example, offering services, leasing components and taking back materials are profitable activities. Therefore, the models should identify, in the idea of a circular economy, the cost of those activities and the (market) value of the involved components and materials.
Guidelines
Within the BAMB project, circular business models are developed. Aspiring a transition from product to service oriented businesses, the developed business models will preferably be performance based.
Related terms
Circular economy: an economic system wherein components are kept at their highest value along their service life and are returned as valuable resources afterwards. It therefore relies on circular business models and careful design (after MacArthur, 2012).
Linear economy: an economic system in which components’ value depreciate during their use phase and are subsequently disposed. The linear economy is often described as a take-make-waste system.
Residual value: the (market) value of a building, parts of a building, or an amount of material at the end of the period of analysis or considered service life. Circular business models allow keeping the residual value at the same level as the initial one.
References
Ellen MacArthur Foundation (2012) Towards the Circular Economy, an economic and business rationale for an accelerated transition. Cowes: Ellen MacArthur Foundation.
Ellen MacArthur Foundation (2017) What Is a Circular Economy? Accessed March 2017 via www.ellenmacarthurfoundation.org/circular-economy.
ISO (2013) ISO 15686-11 Buildings and constructed assets, Service life planning – Part 11 Terminology. International Organisation for Standardisation.
Plan C (2017) Empowering Circular Futures. Accessed March 2017 via www.plan-c.eu/nl/over-ons/de-circulaire-economie
Renswoude et al. (2015) Circular Business Models – Part 1: An introduction to IMSA’s circular business model scan. Amsterdam: Instituut voor Milieu- en Systeemanalyse Amsterdam.